Friday, February 5, 2016

Keystone's Midday Market Action; US Monthly Jobs Report

The circus comes to town once each month. Here is this morning's set-up and results after the Monthly Jobs Report;

The tension increases ahead of the jobs number. The consensus for the Monthly Jobs Report is 188K jobs. Last month was the robust 292K jobs. Revisions are important. The unemployment rate is expected to remain flat at 5.0%.

The consensus for the Average Hourly Earnings is +0.3% compared to last month’s 0.0%. Inflation, that the Federal Reserve has attempted to create for the last seven years with their obscene Keynesian spending, cannot exist without wage inflation. The wage data is more important than the headline jobs number and rate. Since the Fed has begun a rate hike cycle, Chair Yellen desperately wants to see wages increasing and will want the wage data to meet the +0.3% estimate and more. If wages remain weak, Yellen will have to ‘take a powder’ to collect herself. Wages are expected to rise due to minimum wage raises.

Minutes before the data, the S&P futures are down -2. Dow -5. Nasdaq flat. WTIC oil 32.03. Brent oil 34.80. Natty 2.045. Gold 1160. Silver 14.92. Copper 2.123. DAX -0.5%. CAC +0.2%. FTSE +0.1%.

Euro 1.1211. Euro/yen 130.78. Dollar/yen 116.65. Pound 1.4553. Mexican peso 18.2009. Canadian dollar 1.3746. Dollar/yuan 6.5724.

Treasury yields are; 2-year 0.70%, 5-year 1.22%, 10-year 1.84%, 30-year 2.69%. The 2-10 spread is 114 bips.

At 8:30 AM EST (1:30 PM London; 2:30 PM Frankfurt; 10:30 PM Tokyo), the Monthly Jobs Report is 151K jobs. The unemployment rate is under 5.0% to 4.9% the lowest since February 2008. November jobs are revised up 28K from 252K to 280K and December’s blowout number is revised lower by 30K from 292K down to 262K. The two months of revisions net a 2K job gain. Private sector jobs are up 158K. The retail sector gains 58K jobs, food service 47K, healthcare jobs gain 37K and manufacturing gains 29K jobs. Education and transportation jobs are slashed. Sadly, 105K of the 151K jobs reported are minimum wage jobs.

The Average Hourly Earnings are up +0.5% versus the +0.3% consensus and 0.0% last month. Wages are up +2.5% annually. The labor participation rate is 62.7% as compared to last month’s 62.6% now up for two consecutive months. The U-6 rate is unchanged at 9.9%. The average workweek is up +0.1 to 34.6 hours versus the consensus expectation and prior month’s number at 34.5 hours.

Fed Chair Yellen will breathe a sigh of relief since the unemployment rate is under 5%, the labor participation rate drops and wages are rising. The four-hike rate path for this year is back on the table. Equities sell off hard on the results. The S&P’s drop 10 handles. Traders realize the potential March hike is back in play and hit the sell button.

Humorously, the jobs number may have created more confusion than clarity for markets. The headline jobs at 151K is a miss hinting at a sluggish economy but wages are increasing indicating a robust economy. Drilling down, wages were expected to jump higher due to seasonality factors and many large companies increasing minimum wage rates for employees. Thus, those not impressed with the economy, Yellen, the Fed and the stock market will proclaim that wages only rise due to the minimum wage increases while market and Federal Reserve cheerleaders will shout to the masses that the economy is recovering since companies are raising wages.

Futures react wildly to the down side. Three minutes after the data release, S&P -8. Dow -48. Nasdaq -19. DAX -0.9%. CAC -0.2%. FTSE -0.1%. Europe follows the US lower. US 10-year yield 1.839%. Euro 1.1207. Dollar/yen 116.61. Pound 1.4537. USD 96.54.

WTIC oil is flat at 31.70. Brent oil is up +0.3% at 34.55. The US Trade Deficit is up +2.7% to $43.4 billion in December.

At 8:36 AM, S&P -7. Dow -45. Nasdaq -21. WTIC 31.81. Brent 34.62. Euro 1.1199.

At 8:39 AM, S&P -8. Dow -55. Nasdaq -17. WTIC 31.77. Brent 34.57. Euro 1.1176. Gold 1158. Silver 14.89. Copper 2.113. The  market reaction to the jobs report is subdued.

Treasury yields are; 2-year 0.73%, 5-year 1.25%, 10-year 1.86%, 30-year 2.706%. German bund 0.309%. Japan 10-year yield 0.035%. WTIC 31.60. Brent 34.40.

S&P -5. Dow -27. Nasdaq -9. Euro 1.1135.

At 9:30 AM EST, US markets begin trading gapping lower. Equities take on a weaker profile than the futures indicate. Data companies are crushed after Tableau’s weak results. DATA crashes -50%. SPLK -15%. QLIK -14%. LNKD -33%. Over $10 billion in LinkedIn’s market cap disappears in a heartbeat. CRM -7.3%. The tech sector is pounded with XLK down -1.1%. Democratic presidential candidate Hillary Clinton put JCI and VRX on notice during last evening’s debate and the stocks drop -0.4% and -0.2%, respectively.

Energy stocks are bludgeoned. XLE -2%. HES -10%. DVN -6.1%. MRO -5%. CHK -5.3%. MUR -4.1%. HBI collapses -10%; long underwear sales are weak due to the unseasonably warm winter. Steel giant MT collapses -8%. CMI -1%. Financials and consumer staples are marginally higher. Utilities tank. XLU -1.4%.

The S&P 500 is down 11 points, Dow down 56 points and Nasdaq down 33 points. WTIC oil is down -1.8% to 31.15. Brent oil is down -1.3% to 34.03. Weaker oil prices drag the stock market lower as  usual. Natty 2.027. Gold 1148. Silver 14.72. Copper 2.095.

At 9:48 AM, the SPX is down 17 points, -0.9% to 1898 and dropping. The Dow Industrials are down 95 points, -0.6%, to 16321. The Nasdaq is down 59 points, -1.3%, to 4452. The Russell 2000 small caps are down 11 points, -1.1%, to 1004. VIX 22.71. TRAN -0.7%. Euro 1.116. USD 96.96. WTIC oil 31.07. Brent oil 33.94.

Treasury yields are; 2-year 0.73%, 5-year 1.26%, 10-year 1.87%, 30-year 2.71%. German bund 0.309%. Japan 10-year yield 0.029%. Gold 1149.

At 10:07 AM, stocks attempt to stabilize. The SPX is down 11 points, Dow down 50 points and Nasdaq down 53 points. VIX 22.09. Trannies are positive; TRAN +0.2%. USD 97.20. The dollar is strengthening and yields floating higher so market participants believe the likelihood of a second Fed rate hike increases. Thus, pressure remains on equities.

As always, follow all daily market events with Keystone the Scribe.

Tuesday, February 2, 2016

SPX S&P 500 2-Hour Chart Potential Inverted H&S Upward-Sloping Channel

Markets continue along on a tortuous choppy path. Large point swings occur intraday and day to day due to the elevated volatility. The VIX dropped under 20 last Friday during the big rally and today spiked above 22 during the big selloff. Saw tooth markets like this are best watched from a distance with minimal trading since this behavior chews up bulls and bears alike.

The inverted H&S pattern remains in play shown by the black lines. The target is 1990-2000 for the inverted head and shoulders pattern after the neck line at 1905-1910 was violated to the upside. A back kiss would be expected and stocks are slapped across the face today falling back to the neck line for the back test. Tomorrow is critical, price will bounce or die from this level. A bounce and price will set its sights on the 1940 area again and then the higher target and gap fill. Failure from here and price will seek 1890 support then 1875.

The blue channel is in play; price is at the bottom rail of the channel and will make a bounce or die decision either to stay inside the channel or collapse lower to the 1890 and 1875 support levels. The prior price support where the two right shoulders are is 1875-ish. The indicators are not tipping their hand to any great extent; there are mixed signals. The indicators are weak and bleak except for the RSI that would like a little one candlestick bounce, but then some further softness in price should occur in this 2-hour time frame. Direction is a difficult call since it depends on oil prices. If oil decides to rally tomorrow then stocks will rally.

Price topped out five candlesticks ago but the MACD line was still long and strong wanting a higher high in price. The RSI never reached overbot territory. The collapse in oil prices have sent the stock market down the rabbit hole to begin the new week of trading; tomorrow is an important day. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

OVX Oil Volatility and WTIC West Texas Intermediate Crude Oil Weekly Charts

Oil is bludgeoned mercilessly over the last two days smacked back down to a 29-handle. A global economic slowdown, weak China manufacturing data, robust inventories and oil producing nations pumping oil at record rates are sending prices lower again. The bearish sentiment is rampant. Remember the bearish sentiment a couple weeks ago at that bottom in price? Sentiment was very bearish then and it is more bearish now. Punidts are parading across television and computer screens every five minutes one calling for a lower target than the next. Comically, the consensus now is that oil will be in the teens any day.

The taxi cab driver is all-in on the short side with oil. He said the guys on television told him oil is going under 20. Aunt Agnes, a jovial blue-haired soul in a dress that could double as curtains, took her entire life savings and went short oil because the nice young man on tv said it was guaranteed that oil would move lower.

You know what happens when the boat is fully loaded to the one side. Oil volatility, OVX, is worth a look. The levels of rampant fear are confirmed with the elevated volatility numbers. The green circles show where negativity is off the charts, everyone is wringing their hands convinced that oil is about to completely collapse to near zero, exactly when it actually rallies. What do you think will happen to oil as the negative news and proclamations that oil in the teen's is quickly on the way? As a rule of thumb from the OVX chart above, bottoms in oil occur when OVX volatility is at or above 65. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Sunday, January 31, 2016

CL Crude Oil Commitments of Futures Traders COT Weekly Chart and USO OIl Fund Daily Chart

The oil COT chart was highlighted a couple weeks ago and the comment at the time was that the close proximity of the blue and red bars towards the centerline, the most squeezed in for a long time, indicated a bottom in oil. In addition, the prior two key lows in March and August occurred with bars squeezed in towards the centerline of the chart.

So a bounce occurs in price and the bars expand outwards which occurs during a rally in price. The daily chart shows the universal positive divergence across all indicators, as well as oversold conditions and the falling wedge behavior, that created the launch in price. The USO oil price is well below the moving averages so a mean reversion higher is needed.

Oil should rally higher in price until the COT bars print inside the red circle. Does it happen this week or one month from now? There is a cluster of resistance formed during December at the 11-ish area for USO. Oil prices are expected to float higher unless a negative news event occurs to collapse prices lower such as Iran ramping up production or Russia refusing to curtail production. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note:  The COT chart is provided by Cot Price Charts a very useful and informative site and the chart is annotated by Keystone.

Note Added 8:24 PM EST on Monday evening, 2/1/16: WTIC oil crashes -7% today down to the 31.32 level. Price is taking a rest from the launch from under 27 to 34 over the last two weeks. More oil volatility is expected. The weakness in the China PMI took wind out of oil's sails as well as the OPEC, Non-OPEC nations and Russia not wanting to cut production rates. Oil is trading emotionally off the news bites.

WTIC West Texas Intermediate Crude Oil Weekly Chart

Keystone highlighted the falling wedge, oversold conditions and positive divergence (green lines) expecting a possie d launch, which occurs with oil price jumping from 26 to 34 over the last couple weeks. The stochatics are long and strong hinting at a higher high for price after any pull back occurs. Watch for the MACD positive cross (green and red lines) which would indicate higher oil prices ahead.

The lower standard deviation band violation was highlighted a couple weeks ago and price bounces with a target of the middle band at 40.46 and falling on the table. Price will likely want to kiss the middle band which would be expected anytime over the next couple-three weeks at the 36-41 range.

So the expectation is for more buoyancy in oil prices but it is dependent on the news flow as evidenced last week. Oil prices jumped on news of a potential meeting with the OPEC, non-OPEC nations and Russia that were to agree on a 5% oil production cut. Oil prices soared higher. Then Iran and Russia threw a wet blanket on that news so oil prices relaxed.

Today, Sunday, the Saudi's are back at it talking about the need for cooperation among oil producers to lower oil production. If a meeting and production cut occurs from the oil producers the WTIC price will likely jump to tag that middle standard deviation band in a heartbeat. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

CPCE Put/Call Ratio and SPX Daily Charts Signal Near-Term Market Top at Hand

Traders remain relaxed and complacent despite the market turmoil. The CPCE is down at 0.58 where a market top would be expected to occur at anytime any day forward. The CPC put/call ratio is not yet down to a comparable low like the CPCE above so that may hint that a couple more days are needed before the market top is in place.

The saw tooth action over the last two weeks is creating confusion in the numbers. In late December the CPCE was at a low with complacency. A market selloff occurs as forecasted but the put/call immediately catapults to the 1.20 number indicating rampant fear and panic and a market bottom, which occurs. The put/call then drops into complacency creating the top and steep drop off starting during the last couple days of last year. The CPCE is now down to the similar levels as the late December stock market top. A lot of the put/call activity is noise nowadays due to the high volatility creating the large-point whipsaw action.

Thus, if you are bullish the market, temper your enthusiasm and be more tactical and cautious during the week ahead. A short position against the market for a near-term trade could be considered with a scale-in to the short side taking place during the week ahead. Check the CPCE and CPC put/call ratio's on Monday evening. If the CPCE drops under that thick red line the market top is here so it would be extremely important to have downside protection in place immediately. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 8:29 PM on Monday, 2/1/16: The CPCE created a strong spank down at the opening bell this morning. The Dow was down 166 points. Stocks rally intraday, however, and the CPCE ends at 0.63. CPC is 1.02 in the middle area no man's land. Both put/call ratio's are going to need to move lower to signal a near-term top; there is not enough complacency in place. Thus, the market bulls may create buoyancy in stocks for a day or three.

Saturday, January 30, 2016

NYMO and NYA Daily Charts Near-Term Market Top at Hand

The NYMO explodes higher last week and is up in the range consistent where stock market near-term tops occur (red circles). Remember when the NYMO collapsed and played around under -60 Keystone was looking for a rally at hand, which occurred. Now we are on the other side of the boat. Price oscillated at the bottom and may very well oscillate for a day or three or more at the top, however, a near-term top is at hand and ready to begin at anytime any day forward.

The NYMO exceeds all prior highs except for the early October high. Interestingly, that huge spike resulted in a market selloff but prices recovered and then printed the key top about three weeks later. An open mind must be given to this same fractal behavior occurring again as shown by the brown boxes. Nonetheless, at the least, a market top should occur early in the new trading week, if not, very likely at the middle of the week, if not, extremely likely by the end of the week.

Stocks may sing a siren song this week luring long traders into the long side especially with the easy money the PBOC (Chinese central bank) will likely provide to goose markets into the New Year's holiday. Be leery of the upside in stocks as the NYMO indicates. You can play with some longs that you are ready to ditch on a moment's notice but now is likely not the time to commit to the long side for a longer duration trade. The next move down n the NYMO to -60 will likely be a better time to commit to the long side just like it was a couple weeks ago. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 8:39 PM on Monday evening , 2/1/16: NYMO is at 52.88 so a stutter-step sideways. Watch tomorrow to see if the NYMO spikes higher like the fractal from early October, that would be in concert with stocks printing higher, but watch-out since the pull back in equities came quickly afterwards.

SPX 2-Hour Chart Inverted H&S

Here is the 2-hour with the updated inverted head and shoulders (H&S) pattern. The SPX went sideways last week then broke out to the upside. Thus, it has two right shoulders but no one is perfect. The price action allows two solid neck line levels to be drawn in the 1905-1915 range. The head of the H&S is 1825. Thus, calculating two top side targets for the inverted H&S is 1985 (1905+80) and 2005 (1915+90), call it the 1985-2005 target zone and this is now in play since price has broke up through the 1905-1915 neck line. There are a few gaps that need filled up top.

The histogram is negatively diverged, the stochastics are overbot and price has severely violated the upper standard deviation band, so these three indicators conspire and want to create a pull back in price. However, the RSI, MACD and money flow remain long and strong and will want higher highs in price after any pullback in this 2-hour time frame.

The arrows show the tight squeeze on the standard deviation lines that popped price skyward. Price has violated the upper band so a move back to the middle  band at 1901 and rising is on the table going forward. The middle band will move up into the 1905-1915 neckline area so this zone should be back kissed in the days ahead where price will decide if it truly wants to go higher, or not. The chart is favorable to the bulls but the choppy erratic action will likely continue due to elevated volatility. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

SPX 60-Minute Chart 200 EMA Cross

The SPX 60-minute chart with 200 EMA cross is a critical short term market signal. Price is at 1940 under the 200 EMA at 1947.48 forecasting bearish markets for the hours and days ahead. Bears will flip stocks south again and resume the downward slide across the board if the SPX remains under 1947 and heads lower.

The bulls win big time and a strong upside rally is confirmed if the 200 EMA at the 1947-1948 level is taken out to the upside. Write 1947.48 down and watch it like a hawk in the week ahead; it is an extremely important level; you will likely see price play around at this level going forward as it makes a critical bounce or die decision.

The arrows show the tight squeeze on the standard deviation lines that popped price skyward. Price has violated the upper band so a move back to the middle  band at 1905 and rising is on the table going forward. Price may run up to tap on the 200 EMA then come down to kiss the middle band then back up again. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

UTIL Utilities Weekly Chart Sideways Channel Breakout

The weakness in the utilities over the last few months was a dire indicator for the broad stock market and stocks did fall down the rabbit hole. The outperforming sector last week was the utes catapulting +4% higher above 600. The indicators are long and strong wanting more price highs after any pull back in this weekly time frame although the money flow is not impressed and is trying to create the initial pull back from the big run higher during the last 7 weeks.

Utilities moving higher is a bullish sign for stocks in this weekly time frame say for the next couple months or so into the April-May period. This is interesting since many market participants were ready to slit their wrists last week and continue to predict a huge drop in stocks at anytime. Usually the consensus is always going the wrong way. The television pundits told Ma and Pa Kettle to buy stocks over the last 18 months and now they have lost -10% to -30% of their money. Pa is eating franks and beans while Ma is huddled in the corner at the cast iron potbelly stove burning newspaper advertisements to keep warm.

The 15-week closing price is key since it determines if utes are in a weekly uptrend or downtrend and this influences broad stock market direction. The new week ahead compares back to the purple circle. Last week, price took out the 597 level creating a weekly uptrend for utilities which is market positive going forward. Price would need to drop under 594.41 to create a negative market signal. If UTIL then falls under the 50-week MA at 578, a stock market crash is on the table. At the least, if 578 fails, the SPX would be expected to drop from 20 to 40 handles in very quick order (a couple hours). The blue circle is the comparison number for the week of 2/8/16 which is 580.50 that will replace the 594.41 in importance.

Thus, providing fresh bear meat for those short the market, bears want UTIL under 594 this week which will create market selling then under 578 stocks will fall into a dramatic collapse. Or, for the week of 2/8, the market bears need UTIL to fall below the 578-580 level which would open a trap-door in the stock market creating carnage.

On the bull side, price simply has to stay at current levels and float sideways or higher and this will help the stock market bulls on a weekly basis going forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.