Sunday, March 30, 2014

Keystone's Weekend Reconnaissance 3/30/14

March began at 1859.45 and price is less than two points below at 1857.62 poised to print a negative month. The bulls must come to play on Monday (EOM and EOQ1) if they want to print a positive month for March. The bulls continue to hold price above the 1848-1851 support gauntlet which is a feather in their caps. The year began at 1848.36. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead, however, the 8 MA is stabbing downward towards the 34 MA for a potential negative cross. There are six 8/34 crosses in the last seven days verifying the ongoing bull-bear sideways fight. One side or the other will win big in the coming days. The SPX is above the 200 EMA on the 60-minute at 1854.15 signaling bullish markets for the hours and days ahead. Watch the 1854.15 like a hawk on Monday. Bears need the negative 8/34 MA cross on the 30-minute and 200 EMA cross on the 60-minute, otherwise, they got nothing.

The 20-day MA is 1863.08 and 50-day is 1834.05 so the price move from this bracket chooses the winner moving forwardKey S/R is at 1884, 1878, 1874, 1868, 1863 (20-day MA), 1859 (March began here), 1855, 1854 (200 EMA on the 60-minute), 1848-1851 support gauntlet (the year began at 1848), 1841-1843 support gauntlet and 1834 (50-day MA).

Volatility remains key. Note how the VIX closed at 14.41 only two measly points above the 14.39 bull-bear level identified by Keybot the Quant algo. At Monday's opening bell which every way VIX pivots, equities will move the opposite way. Bears will have a happy day if VIX remains above 14.39 and heads above 15, 16 and higher. Bulls will rejoice if VIX drops under 14.39 since equities will be moving strongly higher. As always, use the VIX 200-day MA as a market directional signal as well and VIX is under the 200-day making for happy bulls.

Keybot the Quant remains short as the daily roller coaster ride continues. The algo identifies VIX 14.39 and XLF 21.77 as the two key parameters controlling market direction currently. Bulls need VIX under 14.39 (lower volatility) to guarantee market upside and will receive further upside fuel with RTH 59.57 (stronger retail sector). Bears need XLF under 21.77 (weaker banks) to guarantee market downside. Equities will float sideways on Monday if VIX remains above 14.39, RTH under 59.57 and XLF above 21.77. If the VIX drops under 14.39 and the RTH moves above 59.57, Keybot will likely flip long. Also, if the VIX jogs above and below 14.39 several times during the session, this will favor the bulls and enable Keybot to flip long easier. Bears need to spike VIX higher and keep it higher making a statement that market selling will continue.

For the SPX on Monday starting at 1858, the bulls need to push up through 1867 to create an upside acceleration. The bears need to push under 1850 (the sturdy 1848-1851 support gauntlet that will dramatically weaken equities) to accelerate the downside. A move through 1851-1866 is sideways action to begin the week. Price is in the middle so each side needs an 8 or 9-point move to receive the mojo acceleration reward for their respective direction. The BPSPX is 72. Bulls need to hold the 70.00-70.50 level and move higher to maintain a market buy signal. Bears need to push the BPSPX under 70.00-70.50 to create a market sell signal ushering in market mayhem.

Keystone's Eclipse Indicator has a window open this week for a potential large market sell off to occur. A Bradley turn date is 4/6/14 so a Bradley window is open through 4/11/14 for a market trend change to occur. The dollar/yen begins the week at 102.92 moving higher. Equities will be charging higher if dollar/yen runs up through 103. China PMI's as well as other countries and Europe PMI's are important early in the week. The ECB Rate Decision and Press Conference on Thursday morning is the most important event of the week more important than the US Monthly Jobs Report on Friday.

Pay attention to the 20-week MA's on the major indexes. The RUT sits exactly at this support, ditto the Nasdaq, so a bounce or die decision has to occur to begin the week. If tech and small caps continue lower the SPX and Dow will target their respective 20-week MA's. The SPX 20-week MA is 1825.44. The Dow 20-week MA is 16152.46.

Boiling all the above mumbo jumbo into an easy game plan, watch VIX 14.39 to determine market direction. Bulls want to push up above 1859.45 so the positive-month March banner can be waved, then take out the 20-day MA at 1863 to guarantee upside victory ahead. Bears need to maintain a negative-month for March under 1859.45, keep the VIX above 14.39 and heading higher, and then push under the 1848-1851 support gauntlet that guarantees a lower price that will target the 50-day MA at 1834 and then the low 1800's. VIX 14.39 will tell you the winner when the bell rings.

For the big picture projecting out a couple weeks, bulls win big with VIX under 14.39 and SPX above 1863. Bears win big with VIX above 14.39 and SPX under 1834. Anything between SPX 1834-1863 is noise. Russia's Putin keeps massing troops at the Ukraine border kicking sand in everyone's face.

Keystone's Eclipse Indicator

This quirky and esoteric signal is very interesting and has a good track record forecasting market sell offs. The eclipse technique starts with identifying the eclipse dates and note where they cluster. Within that cluster area (large red box), markets are prone to large sell offs.  Once a center point is identified for the dates, a time period of one month before that date, and one month after that date are key, as shown by the small red boxes, which identifies the strongest window for a market sell off to occur.

Typically, if a large sell off occurs from the first small red box, the second box becomes benign since the negative energy is dissipated. The large eclipse window is open right now from 3/8/14 through 6/5/14. The tighter periods that are more prone to experience a sell off are the small red boxes from 3/8/14 through 4/4/14 and 5/8/14 through 6/5/14. So this week is a key week since the strong first window of the eclipse indicator remains open through Friday for the potential of a large sell off to begin. If markets remain in a flat sideways struggle into late spring the middle and late May period will create a strong negative window. The actual eclipse dates are 4/15/14 (comically this is tax return deadline day) for the total lunar eclipse and 4/29/14 for the annular solar eclipse.

The circles show where the eclipse boxes tagged market pull backs, about 10 of the 12 small red square windows resulted in market sell offs, and right now there are only five days remaining in this current small red box window. The eclipse window is now occurring at the same time with Bradley turns occurring so wild market gyrations would be expected. The markets sit in the first small red box right now so it is now or never for bears. Either bears begin beating markets lower this week or they may not have the juice until May. The week of trading ahead will be very interesting as well as the next two months of April and May. 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 Standard Deviation Bands Tightening

Bulls and bears are fighting it out through the 1840-1880 range for the last couple months. You could have went on vacation and would not have missed a thing. March starting number is 1859.45 and there are only 6.5 hours of trading remaining in the month; EOM and EOQ1. Price will print a negative month unless the bulls come to play. The weekly chart is highlighted since late last year and the two negative divergence spank downs occur as forecasted. The stochastics are on the verge of coming off the overbot territory and falling under 80 which typically corresponds to a flush lower.

The MACD cross remains bearish (small red circle) and bears are hanging on by a hair of their chinny chin chin. Watch the MACD cross closely this week. The pink box for the ADX shows how a strong uptrend was in place for most of last year but at the start of this year the strong uptrend disappears with ADX dropping down to 20. If the uptrend was strong the ADX should be in the mid to high 20's and above 30 heading higher, so the long 5-year rally is likely very old in the tooth. The pink ovals show the tight standard deviation lines ready to squeeze out a firm move in one direction of the other. The last two moves were higher, one at the start of 2013 and the other was the end of year rally, both fueled by the weaker yen.

The BOJ meets this month to decide on policy. The ECB rate decision is Thursday of this week and will wildly impact global markets. Draghi has the weight of the global economy on his shoulders. His decision Thursday morning will violently impact the euro and in turn global equities. If Draghi provides stimulus or speaks dovishly, the euro will fall, dollar will pop, and equities should move lower, but it is a tough call to make since the central bankers have all price discovery tied up in knots. If Draghi keeps playing coy and does not mention the serious deflation problem in Europe, and is mum on any stimulus, the euro will move flat to higher and stocks will remain buoyant perhaps pushing a higher move out of the tight bands.

The chart is bearish and the projection is sideways to sideways lower for price for the weeks and months to come. However, the central bankers always appear to have a trick up their sleeves. The RUT and COMPQ, Russell 2000 small caps and Nadsaq, respectively, have both dropped to their 20-week MA's, a critical support level. Watch to see if the SPX and Dow follow suit to their respective 20-week MA's. The SPX 20-week MA is 1825.44. Tech and small caps typically lead the broader indexes. 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.

Friday, March 28, 2014

Keystone's Morning Wake-Up and Midday Market Action 3/28/14; Consumer Sentiment; Russian Troops Massing at Ukraine Border

The bulls refuse to give up the 1848-1851 support gauntlet! The SPX fell through the gauntlet yesterday and bounced off the 1841-1843 support and then moved above 1851 foiling the bears once again. There is only one day remaining in the month, Monday, EOM. March began at 1859 so pay attention to that level. The year began at 1848 so price decided to spend the night at 1849 between these two key levels, only one single point higher on the year. The 8 MA is below the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. The SPX is under the 200 EMA on the 60-minute at 1853.66 signaling bearish markets for the hours and days ahead. Watch the 1853.66 like a hawk today since it tells you who is winning.

The 20-day MA is 1863.17 and 50-day is 1833.86 so the price move from this bracket chooses the winner moving forward. Key S/R is at 1884, 1878, 1874, 1868, 1863 (20-day MA), 1859 (March began here), 1855, 1854 (200 EMA on the 60-minute), 1848-1851 support gauntlet (the year began at 1848) and 1841-1843 support gauntlet, the last stop on the way lower to the low 1800's.

Volatility remains key. Note how the VIX  closed at 14.62 exactly at the 200-day MA signal line. Scroll back to study the VIX chart. Whichever way the VIX pivots equities pivot in the opposite direction. Considering the positive futures the VIX will move down at the opening bell and equities up. Keybot the Quant remains short as the daily roller coaster ride continues. The algo identifies VIX 14.39 and XLF 21.76 as the two key parameters controlling market direction currently. Bulls need VIX under 14.39 to guarantee market upside. Bears need XLF under 21.76 to guarantee market downside. Equities will float sideways today if VIX remains above 14.39 and XLF above 21.76. Bulls can also receive strength with RTH 59.60. If the VIX drops under 14.39 and the RTH moves above the 59.50-59.60 area, Keybot will likely flip long.

For the SPX starting at 1849, the bulls need to push up through 1855.50, about 6 to 7 points higher, and an upside acceleration into the 1860's will occur. S&P futures are +4 to +6 all morning long. The bears need to push under 1842 to accelerate the downside. A move through 1843-1855 is sideways action into the weekend.

There are lots of balls in the air currently affecting markets. Global traders have increased their attention on geopolitics so equities may have been pricing-in some of this potential negativity creating selling pressure. A Bradley turn date occurred last Saturday, 3/22/14, and another occurs 4/6/14 so markets are prone for some wild gyrations and trend changes. Window dressing occurs at quarter-end as funds want to show their clients that they owned the outperforming stocks in Q1 and not the underperforming stocks so this typically creates market buoyancy. With only one day remaining in the month and quarter, however, the boost from window dressing should have played out. Copper is higher this morning which will maintain equity buoyancy today.

Consumer Sentiment is 9:55 AM so markets will pivot at the top of the hour. BPSPX drops to 71.60 about five percentage points from the peak at 76.50 five days ago. The bears will receive a market sell signal on the BPSPX under the 70.50 and 70 levels so check this chart this evening. Bulls must bounce the stock market today to prevent the BPSPX sell signal from occurring.

Concerning housekeeping on trades, profits were taken on the FB short and the trade was exited. ARO was entered as a long play due to encouraging positive divergence but it may take as much as one month to bottom; it is a very dangerous and speculative knife-catch expecting a bounce. PBR is moving up very strongly and now has the attention of analysts. Brazil popped yesterday. It was interesting to witness the exact birth of PBR nine days ago with the falling wedge and positive divergence as Keystone highlighted.

Note Added 9:43 AM: Equities pop higher as futures indicated and the SPX moves above the critical 200 EMA at 1854 signaling bullish markets for the hours and days ahead. The bears need to reverse this important 200 EMA cross signal today. The SPX tested 1855.50 in quick order and pushes up through so price is in the 1860's. Dollar/yen leaps higher to 102.50 so the weaker yen sends stocks higher. Banzai! The VIX is down to 13.85 crumbling through the key 14.39 identified by Keybot so this creates strong bull fuel. XLF 22.10 continuing to cause market bullishness. RTH 59.25 continuing to cause bearishness. The SPX moves up through the March starting number at 1859 and bumps its head on the resistance at the 20-day MA at 1863.27. HOD is 1862.40. Bears are okay if they maintain price under the 20-day MA. If bulls push above the 20-day, the bears will fold like a cheap suit. Consumer Sentiment is minutes away and markets should pivot.

Note Added 10:08 AM: Sentiment is 80; flat and uninspiring but markets float higher anyway. Everything is going the bulls way today. The SPX is 1864.11 above the 20-day MA at 1863.41. HOD is 1865.11 so watch to see if the bulls can take this level out. Resistance above is 1868.

Note Added 1:51 PM: Markets pop today on the lower volatility, higher copper, weaker yen (dollar/yen was up near 103 pumping the stock market higher) and talk of Chinese stimulus. Over the last hour, the dollar/yen drops to 102.84, so equities leak lower off the top. VIX is up to 14.35 but not yet above the critical 14.39 bull-bear line. Markets will weaken significantly if VIX moves above 14.39. RTH remains bearish at 59.35. XLF is 22.09 remaining bullish. SPX is 1860 fighting for the March starting number at 1859.45. This fight through Monday determines if March is an up or down month. The SPX tested the 20-day MA at 1863 and so far the bears spank price lower for a successful bear back test. The bulls can make a statement if they finish today above SPX 1859.45 and especially above the 20-day at 1863 while keeping VIX sub 14.39. The bears can make a statement if the SPX finishes under the 1859.45 and especially under 1855 support and also under the 200 EMA described above at 1853 while moving the VIX above 14.39. Who will make a statement into the weekend? The Russian troop count on the Ukraine border is now estimated at between 50K and 80K troops. They are not there for a dinner party.

Note Added 2:03 PM:  The VIX moves above 14.39 three minutes ago. This is critical and will tell you who wins into the closing bell. Bears win with VIX above 14.39. Bulls win with VIX under 14.39.

Note Added 3:08 PM: SPX 1854.92. The important 200 EMA is 1854.13 so this critical fight for the short term direction confirmation will go into the closing bell. Dollar/yen 102.76.  VIX 14.59. The bears are making the statement with plenty more trading time available. China PMI's hit on Monday, as well as other global PMI's, so this will greatly impact markets early in the week. Also, what is Putin up to? Does he want to keep annexing portions of Ukraine to create a land bridge region of Russia to connect to his new jewel Crimea? Bulls can recover if they push VIX under 14.39. Bears can create market carnage into the closing bell if XLF drops under 21.76 (now at 22.05) but this fight will likely occur next week.

Note Added 10:04 AM on 3/29/14: The SPX finishes at 1857.62 above the 200 EMA on the 60-minute at 1854.14 signaling bullish markets for the hours and days ahead, however, this is a see-saw battle that will continue on Monday. Price closed under the March starting number at 1859.45 with one day remaining to determine if the month is up, or down. Price closed under the 20-day MA at 1863.08 providing a feather in bear caps. VIX drops to 14.41 remaining two pennies above 14.39, identified by Keybot, causing market bearishness. How does Keybot always identify these key levels before they occur? VIX 14.39 is key at Monday's opening bell and immediately tells you who wins going forward. Bulls are happy because the VIX is below the 200-day MA. Next week is insanity with PMI's and month and quater-end to begin the week and the ECB Rate Decision and Monthly Jobs Report to end the week. Pay attention to the Nasdaq ($COMPQ) and RUT ($RUT) 20-week MA's now acting as pivot points. Prices will either bounce or die. The bounce would send equities strongly higher; the die would send equities crumbling lower. A new moon peaks in a few hours at 2 PM EST and markets are typically weak moving through the new moon. Markets are typically bullish the first few days of a new month. Russian troops continue massing on the Ukraine border. Traders continue to ignore geopolitical risk and are much more concerned about what type of steaks to buy for the weekend barbecue. The darkness created by the new moon provides a benefit for a military using night-vision technology.

TYX 30-Year Treasury Bond Yield Weekly and Daily Charts H&S Pattern

The theme of selling short maturities and buying long maturities continues. The 2-year yield is 0.44%. 5-year yield 1.71%. 10-year 2.68%. 30-year 3.52%. The 30-year yield has not seen 3.5% since last summer (pink line). The yield curves remain more flat than steep, disappointing the traders long the banks, with the 2-10 spread at 224 basis points and the 5-30 spread at 181 bips; far flatter yield curves than the consensus expects.

The bottom in the 30-year yield was identified in 2012 with the falling wedge, oversold conditions and positive divergence, and the launch occurred. Yields move higher with the inverted H&S pattern on the weekly. The blue lines show two right shoulders. The head at 2.50% and neckline at 3.20% targets 3.90%-4.00% if the 3.20% is violated to the upside, which occurred and the upside target is achieved satisfying the multi-month inverted H&S pattern. Now a red rising wedge is in play and negative divergence that spanked the yield lower from the top to begin this year. A head and shoulders is now in play with head at 4.00% and neck line at 3.60% which targets 3.20%-3.3% if the 3.60% is violated to the downside, which occurred.

The daily chart shows positive divergence in play so in the near term yield will likely bounce. Yield violated the lower standard deviation band so a move to the middle band would be expected. The weekly chart is sick. The H&S is in play and the indicators are weak and bleak except for the histogram. The histo gels with the daily chart and will help yield bounce for a back kiss of the failed neck line. The H&S downside target, horizontal support and the lower rail of the rising channel all form a confluence at 3.20%-3.40% so this acts as a magnet for yield. Everyone expects higher yields but the weekly chart is not enthusiastic for the up in yields and in fact appears happier if yields leak lower.

Considering the near term recovery likely for yields in the coming days up to 3.60%-3.70%, the weakness should resume due to the weak indicators on the weekly chart. Overall, sideways to sideways lower yields are expected moving forward for the weeks and months to come with a downside target of 3.20%-3.40% in late spring or summer. This analysis goes against probably over 90% of what the consensus expects which is the opposite; higher yields. 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.

Thursday, March 27, 2014

ARO Aeropostale Daily Chart Downward-Sloping Channel Oversold Falling Wedge Positive Divergence

ARO is puking ever since the weak holiday season. Teens are not working as much these days and when they ask for dough off the parents, there is likely less to go around. The trip to the mall also takes five or ten bucks of gasoline so perhaps these days many would-be shoppers are laying around at home. Apparel sales are hit lately across the board. Aeropostale is a strong brand, however, and many teenagers and young adults continue to proudly walk around with the label. The stock continues to collapse falling out of the downward-sloping wedge.

The gap down move in mid-March was an eye-opener; a stick was jabbed in that eye. Price has plummeted and now sits on an island under 6 so a potential island reversal would be in play in the future. Positive divergence bounced price in mid-February. The positive divergence remains over the last couple months although the very near few-day time frame shows the bears making a push. The expectation is for a positive divergence bounce. The weekly chart is also setting up with positive divergence but may need another one to three weeks to base. When both the daily and weekly charts combine with universal possie d that is a very bullish indication.

It may be a bit early but Keystone bot ARO today creating a new long position. This is a true knife catch that either slices off the hand or is caught with the handle. It may take a little patience moving forward but a move back up to at least back kiss the lower trend line would be a reasonable expectation in the near-term. Note the large capitulatory selling volume during the gap down. Traders were running from ARO screaming and rightfully so since sub 6 led lower now under 5. Many times one more strong capitulatory down day will occur to completely flush out even the most die-hard long player that held on the whole way down. Once this final flush occurs and everyone has completely given up, and talk of bankruptcy will probably be floated by investment house stoolies trying to keep the price low so they can accumulate, the stock will recover.

ARO is a highly speculative long play. Time will tell if it turns out like the greatness of JCP, or ends in disaster like RSH. Sometimes an advantage of a stock that is bludgeoned like ARO is that once the broad market begins selling off, and the retail sector as a whole sells off, the stocks that are beaten down already do not typically receive as serious a beating. 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.

XJY Japanese Yen Sideways Channel Tight Standard Deviation Bands

The standard deviation bands are squeezing in tight (pink) for another big move to occur in one direction or the other. The squeeze in late 2012 was lower, the squeeze in late 2013 was lower, what will occur this time? The move will be profound.

The green lines show the positive divergence that has been highlighted many times since late last year forecasting a move higher with the yen, which occurred, the exact opposite of what the consensus expected. The yen is favoring the sideways channel. The indicators are long and strong printing higher highs so higher prices for yen are desired even after any pull back occurs. The yen bulls need the RSI to move above 50% into bull territory.

To understand the asset relationships currently in play, a weaker yen, weaker XJY, represents the BOJ weakening their currency with QE. This sends the dollar/yen currency pair higher and sends Japan, US and European stocks higher. The BOJ saved Europe last year, both stocks and bonds, with all the weak yen. Conversely, as the yen strengthens, the XJY moves higher, the dollar/yen pair moves lower, and equities sell off. Note the big drop in the XJY from late 2012 into mid 2013 that fueled the stock market higher. Equities vascillated mid-year and then note the drop from October 2012 into the end of the year. That is the Fall rally for the US stock market fueled by the weaker yen. BOJ Governor Kuroda was out back beating the yen relentlessly with a baseball bat to pump stocks higher. Everyone cheers yelling "Banzai!" as fortunes are made by destroying the currency.

This year, in January, the yen pops on the possie d (green lines) and equities sell off. The expectation is for a stronger yen and lower dollar/yen pair moving forward for the weeks and months ahead; sideways to sideways higher. This would correspond to the stock market moving sideways to sideways 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.

INDU Dow Jones Industrials Weekly Chart Long-Term 18-Year Stock Cycle

The long-term chart highlights the most reliable stock cycle, the 18-year. The secular bull ran into the mid-1960's. Then the secular bear took over as the US moved through the flower child years, and Vietnam mess, the gasoline crisis and the shaky high-inflation years with President Jimmy Carter. In 1982 Ronald Reagan took office as President and broke the airline unions. Once the door to lower wages was opened, companies became highly competitive and the economy and stocks soared into the dotcom bubble in 2000. In December 1996, Chairman Greenspan commented on "irrational exuberance" but markets continued higher for four more years before the 2000 crash.

The year 2000 ushered in the 18-year secular bear but by the looks of it, 14 years in, the stock market is at new all-time highs. So much for the most reliable cycle? Probably not. Note that even in the 1964-1982 secular bear stocks maintained a flat profile rather than dropping dramatically. A similar finish in 2018 would place the Dow at 9000-11000. Note the expansion pattern in play with price now teasing the upper rail. A drop from here would actually target 5500-6500 about four years out.

It is common to have strong cyclical rallies inside secular bears. Likewise, cyclical bears inside secular bulls. The 1987 crash only appears like a blip during the robust secular bull cycle from 1982 to 2000. Interesting times are ahead for the next few years. The 2018-2036 secular bull makes a lot of sense since inflation and/or hyper inflation will be hitting due to the Fed and other central bankers dirty deeds and all assets will be inflating. A loaf of bread will be five bucks, a gallon of gasoline ten bucks, the Dow will be running through 20K on its way to 30K and the SPX will be over 2K on the way to 3K. Unfortunately, the dollar will be losing value so the overall result is running in place.

The current 2000-2018 secular bear remains a mystery since the obvious expectation is far lower equities. There are four years remaining in this current 18-year secular bear stock market cycle and this most reliable cycle says watch your wallet moving forward; it may be a nasty four year ride. 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.

XEU Euro Weekly Chart Rising Wedge Negative Divergence

The negative divergence spank downs were easy enough to identify as the euro keeps printing new highs (red lines). Europe needs a weaker euro to boost the manufacturing and export industries and help the troubled continent recover. Many traders are surprised that the euro remains so strong. Everyone pauses at each word Draghi speaks waiting for the tiniest hint that he will implement a stimulus program which would bludgeon the euro. But Draghi remains coy dancing on both sides of the street. The inevitability appears to be a weaker euro but as always what is the timing?

An ECB meeting is coming up fast in the days ahead so that will create the typical Thursday morning drama. The chart above favors the bears due to the long-term rising wedge. The drops from rising wedges can be quite dramatic. Price violated the upper standard deviation band (pink) so a move to the center band is on tap and this is the 20-day MA at 1.3683. This would also be a test of the lower rail of the rising wedge, a critical juncture (blue circle). A bounce, or die, decision will occur. Moving into April and May, since the central bankers are in collusion, the Fed, BOJ and ECB, the Bank of Japan may try to launch markets with more QE. This may further take the heat off Europe and allow Draghi to remain coy. The euro would favor another move higher to the top rail of the wedge. But it does seem inevitable that, say, by summer time, the euro should be weakening.

The lower band target is 1.3454. The 50-day MA is 1.3423 and the 200-day MA is 1.3346 both are downside targets. Keystone is currently short the euro with EUO and will likely trade in and out moving forward for the months ahead paying attention to the potential near term drama at the blue circle at 1.36-1.37. Many folks expect a weaker euro and perhaps as soon as in the days ahead with a stimulus plan from Draghi so this typically means it will not occur. Perhaps the strong euro drama will continue through April into May. If so, the euro can probably be re-shorted from the top part of the wedge at 1.38-1.40. Of course if the bottom rail of the wedge fails at 1.366-ish, the euro can drop to the 200-day MA in very quick order. 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 60-Minute Chart 200 EMA Cross

"Houston, we have a problem." Worrisome words from the astronauts decades ago that are apropos when the SPX drops through the 200 EMA on the 60-minute, now at 1853.77. The negative cross signals bearish markets for the hours and days ahead. Bad things will happen to equities if price remains under the 200 EMA. Note how the bulls rallied the troops mid-month to avoid disaster. Can the bulls muster up the strength to move back above 1854 and higher and save the day frustrating bears once again? If not, the bulls will collapse into the hot oil caldron below.

The blue lines show key S/R at 1884, 1878, 1874, 1868, 1863.05 (20-day MA), 1859 (March began here), 1855, 1853.77 (200 EMA on the 60-minute), 1848-1851 support gauntlet (the year began at 1848) and 1841-1843 support gauntlet, the last stop to the low 1800's. The 50-day MA is 1833.81 would represent the bulls last stand, like Custer's Last Stand. The green lines created the positive divergence bounce off today's price bottom but the indicators never reached oversold levels and the MACD line prefers to see weaker prices moving forward a couple candlesticks, which is a couple hours time. Watch price in relation to the 200 EMA at 1853-1854. Bulls recover and breathe a sigh of relief above 1853. Under 1853, the bears rule the markets. 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 5:19 PM: SPX finishes at 1849.04 four and one-half points under the critical 200 EMA at 1853.66. The negative 200 EMA cross is an extremely bearish development. Tomorrow is critical to see if the negative 200 EMA cross remains, or not. If so, bad things will begin happening to markets.

VIX Volatility Daily Chart

Same-o story with the VIX these days. Keybot the Quant algorithm identifies VIX 14.39 as the key bull-bear level. A standard signal that is a useful market forecasting tool is the VIX 200-day MA now at 14.66. Equities move lower as volatility moves higher. Equities move higher as volatility moves lower.

Bears are happy campers as long as VIX remains above the 14.39-14.66 zone since market selling will continue. Market bulls got nothing unless they can push the VIX under 14.39-14.66This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 3:30 PM:  Late session drama; the VIX drops to 14.88 only 22 pennies above the critical 14.66 level. Can the bears hold on or will the bulls push volatility lower to receive upside market fuel?

Note Added 5:22 PM:  The bulls are not giving up. They close the VIX exactly at the 200-day MA at 14.62. Do you think the 200-day is important? This creates a bounce or die move tomorrow. One side is going to be very happy, the other side very sad. As long as VIX is above 14.39, bears win. Bulls win under 14.39.

Wednesday, March 26, 2014

BPSPX S&P Bullish Percent Index Daily Chart

The BPSPX remains on a market buy signal. For the BPSPX, the six percentage-point reversals are key and the moves through the 70% level. Markets topped to begin the year at BPSPX 84. The bears receive the market sell signal confirmation at 78 and then once price fell through the 70% level the bulls were running for cover with the double-whammy sell signal in place. As February began, the bulls mount a comeback and place a bottom. Once BPSPX reversed six points from 62 to 68 the bulls attained the coveted market buy signal. This provides further upside juice and once the BPSPX ran above 70%, the party hats were on and the wine corks were popped. Long traders are staggering along singing an optimistic tune.

Markets ran higher to print the new all-time intraday high last Friday at SPX 1883.97, only three sessions ago where the BPSPX printed a top at 76.50 we will call it. So a six-point reversal to create happy bears is 70.50. Since this is so close to the critical 70% as well, simply lump them together. Bulls have no worries about market downside and equities will remain buoyant as long as the BPSPX stays above 70. Once the BPSPX falls under 70, the market selling will be in full force with markets dropping lower and trending 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.

Note Added at 12:00 PM on 3/27/14: In the Wednesday, 3/26/14 session, BPSPX drops to 71.60. This is down about five points off the peak five days ago. One more point, under 70.50, would qualify as a six percentage-point reversal and create a market sell signal. Be sure and check the BPSPX chart this evening.

SPX 30-Minute 8/34 MA Cross

Daily whipsaw drama occurs. Every down move is met with an up move and visa versa. The sideways path through 1840-1880 continues for the last eight weeks. The blue lines show key support and resistance at 1884, 1878, 1874, 1868, 1859, 1855, 1848-1852 gauntlet and 1841-1843 gauntlet. Price begins at 1866 and the futures want to see a bounce of six to nine handles to 1872-1874, which would be a direct test of the strong 1874 resistance.

The 8 MA pierces up through the 34 MA in the final hour of trading yesterday signaling bullish markets for the hours ahead. Bears need a negative 8/34 cross or they got nothing. A bullish move through 1874 brings 1878 which then opens the door to test the all-time highs again. Markets have rallied at the open the last two days only to give it up so the bears need a repeat of this behavior today, otherwise, the bulls are running. The 1872-1874 resistance test is very important. 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 at 12:05 PM on 3/27/14: The 8 MA crosses under the 34 MA yesterday signaling bearish markets for the hours ahead.

SPX Daily Chart Tight Standard Deviation Bands

Markets continue along a whipsaw path, up one minute down the next, stumbling sideways through 1840-1880 (pink channel) for seven weeks. The standard deviation bands are squeezing in tight so a big move is afoot over coming days that takes price either to the top band at 1885-1890, or to the lower band at 1835-1841, in a heartbeat. So a move of about 20 or 30 handles that will likely continue. The red lines show the two negative divergence spank downs but the bears are having difficulty gaining any downside traction. The Fed crew is busy walking back Chair Yellen's statement about a rate hike occurring six months after QE ends which creates market lift. Also talk of ECB stimulus coming. And most of all, the dollar/yen rises above 102.30 to 102.35 so the weaker yen pumps stocks higher. Banzai! S&P futures are +6 a couple hours before the opening bell.

The 20-day MA at 1863.07 is key; the bulls are happy they closed above this critical moving average yesterday; bears were happy the day before for closing under. The price action and indicators show the sideways nature occurring. This behavior reinforces the thought that stocks will squirt out in one direction strongly up or strongly down, probably as this week finishes. A Bradley turn occurred on Saturday so the window is open for markets to commit to a direction. Another Bradley turn occurs on 4/6/14, then 4/27/14, then 5/6/14. So markets may take on some wild gyrations for the next six weeks; big moves up and down.

The 150-day MA keeps sloping strongly higher so the bulls are not worried or concerned. Market trouble will be confirmed when the 150 flattens and rolls over to the downside. Price likes to continually back test the 50-day MA, now at 1833, from above and below. The recent long stint without testing was about 8 weeks October into December. Similarly, price is above the 50-day for about 7 weeks now so a visit to the 50-day MA should be on tap in early April. Note the strong selling volume candle three days ago. Stocks were thrown overboard. This encourages dip-buyers and the end of quarter, Q1, window dressing is also in play helping bulls. The large volume down day is the highest volume since last June--when markets printed the strongest buying volume identifying the stock market bottom. Does the uber high selling volume identify this area as the market top?

Money flow is under 50% helping bears. RSI and stochastics are above 50% in bull territory. Watch these levels as a gauge of who wins. The MACD line cross remains negative (red circle) so watch to see if the bulls can reverse the cross, or not. Price will eventually move out of this 1840-1880 sideways range. S&P futures want price to explore the top side to begin 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.

Monday, March 24, 2014

Keystone's Midday Market Action 3/24/14

The March Seasonality article at the beginning of the month highlighted that last week is up 85% of the time and that played out as the seasonality dictated. Some backing and filling is occurring at the 1850-1880 level. The SPX printed a new all-time intraday high at 1883.97 on Friday but has not printed a new closing high in a couple weeks.

A Bradley turn date occurred on Saturday 3/22/14 so markets are in a window for a trend change or huge acceleration move. Considering the new all-time high print on Friday and now the reversal, the Bradley turn may result in a new trend lower for equities. Bradley turns do not forecast direction; only that a key inflection point will occur for markets within a few days plus or minus of the date.

The key S/R levels are highlighted this morning. Key S/R levels are 1884, 1878, 1874, 1868, 1859, 1855, 1848-1852, 1845-1846, 1843, 1838-1841, 1826-1832, 1808-1815, 1803, 1800 and 1796. Price is now fighting at the 1848-1852 support gauntlet. Bulls win above 1852. Bears win below 1848. Watch the 1859 level where March began. There are less than six trading days remaining in the month.

The 8 MA is below the 34 MA on the SPX 30-minute chart signaling bearish markets ahead. The SPX is above the 200 EMA on the 60-minute chart at 1852.30 signaling bullish markets for the hours ahead but price has dipped below this morning and is fighting along this key level as the day proceeds. Volatility is higher. The VIX is well above the 200-day MA which is a bearish market signal

Keybot the Quant remains short as markets remain a coin-flip. Bulls need lower volatility (VIX)Bears need lower retail (RTH) and commodities (GTX). The Keybot algorithm is now treating the retail sector as a top priority concerning market direction. Watch RTH 59.60 as a key bull-bear line in the sand. Very interesting. Whoopsies daisies. As this is typed, RTH slips under 59.60. See if this negativity holds. If it does, equities are going to take another leg lower. Equities will recover if RTH moves above 59.60 and heads higher. Biotech and pharma stocks are getting beaten from -4% to -8%. Looks like the bears are stretching their muscles to begin the week. Watch the SPX 1848-1852 support gauntlet, the 200 EMA cross on the SPX 60-minute chart at 1852.30 and RTH 59.60 to determine market direction.

Note Added 11:50 AM:  SPX 1852.30 testing the 200 EMA. You know what that means. Yes. Bounce, or die. RTH 59.45 should usher in more weakness.

Note Added 12:16 PM: Bounce. SPX bounced but now leaks lower for another test of 1852.30. Bounce or die. What will it be bulls and bears? Who wants it? RTH 59.56 with bulls pushing it higher only four pennies from the 59.60 bull-bear line in the sand. Bulls got nothing unless they can push RTH above 59.60.

SPX 30-Minute Chart 8/34 MA Cross Horizontal Support and Resistance Levels

The sideways bull-bear fight continues through 1841-1884. The horizontal lines show strong support and resistance at 1884, 1878, 1874, 1868, 1859 (March starting number), 1855, 1848 (start of 2014 number) and 1841. The green lines show the positive divergence, falling wedge and ovesold stochastics and RSI that created the price launch one week ago. The red lines show the negative divergence, rising wedge and overbot stochastics and money flow that created the spank down on Friday continuing today. The indicators remain weak and bleak (red lines sloping lower as indicators print lower lows) so price will likely seek a lower value even after a bounce occurs in this 30-minute candlestick time frame. Stochastics are oversold and will help create an intraday bounce. Thus, the market weakness may linger for at least 3 to 6 candlesticks so that would take things into this afternoon.

The 8 MA is under the 34 MA signaling bearish markets for the hours ahead. Watch to see if it holds since the bulls are always there to slap the bears in the face, just like last week where the SPX reversed the downward slide and ended up printing a new all-time high at 1883.97. If 1859 fails, next support is 1855, then 1848. Bulls need to push up through 1859 and run towards 1868 againThis 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 10:44 AM:  The SPX falls through 1859 and tests the 1855 support resulting in a bounce from the LOD 1854.81. Bulls win above 1859. Bears win under 1855. VIX is up to 15.66 well above the 200-day MA. The 20-day MA is 1862.05 and it would not be surprising to see an intraday bounce to back kiss this level.

Note Added 11:07 AM:  The SPX loses 1855 S so 1848 is next support. Remember the 200 EMA on the 60-minute is 1852.28 and 1848-1852 is the strong support gauntlet highlighted in the S/R missive. In the early going today, bears are pushing. This is a major market decision occurring at 1848-1852. Very bad things will happen to equities sub 1848. Bulls will stay in the game above 1852. The fight continues through 1848-1852.

SPX Support, Resistance (S/R), Moving Averages and other Important Levels for Trading the Week of 3/24/14

SPX support, resistance (S/R), moving averages and other important levels are provided for trading the week of 3/24/14. The SPX prints a new all-time intraday high on Friday at 1883.97 taking out the prior all-time high on 3/7/14 at 1883.57 by forty pennies. Interesting how the all-time closing high at 1878.04 from 3/7/14, two weeks ago, remains in place. March began at 1859.45 so look for price action around this pivot point during the last six days of the month. The year began at 1848.36.

For Monday, the bulls need to push up through 1884 to accelerate the upside, a formidable task. The bears need to push under 1863.50 to accelerate the downside. As this missive is typed, the SPX is breaking under 1863.50. The 20-day MA at 1862.21 carries a lot of clout and is a key bull-bear signal. The 8 MA drops under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead so keep an eye on that. The 200 EMA at 1852 on the 60-minute chart is another key bull-bear level. Market bulls are not concerned and will recover if the SPX stays above the 200 EMA at 1852. Big market trouble is ahead with accelerated and sustainable selling if SPX loses the 200 EMA at 1852.

The 1848-1852 level is a very strong support gauntlet. If price falls through 1848-1852, far lower numbers will be in store such as 1800-1830. Big picture, the key S/R levels are 1884, 1878, 1874, 1868, 1859, 1855, 1848-1852, 1845-1846, 1843, 1838-1841, 1826-1832, 1808-1815, 1803, 1800 and 1796. Price drops and bounces off the support at March's starting number at 1859.45 to begin the festivities. A break under 1859 may serve as an early signal that price wants to print a negative month for March. Bulls will receive a feather for their caps if they can maintain March as a positive month.

1884 (3/21/14 All-Time Intraday High: 1883.97) (3/21/14 Intraday High for 2014: 1883.97) (3/7/14 Intraday Top: 1883.57)
1883.97 Previous Week’s High
1883.97 Friday HOD
1878 (3/7/14 All-Time Closing High: 1878.04) (3/7/14 Closing High for 2014: 1878.04)
1866.52 Friday Close – Monday Starts Here
1863.46 Friday LOD
1862.46 (20-day MA)
1859.45 March Begins Here
1852.30 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)
1851 (1/15/14 Intraday Top: 1850.84)
1849 (12/31/13 Intraday High Top for 2013: 1849.44)
1848.36 Trading for 2014 Begins Here
1848 (1/15/14 Closing High: 1848.38) (12/31/13 Closing High for 2013: 1848.36)
1842.81 Previous Week’s Low
1832.14 (50-day MA)
1826.09 (20-week MA)
1814.61 (100-day MA)
1814 (11/29/13 Intraday Top: 1813.55)
1812 (12/9/13 Intraday Top: 1811.52)
1809 (12/9/13 Closing Top: 1808.37)
1807 (11/27/13 Closing Top: 1807.23)
1799 (11/18/13 Intraday Top: 1798.82)
1798 (11/15/13 Closing Top: 1798.18)
1775 (10/30/13 Intraday Top: 1775.22)
1772.14 (150-day MA; the Slope is a Keystone Cyclical Signal)
1772 (10/29/13 Closing Top: 1771.95)
1753.11 (10-month MA; a major market warning signal)
1743.29 (200-day MA; not tested for 1 year extremely odd behavior)
1733 (10/17/13 and 1018/13 Gap-Up: 1733.15-1736.72)
1731.01 (50-week MA)
1730 (9/19/13 Intraday Top: 1729.86)
1729.95 (12-month MA; a Keystone Cyclical Signal) (the cliff)
1726 (9/18/13 Closing Top: 1725.52)
1710 (8/2/13 Intraday Top: 1709.67)


Thursday, March 20, 2014

SPX 30-Minute Chart 8/34 MA Cross

The broad indexes stumble out of the gate today staggering lower, then recover staggering higher. The 8 MA is under the 34 MA signaling bearish markets for the hours ahead, however, the SPX is printing above the 8 MA which will cause the 8 MA to curl upwards for a potential positive cross. Bulls need a positive 8/34 cross or they got nothing. Bears need to push the SPX under 1865 as soon as possible to keep the 8 MA moving lower. Use the 8/34 cross and the VIX chart, a few articles back, to determine direction today. VIX is teasing the 200-day MA at 14.70 so watch to see who wins that battle.

The negative divergence created the spank down (red lines) and the thin blue lines for the indicators show that a sideways stumble may occur moving forward. Watch to see which side of 50% the RSI and stochastics move since that will verify direction. The 1874 is very strong resistance and it held to make bears happy. The 1848 is very strong support and the price level where 2014 began at 1848.36. The month of March began at 1859.45. The SPX may favor a move sideways through 1848-1874 going forward. The exit from this channel will be important with bulls winning big above 1874 and bears winning big under 1848. Watch the 8/34 cross to identify the winner. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 3/20/14: The SPX is 1864.89. The 8 MA on the 30-minute is 1864.69. Bulls need to move higher from this pivot to curl the 8 MA upwards. Bears need to move lower to keep the 8 MA dropping. VIX is 15.05 above both the 200-day MA at 14.71 and Keybot the Quant's number at 14.30 making for happy bears. Bulls got nothing unless they can at least push the VIX under 14.71. Doctor Copper is in sick bay again puking -2%.

BDI Baltic Dry Index Weekly Chart Sideways Channels

The sideways symmetrical triangles played out to the decision time last summer. Most traders and analysts professed the end to the shipping sector. Instead, the BDI ran higher and easily achieved the 1500 and 2100 targets to satisfy the triangle patterns. At the end of last year, the negative divergence was highlighted (red lines), with the majority of trades saying to buy, buy, buy.  A spank down was expected instead and occurred. Price is favoring a sideways move through 1100-1600 going forward.

Copper is smacked lately due to China slowing down. Ditto for steel, coal, iron ore, most commodities that fueled the China boom over the last couple decades. If less coal, coke, iron ore and steel require shipping across the ocean, then BDI drifts lower. The ag sector remains strong so the dry bulk shipping of grains is likely doing well and accounts for the positive side of the Baltic Dry Index. With a continuing slowdown in commodities expected, the BDI will likely move sideways in this slow-growth global economic funk; a sick sluggish slow economy with far too many people out of work for years.

Note how the moving averages are lining out sideways; the 20-day MA is dropping, the 50-day MA is moving higher. The 200 is starting to flatten. Shippers typically receive a goose from summer into fall since they are shipping all the Christmas gifts and supplies. The projection is for a flat move in the coming weeks and months for BDI and the shipping stocks. Opportunities on the long side should shape up in the early and mid summer time. 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.

USD Dollar Index XEU Euro TNX 10-Year Treasury Note Yield Daily Charts Yellen Aftermath

Fed Chair Yellen had her coming-out party yesterday; her first FOMC meeting. The bottom fell out in markets when Yellen provided a six-month target period for the time between when QE stops and the first rate hike will begin. Since QE is on schedule to finish in August or September, and Yellen herself says Fall of this year, which is September through November, add six months and the first rate hike will occur between February and May of 2015, only year away. Trader consensus for the first rate hike is June 2015 so Yellen has reduced this target by about three months and markets respond wildly.

The dollar launches higher from the falling wedge mentioned a couple days ago. The dollar is moving sideways through 79.3-81.3, a 2-point range, for months. The dollar may seek a move sideways through the center channel, 79.8-80.8, going forward. The strong move in the dollar sends the dollar/yen currency pair higher above 102 and the euro/dollar lower off the recent highs. The euro, XEU, receives a slap down from the rising wedge and is testing the lower rail of the upward-sloping red channel. Note how the euro dropped to the top trend line of the sideways channel at 1.3830. A bounce or die decision is required today. Euro is at 1.377 losing the 1.38 level as this is typed. Keystone is short the euro via EUO. ECB's Draghi will be content seeing the euro drop. A lower euro is needed in Europe to boost the manufacturing and export industries and pull the continent out of the slump. A higher dollar, however, will place pressure on commodities moving forward.

The 10-year yield catapults higher towards the 2.80% top channel trend line. The 10-year yield has moved sideways through 1.50%-3.00% for months and more specifically through 2.60%-2.80% for over two months. The move either up and over 2.80%, or collapse under 2.60%, will be very telling. Inflation and banks win above 2.80% but telecom and utilities will be smacked. Deflation and telecom and utilities win below 2.60% but banks will be smacked. Interestingly, the short end, 2 and 5-year yields catapulted higher along with the 10-year yield and the yield curves did not particularly steepen to any great extent. Banks need a steeper yield curve moving forward if they plan on making money. This is why a jump in banks occurs when the yield moves higher. Keystone uses a 255 basis point 2-10 spread as an indicator where banks become happy. The 2-10 spread remains at 235-ish well below the 255 the banks wnat to see. The spreads remain relatively the same after Yellen's comments indicating that the short end yields are moving strongly higher in relation to the long end.

The BOJ and Fed use the dollar/yen to goose the stock market. The BOJ weakens the yen which sends the dollar/yen higher and stocks higher. A higher dollar, however, will change this relationship moving forward. The euro may take on a stronger leadership role moving forward with a higher dollar = lower euro = lower commodities = lower stocks and lower dollar = higher euro = higher commodities = higher stocks. The higher dollar path is anticipated moving forward. Chair Yellen's tenure kicks off in dramatic fashion. Watch the break of TNX either above 2.80%, or below 2.60%. 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.