Monday, June 2, 2014

Keystone's Morning Wake-Up 6/2/14; PMI's; ISM

The SPX logs another up month for May. On Friday, 5/30/14, the SPX prints a new all-time intraday high at 1924.03 and new all-time closing high at 1923.57. Is it time to "Sell in May and Go Away?" The bulls keep powering higher with a Caligula-style upside orgy fueled by QE easy money still pumping $45 billion into the economy each month. Today is the first trading day of June. June begins at 1923.57. Usually new money enters the market for a new month creating lift. Interestingly, Keystone's 80/20 rule (8's lead to 2's) works more often than it does not with the SPX 1280 level serving as a predictor of 1920. Price pierced 1923.80 on Friday so 1924.20 may be on tap. The 1918 led to 1922. The 1928 level, if achieved, would hint at 1932.

The BPSPX is at 76.60 and continues higher remaining on a market buy signal. Everything is going the bull's way although the volume for the stock market move higher is light over the last two weeks. It is easier to push markets higher on thin volume. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Bears got nothing without a negative 8/34 cross on the 30-minute.

Key support below is 1924, 1920, 1912, 1901-1902, 1897 and 1891. Big picture support is 1924, 1897, 1884, 1878, 1848 and 1841. A back kiss of the 1912 support level, an important break-out area, and the 20-day MA at 1890.07, and rising, is expected moving forward. Price is violating the upper standard deviation banks on the SPX daily chart for five consecutive days which typically forecasts a move back to the middle band which is the 20-day MA.

Keep watching the slope of the 150-day MA for RUT since this will indicate the exact conception of a cyclical bear beginning and the five-year-plus rally over. The 150-day MA continues to flatten but has not yet turned negative so as long as the moving average is flat or higher the bulls continue to par-tay. The low volatility is a warning sign that something is likely not right under the surface of the markets. ECB's Draghi announces the stimulus program on Thursday morning so markets may be in a holding pattern until then.

Keybot the Quant remains long and the algo is in overbot territory which does not occur often. Keybot signals that the bulls are in clover enjoying the non-stop upside, however, at the same time, overbot conditions indicate that there may be no where to go but down once price does roll over. The market bears likely need a stronger dollar to send copper and commodities lower to stall the rally, however, China PMI was better than expected adding a boost to copper today. On the esoteric side, Keystone's Eclipse Indicator identifies 5/22/14 as having potential for a major market top give or take a couple weeks. This window will close this week so if the market bears plan on moving equities lower they had better start this week.

The SPX 2-hour, 1-hour and 30-minute charts are setting up with or set up with negative divergence so topping in price would be expected today, however, with Draghi on tap in three days, markets may stumble sideways more than anything until the ECB decision. The SPX closed near the high at 1924 on Friday so any tiny smidge of green in the S&P futures will create several more handles of upside for the SPX towards 1930 and the S&P futures are +2.5. The bears need to push under SPX 1917 today to regain their downside mojo. A move through SPX 1918-1923 is sideways action for Monday. ISM Mfg Index is 10 AM which may create a market stutter step. Markets will likely chop sideways through 1900-1950 and weaken under 1900 and lower as the weeks play out towards Labor Day; sideways to sideways lower as the year moves along. Does "Sell in May" begin today?

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