Thursday, July 24, 2014

SPX 30-Minute Chart 8/34 MA Cross Overbot Rising Wedge Negative Divergence

The 30-minute receives an initial smack down due to the negative divergence. The chart would be content with this mornings price high, a new record all-time high at 1991.39, as a near term top. The previous 2-hour chart hints at a recovery move to play around at the highs again after an initial selloff occurs. The 8 MA remains above the 34 MA signaling bullish markets for the hours ahead. The bears need to push the SPX under the 8 MA at 1989 to start curling the 8 MA downwards to create a negative 8/34 cross. The bears got nothing until they receive the 8/34 negative cross.

Projection is sideways to sideways lower moving forward with current price levels serving as a near term top. Watch the MACD line cross to see if the bulls may try to thrust higher; the RSI also did not become overbot, but overall, the chart is consistent with price topping out and rolling over. Key support below is 1986, 1985, 1984, 1982, 1980, 1976, 1973, 1968, 1963, 1961, 1960 and 1956. Note the TRIN today down at an uber low at 0.74 creatign bullish lift today. Ditto dollar/yen at 101.82. Banzai! The weaker yen sends stocks higher. Interestingly, the VIX is up today, so is the SPX, so one of them is wrong. VIX is at 11.78 languishing under 12 continuing to create lift in the stock market. Bears need VIX 12.95 to create sustainable market selling. 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.

BPSPX S&P 500 Bullish Percent Index Remains on Market Buy Signal

The BPSPX remains on a market buy signal. You recall the drama in May when the buy signal triggered and the bulls have never looked back ever since. When the BPSPX reverses six percentage points a directional change is verified and when the 70% is crossed the double whammy buy or sell signal occurs. The 35 level is also important but the over 5-year bull market rally has left that lower level in the dust. In the years forward we will be talking about the BPSPX when it is down between 10 and 60; all things revert back to the mean eventually. In February the reversal occurs from 62 to 68 so the bulls had mojo and then once the 70 level was taken out the market buy signal verified the upside rally.

In March, equities peaked and the BPSPX reversed to the bear side from 77 to 71, then losing the 70 level, the bears were in clover. Then the bulls slap the bears in the face in early May recovering from 65 through the 70 and 71 levels receiving the buy signal again. The top print is 84.60, call it 85 to keep things simple, so a six percentage-point reversal is 79 for the bears to receive the initial market sell signal. Then under 70 the market downside will be locked firmly in place. However, the bulls are keeping price above 79 not allowing the bears to have a day in the sun, for now. The BPSPX will drop under 79; it is only a matter of when. For today, the bulls continue to ride the market buy signal. 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 2-Hour Chart Overbot Rising Wedge Negative Divergence

The theme the last couple days is waiting for the SPX to peak out in the near term. The bulls keep finding a way to add oomph. The key driver from late Tuesday through yesterday is the West backing down from announcing the strong sectoral (Level Three) sanctions against Russia. Once Europe and the US showed that they were weak-kneed and not willing to take the economic hit from sanctions, along with Russia, global stock markets rally higher. This accounts for the upside action from the 1982 intraday low seven candlesticks ago (Tuesday).

The bulls needed to punch up through 1989.50 to create an upside acceleration and the bulls keep pushing printing new all-time highs as this missive is typed now above 1991. The 2-hour chart above shows overbot conditions; the stochastics are cooked. The RSI is not overbot, however, so the sneaky bulls may plan some additional upside. The indicators are universally negatively diverged over the last few weeks but the very near term (the last couple days) RSI and MACD line want to squeeze out another price high after the initial spank down occurs. Price would be expected to drop down into the upward-sloping purple channel moving forward. The blue dots show the price extensions above the moving averages when the mean reversions typically occur.

The expectation continues for price to top out at any time today or at the latest early tomorrow. Since the RSI and MACD is trying to squeeze out more juice, one to three more candlesticks (two to six hours) may be required for price to top out so the bulls may be able to keep markets buoyant moving into the closing bell today. 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.

Wednesday, July 23, 2014

RUT Russell 2000 Small Caps Daily Chart Cyclical Market Signal

Keystone has mentioned the slope of the 150-day MA on RUT a couple of times over the last month. The slope of the 150-day MA for any index or stock is very important since it tells you if the price action is in a cyclical bull, or cyclical bear market. Keystone uses the 150-day MA slope on the SPX as a key broad market indicator but since small caps typically lead, the flattening and potential roll over of the RUT 150-day right now is very important.

If, actually when, the slope of the 150-day MA turns negative the RUT will fall into a cyclical bear market. The RUT last flattened in late 2012 where the markets were going to roll over but the Congress saved the day to begin the new year in 2013. The last significant cyclical bear for the RUT with a  negative 150-day slope was mid 2011 through early 2012 and of course this encompasses the August 2011 waterfall crash. In fact, the slope turned negative as the crash occurred. By the time a few days went by and the slope was clearly moving down, the RUT had already dropped from 870 to 640, -26%.

Sticking to the here and now, the RUT remains in the cyclical bull since early 2012 over two years time. Using YHOO Finance's interactive chart for ^RUT, with a 150-day MA, the last several days of 150-day MA end-of-day prints are; 1152.23, 1152.38, 1152.47, 1152.80, 1153.09 and 1153.41 yesterday. Looking at the differences and rate of change between each; 15 cents, 9 cents, 33 cents, 29 cents and 32 cents. The market bears were within nine thin pennies of turning the 150-day MA slope negative and officially beginning a cyclical bear market in small caps.

But alas, the bulls slap the bears in the face again, backed by the Fed's easy money, and the RUT recovers. Check the 150-day MA each day forward to see if that spread tightens and if the slope turns negative. When that day occurs the market bears can pop champagne corks since their long wait for extended and significant market downside is finally at hand. Until then, however, the bulls continue to rule the roost with an over two-year cyclical bull market in small caps continuing. Obviously, if the RUT prints below 1153 going forward this will help create the roll over in the 150-day MA and a cyclical bear market ahead. The market bulls must keep RUT price above 1154 and heading higher to keep the cyclical bull market party alive with an upward-sloping 150-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.

Tuesday, July 22, 2014

SPX Weekly Chart Rising Wedge Overbot Negative Divergence

As usual, as has been the case for well over one year's time, the bear's are slapped in the teeth again and hit over the head with a 2x4. The market bulls crush the VIX under 12 and create an upside orgy rally today that would make Caligula blush. We have been monitoring the weekly chart for the last month and as you recall we were waiting for a 1 to 3 weeks more and another matching or higher price high, due to the MACD line remaining long and strong in the very near term, and today, voila, it appears. Market bears are happy to see this chart although the money flow may further delay the bears day in the sun by a couple more weeks.

The new price high occurs today and the indicators are lined up with negative divergence across the board both on a multi-month time frame and in the near term. The little red circles may potentially delay the market top for a week or two but the top appears at hand. When Friday prints, check this chart because the MACD line and money flow very short term move (little red circles) will likely be flat or sloping down (neggie d) sealing the fate of the SPX. Regardless, she is very very close now and this is a potential multi-year market top.

The neon green circles show the touches for the 20-week MA occurring at least once every 4 to 6 months at the most so it is time for price to revert to the mean. Price has not touched the 50-week MA since November of 2012, 20 months ago! This is long overdue for a back kiss and price always overshoots to the downside just like the upside. Remember, the collapses from rising wedge patterns can be quite dramatic; sharp and quick where the markets are down -5% before anyone even notices and that is only the beginning. Exercise extreme caution moving forward.

Cash is a nice place to be and do not let people tell you that it is stupid letting money sit in cash. Be patient and let things play out for a few weeks or months forward. Despite the non-stop woodshed beatings the bears receive, they manage a smile on their black and blue swollen face. The bear's bloody eyes display a calm resolute look since they know the chart above will lead them to victory very soon. Projection is for sideways to sideways lower for the weeks and months to come with a multi-year market top potentially printing right now. Index shorts can be continually scaled into here 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.

CAT Caterpillar Weekly Chart Rising Wedge Overbot Negative Divergence

CAT has finally run its course. Notable short-seller Jimmy Chanos of Kynikos Associates will be happy since he is short CAT and has been professing its ills for many months. He will now finally be able to breathe easy. Caterpillar can be shorted here forward. The green sideways symmetrical triangle was highlighted as it developed and played out with an upside break out as many of you long time readers remember from last year. The vertical side of the triangle is about 25 handles so from the breakout at 85, add 25, and voila, 110 target is achieved. That bull rally was basically straight up.

While the triangle pattern target is snagged, the red lines show a rising wedge in place with overbot indicators and negative divergence across the board (red lines). This is an attractive stock to short going forward. Purple lines provide support. Economists and traders say the global economy is running on all cylinders but that is in conflict with CAT rolling over for the weeks and months ahead. All construction, bridges, buildings, roads and houses begin with a hole in the ground made by a yellow excavator or dozer. Watch rubber and tire makers to see if their sales drop since there will be less need for big industrial tires for the CAT equipment. Projection is sideways to sideways lower prices into the end of the year. 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 7/24/14: CAT reports disappointing earnings this morning. The stock plummets -3.4% printing an intraday low at 104.09 at that 104-105 first level of support.

JJG Grains ETN Daily Chart Downward-Sloping Channel Falling Wedge Oversold Positive Divergence

The drop in corn and wheat prices has been spectacular. JJG is a grain ETN that shows the carnage. The move lower shows inflation fears subsiding and turning into disinflationary fears. Corn is in many products and a requirement for raising beef, pork and chicken so the food inflation at the supermarket will relax moving forward. The blue downward-sloping channel is in play. JJG is beaten like a rented mule but note that the green lines show universal positive divergence across all indicators, oversold conditions, and a falling wedge pattern (bullish). If you are a nimble trader, this would be a nice long trade to jump into for a quick pop. The weekly chart remains weak so you have to take the money and run once it launches. A move up to the bottom rail of the channel and horizontal support at 40-ish is an upside target. Keystone does not hold a position in JJG currently.

The inflation-deflation debate will rage on but the chart shows that the food inflation is deflating. JJG will bounce but then stagger sideways even making new lows moving forward say through 35-43 for the weeks and months ahead. 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.

HYG High-Yield Weekly Chart Rising Wedge Overbot Negative Divergence

High-yield instruments have rolled over from lofty levels. This is one of the bubble areas Keystone has been highlighting in recent months. SJB (very thinly traded) is an ETF that moves inverse to high-yield (SJB moves up if HYG falls) and Keystone remains long. Collapses out of rising wedges can be quite dramatic. The fall from the top is harsh but still nothing that a rising wedge pattern is capable of. The purple circles show that price has not back tested the 20-week MA, now at 93.63, for close to one year, until now. Price always reverts. The 50-week MA, now at 91.17, has not been tested in one year as well. A collapse from a rising wedge could easily tag the 50-week MA and prices typically overshoot to the downside just as they overshoot to the upside.

That said, the 20-week MA is a logical place for a relief bounce. The MACD and stochastics are weak and bleak. The RSI and money flow, however, can help with a short-term relief bounce. Overall, the expectation is that the top is in for high-yield. Even if price ventures up for an M top, or double top pattern, price is not expected to make new highs again. HYG has jumped from 40 to 95, +122%, due to the Fed's easy money starting with QE1 in March 2009; over +25% per year but the Fed says there are no bubbles in this area. HYG may recover in the near term but lower prices are expected going forward for the weeks and months ahead. 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 30-Minute Chart 8/34 MA Cross Tight Bands Squeeze Out Upside Rally Rising Wedge Overbot Negative Divergence

Here is an update of yesterday's chart. The bulls broke up through the sideways channel at 1976 resistance so 1980 R was attacked which also gave way. This opened the door to test the all-time highs at 1985-1986 and bingo, a new all-time intraday high is printed at 1986.24. The tight bands squeeze out an upside move. The 8 MA crosses above the 34 MA yesterday afternoon signalling bullishness for the hours ahead which occurs today.

The red rising wedge is developing, the stochastics are overbot, the red lines show negative divergence in the multi-day frame as well as VST over the last couple hours except for a smidge of juice with the MACD line. So markets would be expected to top out in 1 to 4 candlesticks so in an hour or two. Thus, perhaps a sell off may appear into the closing bell. AAPL earnings are released after the closing bell and will greatly impact the broad markets.

Key S/R is 1986, 1985, 1980, 1976, 1973, 1968, 1963, 1961, 1960, 1956, 1951 and 1949. Keybot the Quant algo turns bullish today but remember that Keybot is operating as a lower risk lower reward type model and not designed to catch exact tops or exact bottoms. A spike in volatility or weakness in retail, financials or copper will immediately turn the markets negative again. For now the bulls are happy with a happy upside orgy day but the projection is for the SPX to top out perhaps this afternoon. 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 3:50 PM:  The SPX remains elevated today dropping down to 1981 a short time ago receiving some of the neggie d spank down action. The topping out behavior remains in play. The SPX 2-hour chart may try to squeeze out 1 or 3 more candlesticks so the top may be on tap tomorrow. There is 10 minutes remaining to see if the SPX can print a new all-time closing high. The SPX will print a new all-tiem record intraday high at 1986.24. Trannies are at all-time highs again and will be looking for the Dow Industrials to confirm. VIX is 11.92 not moving lower to provide more bull fuel, but not moving higher so the bears do not receive help. Market bulls will need a lower VIX tomorrow to take equities higherTRIN 1.00 dead flat neutral refusing to pick a side today not wanting anything to do with bulls or bears.

Note Added 4:02 PM: The SPX does not print a new all-time closing high.

Keybot the Quant Turns Bullish

The ebb and flow continues with Keystone's trading algorithm, Keybot the Quant, flipping to the long side at SPX 1982. Do not hold your breath since it would not be surprising for a whipsaw move to occur back to the bear camp. Volatility is the key market driver since late last week due to the geopolitics so the wild moves in VIX, up and down, sends the broad indexes in the opposite direction, down and up. Watch VIX 12.96 as the bull-bear danger line. VIX is at 11.95 comfortably in the bull camp creating the market upside today. More information is at Keybot's site;

Keybot the Quant