Monday, November 4, 2013

Keystone's SPXA150R Daily Chart Indicator

The SPXA150R is one of Keystone's market signals. When markets are in rally mode, such as this long 4-1/2 year rally, the 80, 85 and 90 levels can be used to gauge the topping action. When price moves above 80 it is the first signal that markets are becoming overextended to the upside. This is when you begin to consider what long stocks you would like to take profits on and throw overboard and otherwise tighten up the long side and develop a short shopping list. When the SPXA150R moves above 85, the markets are becoming strongly bearish and very overextended to the up side. This requires action of reducing longs and increasing shorts as markets move towards a blow-off top. Above 90 is a gift to short-sellers, as was highlighted in May. You can typically short in this area of 90 and higher without any concern at all. Markets are peaking out and will pull back.

The interplay between these levels provided insight as well. Once price drops down through the zones and under 80, markets are likely heading into a cyclical bearish pattern moving forward and will remain weak unless the bulls muster up some energy and try to move equities higher above the 80 level once again--like now. The recent rally driven mainly by Fed easy money hype and euphoria causes price to regain the 80 level and attack the 85 level again, before dropping, and then bouncing off the 80 level to sit at 82 to begin the new week of trading. If price moves above 85, the market rally will continue but caution would be required since equities will simply move upwards into position for the next pull back. If price drops under 80, this will provide the green light for market selling and lower prices going forward. So check the chart after the close each day this week to see which side of 80-85 wins since it will determine the next move 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.

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