Thursday, June 21, 2018

EEM Emerging Market ETF Daily Chart; Death Cross

EEM, the Emerging Market ETF, prints a death cross (50-day MA under the 200-day MA) a few days ago. Usually a bounce occurs in price once the death cross is formed. Overall, emerging markets are dead meat as long as the 50 remains below the 200. Watch to see if the 200-day MA rolls over and begins sloping negative, if so, things can get very ugly 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. 

VIX Volatility Daily Chart; Battle at 200-Day MA Determines Short-Term Bull or Bear Market

Keystone's VIX 200-Day MA Cross Indicator is an excellent short-term market forecaster. Stock market bulls win big below the 200-day MA now at 13.88 while bears win big above 13.88. Price is at 13.42 with the S&P futures -6 as this message is typed four hours before the opening bell for the Thursday regular session (the VIX begins trading at 3 AM EST).

Obviously, stock market trouble occurs above 13.88 but bulls are fine if the VIX remains under 13.88. The NYA 40-week MA Cross Indicator (see previous chart) is a predictor of the intermediate term (weeks and months) while the VIX 200-Day MA Cross Indicator is for short-term market moves (days, weeks, sometimes months). The NYA is at 12649 only one tiny point above its key 40-week MA at 12648. Thus, it is easy to develop a guideline for the path forward.

If the NYA remains above 12648 and rallies higher (bullish), while the VIX remains below 13.88 (bullish), the bulls will be throwing confetti while singing and dancing. Traders will be drinking Fed wine celebrating new all-time record highs day after day.

If the NYA fails below 12648 moving lower (bearish), while the VIX remains below 13.88 (bullish), the stock market will bumble along choppy sideways with a downward bias for the weeks and months ahead.

If the NYA remains above 12648 (bullish), but the VIX moves above 13.88 (bearish), the stock market will be soggy in the days and week or three ahead but after that will recover and rally again on the weekly basis.

If the NYA fails below 12648 (bearish) and the VIX moves above 13.88 (bearish), it's ovah, as they say in Brooklyn. Stocks will collapse lower and remain sick for the weeks, and potentially 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.

Note Added Thursday, 6/21/18, at 10:10 AM EST: The NYA collapses at the opening bell. The VIX is printing at 13.70, ho, whoa, ho, check that, price spikes to 13.97 above the 200-day MA. The bad scenario is playing out. VIX is at 13.93 above the 13.88 bull-bear line in the sand. Watch it closely. Bears will need to send the VIX above 14 and 15 to begin growling loudly. The SPX is down 12 points at 2756 testing the 20-day MA support at 2754 so the S&P 500 will bounce or die from here. VIX prints 13.88 sitting exactly on the 200-day MA. The market is making a major decision today. The bulls must keep the VIX below 13.89, otherwise, they are toast.

Note Added Thursday, 6/21/18, at 10:20 AM EST: The VIX pops to 14.19. SPX is down 16 points to 2751 failing below the 20-day. The 50-day MA support is 2713. The NYA is at 12562 well below the key 40-week MA indicating a cyclical bear market pattern ahead

Wednesday, June 20, 2018

NYA NYSE Composite Weekly Chart; Battle at the 40-Week MA Determines Cyclical Bull or Cyclical Bear Market Ahead

One of Keystone's key market indicators, the NYA 40-week MA Cross, is making a major decision. The NYA is sitting on the key 40-week MA that determines whether the stock market is in a cyclical bull or bear going forward. It is for all the marbles. Watch which way it pivots tomorrow. If NYA fails below 12647, the stock market will likely collapse lower. If NYA remains above 12648 and moves higher, the bulls are gathering upside stream and more new all-time record highs will be ahead.

The NYA 40-week is deciding if the stock market will fall into a bear market pattern going forward, or not. Keystone's UPS 20/50-Week MA Indicator remains bearish predicting a cyclical bear market ahead (the UPS 20-week MA stabbed down through the 50-week MA six weeks ago). If the NYA fails, two key indicators will be declaring a bear market ahead.

The potential bear flag in the chart above jumps out at you. Leg one from 13650-ish to 12150-ish is 15-hundo points. The consolidation period occurs from February to present which has a sideways to sideways-up bias which is textbook for a bear flag (price hugs the 40-week MA the last few months). If leg two begins from 12850-ish, the downside target is 11350-ish (12850-1500=11350). The 200-week MA support is at 11180. 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 Thursday, 6/21/18, at 10:07 AM EST: The NYA fails at the opening bell now printing at 12577. The battle continues but the bears are in the driver's seat.

Keybot the Quant Turns Bearish

Keybot, Keystone's proprietary trading algo, flips short on Monday at SPX 2758. As always, more info is found at Keybot's site;

Keybot the Quant

Sunday, June 17, 2018

SILVER Weekly Chart; Sideways Symmetrical Triangle; Standard Deviation Bands Tighten

Last week, silver is down -1.6% to 16.48 below key moving averages as the epic long-term sideways symmetrical triangle continues forming with price at the apex. The vertical side of the triangle in 2016 is about 5 bucks so a breakout above 16.8 would lead to 21.80 in the months ahead. A breakdown from 16.40 would send price in a multi-month down move to 11.40. Those are two drastic outcomes.

At a minimum a 3-dollar move would be expected for the months ahead (2017 vertical line) where silver bulls target 19.8 and silver bears 13.40. The standard deviation bands are squeezing in tight on the weekly chart which hints that the initial move is going to be sharp and fast and likely to begin at anytime forward. Last week was a sharp move higher but it was a fakeout with silver retreating by the end of the week. 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. 

Saturday, June 9, 2018

TNX 10-Year Treasury Note Yield 5-Minute Chart; Flash Crash 6/7/18

The US 10-year Treasury note yield flash crashes on Thursday, 6/7/18, at 1:30 PM EST.

Treasury yields are; 2-year 2.52%, 5-year 2.81%, 10-year 2.96%, 30-year 3.10%. The 2-10 spread is 43.8 bips. Yields on the long end are slipping lower.

SPX 2774. The Dow is up 135 points at 25281. The Nasdaq Composite tanks 40 points, -0.5%, to 7649. The Russell 2000 slips 6 points to 1669. Markets are mixed. VIX 12.15.

Brazil steps in with $2 billion to support the real. The move is increasing the worry around emerging market currencies that are crumbling against a stronger US dollar. The recent trucker strikes have seriously hurt Brazil’s economy. Brazil’s Bovespa loses -5%. EWZ tanks -5.2% and is briefly down -9%.

At 1:27 PM, the 10-year yield is at 2.94%. The US 10-year yield flash crashes to 2.88%. At 1:33 PM, the 10-year is at 2.92% then falls off a cliff printing 2.88% at 1:35 PM. Global yields move generally lower. Investors are flocking to the safe havens (buying notes and bonds sending yields lower). Brazil creates global contagion fear.

In about 15 minutes, the US 10-year yield is recovering to the 2.92% to 2.94% range near where the flash crash started now chopping sideways. The 10-year yield flash crashes 6 basis points in 2 minutes (2.94% to 2.88%) and at the low yield is down 12 bips from the 3% high overnight.

SPX 2766.66. INDU 25242. COMPQ 7621. RUT 1666.66. VIX 12.27.

WTIC oil is up +1.7% to 65.84. Brent oil is up +2.2% to 77.03. Natural gas gains +1.1% to 2.93. Gold 1298. Silver 16.84. Copper 3.2805. Sugar -3.8%.

Euro 1.1811. Euro/yen 129.59. Dollar/yen 109.72. Pound 1.3418. Euro/pound 0.8804. Indian rupee 67.1312. Mexican peso 20.5171. Canadian dollar 1.2983. Dollar/yuan 6.3921.

Treasury yields are; 2-year 2.50%, 5-year 2.79%, 10-year 2.94%, 30-year 3.08%. The 2-10 spread is 43.4 bips.

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, June 6, 2018

NYMO McClellan Oscillator and NYA NYSE Composite Daily Charts

The NYMO remains at lofty levels consistent with stock market tops (green circles). Red circles indicate market bottoms. NYMO has basically not been below 0% for a month so it will need to mean revert. A sturdy tradeable bottom has not occurred since the late March bottom with NYMO printing below -40 to prove that stocks washed-out. So now is the time to favor the short side and not consider longs until the NYMO comes down and prints below, say, -30 and lower.

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, June 5, 2018

CPCE and CPC Put/Call Ratios and SPX S&P 500 Daily Charts; Stock Market Near-Term Top is At Hand

The green circles are market bottoms and red circles market tops. What do you think is likely to happen and begin over the coming days?

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. 

Monday, June 4, 2018

Keybot the Quant Turns Bullish in Sideways Choppiness

Keybot the Quant, Keystone's proprietary trading algorithm, flips bullish on Friday at SPX 2734 after the jobs report but is already champing at the bit to go short again. Watch XLF 27.82 and UTIL 685.76 as two key parameters impacting broad stock market direction. More information is found at Keybot's site;

Keybot the Quant

The Dirty Truth (and Math) Behind the +3.8% Unemployment Rate in the 6/1/18 US Monthly Jobs Report

By The Keystone Speculator

On Friday, 6/1/18, market participants and business news outlets are giddy over the US Monthly Jobs report. The 223K jobs are above the 190K consensus but the prior month’s weak 164K jobs are revised lower to 159K. Funny how no one mentioned that. Nobody wants to be the wet blanket at the jobs report party.

Wages only met expectations at +2.7% year-on-year a pittance as all of you working stiffs will agree. When is the last time you received a substantive raise? The Federal Reserve does not tell you that wages need to grow at a +4.0% to +4.5% and higher pace to sustain inflation. The wage numbers remain low for many years and are not even above +3.0%.

Overall inflation cannot exist without wage growth. The grand nine-year monetary policy experiment by the Federal Reserve has not created inflation. The Fed’s obscene Keynesian spending has only served to enrich the wealthiest Americans that own large stock portfolios. Inflation remains Godot.

But alas, forget those two negative Nancy’s from the jobs report and instead focus on the unemployment rate that falls to an 18-year low at 3.8% (April 2000). The unemployment rates for blacks and Hispanics are at record decade-lows. What is not to like?

The republican news outlets such as Fox News cheerlead the jobs report throwing confetti and singing songs all weekend long. Even the liberal news outlets such as CNN and MSNBC begrudgingly credit President Trump for a strong jobs report (although many die-hard democrats says the economic strength is due to President Obama’s policies). The baby games are never-ending for the demopublicans and republocrats inside the beltway because they are two sides of the same political coin.

To Joe Sixpack, Aunt Nancy, Uncle Johnny, low-IQ teleprompter readers and novice market participants, a low 3.8% unemployment rate is great news. A low number means more people are working and the economy is doing great, right? Well maybe yes and maybe no. This article explains the nuances behind the number.

The unemployment rate obviously moves down as more people are put back to work, however, the rate also moves down when people cannot find a job and they give up looking for work. In the Bureau of Labor Statistics (BLS), people that are not actively seeking work are not counted in the unemployment rate.

A phenomena typically occurs when an economic recovery takes hold; the unemployment rate will usually tick higher, yes higher, for a quarter or two. This is a good sign. It indicates that tens and perhaps hundreds of thousands of people, maybe millions, believe that the economy is getting better so they start knocking on doors again looking for jobs. Since these folks are actively seeking work again, they are counted in the unemployment rate number which will actually bump higher. The folks rushing back into the labor force do not attain jobs overnight but will over time and this will send the unemployment rate lower after the brief period of buoyancy and lower for the right reason.

This leads us to the quandary over the paltry +3.8% unemployment rate on Friday. Is it due to a strong economy or is it more of the same-o, same-o, stagnant economy and folks are no longer counted since they have given up hope at finding a job? Perhaps the economic conditions are not improving as stupendously as touted daily by business news pundits.

In truth, millions of Americans remain out of work, and some for many years. Many families have been destroyed economically and emotionally since the 2008-2009 financial crisis. The dirty truth behind the low unemployment rate is that it likely reflects an ongoing stagnant economy with people unable to find adequate work and no longer counted in the statistic.

In addition, many businesses are at bare-bones staff levels and cannot cut anymore. Companies are waiting and hoping for an economic recovery to justify keeping the doors open since they cannot carry employees on overhead forever.

In a nutshell, if the economy is actually doing as well as touted by the business media, the unemployment rate would have likely ticked upwards to +4.0%, +4.1%, maybe +4.2, over the last couple months to reflect the flood of people running back into the job market because they see and believe that the economy is taking off like gangbusters. This is probably not the case.

Let’s get mathy. There are about 161.0 million people in the civilian labor force. Reference the BLS for detailed numbers. This article will keep the numbers simple. About 154.9 million people are working and 6.1 million are not. The 6.1 million divided by 161.0 million yields the +3.8% unemployment rate. The prior month saw 6.3 million people not working so dividing the 6.3 million by 161.0 million yields an unemployment rate at +3.9%.

If next month’s job report shows a further improvement in the people not working, say down to 5.9 million, that would yield a +3.7% unemployment rate (5.9 divided by 161.0) and the market commentators, traders and money managers will be partying like its 1999 (thank you Prince).

If life was so simple, Keystone would not have gray hair and perhaps in some spots would still have hair. Remember, these numbers no longer count the millions of people out of work that have given up looking since there are no jobs available. The unemployment rate would indicate a nice trend lower from the +4% numbers to +3.9%, to +3.8% on Friday, and perhaps down to +3.7% next month. The business commentators will be grinning like Cheshire cats cheering the glorious news.

Let’s look at the unemployment rate numbers for a joyous economy. There are 96 million people not in the labor force. Tens and hundreds of thousands, perhaps millions of people become so excited they can no longer contain themselves. Finally, doors will no longer be slammed in their face. Help wanted signs will be displayed on store fronts everywhere. Neighbors and relatives will be telling the unemployed about all the local companies hiring like gangbusters. How would the numbers look if this was happening?

Let’s say a couple hundred thousand people are finally encouraged about finding a job after many months or years of depressing unemployment. When the BLS asks these folks if they are looking for work, they enthusiastically say yes. They are now counted again in the unemployment rate. The job hires do not occur overnight. It may take several months or a quarter or two for companies to bring on the workers they desire as the economy accelerates higher.

Staying with the same example, under this scenario there would be, say, 6.3 million people that are not working, higher than the prior month, but this is actually good new since people are so excited and confident about their job prospects they are rushing back to the labor market. Doing the math, and keeping the overall civilian labor force number the same to keep the math easy, the 6.3 divided by 161.0 yields an unemployment rate of 3.9%. Whoopsies, daisies.

Everyone is happy that they may finally get a job but the unemployment rate is moving higher. This is the phenomena mentioned above and would actually be expected. An unemployment rate ticking higher a few notches would be encouraging and verify the strength in the economic recovery.

After a few months, hundreds of thousands of people would return to the workforce and the number of people not working will drop dramatically which then takes the unemployment rate back down for all the right reasons.

On the other hand, let’s say the economy is less robust than touted by the business media. Companies will keep slicing workers as best they can without impacting current business. The number of people not working will continue moving lower since the folks out of work six months or longer will no longer be counted in the BLS statistics and the unemployment rate will continue leaking lower.

Which scenario do you think is happening? Is the economy recovering placing people back to work and slowly sending the unemployment rate lower or perhaps is the economy not as strong as touted, and the reason the unemployment rate is dropping is simply because people that cannot find jobs are no longer counted in the unemployment rate statistic?

When the recession arrives in the months ahead, the number of people not working will increase dramatically. Say the non-working jumps to 8 million that will be an unemployment rate of +5.0% (8 divided by 161). In a recession, you will see the rate climb from a 3-handle to 4, 5, 6 and perhaps even a 7-handle.

The main objective of the above exercise is to reveal the dirty truth behind the low unemployment rate. The low +3.8% rate may be nothing more than a Potemkin Village. It wil be far happier news if the rate sneaks higher a tick or three (tenths) to indicate that people are enthusiastically looking for work again. The low +3.8% unemployment rate does not instill that feeling of confidence and joy.

The Labor Participation Rate, another number conveniently ignored in the Friday data by those hyping the upside euphoria in the stock market drops a tenth to 62.7%. The number of people actively looking for work falls. Nobody wants to be the wet blanket at the jobs report party.