Sunday, June 29, 2014

Keybot the Quant at Overbot Levels

The Keybot the Quant algorithm remains long for the last five weeks as the Fed keeps pumping the stock market higher with easy money. The RTH 59.04 level is likely the market bears best chance to turn equities around to the downside. The West Coast dock strike is already impacting retailers and the Monday evening strike deadline looms which will impact RTH. Keybot is at +81 a very lofty overbot territory so just like the RSI, stochastics and money flow indicators on a chart, the +81 reading verifies the bull party ongoing but at the same time caution should be exercised since the overbot conditions likely identify a market top.

Keybot's site provides two SPX charts showing what happens to markets when oversold conditions occur for the algo number at -70 to -100 (market bottoms) and also for the recent overbot algo numbers at +79 and higher (market tops). Keybot's overbot condition can be lumped in with the other technical parameters such as the CPC and CPCE put/call ratios, VIX, SPXA150R, sentiment indicators, an uber long 5-year plus rally that historically needs a correction, a rally with price above the 200-day MA and 50-week MA for over one year's time and Bob Shiller's elevated CAPE ratio, that all indicate a significant market top is likely at hand.

Keybot the Quant

SPX Weekly Chart Overbot Rising Wedge Negative Divergence Upper Band Violation

The money flow was being watched last week since the green line was long and strong in the shorter-term (over the last month) wanting to see another price high. Interestingly, the SPX price high occurs last week and the money flow is dead flat (short red line), hence, negative divergence. The money flow is no longer wishy-washy; it is ready to send price lower. Watching the indicators set up with neggie d, however, is sometimes like herding kittens. The minute that one indicator lines up in all time frames with neggie d, another decides to stray away and turn positive to continue the ongoing buoyant trend.

The MACD line in the very short term is the only long and strong indication on the entire chart (short green line). All other indicators across all time frames, a month, a few months and even over one year's time, are negatively diverged. Thus, price needs a smack down, and after the slap down, price may want to come up one more time for a matching or higher price high (due to the MACD line not yet negatively diverging over the short one month or so period) and then an extended down path should begin for equities, starting with a potentially dramatic collapse from the rising red wedge. So the projection would be a down week, then up week that tops out, then down from there forward, or alternately, markets simply continuing lower from current levels with the MACD rolling over without incident giving up the ghost without a fight.

Watch the MACD lines since the negative cross will tell you that the bears have taken control, or not. Since the upper standard deviation band was violated at 1966, a move back to the middle band, the 20-week MA at 1882.88, is now on the table. The projection is for sideways to sideways lower prices going forward for the weeks and months ahead with a potentially sharp dramatic drop occurring from the rising wedge at any time. We are so close you can taste it. You already have prepared exiting long positions that you are not willing to hold for several years and building your large current cash position. The month of July should be entertaining. 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 Rising Wedge

As the previous daily chart highlighted, price has no reason to move higher since the red lines show universal negative divergence across all indicators creating the spank down last Tuesday. The negative MACD cross remains in play (red circle). Watch the skinny short green line for price at the all-time closing high at 1962.87, call it 1963. Watch the skinny maroon lines in the right margin for the indicators. If price moves above 1963 and closes above, the chart will remain negatively diverged and bearish as long as the indicators stay below the maroon lines. Thus, the chart is bear-favorable.

Price tested the 20-day MA at 1946.43 but more respect should be shown so more touches would be anticipated. June began at 1923 so it looks like the bulls will log five consecutive up months juiced by the Fed's easy money heroin. The higher volume days are due to the OpEx on Friday, 6/20/14, and last Friday's Russell rebalancing, 6/27/14. The largest volume days, where price may migrate to see who truly has the stronger volume hand, are in that sideways congestion zone at 1840-1880, so price likely has to move there so a decision is made concerning who will be the winner to end the year.

This week is shortened to four-days of trading closed on Friday due to the Independence Day July 4th holiday. Markets are typically bullish the two days in front of the three-day holiday weekend and markets are also typically bullish for the start of a new month, especially a new quarter, Q3, and the second half of the year. Every single check mark exists in the bull column with the bears simply showing up each day to get slapped around. If it is any consolidation to the bears, the markets may now have no where to go except down.

The projection remains the same as the previous daily chart analysis. The top is in or will be in during the coming days and a dramatic collapse of from 80 to 150 SPX handles is expected from the rising wedge. 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 6/30/14

SPX support, resistance (S/R), moving averages and other important levels are provided for trading the week of 6/30/14. Levels shown in bold are strong resistance and support. Bold and underlined levels are very strong and important S/R. The SPX prints new all-time highs last week in the 1960’s. June began at 1924 and ends on Monday as well as the second quarter and the first one-half of the year; EOM, EOQ2 and EOH1, respectively. The bulls will log the fifth consecutive up month unless a market event occurs overnight that would dump 40 SPX points on Monday, a -2% drop, (unlikely) so it appears the bulls already have the up month in the bag. The Fed wine is flowing like water. Trading is free and easy simply buy anything since Fed Chair Yellen is guaranteeing equity upside forever with ZIRP and also says the stock market is undervalued. The central bankers are the market.

Interestingly, the SPX closing high at 1962.87 is already over one week old occurring back on OpEx Friday, 6/20/14. Equities spike higher last Tuesday to print the all-time intraday high at 1968.17 but give up the gains and cannot print a new closing high. Watch the 1962.87 like a hawk since this price level will provide more market lift if the bulls can print a new all-time closing high.

Price dropped last week to finally back kiss the 20-day MA at 1946.43 and rising but the back test was cheesy. Price should show far more respect to the 20. The upper standard deviation band was penetrated so a trip back to the middle band, the 20-day MA, was on tap, and did occur, even if it was cheesy, satisfying this technical requirement. The bulls score two large volume up days but the one is OpEx Friday on 6/20/14 and the other last Friday, 6/27/14, with the Russell rebalancing, so not exactly ringing endorsements of the upside price move. The higher volume on these two days is more purely technical providing less credit for the higher prices.

The new moon was Friday early morning and markets were weak moving through the new moon as would be expected. Equities recovered into the closing bell on the upside bias caused by the Russell rebalancing. The bulls are salivating at the days ahead since this week is a four-day holiday-shortened week with markets closed on Friday for the Independence Day July 4th holiday. Equities are typically bullish the two days in front of the three-day holiday weekend. Volume dwindles and it may now turn into pure vapor and fumes. Traders return slowly the week of 7/7/14 and some piggy-back vacations, so the volume does not typically pick up again until later in the week or during the week of 7/14/14.

Since a new month, new quarter and the second one-half of the year is beginning, new money typically flows into the market creating lift. Everything is going the bulls way. In fact, many have decided to continue drinking the limitless Fed wine from this weekend all the way into the holiday next weekend. Even Yellen is donning a lamp shade dancing through the halls of the Eccles Building with Fed members following behind in a congo line; all in a drunken glee impressed with themselves that they can create a higher stock market forever.

Many indications such as CPC, CPCE, SKEW, VIX, SPXA150R, Keybot the Quant algorithm's +81 overbot conditions, sentiment indicators and Bob Shiller's CAPE ratio, to name a few, highlighted last week forecast trouble ahead for equities. Complacency is rampant. No wonder the long traders will be staggering drunks all week long buying stocks without paying any attention to the actual ticker symbols. There is no fear or worry. On top of all this fearlessness and complacency, the start of the month and pending holiday bullish seasonality factors only serve to pour more Fed juice into the punch bowl. At the peak of all this joy, perhaps this is when the slap in the head with a 2x4 begins instead? Considering the light projected volume for the days ahead, it is easy to keep markets buoyant to the upside, however, if an event occurs the markets would likely be ill-prepared to handle the negativity and the low volume would exacerbate the bearish impact on equities.

For the SPX starting at 1961, the bulls only need one-half point, to punch up through 1961.50, and the confetti will be in the air with an acceleration to 1963 and 1968 all-time highs occurring quickly. Watch the S&P overnight futures to see if any hint of positivity occurs, if so, put on your party hats since the bulls are likely going to print a new all-time high. The bears must keep the overnight futures negative at all costs. In addition, market bears need to push the SPX nine points lower, under 1952, or they got nothing. A drop under 1952 will quickly drop price to 1949 for a bounce or die market decision. A move through 1953-1961 is sideways action for Monday. The bulls are driving the bus as the markets take on an eerie calm.

1968 (6/24/14 All-Time Intraday High: 1968.17) (6/24/14 Intraday High for 2014: 1968.17)
1968.17 Previous Week’s High
1963 (6/20/14 All-Time Closing High: 1962.87) (6/20/14 Closing High for 2014: 1962.87)
1961.47 Friday HOD
1960.96 Friday Close – Monday Starts Here
1956 (6/9/14 Intraday Top: 1955.55)
1952.18 Friday LOD
1951 (6/9/14 Closing High: 1951.27)
1946.43 (20-day MA)
1944.69 Previous Week’s Low
1933.27 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)
1924 (5/30/14 Intraday Top: 1924.03) (5/13/14 Closing High: 1923.57)
1923.57 June Begins Here
1909.58 (50-day MA)
1902 (5/13/14 Intraday Top: 1902.17)
1897 (5/13/14 Closing High: 1897.45) (4/4/14 Intraday Top: 1897.28)
1891 (4/2/14 Closing High: 1890.90)
1884 (3/21/14 Intraday Top: 1883.97) (3/7/14 Intraday Top: 1883.57)
1882.88 (20-week MA)
1879.24 (100-day MA)
1878 (3/7/14 Closing High: 1878.04)
1856.48 (150-day MA; the Slope is a Keystone Cyclical 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)
1837.51 (10-month MA; a major market warning signal)
1824.90 (200-day MA; not tested for 19 months extremely odd behavior)
1814 (11/29/13 Intraday Top: 1813.55)
1812 (12/9/13 Intraday Top: 1811.52)
1809 (12/9/13 Closing Top: 1808.37)
1807.82 (12-month MA; a Keystone Cyclical Signal) (the cliff)
1807 (11/27/13 Closing Top: 1807.23)
1802.02 (50-week MA)
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 (10/29/13 Closing Top: 1771.95)
1733 (10/17/13 and 1018/13 Gap-Up: 1733.15-1736.72)
1730 (9/19/13 Intraday Top: 1729.86)
1726 (9/18/13 Closing Top: 1725.52)
1710 (8/2/13 Intraday Top: 1709.67)

Friday, June 27, 2014

SPX Daily Chart Rising Wedges

Two powerful rising wedges remain in play for price. The collapses from rising wedges can be quite dramatic. A few days ago the negative divergence was developing and the wait was for the top to be placed, which it was, as shown by the red lines creating the spank down. Sometimes in the VST, the indicators will try to squeeze out additional bullishness before a firm roll over occurs but for the price spike high shown by the long red candlestick (intraday reversal), occurs with every indicator lower (negative divergence). Thus price does not have any reason to go higher now and there are no overhead gaps that need filled either. Note how price used the lower rail of the maroon wedge as support, then bounced, and then yesterday drops under the trend line only to recover by the closing bell to perch exactly on the maroon trend line. Bounce or die.

The 20-day MA at 1944.56 needed back kissed for several days and price fell for a quick test yesterday but if you got up for a cup of coffee you missed it. The 20-day should be shown a little more respect. The SPX needs to revert lower as the lofty price moves above the moving averages show (purple dots). A feather in the bears cap is the negative MACD cross (red circle). Watch this closely since it will immediately tell you who is winning the game. The bulls need to reverse the MACD cross as soon as possible while the bears want to send the MACD lower under the prior low as soon as possible. The histogram is under zero in the bear camp. Money flow and the histogram is weak and bleak hinting that further price lows are on tap.

The high print a couple days ago has a good chance to hold as a potential multi-year top. As previous charts such as CPCE, CPC, VIX, and the elevated SPXA150R, and other factors have shown, the markets may be placing a very significant top currently. This entire analysis would jive together to create the, say, 100-handle or more SPX spank down. The SPX weekly chart may be a very short term bear spoiler, however, since the money flow is long and strong in the very short term hinting that on a weekly basis, price may want to come up for one more time for THE top. This would manifest as a few days of weakness, then a recovery placing the multi-year top near the all-time highs, over the next couple weeks. This scenario may play out since next Friday is happy July 4th celebrations and markets will likely be bullish from Wednesday on. Markets are closed next Friday. New money may flow into markets for the new half, quarter and month as well creating market lift.

Thus, the projection is that the top may be in currently and some further weakness is anticipated for the days ahead. Equities may recover to print a top the week of 7/7/14, or trickling into 7/14 or 7/15, but considering the negativity forecasted at any time by the SKEW and other items mentioned above, markets are very close to a significant top and may have already printed the top. Today and Monday will tell a lot. Equities should either continue selling off and moving lower which will be a significant pull back of 80 to 150-handles, or, equities sell off for a few days but recover to the all-time highs one more time over the next couple weeks placing a firm market top and then the 80 to 150-handle SPX selloff to the downside begins. Pay attention to the June starting number at 1923.57 to see if another positive month prints come Monday evening (EOM; EOQ2; EOH1), or not. 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.

BCS Barclays Daily Chart Price Collapse New York Regulators Sue Over Dark Pool

Barclays was punished -7.4% on Thursday, 6/26/14, on news that New York regulators sue Barclays for securities fraud concerning its dark pool. Regulators allege that Barclays misleads institutional clients boasting of a level playing field when at the same time preferential treatment is provided to HFT traders. Dark pools are legal and allow trades to occur in anonymity. Large block institutional traders use dark pools when placing trades to not tip off or draw attention to their large positional bets. The serious allegation is that Barclay’s hid from institutional clients and regulators the high-frequency trading data from its largest dark pool trader, the computerized TradeBot, so it did not appear that HFT was rampant and receiving preferential treatment. Regulators further allege that Barclays used false statements to promote the dark pool. Barclays collapses on the news.

BCS peaked last Thursday at 16.44 and dropped to 14.38 a 2-point drop, -12.2%, over the last five days. Ouch. That is going to leave a mark. The bank is selling off for several days before the news since the insider traders were told of the trouble ahead of time and exited the stock leaving the sucka's hold the bag. Nothing changes on Wall Street. Other banks that run dark pools, such as CS, DB and UBS are bludgeoned from -2.4% to -4% lower in Thursday trading. US banks are weak. C is punished -1.2%.

The fallout from Barclays dark pool problem continues into Friday morning. Associated banks and brokers such as DB are beginning to sever connections with the now cancerous bank. Barclays recovers +1% after yesterdays drubbing trying to reverse the five days of selling. The regulators are taking a bite out of the dark pools. The regulators are focused mainly on European banks in recent months which is creating an increasing rift between US and European financial institutions. 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, June 26, 2014

SPX 30-Minute Chart 8/34 MA Cross

The 8 MA remains under the 34 MA signaling bearish markets for the hours ahead. The bulls staged a come back yesterday finally pushing up through 1956 resistance, then 1958 then attempted the break at the strong 1960 R, that would lead to new all-time highs, but failed. Price drops back under the 1956 support and 1951 support and now dances around the 1949 support. The bounce from the LOD at 1944.69 today is exactly off the 20-day MA at 1944.26 that has needed back kissed for several days.

The 8 MA is 1952.78 so as long as price stays under this level, and heading lower, bears are fine. If the SPX moves above 1953 and higher that is the first hint that the bears are going to fold like a cheap suit. SPX is at 1949.49.

The green lines show the positive divergence that formed after the strong price drop at the opening bell that creates the bounce. The MACD line is leaking lower, however, hinting at another trip lower. Further, the 1-hour and 2-hour charts hint at one more trip lower so a move down to test the 1940-1944 support area again is a reasonable expectation. The bears have no oomph. Copper, retail and many other sectors and parameters remain strongly bullish. RTH came down to tease the 59.04 bull-bear line in the sand but bounced. This appears the best chance for bears to create extended downside if it occurs.

The new moon is tomorrow morning, through the night time hours, and markets are typically bearish about two-thirds of the time through the new moon so perhaps markets will place a mini peak higher today that will lead to the lower lows at 1940-1944 tomorrow. The VIX is 11.92 remaining low, under 12, helping bulls. TRIN is 0.98 dead flat not favoring bulls or bears today. Bears need RTH under 59.04 to prove they have oomph, otherwise, their adventure to the downside this week will be short-lived. RTH is at 59.25. The beat goes on. 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 12:01 PM: SPX is above 1952 exactly where the 8 MA is at on the 30-minute chart. Bears must keep SPX under 1952 and move price lower quickly, otherwise, the bears will crumble as price moves to 1953 and higher. TRIN 0.96. VIX 11.91. RTH 59.25.

Note Added 12:06 PM:  SPX is 1951.80. The bears keep trying.

Note Added 6:32 AM on 6/27/14 (Friday): The SPX kept marching higher into yesterdays closing bell. The Dow sits on its 20-day MA, so watch which way price pivots, and the SPX bounced off its 20-day MA at 1944.56 yesterday, so this key moving average may play a key role today and early next week. June began at 1923.57 and there are only two days remaining. A new moon peaked about three hours ago and equities are typically weak moving through the new moon. Window dressing does not appear to be in play for the month end, quarter end and first-half year end on Monday (EOM, EOQ2, EOH1) since everyone is already long the stocks that outperformed; there is no reason to reposition. The Fed wine is sending all stocks higher. The Russell Rebalancing today will introduce a lot of volume. Consumer staples are already hit the last few days and are shunned in favor of tech for this rebalancing so watch XLP and XLK. Market bears got nothing despite the market softness. Watch RTH 59.04. Bulls are fine as long as RTH stays above 59.04. Bears got nothing unless the RTH drops under 59.04. The 8 MA is below the 34 MA on the SPX 30-minute chart above still signaling bearish markets for the hours ahead but the 8 MA is about to slice up through the 34 MA to signal bull fun and a run to the all-time highs again today. The market bears must begin Friday on the weak side and move the SPX under 1954 (the 8 MA on the 30-min) as quick as possible. If the SPX remains above its starting number at 1957, and floats higher, and touches the strong 1960 handle, bingo, this will launch the bulls into victory and new all-time highs into the weekend. Bears must keep the SPX as far under 1960 as possible. So bears need the SPX under 1954 from the opening bell and heading lower, and also RTH under 59.04, or they got nothing. If the bulls keep the SPX above 1955 from the start, they have a shot at rallying to the all-time highs in the high 1960's today. S&P futures are -5 three hours before the opening bell.

Wednesday, June 25, 2014

SPX 30-Minute Chart 8/34 MA Cross

Wonders never cease. The bears finally create a negative 8/34 MA cross signaling bearish markets for the hours ahead. The 8 MA is 1955 and dropping sharply so as long as the SPX stays under the 1952-1955 area the bears should be fine. Price is laying around at the very strong 1951 and 1949 S/R levels. If the SPX moves higher from here a test of the 1956 level is on tap. A move lower would tease the strong support levels at 1942 and 1940.

The SPX fell yesterday as the 2-hour chart forecasted (reference yesterday's charts). Yesterday, the tweezer bottom shown above occurs late-day due the stochastics positively diverging in the oversold territory. The MACD line and ROC want to see another lower low in SPX after a bounce occurs. The green lines highlight a falling wedge, which is a bullish pattern, and note how the bottom of the pattern jives with the 1940-1942 area making this a logical place for a firm near-term bottom. The SPX may develop a sideways pattern through 1940-1956 going forward.

The projection is for a lower low than the LOD at 1947.49 due to the weak and bleak MACD line and ROC. A near-term bottom may occur at the 1940-1942 support where stocks can stabilize and recover. Bulls got nothing until they create a positive 8/34 MA cross. The bears are in charge in the very short term so watch to see if the negative 8/34 cross remains, or, like in prior times, Lucy the bull pulls the football away from Charlie Brown the bear and he falls on his keister as he tries to kick and win. 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 11:14 AM: The bulls waste no time running higher to test the 1956 resistance. Can the bears hold the line at 1956? TRIN is 0.90 favoring bulls but not convincingly. The bulls maintain strong copper and retail sectors smashing any bear hopes of extended downside. A developing sideways channel through 1940-1956 may develop or even a tighter 1949-1956 channel. The 1958 is further resistance above and the round number 1960 is very strong resistance which would lead to the all-time highs again if breached.

Note Added 12:19 PM: The bears hold 1956 R, so far. TRIN 0.97 moving up, call it neutral since it is close enough to one so TRIN no longer provides an advantage to bulls today. VIX is negative and under 12 so bears must reverse this to prove they mean business. Bears would need to push under SPX 1951 support to show they have oomph, this would create a 1949 failure and set the path lower. The 8/34 MA cross above remains bearish. Overall, the market bears got nothing unless they can push copper and the retail sector lower.

Note Added 12:27 PM:  The SPX is 1954.09 and the 8 MA on the 30-minute is 1953.06 and dropping. Therefore, price above the 8 MA will curl the 8 MA higher and set the bulls up for a positive 8/34 cross later today or tomorrow. The bears must send the SPX at least a couple points lower immediately, under 1953 and lower, to keep that 8 MA heading south and keep the market bears in charge. If the SPX stays above 1953 and heads higher over the next hour, the bulls are going to win today. TRIN 0.98. VIX 11.78.

CBOE SKEW Index Daily Chart Signals Significant Market Top

Start buying canned goods and store water in the basement as the SKEW runs wildly higher above 140. A reading of 100 shows a calm market but as the SKEW increases so does the chance that an extraordinary event will occur, a black swan, or other such turmoil that sends the stock market into a tizzy. The green circles show recent market bottoms and the red circles show recent tops. For many of the inflection points, the SKEW is peaking before or coincidentally with the market top and bottoming out ahead of or coincidentally with the makret bottoms making it a very attractive signal to monitor.

What is it saying now? Obviously the chart says 'watch out'. A market selloff would be expected going forward. The top to start the new year (double circle) results in a drop of 110 SPX points and the late March-April quick drop results in 85 points of downside. Thus, the expectation is for an 85 to 110-handle drop in the SPX from this current uber high SKEW print (SPX has peaked or will in the coming days or week or two). The recent SPX top is 1968 so the downside target is 1850-1880. Watch your wallet. Also of interest is the green line since as a rule of thumb, using the recent lows as a guide, it appears unwise to buy stocks on the long side until the SKEW drops under 125 and preferably lower. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Tuesday, June 24, 2014

SPX 2-Hour Chart Rising Wedge Overbot Negative Divergence

The bears are smacked in the teeth again as is always the case. On the 2-hour yesterday, the neggie d wanted to see a smack down and weakness but the long and strong MACD line in the VST wanted another high in price and voila, over the last few candlesticks that scenario plays out (reference the previous SPX 2-hour chart). Note that now price is higher but the MACD line is clearly negatively diverged. The red and maroon lines show near universal negative divergence across all indicators and time frames currently. The RSI is trying to print a higher high in the VST and will probably succeed thus price likely needs from one to three candlesticks (from two to six hours) again to top out and begin a more extended down move. The projection would be for equities to top out today due to the negative divergence and move down towards the lower trend line at 1955-ish.

The SPX prints a new all-time intraday record high at 1968.17. The 20-day MA at 1941.08 and rising needs back tested. Note that the 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. The bears made a run lower yesterday to try and create an 8/34 MA negative cross but fell flat on their face. Bears got absolutely nothing without the 8/34 negative cross on the 30-minute SPX chart.

The dollar/yen moves higher to 102.14 well off the lows under 101.90 only a couple hours ago. Banzai! The rise in the dollar/yen up through the 102 pivot reflects a weaker yen so the US stock market moves higher. Market bears need to push the dollar/yen under 102 to introduce equity weakness today, otherwise, they got nothing. The BOJ, Fed and other central bankers are the market. Traders are drunk off Fed wine, staggering around the trading floor buying any stock that has a ticker symbol, and then kneeling in front of the Fed shrine in the corner praying for continued stimulus and easy money. Everyone sings, "for she's a jolly-good fellow" to honor Fed Chair Yellen; the QE Queen. 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 12:05 PM:  VIX is flat and TRIN is at 1.35 firmly in the bear camp today despite the higher stock market. Equities should weaken today, otherwise, the TRIN needs to drop under one and head down towards 0.9 and 0.8.  Dollar/yen 102.12. The SPX is 1966.37. The SPX HOD at 1968.17 remains in place thus far. Markets float sideways at elevated levels since the dollar/yen remains buoyant. The status is quo. The bulls are cruising occasionally slapping the bears in the face for fun and 100% confident that stocks will never sell off.

Monday, June 23, 2014

Keystone's Morning Wake-Up 6/23/14; PMI's; Existing Home Sales; MU

The bears are slapped in the face day after day for nearly two weeks. Fed Chair Yellen stokes the bull fire by cheer leading stocks last week professing that the stock market is undervalued. If you need any more evidence that free markets are non-existent look no further. Equities simply move higher on the Fed and other central banker money printing. US futures are flat moving towards the first day of trading this week. Long traders are giddy drinking Fed wine and proclaiming that the Dow 17K milestone will print today.

Seasonality-wise, the week after OpEx in June is a very weak week. This month is odd, however, since the trading month began on a Monday rather than mid-week. This pushes the expected seasonal weakness into the end of month and quarter (EOQ2) where window dressing would be expected creating market lift. Since most funds probably own the successful stocks this quarter already, the window dressing effects may be muted this time around. To summarize, based on seasonality alone, market weakness would be expected this week with some lift potential middle to late week due to Q2 window dressing.

Copper was the dagger in the bears heart last week and continues to move higher today due to the rosy China PMI data. Through all this market roller coaster turmoil, Keybot the Quant remains long for the last month. Watch JJC 37.60 and RTH 59.00 for any potential cracks in the bull armor. For the SPX starting at 1963, the bulls only need one point, to touch the 1964 handle and bingo, another several-handle upside move is on tap taking price to 1970. The bears need to push under 1959 to accelerate the downside. A move through 1960-1963 is sideways action and very unlikely considering such a tight range. Bulls win above 1964. Bears win under 1959.

The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead so the bears got nothing unless they create a negative 8/34 cross. The sentiment indicators, VIX, CPC and CPCE continue to verify the rampant market complacency and fearlessness. This is also backed by the parade of pundits across the television screens each day one calling for a higher stock market than the other. The Fed booze is flowing like water and long traders are now shooting up on the crack cocaine easy money that Yellen promised last week.

Equities will pivot at 10 AM today on the Existing Home Sales.MU is a darling of long traders with funds maintaining strong bullish exposure so the earnings after the closing bell are important. Consumer Confidence is tomorrow morning a key monthly market metricBegin watching the June starting number at SPX 1923.57 since there are only six trading days remaining in JuneNext week is a 4-day holiday-shortened week with the July 4th holiday on Friday.

Bulls are cruising with JJC above 37.60 and RTH above 59.00. The upside party will continue with SPX 1964. The bears need to push copper and the retail sector lower, the SPX under 1959 and/or create a negative 8/34 MA cross on the 30-minute chart, otherwise, they got nothing.

SPX 30-Minute Chart 8/34 MA Cross Overbot Negative Divergence

The 8 MA is above the 34MA on the SPX 30-minute chart signalling bullish markets for the hours ahead. Bears got nothing unless they create a negative 8/34 cross today. The 2-hour chart wants to see a spank down so if equities weaken today watch for the 8/34 negative cross to signal that down is the real deal, or not. The 8 MA is moving flat at 1962 so very simply, the bulls win with the 8 MA moving higher if price stays above 1962 and moves higher. The bears will curl the 8 MA lower for a potential negative 8/34 cross if the SPX drops under 1962 moving lower.

The indicators are overbot and negatively diverged creating the spank down about five hours ago and ready to create another. Note the juice in the RSI over the last couple one-half hour candlesticks. The 2-hour chart hints that price may play around at the elevated levels for a few hours to begin the week so that little RSI juice above may be creating enough oomph to keep price elevated moving sideways in this time frame. The expectation, like the 2-hour, however, is lower today with price peaking some time today. Bears have been beaten daily for almost two weeks but the negative 8/34 cross, if it occurs, will show that they have some fight remaining.

If the positive 8/34 cross remains, the bulls are cruising, occasional walking across the aisle to slap the bears in the face just for fun. Rich Uncle Fed watches and encourages the bullish traders' spoiled behavior since there are unlimited funds to send stocks higher and there are no consequences. Fed Chair Yellen cheer leads the stock market and plans to run the printing presses forever. 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 Upward-Sloping Channel Rising Wedges Overbot Negative Divergence

This will be interesting to watch today since we have been monitoring the chart since the last half of last week. Price is moving up through the upward-sloping channel. Negative divergence is in place for the 2-hour time frame for both over the last couple weeks as well as the VST, sans the MACD line that remains long and strong (short green line). The bulls keep finding ways to squeeze out more upside juice. Thus, market softness is expected from the overall neggie d but price will likely want to come back up again for another matching or higher high so the MACD can negatively diverge and confirm that the neggie d spank down is at hand. (The SPX is ready to roll over as soon as the MACD line rolls over).

Thus, the projection is a move down for a few handles then a recovery to the current highs over the next one to three candlesticks, which is today (2 to 6 hours), then a more sustained path lower should develop with neggie d spanking price lower probably targeting the lower rail of the channel. The two-week rising red wedge in play where price is at the apex of the wedge ready to drop. Of more interest is the red wedge that runs off the right side of the chart (two red lines running off the right margin). If you scroll back to study the SPX daily and weekly charts, they appear to be topping, the daily likely wants to see weakness early this week, but there appears one more move back to the current highs desired for the indicators to all roll over with negative divergence creating sustainable downside. Marrying the daily and weekly charts with the red rising wedge running off the page above targets a potential market top next week at the 1960-1968 level. So equity action will be very interesting to finish the month of June and begin July. June began at 1923.57. The July 4th holiday is only nine trading days away and is on a Friday this year.

Due to the uber complacency as evidenced by the VIX, CPC, CPCE and lofty markets shown by SPXA150R, and the SPX daily and weekly charts setting up negatively, a substantial market top is anticipated over the coming days between now and early July. The 2-hour above says equities will top today, probably late morning, and roll over to the downside but will likely recover again (due to the weekly chart) to place a firmer top a few days from now perhaps next week. As always, the technical analysis can change quickly, especially if Fed Chair Yellen appears on the floor of the NYSE shaking her pom-poms. 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.

BRENT Brent Crude Oil Weekly Chart Sideways Symmetrical Triangles Sideways Channels

Crude oil is a major focus of global traders as the Iraq turmoil continues. Commodities and commodity currencies bounce today after the stronger than expected China PMI data. European PMI's, especially, France, are on the disappointing side. Brent breaks up and out of the yellow triangle at 108 so the upside target is a lofty 144. A retracement and drop under 108 would open the door to 72. The former is the inflationary outcome and the latter the deflationary outcome.

Considering the ongoing Iraq conflict, trader consensus is up. Interestingly, if a global slowdown appears and takes hold, oil demand will drop sharply leading to a far different outcome than expected. The sideways symmetrical triangles many times will morph into longer more extended sideways triangles so the pink triangle is in play. Price broke out above at 112 one week ago and would target 149 on the upside the same target as the yellow triangle; call it 140-150. If price retracts and drops under 105 (lower pink trend line), price would seek 79, again, in the neighborhood of the yellow triangle downside target; call it 70-80.

The indicators are long and strong in the VST favoring the upside breakout except for money flow. The key will be if the indicators move above the thin red line, or not, if/when price matches the September 2013 high at 117-ish. If the indicators remain under the red lines this will create negative divergence and hint that the upside will be limited as the next couple months play out. If the RSI breaks above the red line then price will likely remain elevated for several months forward.

The white sideways channel 105-118 is in play and price inches higher to test the upper rail. Considering the long and strong indicators for the short term (green lines) a move through the blue channel at 112-118 may be prudent for the next few weeks as the Iraq drama plays out. The Brent oil bulls win big above 118. The oil bears remain in the game under 118 and will receive downside fuel under 112. 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, June 20, 2014

Keystone's Midday Market Action 6/20/14; OpEx Quadruple Witching

Boo! Today is Quadruple Witching so robust volume occurs at the open and will also occur during the last one-half hour of trading before the closing bell. Keybot the Quant algorithm remains long the market as the bears cannot catch a break. In fact, the bears are mortally stabbed today with JJC (copper) moving above 37.60, into the bull camp, and creating much of the market strength today. The bears need to push JJC under 37.60 as soon as possible, otherwise, the beatings will continue. JJC is printing 37.97 currently up +1.6% hoisting the bears on a pike. Copper remains the key equity direction driver currently.

The bulls needed to push the SPX less than one point higher to create an upside acceleration today and that move is playing out. The Dow prints a new all-time high at 16978.02 only about twenty points from 17K. Trannies have not exceeded their prior all-time intraday high. The SPX prints another all-time intraday high at 1963.91. Everything is going the bulls way. Fed Chair Yellen cheer leads the stock market and everyone is wasting no time buying. Typically, a Fed meeting move that delivers happy news receives a 25 to 30-handle pop in the SPX. Price is currently up about 20 points from the 1940-ish low where the 3-day rally began so the move remains mild based on prior bull moves. A 10-point move higher today, however, will place the joy in line with prior Fed-pumping joy.

Previous charts such as CPCE, CPC, VIX, TRIN and the SPX weekly and daily charts, show a very negative set-up for markets. The bulls may squeeze out one to three more weeks but the indexes are very toppy now. Considering the low put/calls, the SPX may top in this existing area right now and these price levels may hold for the indefinite future. The SPXA150R, the percent of S&P 500 stocks above their 150-day MA, is at 84.80 very elevated. The 90 level is a gift for short-sellers since the markets are virtually guaranteed to sell off due to the over exuberance. This area from SPXA150R 84.80 and higher is a great place to begin scaling into index short positions going forward.

The BPSPX is up to 83.80 remaining on a firm market buy signal. Bears need to reverse the BPSPX by six percentage-points to receive a sell signal. This is more of a lagging and confirmation signal. The SPX 2-hour chart shows that price needs some more time at these elevated levels to create negative divergence with the indicators (see previous chart) but a near-term market top should be very close at hand either today or Monday. Copper is a game changer. Watch it closely. If JJC stays above 37.60 it is nothing but blue skies and rainbows and a continued bull rally party. Bears need JJC back under 37.60 or they got nothing.

Traders remain very complacent. The next couple weeks will be very interesting. The bears are likely enduring the last of the near-term pain today and perhaps Monday. Watch JJC 37.60. Interestingly, seasonality-wise, the week after OpEx in June (next week) is typically a down week. Thus, astute traders may begin positioning themselves for expected weakness next week ahead of time. Markets should top out at anytime. Copper is the fly in the ointment for bears creating the strength today that may help equities maintain buoyancy into the closing bell.

Summer begins tomorrow in the northern hemisphere with the solstice occurring at 6:51 AM EST. Keystone is donning his ceremonial Celtic fur vest and Merlin hat and plans to spend the night waiting for the sunrise inside the crystal circle beyond the pines.

Note Added 12:42 PM:  VIX turns positive today but remains low overall helping market bulls. TRIN is up to 1.23 so the Nasdaq is lined up negative as would be expected but the SPX and Dow remain positive. With volatility and the SPX/Dow all positive, one of them is wrong. Either VIX drops to signal happy bulls into the weekend, or, VIX continues higher sending the SPX and Dow lower. JJC is 37.98 well above the 37.60 bull-bear line so the bulls are relaxing looking forward to the weekend. The SPX 2-hour chart is negatively diverging with the RSI rolling over but the MACD line still wants another high (see this morning's chart), thus, another one to three candlesticks are needed, so the bears may be able to create the market top very late in the session today, if not, likely Monday.

Note Added 9:40 AM on 6/21/14: The bulls run higher riding the copper chariot. The SPX, Dow, UTIL, XLU and XLE all print at new all-time highs. The SPX 2-hour chart is negatively diverged across all indicators except for the MACD line over the very near term (the last four hours of trading), therefore, a spank down would be expected as discussed on Friday but price likely wants to tease at the highs again at 1963-1965 which should create universal neggie d and a more extended down move. It may take one to three candlesticks for the MACD line to negatively diverge so equities should top out either Monday morning or Monday afternoon. The 1955-ish S/R is a logical initial downside target. The bears should have a turn at bat next week. The bulls are cruising on a euphoric ride of complacent glory.

TRIN Arms Index Daily Chart

The TRIN drops to an uber low 0.32 this morning indicating off-the-charts bullishness. The low print is shown on a candlestick chart but the line chart is used above to eliminate a lot of the noise. The red circles identify market tops when the bulls are running without fear and traders are tripping over each other to buy any stock with a heartbeat, like today. The green circles are market bottoms where a whiff of panic and unease enters markets which creates the conditions for a rally.

The thick blue line at 1.00 is the neutral line for the Arms Index. If the TRIN is 1.00 to say 1.70, this represents steady-eddy market selling without any panic. This type of selling can continue for a while. When the TRIN moves above 2, 3, 4, and higher, traders are jumping out of windows as the markets sell off--the exact time to buy. If the TRIN is under one and in between 0.80-1.00 this represents steady-eddy buying in the stock market. Under 0.70 shows a buying frenzy in place where the bullishness is getting completely out of hand identifying a market top. Under 0.50 is identifying a quickly-developing market top simply because everyone is long and there are no sellers remaining.

TRIN is 1.03 right now recovering from the uber bullish 0.32 this morning. Call it neutral. So, despite the stock market running higher with the Dow just printing new all-time highs, the TRIN is neutral to the action now not favoring the bulls or bears today, after the uber bullish euphoria peaked about an hour ago. 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 Negative Divergence Developing

The bears receive a major blow today. Copper was the last piece of the puzzle needed by bulls and the move higher in the other yellow metal sends stocks sharply higher. Watch JJC 37.60 as a market bull-bear gauge with price running away to the upside at 37.94. The market bears are beaten mercilessly. There is no near-term hope for bears (the next couple days) unless copper weakens.

Price continues higher in the upward-sloping red channel. The indicators are negatively diverged across the last couple weeks but note the very short term strength (green lines). The RSI and MACD line want to see another higher high in price before they will commit to firm negative divergence in the VST. Thus, at least one to three more candlesticks are likely needed for the chart to set up for the bears; this would be two to six hours of trading time which is today's session and into early Monday.

Considering the Fed joy and Yellen Rally, where she now cheer leads stocks telling Uncle Ned to take his entire social security check and buy dividend stocks, the bulls are going to try and keep the market buoyant into the weekend and will be definitely able to do so with JJC above 37.60. If the bears can turn copper negative they can create the SPX market top before the closing bell. Today is Quadruple Witching so there will be wild crazy volume in the final fifteen minutes which may create an overall wild ride for the last hour of trading 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 10:30 AM: The VIX prints another near 8-year low at 10.34. The TRIN dropped to 0.32. Welll, doggies, that is a low print for TRIN and is another tool that says the markets are topping in here. However, in the here and now, in this instant, the low volatility and TRIN are a one-two punch into the bear's gut. Interestingly, the bears pump the TRIN up to the neutral 1.00 number right now so they are not going down without a fight.

Note Added 9:45 AM on 6/21/14: The bulls run higher fueled by copper. The SPX prints a new all-time intraday high at 1963.91 and new all-time closing high at 1962.87. The SPX 2-hour chart is negatively diverged across all indicators except for the MACD line over the very near term (the last four hours of trading), therefore, a spank down would be expected as discussed above but price likely wants to tease at the highs again at 1963-1965 which should create universal neggie d and a more extended down move. It may take one to three candlesticks for the MACD line to negatively diverge so equities should top out either Monday morning or Monday afternoon. The 1955-ish S/R is a logical initial downside target. The bears should have a turn at bat next week. The bulls are cruising on a euphoric ride of complacent glory.

SPX Weekly Chart Rising Wedge Overbot Negative Divergence

The bears have been raped by the Fed over the last year but the theatrical drama is reaching the final Act III. Price is squeezing into the apex of the long-term rising wedge. The collapses from rising wedges can be quite dramatic. Price has violated the upper band at 1957.69 so a move back to the middle band, the 20-week MA at 1874.65, and rising, is required at a minimum.

For the last few weeks the selling volume rules the roost. This is distribution where the smart money is exiting the market on the week after a lot of upside joy like the prior week. The television pundits whip folks into a buying frenzy, like now, so Aunt Agatha took her entire life savings out from behind the antique mahogany vanity and placed all of it in utility stocks. The hedge fund man, waxing kindness, said he has some shares he can provide for her.

The red lines show the neggie d desiring another spank down but note the MACD building some long and strong juice for the VST. This may delay the market top for 1 to 3 weeks where firm neggie d will exist across all time frames; but overall the chart is currently negative. Today's action is important. The bulls can push things higher with the RSI poking higher so check that after today's closing bell. The projection forward is lower prices with two potential paths provided. The dark blue path sends price lower from here targeting the 1870-1910 area. The light blue path shows the same sell off over the coming week or so occurring but a recovery back up to the highs again and then extended roll over to the downside targeting the 1870-1910 area.

Considering the ominous rising wedge pattern, and the goosed nature of markets by the Fed with the complacency at record levels, a black swan event cannot be ruled out as well as a flash crash event. Incorporating the low volatility and low put/call ratios into the analysis, where the CPCE is at multi-year lows, the markets may very well be placing a multi-year top right now like 2000 and 2007. A prudent path forward is to sell long positions, develop a larger cash position and scale into shorts. 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 9:53 AM on 6/21/14: The SPX prints new all-time highs to end the week. The new weekly high comes with a long and strong MACD line, histogram, and now money flow, in the VST only (over the last couple weeks). Overall, in the multi-month time frames, the chart remains negatively diverged across all indicators. Therefore, a spank down week should be on tap, but the indicators want price to come back up again to current levels, then the neggie d should appear for the VST as well. So a pull back is in order but the SPX will likely then come back up a week or two later to the current highs again which would then be the candidate for the top that leads to more extended downside and a potential catastrophic collapse from the rising wedge. The expectation remains for equities to place a significant top at anytime now through the next two or three weeks.

SPX Daily Chart Rising Wedge Overbot Negative Divergence

The SPX daily came up for the higher high as discussed a few days ago. Over the last two weeks, we are watching the two peaks with negative divergence developing with the higher highs in price. The indicators wanted the spank down in price two weeks ago except for the MACD line that was long and strong wanting one more price high. Price comes up for that higher high and note now how neggie d is in place across all indicators, thus, this is a top right now and a smack down should begin. Watch to see if price loses the lower red trend line when it moves lower.

The SPX continues to desperately need to back kiss the 20-day MA at 1935.17 and rising. Note the buying volume in recent days. Not one of the individual day's volumes exceed the selling day volume 6 days ago. Projection is for stocks to top out probably today, if not, Monday, and move lower like the top that was placed a couple weeks ago. 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 10:00 AM on 6/21/14: The neggie d described above remains in place. The SPX prints another new all-time intraday high at 1963.91 and new all-time closing high at 1962.87. The volume is robust mainly due to OpEx Quadruple Witching but nonetheless the bulls have to be given credit for a strong volume up day. The RSI is squeezing out a hair more upside juice so the expectation would be a move down, then back up, then that top would lead to more extended downside action ahead. The 20-day MA at 1935.21 and rising, is a great target underneath since it needs back tested. Thus, perhaps down to 1940 (since the 20-day is rising and will form a strong confluence with support at 1940), then back up to the 1960's, then roll over for extended downside ahead. This scenario should occur over the coming days, or week or two. Another outcome is a more mild drop now to 1955, then recovery to the 1960's, then roll over and drop down to the 20-day MA at 1935-1940 and lower. The bulls could always come in with extra juice on a happy news event which would extend the move higher but that will be known early next week if it is a possibility, or not.