Tuesday, December 31, 2013

SPX 2-Hour Chart Megaphone Expansion Pattern Overbot Negative Divergence

Time to pick up the handle on the brown megaphone and yell, "the top is in." The brown expansion pattern remains in play with price continuing to test the upper trend line. Remember we were waiting for one more move up in price because of the long and strong RSI and MACD line (green lines), and, here we are. The SPX took out the prior intraday all-time high from 12/27/13. The HOD shown on the chart at 1845.61 is currently the new all-time record high for the SPX.

Now that price came back up, note the universal negative divergence (red lines). It took a few days but the chart finally set up for a roll over. The 1-hour and 30-minute charts have some VST juice so if they jog for a few candlesticks before rolling over, that would be about 2 to 4 hours of trading time, which would encompass today's trading. Thus, projection is for the SPX to now move sideways to sideways lower moving forward. Interestingly, the new moon is only about 17 hours away, markets are closed tomorrow, and equities are typically weak moving through the new moon. The major Bradley turn is right now as well hitting just as the 2-hour chart tops. New money should come into markets the first few days of the year which is a bull plus. The gap at 1833-1835 should come into play moving forward the next day or few, and the expectation would be for price to move below. VIX just turned one penny positive--the opposite of what to expect on an up market day 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.

Note Added 11:22 AM:  SPX prints a new all-time high at 1848.64. Expectation remains for SPX to roll over moving forward perhaps into the closing bell. If the day ends in an upside orgy, then selling is anticipated when trading resumes on Thursday. Watch the hourly charts to make sure the negative divergence remains; that is all that matters. GTX is 4833 coming very near the bull-bear line at 4820. If GTX closes today under 4820, this would be a go signal for bears. GTX above 4820 hints at the bulls maintaining market elevation. Watch the 8/34 MA cross on the SPX 30-minute chart. The 8 MA is above the 34 MA signaling bullish markets for the hours ahead. The 8 actually stabbed down through the 34 MA yesterday but it was a safe bet it would reverse and move back above, which it did, since the 2-hour chart wanted the SPX to come up for another price high. The bulls are in the market, the bears have given up. Some of the upside joy today is probably based on the expectation for a big upward spike to begin 2014 on Thursday morning. Everyone is bulled up for the new year. VIX is positive at 13.68. Bears need to push the VIX above 14 to get their mojo back.

BDI Baltic Dry Index Negative Divergence Price Extended Sideways Channels

Everyone was still poo-pooing the shippers when price broke up and out of the long-term sideways symmetrical triangle from 2012-2013 this summer. This pattern paved the way to the upside and the prints above 1700 easily satisfied the projections. There are lots of shippers to play; traders like DRYS as a favorite, DSX, SEA, BALT, FRO, GNK, EGLE, etc... But the last one-half year was a heck of a run. The shippers also typically receive love ahead of the holiday season as a lot of bulk dry goods are shipped. Coal, iron ore and steel have rebounded in 2013 and this goes hand and hand with the stronger BDI. The chart, however, says the party is long in the tooth--just when many are jumping on the band wagon. Price is far extended above the moving averages (pink dots) requiring mean reversion. Shippers tend to go up as Treasury yields rise so the expectation considering the chart above, is for yields to remains somewhat flat for 2014 rather than rising sharply.

The red lines show the negative divergence top a couple weeks ago and the neggie d was universal across all indicators, therefore, the chart is not interested in price coming up for a matching or higher high again. Note how the indicators are all lagging as price nears that matching high. Even if a higher high prints, that would be a good short opportunity since the negative divergence should be firmly in place. Projection is sideways to sideways lower moving forward for weeks and months ahead with price likely seeking the sideways channels through 1600-2300 or through 1200-2300. Those looking for continued upside in the Baltic are going to likely be very disappointed as 2014 proceeds. 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, December 30, 2013

Keystone's Summary of 2013 Predictions

Keystone's 2013 Predictions Summary

It’s time for another year of predictions that will provide comic relief in December 2014, but first a look back at 2013 is in order. The analysts are out in force now forecasting the SPX to move above 2000 in 2014. Perhaps they will all be correct. Last year, there was a consensus from 1390 to 1615 and the SPX blew up through even the highest estimate. The power of the central bankers, especially the Fed and BOJ, can never be underestimated. Like the old Wall Street adage says, “don’t fight the Fed.” In addition, the low rates fuel share buy backs that pump asset bubbles higher. The weakness in copper and commodities from February 2013 forward had no negative effect on markets. This is remarkable and verifies the power of the Fed. The ‘shock and awe’ move by the BOJ in April 2013 was the single greatest market upside driver in 2013.

Keystone was looking for lower equities in 2013 and had the direction and magnitude wrong. Fortunately, Keybot the Quant, Keystone’s trading algorithm, is smarter and navigates successfully through the year. Keystone continues to hold short positions against the markets that are currently all under water as equities continue higher. Market bears should get a turn at bat in 2014.

Keystone looked for dollar buoyancy in 2013 and euro weakness. Both were on the flat to bullish side. Also, a continued disinflation with a move towards deflation scenario was expected, which remains in place, but bond yields were expected to be flat. Instead the 10-year yield went from 1.9% to 3.0%. In fairness, the 10-year dropped to 1.6% before the rise. Keystone thought the effects of QE would diminish since there is no velocity of money and the whole globe is now debasing anyways, however, global traders continue to believe in the central bankers and as long as this trust remains, all is fine for market bulls. Keystone expected lower equities which obviously did not occur, in fact, equities logged one of the best years in a long time.

(12/30/13 end of year assessment shown in color)

Keystone’s Predictions for 2013

1.    SPX High for 2013: 1520 (over 1800)
2.    SPX Close for 2013 (SPX Begins at 1426): 1205 ($93x13) (over 1800)
3.    SPX Low for 2013: 1105 (1426)
4.    Dollar Range ($USD): 77-93 (79-85)
5.    Dollar Closing Price ($USD): 88 (80-81)
6.    Euro Range ($XEU): 100-137 (128-138)
7.    Euro Closing Price ($XEU): 113 (138)
8.    10-Year Note Yield Range ($TNX): 1.10% - 2.00% (1.60%-3.00%)
9.    10-Year Note Closing Yield ($TNX):  1.55% (3%)
10.  30-Year Note Yield Range ($TYX): 2.00% - 3.20% (2.80%-4.00%)
11.  30-Year Note Closing Yield ($TYX):  2.65% (4%)
12.  Unemployment Rate % Range:  7.3 – 9.5% (7.0%-7.9%)
13.  Unemployment Rate % December 2013: 8.2% (7.0%)
14.  GDP Average During 2013:  1.1% (about 1.5%-ish)
15.  WTIC Oil Range ($WTIC): 50 – 110 (85-113)
16.  WTIC Oil Closing Price ($WTIC): 73 (99)
17.  Brent Oil Range (BNO): 80 – 130 (96-112)
18.  Brent Oil Closing Price (BNO): 93 (111)
19.  Natty Gas Closing Price ($NATGAS): 5.25 (4.43)
20.  Gold Range ($GOLD):  1000 – 1800 (1180-1700)
21.  Gold Closing Price ($GOLD):  1375 (1200)
22.  Copper Range ($COPPER): 2.0 – 3.8 (3.0-3.8)
23.  Copper Closing Price ($COPPER):  2.60 (3.38)
24. Commodities Range ($CRB):  220-310 (270-306)
25. Commodities Closing Price ($CRB):  265 (282)
26. China Growth Rate % Average for 2013: 6.5% (but data not reliable) (it stays above 7% even 7.5% if you trust the data)
27. The QE3 and QE4 quantitative easing measures are not creating the strength that QE1 and QE2 had. There is a race to the bottom now by all countries, a race to debase, a competitive devaluation. As the year moves along traders will realize that QE simply does not have the super oomph like prior years and this will further weaken markets. (Nope, central bankers continue to rule)
28.  Disinflation will continue with a move into deflation during 2013 as measured by Keystone’s Inflation-Deflation Indicator. Wage deflation will continue to be a major concern. People do not spend money if they do not see their salaries increasing. The massive deleveraging for people, business and government continues. (correct, stocks move higher but we remain in a disinflationary environment; wages are not increasing)
29.  The U.S. will fall into recession this year. Higher taxes and regulations, and Obamacare costs and taxes, will hurt business and hiring. The weak consumer sentiment and confidence numbers, as well as retail sales, in late 2012, pave the way to a sick economy in 2013. (nope, Obamacare is problematic but the weakness has not appeared)
30.  The four-year Presidential cycle points to lackluster first and second years, 2013 and 2014, and this is expected for 2013.  The 18-year cycle, currently in a secular bear from 2000-2018, has a few more years to go before flipping back to an 18-year bull market in 2019-2037. In fact, two more recessions may occur before the 18-year cycle bottoms, perhaps a recession in 2013 and another in 2017, and, if each recession is a couple years in duration, potentially four out of the next six years may be weak for markets. (this statement holds true but 2013 was up)
31.  Structural unemployment will continue in the U.S., and the social fabric will show signs of stress, with increased crime, especially burglaries. Families grouping together to live, such as young adults living at home with parents, or elderly parents living with children, will continue since folks will be hurt by the deflationary funk and low employment. So this boost of family formation will be missing in action. (correct)
32. The housing sector will continue to struggle and the recovery will prove premature.  The poll of people building new homes are shrinking, a shadow inventory remains, the cash buyers are running out, and many of these investors are flippers waiting for a big push in housing that will not yet occur. Many of these flippers will seek to unload the properties which will weaken the housing sector. Other foreclosures, now freed by the banking paperwork, will increase the housing inventory. The banks and financial companies have been buying real estate they will be caught in the housing lull as well, which will create a housing funk for a couple or few more years, a flat lifeless market. (housing peaked in April and down ever since however the jury is out)
33. House prices will move flat and start to fall as the year moves along, surprising everyone believing in the housing recovery. (they continue sideways some elevation; hedge funds chasing real estate)
34. Housing Starts will not exceed one million surprising all that are expecting a strong housing recovery. A strong recovery will be shown by 1,000K starts and higher, not seen since June 2008. (Starts squeezed out 1 million)
35. January should be weak considering that consumer sentiment and confidence is dropping, retail sales are weak and the quantitative easing measures are having less of an effect. The highs for the year may occur early in the year. (nope)
36. Keystone’s Cash Society™ will grow during 2013.  People will realize that taxes can be avoided if you pay cash for goods and services. This behavior will grow the underground cash society. This is the path Greece went down, and other countries that do not properly address debt. Raising taxes does not increase the amount of money that comes into the coffers; it may reduce the amount as the cash society flourishes. (cash society is growing)
37.  A Flash Crash will occur this year on par with the 5/6/10 Flash Crash. (not one quite on par but many notable flash crashes that Keystone catalogs on an ongoing basis)
38. The ECB will start to cut rates (there is not much room from 0.75%) in early 2013 to spur growth in Europe and help the struggling nations. Perhaps at the 2/7/13 meeting. The euro will trend lower all year long. (euro flat to higher although Draghi did cut rates)
39.  Greece will remain part of the euro up thru Merkel’s re-election. (yes)
40.  Merkel will be re-elected in September 2013. (yes, easy one)
41.  At the end of 2013, after Merkel’s re-election, talk will heat up greatly over Greece leaving the euro and also the possibility of Germany leaving the euro. (interestingly, gunmen today shoot at the German ambassador’s residence as Greece and Germany are at odds over austerity; no talk on Greece leaving euro, however)
42.  The German DAX, the big success story of 2013, will roll over and lag in 2013, but some money-pumping will help it recover into the Merkel election. (a lull then Merkel pumped it up through the election to the current new all time highs)
43. The European markets, after phenomenal gains in 2013, will roll over as the European recession deepens and experience a weak 2013. (nope, euro markets remain at multi-year highs fueled by weaker yen)
44.  China hard landing occurs. China’s shady banking and insurance scams (wealth-type products) will unravel and throw the country into turmoil as many citizens are wiped out of their savings. This will slow the move to an urban, domestic-led economy. A mistrust of the city life will continue especially on news of company failures and scams. The move from rural to uban will take longer than many think. The one-child policy will have serious ramifications from a demographics standpoint fueling potential unrest. The growth will probably stay at a 6.5% number, but this will be in concert with a hard landing. (no hard landing yet, one-child policy was changed)
45.  Japan will accelerate their quantitative easing from spring on once the member positions are in place at the BOJ. The dollar/yen and Nikkei may languish as the year begins and not run higher on the yen weakness until the late spring and summer forward. (the BOJ yells Banzai! Destroying the yen and pumping dollar/yen and stock markets higher)
46. Japan will face a massive debt crisis in 2013 which may be a catalyst for a global monetary crisis across the globe. (nope, the party continues)
47.  Japan and the U.S. will forge strong ties with natty gas and LNG which will lead to building a liquefier or two in the States and a terminal or two in Japan which will be a bright spot for the overall economy. America’s natty gas is Japan’s future. (yes)
48. In general, the natty gas industry renaissance will continue in the States despite the government placing road blocks. The negativity concerning fracking should have little effect on the industry. The natty gas auto industry will grow and talk and action will increase on natty infrastructure. Folks will begin to realize that natty gas is one of the tickets out of the country’s monetary mess. (yes, although natty gas infrastructure lags)
49. More and more U.S. manufacturing will move to Mexico and gains will be made with the drug war on the border. The violence will lessen now that States have legalized pot since much of the pot that came across the border is no longer desired. (things are calming a bit)
50.  Protectionism around the globe will increase, with country against country, nation against nation, in little spats, with countries performing tit for tat measures against each other to provide advantages for their own economies. The race to the bottom. The global economic environment will be poisoned by this behavior causing global markets to languish. (there are protectionism measures increasing like China solar panels and French wine)
51.  The Fed will not raise rates in 2013. (easy one, now there is ZIRP Forever)
52.  Unemployment will remain elevated and wage deflation and average hours worked will remain flat showing a continual situation where businesses simply have no plans to hire or expand. (one of the better predictions)
53.  The Dividend Stock Bubble will continue to burst. ETF’s such as SDY and DVY will top in early 2013 and these highs may not be seen for a long time. (they continued to run although this prediction will be used moving forward)
54.  Financials will underperform in 2013. (nope)
55.  The Great American Consumer will finally peter out after decades of reckless spending. The retail sector will be weak in 2013.  A couple or few notable retailers will seek bankruptcy protection in the spring and summer sending shock waves thru the retail sector. (Remember, predicting the demise of the Great American Consumer is a fool’s errand since they have spent non-stop since the 1970’s.  Perhaps Keystone should mark this prediction ‘Incorrect’ right now?) (yes, incorrect; the consumer lives on)
56.  Bankruptcy will return as an oft-used word in 2013 as many businesses across many different sectors will seek protection due to sluggish sales and a weak, low and slow-growth economy. (nope)
57.  The muni-bond top will continue and roll over with MUB trending lower. MUB to likely make its high in early 2013 and then move sideways with a sideways down bias for years to come. (yes)
58.  California will face a monetary crisis and look to the Fed for support. The country will be up in arms over having to bail out States. A couple other States will jump on the band wagon right away, perhaps Illinois. The local and state government difficulties will continue with both looking to raise taxes as a means to raise revenue. (governments are all raising taxes but Cali did not face a monetary crisis)
59.  The automobile industry will be far weaker than anyone expects. The late 2012 surge in Ford pick-ups should abate and sales will be weak across the board moving forward. Weak auto sales will add to copper weakness and continue platinum and palladium weakness. (auto’s surprisingly held in there, the rich made richer by the Fed all bot new cars)
60.  Despite the government wanting to exit GM in 2013, at a loss, the stock will languish all year long due to a weak global economy and auto sector. This will cause the government to delay their exit and open up new concerns over saving GM since they will be headed into trouble again. (nope, it is painted as a happy ending and the stock moves higher)
61.  Internet will start to fracture into those respecting their own privacy and those that do not care. Sites that respect privacy and have and explain strong guidelines will win over many subscribers. Computer privacy issues will be very important to some folks but others will not care. FB and other social sites will continue to make mistakes exposing personal information. The privacy issue will be key in 2013. (great prediction considering the NSA scandal and Snowden occurred and is ongoing)
62.  Twitter IPO will be wildly successful. (yes)
63.  There will be some consolidation of companies in the tech sector in 2013, which will lead to stronger companies, but layoffs. Mobile chip companies such as ARMH and QCOM will continue with favorite son status. (yes)
64.  Sadly, the rich vesus poor class warfare talk will continue and this is simply another negative background force that will hurt the economy in 2013. The business bashing environment will continue thru 2013 and business will continue to struggle in a very difficult environment. (yes)
65.  The U.S. standard of living will continue to slowly decrease over time. (yes)
66. Young people will become disillusioned with college debt that results in the same job that would be obtained without the degree, only now the young person is an indentured servant with 50K government debt. Young folks will gravitate towards skills and seek high-paying jobs in shale gas, welding, natty gas technicians, and other similar industries. The stigma of trade jobs will vanish as the young folks seek these technician-type and other physical-type jobs rather than office jobs. (yes but structural unemployment is a problem)
67. On-line education sites will start to catch up with the needs of young people and will expand in a multitude of ways to educate all people of all ages.  The use of GOOG and AAPL tablets in classrooms will increase. People will be retrained with different skills so they can seek available positions and the Internet and on-line education will play a more important role to fill these needs. (give it a yes)
68.  The country will accept the new marijuana laws and become less concerned as time moves along, especially since many States and localities will want to fund government by taxing the lucrative pot industry. (yes)
69.  Banks, financial institutions, airlines, and many other companies will incorporate more and more add-on fees to boost the bottom line in a weak low-growth economy. The nit-picking fees will further hurt the consumer. (yes, hurt the consumer but create big profits for companies)
70.  The cyber threat will increase and one or two major banks will experience a significant hack attack and problem in 2013. Cyber security companies will do well in 2013. (yes, look at the TGT breach, things are a mess in cyber security land)
71. For tech in general, there will always be great new products but much of the tech revolution from the 1970’s thru the 2000’s is waning. Nowadays, sites perform upgrades that add very little new items and instead create difficulty of use and a poorer experience. This is a sign of an industry trying to extract more with less, providing programmers work to do but the benefit is becoming less attractive. Look at apps, 500K apps and the typical person likely only uses a couple dozen. Plain and simple, the number of new ideas in technology will continue, but at a slower pace. (yes)
72. Data is the most important thing in technology, companies can sell and lease data to multiple outlets and create revenue streams. The data becomes more important than the actual money a site brings in. Privacy limits are pushed again. (yes, ‘data mining’ is a new buzz word, and ‘metadata’)
73.  AAPL will struggle in 2013, the luster is off the rose. The gun-ho Apple enthusiasts have filled their needs. New customers are more open to other manufacturers and more focused on the price point.  The realization will occur that Apple is simply another commodity producer of Smartphone’s, tablets and notebooks like any other manufacturer. AAPL television will either not appear in 2013, or, if it does, only receive a lukewarm reception. (yes, although AAPL may finally make some inroads to China; Samsung rules, folks like the larger screens)
74.  AMZN will sell a mobile phone and it will be successful. (not quite there)
75.  Computers and technology in general will continue to create deflationary affects on the global economy.  Computers are huge deflationary machines. Robots will continue to replace human’s in more and more jobs, especially dangerous jobs. The gains in technology only serve to increase the structural unemployment. (yes)
76. The PC market demise is greatly exaggerated. Content creators will continue to need desktop and laptop machines moving forward.  The desktop manufacturers should experience one more business cycle push where offices upgrade computers, but the slow slide south for PC’s should continue after that, and then develop into a steady base line business. (HPQ runs higher)
77.  Mobile monetization will continue to be a tough nut to crack.  People want things to be free or low cost on the Internet, and do not want to have a small screen littered with ads. There are profits to be made but the realization will hit that mobile ad revenue may not be as great as thought. (jury’s out)
78. The Wallet Wars will be in full display this year and a pivotal year to identify winners and losers in the mobile payment battle. Square is trying to gain the early edge.  The best tech ideas are those out of left field with one company leading. The wallet wars are already a jam-packed battle zone with companies fighting each other to be one of the main darlings.  This behavior will result in a low margin difficult business moving forward. (jury’s out)
79. The trend in localized healthcare clinics treating straight forward healthcare issues will increase, also in-store health models such as WAG. (yes)
80.  The self-publishing of books will increase in popularity with folks attempting to write the great American novel.  The self-publishing machines will increase in popularity and maintain interest in the printed word. Magazines and newspapers will continue to go the way of the buggy whip. (eBooks continue gaining huge popularity)
81. 3-D printing will continue to gain in popularity and use, little boxes that can print nearly anything you need. This has a huge future and is revolutionary. (yes, big year for those stocks)
82.  The automobile industry is placing black boxes in all cars moving forward similar to the flight recording boxes in airplanes. There will be arguments against this new practice but people will forego more of their rights and all future automobiles will be manufactured with the black box recorders with Americans wanting to gladly give up their liberty for a little bit of perceived safety. Folks are already using Progressive’s gizmo that tracks vehicle behavior. (yes, that is where technology leads)
83.  Large X or M class solar flares will hit the Earth at some point in 2013 and folks will be shocked at the amount of electronic damage that occurs due to the electromagnetic pulse. Folks will take solar flare events much more serious moving forward. (nope, for the solar maximum cycle, it was oddly quiet, 2013 should have been a banner year for flares and plasma events)
84. As the difficult economic times continue in 2013, folks will seek out music and other outlets to reduce stress and seek more simple, perhaps frugal lives. More and more products will move towards less use of labeling; understated goods will be in more demand. (yes about the move to avoiding the gawdy labels, but folks are still partying like its 1999, well, at least the wealthy that the Fed makes wealthier)
85. Defensive sectors such as consumer staples like PG will hang in there better than other stocks during 2013. People always need toothpaste, toilet paper, and soap no matter what the economy is doing. (markets did not correct properly all year long but PG ran higher like all the rest)

Correct 48
Incorrect 37
Total 85
Percentage Correct 56%

(Many of the above predictions will be used for 2014)

Blank Template for 2014 Predictions and Prognostications

It's that time of the year again for predictions. The analysts and media pundits are already providing opinions on global markets and world economics for 2014. Analysts and traders across the board are calling for the SPX above 2000 in 2014. The blank template below provides a guide to record your own predictions for 2014. Forecasting one year in advance is very difficult and the assessment of the prior year's predictions are always comedic. Nonetheless, the thought process to arrive at numbers is important and the task itself is important to the development of any trader.

Keystone will assess last year's 2013 predictions and post the 2014 predictions as well.  An empty template is provided below where you can print and assign your own predictions. Forecasting is a big part of trading and it all starts with recording numbers so you have something to reference in the future. Have a friendly bet with a friend or two while honing your prediction skills.  Place the predictions in an envelope in a desk drawer to be referenced one year from now. Then you can place the envelope to your forehead and announce that you have foretold the future, just like Carnac the Magnificient of Johnny Carson fame.

Template for 2014 Market and Economic Predictions:

2014 Predictions By ________________________________:
Date: ______________.

SPX High for 2014:
SPX Close for 2014:
SPX Low for 2014:
Dollar Range ($USD):
Dollar Closing Price ($USD):
Euro Range ($XEU):
Euro Closing Price ($XEU):
10-Year Note Yield Range ($TNX):
10-Year Note Closing Yield ($TNX):
30-Year Bond Yield Range ($TYX):
30-Year Bond Closing Yield ($TYX):
Unemployment Rate % Range:
Unemployment Rate % December 2014:
GDP in December 2014:
WTIC Oil Range ($WTIC):
WTIC Oil Closing Price ($WTIC):
Natty Gas Closing Price ($NATGAS):
Gold Range ($GOLD):
Gold Closing Price ($GOLD):
Copper Range ($COPPER):
Copper Closing Price ($COPPER):
Commodities Range ($CRB):
Commodities Closing Price ($CRB):
China Growth Rate % Range:
China Growth Rate % December 2014:
Other Notes and Predictions:

SOX Semiconductors Weekly Chart Overbot Rising Wedges Negative Divergence Price Extended

A couple weeks ago the purple rising wedge appeared golden, with price unlikely to surpass 520 and to instead start to work lower. However, price jumps higher as the light volume Santa Claus rally rolls along now tagging 532. Traders are convinced that financials will lead markets higher in 2014 and tech and financials go hand and hand. Also, traders figure that smart phone and other gadget sales will continue in full force in 2014 requiring more chips. Everyone is feeling optimistic. The SOX and SMH charts do not agree with this hypothesis. Price may jog from 1 to 3 weeks but the chart is in a topping formation. Ditto the daily chart. Price is far extended above the moving averages requiring a mean reversion.

Keystone has an ongoing position in SSG and just opened another long position in another account. SSG is the double X inverse ETF that goes up if semiconductors go down. SSG is thinly-traded so that must be considered. Projection is for semiconductors to move sideways to sideways lower moving 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.

XLF Financials Weekly Chart Ovebot Rising Wedges Negative Divergence Price Extended

The drama with financials continues. The banks are supposed to lead the markets higher in 2014.  The tail is wagging the dog as traders trip over each other to buy financials and tech stocks without seeing proof that the economy is actually improving. Keystone continues to comment on the 2-10 spread of 255 which determines happy bankers versus sad bankers. The steeper the yield curve, the more money the banks make and that occurs with a spread above 255. Bears rule under 255.  The 10-year yield hits 3% and now pulls back to 2.97% with the 2-year moving around 0.40%. This is a 255-260 spread.  The bulls want to break out to the upside and prove that rainbows and blue skies do exist with a spread above 260 and the XLF catapulting higher. Don't hold your breath.

The red and blue rising wedges are long in the tooth. XLF has doubled in 2 years. Overbot conditions and the negative divergence should create the smack down. The daily chart is negatively diverged as well. The monthly chart, like the general market, is open to price coming back up to current highs after a pull back for a few weeks occurs. On the weekly chart above, price is extended well above the moving averages requiring a mean reversion and the 50-week MA at 19.54 has not been tested for over one and one-half years. Projection is a move lower for the days and weeks forward, say down to the 20-week MA at 20.67, at a minimum, and then a bounce higher again, say in the February-April time frame then a multi-year top should hold moving forward. In general, lower prices are expected for the weeks and months ahead. The drops out of rising wedges can be quite dramatic. Watch the 2-10 spread to see how it resolves in relation to 255. 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.

IBB Biotech Weekly Chart Overbot Rising Wedge Negative Divergence Biotech Bubble Price Extended

Fed Chairman Bernanke and future Fed Chair Yellen say there are no asset bubbles in markets. A move in biotech from 58 to 227, 291%, a quadrupling and nearly quintupling, in less than 5 years, is not a bubble. There definition of a bubble and Keystone's are obviously different. The Fed is saying that stocks moving up 60% per year, year after year are fine and dandy, and not in a bubble. They need to pass out what they are drinking to everyone else, or at least loan everyone a pair of those rose-colored glasses.

As price makes new highs, note the decreased oomph in the indicators, negative divergence, that will want to push price lower. The monthly chart is negatively diverged as well but the MACD line is long and strong so that hints a jog move on the monthly basis. Projection is for the biotech bubble to experience the initial pop moving forward for a few weeks, then price will recover on the monthly basis, coming back up again, then should roll over with extended multi-month and yearly weakness 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.

DVY Dividend Stocks Weekly Chart Overbot Rising Wedge Negative Divergence Dividend Stock Bubble Price Extended

The growing dividend bubble has been highlighted for the last few weeks and months. The red rising wedge, overbot conditions and universal negative divergence says a top is in or will be with a subtle 1 to 3 week jog move. The indicators are out of oomph but price floats higher anyway as folks take their Christmas money and buy stocks. The bubble-no bubble talk continues in the markets with both sides always making good points. However, realize that this is all uncharted territory. No one is alive that traded the markets in the 1920's and 1930's to tell us what to expect. There are interesting things occurring. Equities are pumped higher by the central banker's easy money policies, especially the Fed and BOJ. Banzai! The BOJ April 2013 shock and awe is the main contributor of the stock market upside. In addition, the obscene buy backs have provided rocket fuel pumping companies 10% to 30% above where they should be priced, even higher. The buy backs are allowing companies to beat EPS even as the top line revenue is flat to lower each quarter. Buy backs keep the PE's lower which provides a false sense of security that markets are not in a bubble. Most traders think the Dow and SPX are around a 15 to 16 PE when if the buy backs did not occur, the PE's would be around 17-22. The RUT is already over 20 PE without considering the buy backs. The Case-Shiller PE is 24 typically where market pull backs occur.

Sadly, companies think so low of the economy that they are not willing to invest in equipment and cap ex, which would lead to jobs, but instead spend the money on buy backs that are accounting gimmickry to pump the stock bubbles higher. It gets better. Companies not only are using their available cash for the buy backs but also borrowing taking advantage of the Fed's easy money, to fund buy backs. For the icing on the cake, both Fed Chairman Bernanke and future Fed Chair Yellen say repeatedly that there are no asset bubbles in markets currently (the Fed has never been able to identify an asset bubble ahead of time in their entire 100-year history). Bubbles are subjective. DVY has ran from 22 to 72 in less than 5 years, 227%, tripling and more, do you consider this a bubble? SDY is another chart you can reference.

Another angle no one mentions is that the Chinese and Russian wealthy are shoving money under mattresses as fast as possible to avoid losing it all if their governments confiscate it. This behavior is fueling the bubbles in art, collectibles, vintage cars, real estate, vineyards, wine, and yes, stocks. These folks do not care about bubbles since they will be better off no matter what happens even if the bubbles pop and price is cut in half. Keeping half your money is better than losing all of it. As time moves along, the buybacks fade, the central bankers are exposed as being ineffective, and even the foreign wealthy money dries up as much of it has already pumped ongoing bubbles. What then will propel the stock prices higher and allow companies to meet EPS going forward?

The expectation is for price to roll over to the downside moving forward. Ma and Pa Kettle just took their entire life savings and placed it into dividend stocks. They were told not to worry and even if a sell off occurs, they will have the dividend and be fine over the long term. A 3% or so drop in price will quickly wipe out any divvy joy. One wonders how Ma and Pa will feel 10% lower? Price is extended above the moving averages so a mean reversion is desperately needed. A break of the lower trend line would be a very bearish development. All those folks flooding into dividend stocks thinking they will have some protection in soft markets will be disappointed. Hopefully, Ma and Pa moves into cash to sit things out for a month or three. 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 Megaphone Expansion Pattern Fibonacci Retracements S/R

The SPX 2-hour was highlighted last week waiting for the MACD line to roll over. The refusal of the MACD line to roll over enabled the RSI to regain juice and print a new peak to keep the very short-term Santa Claus price rally in tact. Note that the price peak did not occur with negative divergence for the RSI, MACD line and money flow, therefore, another move up to 1844-1845 or higher would be anticipated to then create universal negative divergence (thin red lines in the right margin) and verify further downside ahead. The brown expansion patterns remain in play. The thinner brown lines show an optional megaphone expansion pattern.

The Fibonacci retracements exactly nail all the important support levels at 1818, 1808-1809 and 1801-1803 which gives these levels street cred. The projection is for price to come up for one more look at the highs but should then roll over to the downside. The Fib retracements and strong support identify the 1808-1818 area as having strong potential to attract price. The 1796 horizontal support slices the expansion patterns at the center line. The gap at 1833-1835 will need filled. Key S/R is 1845, 1842, 1835, 1833, 1828, 1823, 1818, 1814, 1808-1809, 1801-1803, 1796, 1788, 1782, 1775 and 1772.  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 Daily Chart Upper Band Violation Overbot Rising Wedge Negative Divergence Developing Gap

Typically, after a strong month occurs, the last couple days of the month tend to finish weak. So far today, equities are flat to lower although the Dow continues higher. Traders cannot get enough of the blue chips, everyone figuring they are 100% safe and can simply collect the divvy moving forward, protected from any negative market affects. Remember, a drop in price in any of the blue chips of 3 or 5% eliminates any divvy joy. The dividend stock bubble grows and should rupture any time forward. SPX price continues to run up the upper standard deviation band (pink line), violating the upper boundary, so a move back to the middle band, the 20-day MA at 1805.73, and lower band at 1762 are on the table. Price needs to back kiss the 20-day moving forward to simply satisfy expected technical analysis behavior. Note that price breaks out of the sideways 1782-1808 blue channel 6 days ago so price needs to show the 1808-1814 area respect and perform a back test. The 20-day is moving higher which will form a confluence at 1808 providing the 1808-1814 support area with street cred as a likely test needed in the near future.

The MACD line has some near-term juice due to the thin-volume Santa Claus rally. The RSI is flat and not yet overbot. Therefore, a jog move cannot be ruled out which would take price towards the end of this week (markets are closed Wednesday to celebrate the New Year) to set up with firm negative divergence. Projection is for a move lower to the 1818-1823 gap fill and the 1808-1814 support zone then reassess. Any further upside should be relatively limited. Watch to see if the MACD line rolls over as the tail end of the week moves closer. 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 Weekly Chart Overbot Rising Wedge Negative Divergence

The SPX weekly remains a key market metric moving forward for equities. The marroon lines show universal negative divergence across both the shorter-term one-month time frame as well as the multi-month time frames. The chart is content with never seeing another price high above these levels in the weekly time frame moving forward. The SPX monthly chart will receive a new print at tomorrow's EOY close so that chart can be posted later in the week. The bulls want to see another higher high on the monthly chart after a pull back occurs. Thus, the weekly chart likely wants to send price lower, perhaps for January into February, but the monthly chart will want to reexert itself to bring price higher again. Keystone is working on the 2014 predictions, and will assess the 2013 predictions over the next day or two. The monthly chart likely needs from 2 to 5 months to place the multi-year top which would be sometime in the first half of 2014.

Using the weekly chart above, the anticipation would be weak markets to start the first couple months of 2014, then a recovery in the March-May time frame where equities will likely place the multi-year top. The BOJ decision on pumping more stimulus to further destroy the yen and pump the dollar/yen pair higher, or not, in April 2014, will be an epic event, so mark it on your calendar. April 2013 was the 'shock and awe' from the BOJ. Banzai! Japan and US stock markets ran higher in 2013 due to the BOJ pumping in a tag-team approach along with the Fed, which continues. The projected initial move down in January-February may shock many at its magnitude lower, perhaps a quick 100 to 200 handles, then equally surprised at the V bottom and wild upside spike that follows, regaining the losses, then completely surprised and shocked when markets top and roll over in the March-May time frame, not to see these current highs again for a year or few in the future.

Keep watching the indicators above to see if the neggie d remains in place for the indicators, which it should. The overbot conditions and muliti-year rising wedge provides more bear candy so the move lower should begin any time forward. A drop of 100 handles or more in the SPX moving forward is projected. Watch to see if price loses the lower trend line of the rising wedge which would signal big trouble ahead. The 20-week MA at 1748 and rising provides a downside target, perhaps for January or February, to allow the negative divergence to play out. 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 Support, Resistance (S/R), Moving Averages and Other Important Levels for Trading the Week of 12/30/13

SPX support, resistance (S/R), moving averages and other important levels are provided for trading the week of 12/30/13. The SPX gaps-up at the opening bell for five days in a row. There are only buyers remaining in the market. Buyers are selling to other buyers and then as price keeps catapulting higher, the previous buyers jump in to buy off the current buyers and the band plays on. The music is in its full glory now, long traders are drunk as skunks, enjoying the Fed and BOJ liquor, dancing around the packed ballroom ignoring the locked exits and only two chairs available in the corner once the music stops. For now, the light volume holiday trading, the Santa Claus rally, makes it easy to gap up and maintain the elevated highs. The bigger gaps below at 1833-1835 and 1818-1823 are downside targets. Last week's low is 1823 as well. December ends in two days and it looks like the bulls will print another up month unless a 35-point drop occurs in the remaining 13 hours of trading for 2013. Interestingly, and typically, when a month is strongly higher, the last couple days do finish weak. The 20-day MA at 1803.98, and rising, needs back tested and this, along with the horizontal support creates a strong price floor at 1803-1808.

A new moon occurs at 4:15 AM EST on New Years Day, 1/1/14, when markets are closed. Equities are typically weak moving through the new moon each month so a happy finish to end the year may lead to weakness at the tail end of the week when everyone returns to trade the new year with hangovers. For the bulls, new money, especially to begin the year, will help buoy markets into early next week, so these are counteracting forces to begin the year. In addition, we are now in a major Bradley turn window where a significant market move should occur (Bradley turns only highlight the dates where significant market trend changes may occur, or accelerations, but do not predict direction).

For Monday, today, the bulls need to touch the 1845 handle and the big upside party continues with an 1850 print on tap. The bears need to push under Friday's low at 1840 and that will accelerate the downside to the 1833-1835 gap fill. A move through 1841-1843 is sideways action in this thin trading environment. Since this sideways range is so tight, one side or the other will likely receive the nod. S&P futures are flat about one hour before the opening bell. The key for bulls is touching 1845 to continue the party higher. Bears need 1840, then 1828, then 1823, this week to return equities to earth. The breakout from the sideways channel at 1782-1808 occurred 5 days ago and the 1808-1814 area needs to be shown respect and back kissed in the days ahead.

1845 (12/27/13 All-Time Intraday High: 1844.89) (12/27/13 Intraday HOD for 2013: 1844.89)
1844.89 Previous Week’s High
1844.89 Friday HOD
1842 (12/9/13 All-Time Closing High: 1842.02) (12/9/13 Closing High for 2013: 1842.02)
1841.40 Friday Close – Monday Starts Here
1839.81 Friday LOD
1822.92 Previous Week’s Low
1814 (11/29/13 Intraday Top: 1813.55)
1812 (12/9/13 Intraday Top: 1811.52)
1808 (12/9/13 Closing Top: 1808.37)
1807 (11/27/13 Closing Top: 1807.23)
1805.81 December Begins Here
1803.98 (20-day MA)
1799 (11/18/13 Intraday Top: 1798.82)
1798.05 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)
1798 (11/15/13 Closing Top: 1798.18)
1784.68 (50-day MA)
1775 (10/30/13 Intraday Top: 1775.22)
1772 (10/29/13 Closing Top: 1771.95)
1738.81 (20-week MA)
1733 (10/17/13 and 1018/13 Gap-Up: 1733.15-1736.72)
1731.70 (100-day MA)
1730 (9/19/13 Intraday Top: 1729.86)
1726 (9/18/13 Closing Top: 1725.52)
1710 (8/2/13 Intraday Top: 1709.67)
1704.47 (150-day MA; the Slope is a Keystone Cyclical Signal)
1687 (5/22/13 Intraday Top: 1687.18)
1680.78 (10-month MA; a major market warning signal)
1676.40 (200-day MA; not tested for 1 year extremely odd behavior)
1669 (5/21/13 Closing Top: 1669.16)
1652.58 (50-week MA)
1651.71 (12-month MA; a Keystone Cyclical Signal) (the cliff)