Monday, July 25, 2016

SPX (S&P 500) 60-Minute Chart 200 EMA Cross Negative Divergence

The saga with the sideways action and tight standard deviation bands on the 1 and 2-hour charts continues. Price makes a matching or higher high while the indicators slope lower, negative divergence, so there is no oomph remaining and stocks should retreat. However, the central bankers are powerful. The Fed decision is on tap Wednesday afternoon and most importantly the BOJ on Friday morning. Big stimulus is expected from the Bank of Japan and this ongoing global central banker intervention maintains a bid under stocks.

Price was squeezed higher three days ago but retreated after hitting the top standard deviation line. Price then tagged the middle band but has not yet touched the lower band. Perhaps that is on tap at 2162. Technicals want to see a roll over to the downside but the central bankers are standing on the sidelines waving cash at everyone telling investors to not worry.

The SPX remains on the island above 2159 so an island reversal pattern remains in play as previously highlighted (purple lines). Thus, the 2159-2162 is a key support level for price currently. If it is lost, price will likely be at 2153 and lower in a flash. Market bears got nothing substantive unless they push under 2123. The 200 EMA on the 60-minute is 2123 and price is above signaling bullish markets for the hours and days ahead. If 2123, is lost, stocks will be falling in earnest. Above 2123, the bulls continue smoking fat cigars dabbing the ashes in the bears face. 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 11:07 AM EST: The SPX falls under the LOD and is now down to 2163 testing that lower standard deviation band and the base of the island at 2159. Bulls need to hold this 2159-2163 area or the bears will bite off a chunk of market flesh. Stocks are typically buoyant, about 80% of the time leading into the Fed decision so if the bears want to create some selling this is their window now into tomorrow morning.

NTDOY Nintendo Daily Chart Riding the "Pokemon GO" Wave Fibonacci Retracements

One day a hero, the next day a zero. Nintendo catapults higher on the popularity of the Pokemon GO. Look around any park and other community places and you will see many faces buried in smartphones playing the mobile game. Nintendo rocket launches from 17.5 to 37.5 a huge 114% gain; a double. Traders were high-fiving each other telling one another how smart they are.

Today, Nintendo says the Pokemon GO game will not have a material impact on its earnings. Traders hit the sell button. Note how price retreats to the 62% Fibonacci retracement at 25-ish. Watch to see if this level holds, or not. If not, the door would be open to a 100% retracement back to the 17-18 sideways zone. Price will likely bounce in here and may stutter sideways into Nintendo's earning release this week where more information on Pokemon may be provided. Humorously, if you are over 25 years old and out there playing Pokemon, it is time for you to get a job. 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.

FTSE London Stocks Brexit Collapse and Big BOE-Induced Rally Afterwards

The bottom fell out of the pound and UK stocks after the Brexit vote. Long traders were screaming bloody murder. Investors were jumping from windows; fortunately the windows were on the first floor. The central bankers save the day, however, never allowing markets to fully correct over the last eight years. This time BOE (Bank of England) Governor Carney keeps the carnival going by running to a microphone proclaiming that the central bank will provide huge stimulus in August (pink circle). In addition, banking regulations will be tossed out the window to help promote lending. Traders trip over each other while guzzling BOE wine buying stocks with reckless abandon with all the proposed easy money. Can it be more obvious? The central bankers are the market.

The FTSE catapults from 5800 to nearly 6800 riding a magic carpet fueled by central banker Keynesian stimulus; a huge +17.2% gain in only one month's time. Traders cheer Carney for his money printing and celebrate lousy economic data since this guarantees more BOE stimulus and higher stock prices that make the wealthy super rich. What a glorious world! Well, if you are rich it is a glorious world; not so much if you are one of the faces in the huddled masses.

The red rising wedge says the move is long in the tooth. Ditto the neggie d shown by the red lines for the indicators. Stochastics are overbot but the RSI did not reach overbot territory as yet. Looking at the FTSE weekly chart, the MACD line has more juice, so this hints that the index will  pull back in the days ahead perhaps a week or so, but then likely come back up for another higher high in early August. If you made a  bunch of money on the way up with UK stocks, it would likely be prudent to take the gains then entertain a reentry in a few days time after a pull back. 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, July 24, 2016

SDY Dividend ETF Weekly Chart Dividend Stock Bubble Expands

The central banker intervention continues to create the bottoms in stock charts and prices remains above key moving averages verifying the never-ending Keynesian intervention. Traders don rose-colored glasses. Waiting for the dividend stock bubble to pop is like waiting for Godot. Keystone has been posting the SDY and DVY charts for the last couple years chronicling the top in the bubble but dividend stocks will not roll over.

This year, a new leg of life is breathed into the beast with more Fed, ECB, BOJ, PBOC and other central banker easy money. The bottom four weeks ago where SDY bounces off the 20-week MA support now at 81.23 was created by the BOE that came in to the markets promising boatloads of stimulus to save the day after the Brexit vote. The central bankers are the market and have been since early 2009.

Investors are chasing yield and perceived safety in dividend stocks especially over the last six months. Uncle Frank, and Granny Nell, that lives in the small bungalow at the edge of town, both took their entire life savings and bought dividend and utility stocks last week just like the nice young man on television said to do. People are going to get hurt badly.

The red lines show negative divergence in the near-term, and over the longer term, except for the MACD line that is running to the moon now in nosebleed territory. The long and strong MACD will want another higher high in price after a pullback in this weekly time frame. That top, say anywhere from one week to three months out, should be the final act in the dividend bubble saga. The monthly chart is very similar only showing 1 to 4 months more of juice available to allow higher prices.

If central bankers keep pumping, that may keep the party going. This week the FOMC announces its rate decision on Wednesday but there is no expectation of action. More importantly, the BOJ has promised more easy money juice and the NIKK and other global stock markets have rallied so the Bank of Japan had better deliver the goods on Friday or there may be some hari-kari going on. BOE Governor Carney goosed the FTSE and global stock markets to save the day after the Brexit vote promising mountains of stimulus to begin in August so he had better deliver a brand new shiny pony as well next month

That big intraweek spike lower in August 2015 on the chart was during China Black Monday on 8/24/16 when the Shanghai Index, SSEC, fell -8%. The Dow dropped nearly 1,100 points at the opening bell but recovered quickly since central bankers always save the day.

The ADX shows a strong uptrend in place in 2013-2014 that petered out in late 2014. Interestingly, dividend stocks stumbled sideways for over one year and the ADX shows that the sideways trend was a very strong trend. Then, as 2016 began, the sideways trend was not strong and price broke up above the sideways blue channel and the divvy bulls never looked back. The recent trend higher in price, however, is not a strong trend with the ADX moving down to 20.

Aunt Agnes just called; she said she took her life savings and bought telecom and dividend stocks last week. Agnes said the guys on television guarantee huge gains in dividend stocks and she does not want to miss the train leaving the station. She would be better served if she cashed in her ticket and did not get on the train.

The dividend stock bubble grows but the projection is for a significant multi-year top to occur at anytime over the next three to four months. Interestingly, that places markets in the ominous October time frame. Price should seek the middle band at 81.23 and climbing and the lower band at 76.43 and moving higher is also a target. It would not be surprising to see SDY down in the 62-74 range one year from now. The same technical analysis holds for DVY and for many individual dividend stocks. Watch that MACD line; as soon as it rolls over it will likely take the whole enchilada lower and begin a multi-month and multi-year slump lower for dividend stocks and the broad stock market. Those running into dividend stocks with reckless abandon are going to likely regret the decision when they look back one year from now. 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.

TNX 10-Year Treasury Note Yield Weekly Chart

Pundits are parading across television screens proclaiming 1% on the 10-year. Interestingly, they are all the same Einstein's that called for the 10-year yield to run to 4% in late 2013. At the end of 2013, Keystone pointed out the negative divergence in the chart and a smack down from 3% which was the complete opposite of 90% of the punditry's forecasts. It is not rocket science. The red lines show the neggie d and yield received the spank down back then as expected.

So, with all the noise now from analysts and market participants that 1% on the 10-year is guaranteed, that indicates that it may not occur; the consensus is typically wrong. Can the 1% occur somewhere down the road? Sure. Especially if a deflationary spiral develops. Global traders may seek the perceived safety of Treasuries and drive the yield under 1% but that outcome is probably not likely at least through the intermediate term (several months).

The green lines show the positive divergence in play now that will want to bounce yield (remember, higher yields reflect lower prices, in other words, traders shun notes and bonds so price drops and yield rises). The RSI and stochastics are drifting lower this year which may place the yield in a stuttering sideways move for another month but the expectation is for basing and a move higher in yields going forward. The 1% crowd will likely be disappointed.

The RSI and stochastics are oversold hinting that a basing is currently taking place for yield. There is a spaghetti of lines on the chart but note the positive divergence in the indicators over the last 5 years (thin green lines). Yield came down to test the 2012 lows and the indicators were not as weak hinting that yields will recover going forward. Yield punctured the lower standard deviation band (pink) so the middle band at 1.72% is definitely in play as an upside target and also the upper band at 2.03% with both of these targets trending lower (the targets will drop as the days and next couple weeks play out).

The neon circles for the ADX show when the strong trends occur. The strong trend lower in yields in 2011 into 2012 ended in the summer time 2012 and yields reversed and moved higher. The uptrend in yields was strong in late 2013 but the neggie d on the chart told you that that parabolic rise in yields was going to end abruptly, and it did. The strong trend higher in yields ended as 2014 began. The only other strong trend was in early 2015 when yields were rising but that petered out in the springtime in 2015.

Over the last year, the ADX remains under the low 20's indicating that there is no strong trend in place for this trend lower in yields. This hints that yields will recover going forward and the prognosticators looking for a 1% yield in the near-term receive a few more slaps to the face. Slap, slap. If the downtrend in the 10-year yield was strong and heading towards 1% the ADX should be above 30 running towards 40; it's not.

Mixing all this mumbo-jumbo together and sprinkling on some magic dust, the projection would be for yields to move through the unexciting 1.55%-1.90% range 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.

Tuesday, July 19, 2016

BPSPX S&P 500 Bullish Percent Index

The BPSPX is back on a double-whammy buy signal for the stock market. In June, the BPSPX fell under the 70% level which is a market sell signal and then the six percentage point reversal occurs off the top creating a double-whammy sell signal. Price reverses six percentage points off the bottom from 50 to 56 issuing a market buy signal. Then the BPSPX overtakes the critical 70% level creating the double-whammy buy signal.

The market bulls are okay as long as they keep the BPSPX above the 70% level. Markets are in trouble if 70 fails since that will be an initial market sell signal. If a six percentage point reversal occurs from 72.20 to 66.20, that would create a double-whammy sell and stocks will be falling in earnest. Watch it closely each day 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.

Note Added Sunday, 7/24/16: The BPSPX continues higher last week to the 74.40 level so the bulls are using the bears as a punching bag. The SPX prints a new all-time closing high at 2175. Same analysis holds; bulls are fine above the 70% level. Bears will growl if the BPSPX loses 70 and stocks will be falling in earnest under 68.40 (74.40-6.00).

SPX (S&P 500) 1-Hour Chart Negative Divergence Overbot Bull Flag Ascending Triangle Island Reversal Tight Bands Forecast Big Move

The SPX 1-hour chart has lots going on as the chart patterns and spaghetti of lines indicate. The S&P 500 printed a new all-time closing high at 2166.89 yesterday, 7/18/16, but not a new all-time high. The all-time high is 2169.05 from Friday, 7/15/16. The pink arrows show the standard deviation bands squeezing in tight in this one-hour time frame. A large move is coming likely from 20 to 30 handles or more perhaps today. Tight band squeezes do not predict direction only that a large magnitude move is at hand. Interestingly, the tight bands in June led to some additional lift then collapse in price down to 1990.

The important 200 EMA, a critical level that identifies a near-term bull market from a bear market, is at 2108 with bulls in control over the hours and days ahead. The SPX crossed up through the 200 EMA, which Keystone highlighted at the time. Note the textbook successful back kiss (for bulls) on 7/6/16 and then price took off skyward.

For the bulls, the two-leg bull flag pattern in blue is targeting the 2180-2205 area. There is some art involved in the bull flag projections so the case could be made that the pattern has played out. Price is making new record highs so, by definition, is rising but the neon lines show the potential for an ascending wedge pattern over the last four days if you say the base line is 2167-ish. The vertical side is about 20 handles so if price breaks out higher, the ascending triangle would target 2190-2195. The pattern jives with the bull flag target.

For the bears, price remains on an island above 2158-ish. The S&P 500 gapped higher from 2152-ish to 2158-ish and sits on the island for the last four days. An island reversal pattern would occur if price drops lower to the 2157-2159 level, then, in an instant, prints 2152 and lower falling back down through the gap. If the island reversal does not occur, then price may simply venture lower and fill that gap at 2152-2157.

The red lines show the rise in prices for the last week with negative divergence in the indicators. RSI and stochastics were/are at overbot levels. Price is running out of oomph to move higher but looking for the top the last few days is like waiting for Godot. The negative divergence should create a spankdown.

Stocks are usually bullish moving through the full moon each month which peaks in a few hours. However, the uber low CPC and CPCE put/call ratios indicate excessive complacency and lack of fear and are viewed as far more important than a seasonality factor. The low put/calls forecast a drop in the SPX of about 40 to 120 handles from current levels.

Adding another level of complexity, the ECB rate decision and President Draghi press conference is on Thursday. The central bankers are the market. So if Draghi flaps his dovish wings, stocks go up. If he balks and wants to delay more stimulus, stocks tank. As always, for the last eight years, the central bankers control the market.

What does all this mumbo-jumbo mean? Considering the negative divergence and the low put/calls, the expectation is for stocks to sell off from current levels. The tight bands indicate the flush lower may be fast. The wild card is the ECB on Thursday. If stocks rally today and try to remain buoyant into the ECB meeting, the low put/calls have to extract their pound of flesh so the forecast would remain for a pull back in stocks. Keystone is holding/adding near-term shorts looking for the top in here. These are not your grandfather's markets. The central bankers have destroyed price discovery, market functionality and economic cycles over the last few years. 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 8:55 PM EST: The bulls push the Dow higher for new all-time record highs but the SPX lags. Interestingly, the Dow floats higher into the peak full moon which occurred a couple hours ago. The same analysis holds. The bulls are trying to keep the party going into the ECB meeting Thursday morning since Draghi may provide more dovish talk that would provide further market lift. The upside also has momentum on its side. Note how SPX price today kept teasing the 2159-ish level (the top of the gap) and chooses to remain on the island. Tomorrow may be a very exciting day. The tight standard deviation bands on the 1 and 2-hour charts for SPX, INDU, COMPQ and RUT indicate some big excitement is imminent. Perhaps Draghi may lay an egg on Thursday?

Monday, July 18, 2016

CPC and CPCE Put/Call Ratios and SPX (S&P 500) Daily Charts Signal Near-Term Market Top At Hand



The CPC and CPCE put/calls are printing firmly in complacent territory. There is no fear in markets since the central bankers always pats everyone's behinds. When the boat is fully loaded to one side the markets typically go the other way. The bull party euphoric complacency continues today; long traders are drunk as skunks off the flavorful Fed wine, buying stocks with reckless abandon while donning lamp shades on their heads.

The red circles show stock market tops and the green circles bottoms. What do you think will happen? 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 5:03 AM EST Tuesday Morning, 7/19/16: The bulls keep partying higher with another rally in the Monday trade. Keystone presses near-term shorts. The expectation is for a 40 to 120-handle drop in the SPX based on the low put/calls. The wild card this week is the ECB meeting on Thursday morning. Tuesday will determine if the bulls can keep stock markets moving sideways with an upward bias for two more days into the critical ECB announcements, or, if markets simply begin to flush lower in earnest to take a rest from the parabolic one-month rally. Thursday will be a pivot day. If ECB President Draghi provides more easy money, that will pump stocks higher. If he balks and is hesitant that would likely accelerate a move lower in stocks. The central bankers are the market.

Friday, July 15, 2016

SPX (S&P 500) 2-Hour Chart Negative Divergence Tight Bands Bull Flag Inverted H&S

The bulls keep slapping the bears around with help from JPM and continued positive central banker talk that the easy money spigots are flowing. The RSI sneaks out more juice but tops out after that spike higher a couple days ago. Price is on an island above 2159, where it is printing as this is typed, and may perform an island reversal dropping like a stone through the gap to 2153 and lower. Otherwise, price may simply venture lower to fill the gap.

The red lines show neggie d that is rolling price over to the downside. The MACD cross is negative. The tight standard deviation bands are interesting. A big move is at hand in this 2-hour time frame. Price will either rocket higher, or quickly collapse. The blue two-leg bull flag targets 2180 and price tagged 2170 that is close enough for government work. The brown lines show an inverted H&S; the head at 2000 and neckline at 2105 targets 2210 (2105+105).

The expectation is lower prices unless a central banker touts more dovish talk. The tight bands say price will likely either be at 2210-2230, or, 2100-2120, say, early next week. Someone will be happy and someone will be sad. Watch to see if an island reversal occurs described above. It looks like something exciting should happen between now and Monday lunch time. Low put/calls indicate rampant complacency and a near-term market top. 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 12, 2016

SPX (S&P 500) 2-Hour Chart Negative Divergence Developing

Here is an update for the 2-hour chart from a couple days ago. The SPX and INDU are at new all-time closing and intraday highs. The MACD continues higher so the bears are slapped around with higher highs in price. The red lines show the set up from the other day. So a couple candlesticks are needed to see if the MACD rolls over and it does not; that bugger still has an upward lift to it. The bulls are strong. The current candlestick will continue printing, however, and that MACD line can easily be flat after the opening bell tomorrow (Wednesday). The expectation would be for a market top anytime over the next four hours. If that MACD line slopes down after the opening bell, the top may be in at the get-go.

As always, the only thing that can change the forecast is the central bankers or other positive news, such as bank earnings, that is not yet priced into the chart. This morning, former Fed Chairman Bernanke shows up in Japan, high-fiving PM Abe and BOJ Governor Kuroda espousing the greatness of Keynesian economics. The Three Stooges were drinking sake like madmen and planning a helicopter ride to drop money from the sky. The BOJ plans to provide huge stimulus so stocks catapult higher; the NIKK is up +7% in two days. Thus, stocks should top out now as long as a central bank does not intervene.

The upper standard deviation band is violated so the middle band at 2121 and rising is on the table. The neon lines show a two-leg bull flag pattern in play, first leg from 2000 to 2105, which is 105 points, then sideways consolidation with a drift lower forming the flag, then price begins the second leg from 2075-ish so the target is 2180. This is what the bulls are cheering for. The indicators, however, should roll over and forecast a drop in price. Sometimes estimating the bull flag targets is more art than science; the second leg has already ran a long way.

The red lines show neggie d but that pesky MACD line is a single hair higher over the last four hours. The expectation is for a market top on Wednesday and that would fulfill the negative divergence on the 2-hour chart above and the complacent put/calls and the elevated NYMO. Keystone placed trades on the short side this afternoon. Positive bank news or other market jawboning will likely extend the top a few more hours. 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.