Friday, October 31, 2014

SPX Daily Chart Upper Gap Fill Halloween Rally on Double-Whammy Japan Stimulus

Banzai!! The BOJ creates an orgy rally for Halloween. The SPX performs a complete 100% Fibonacci retracement of the September-October selloff from 2019 to 1820 a near 200-handle move down and back up in one-month's time. These are not your grandfather's markets. The central bankers control the markets. A 1.236% Fibonacci extension is 2066 (in play if the SPX moves above 2019-2020). The upper standard deviation band is 2025. Keystone's 80/20 rule says 8's lead to 2's so the breach of 1980 leads to the 2020's. So there are three upside targets at 2020-2066.

The gap fill is accomplished (small green circle). That was hanging over the bear's head during the entire selloff and move back up and the bulls finally fill the gap. Note the gaps on the downside that will need filled going forward (small red circles).The SPX all-time intraday high is 2019.26 on 9/19/14 and the SPX all-time closing high is 2011.17 on 9/18/14. Intraday today the HOD is 2016.18 above the closing high but not yet a new all-time intraday high. The SPX will need to close above 2011.17 for a new all-time closing high. The Dow printed a new all-time high this morning.

The strongest S/R is 2019, 2011, 2007, 2005, 2002-2003, 1998 and 1985-1986. So price is playing around in the 2011-2019 zone. The SPX started the month at 1972.29 and the month ends today so October will be a positive month. The monthly charts receive new prints today and the bulls may have enabled the stock market to maintain these highs for one to three more months when as of last month the SPX monthly chart was finally set up to roll over after six long years. The central banks knew this so they are goosing equities higher to keep the party going.

The green lines show long and strong indicators so higher highs are desired after any pull back occurs. The stochastics are pegged at the ceiling and negatively diverged so this will create an initial pull back early next week but then price should continue higher. Interestingly, the red lines show negative divergence across the multi-month time frame except for ROC. This hints that the new highs will continue for a few days or week or three but may run out of gas in a relatively short time frame. The RSI is not in overbot territory so that opens the door to more upside and price is very near the upper standard deviation band at 2025 which will probably be tagged. Note the violation of the lower band led back up to the middle band and now upper band.

The ADX shows a strong trend in place for the July-August selloff (pink box) and the September-October selloff is even a stronger trend. The huge rally over the last three weeks shows an ADX down at 23. If the move higher in stocks was a strong trend the ADX should be at 35 or 40 right now not 23. Volume is above average but let the day play out to see where it shakes out. It looks like the bulls are painting a happy tape into Thanksgiving targeting 2020-2066. Just as the market picture changed quickly overnight, it can very well change quickly the other way especially if negative geopolitical events occur. Charts will need a few days to absorb all the upside momentum.

Keybot the Quant remains long but there are two interesting things happening; copper and volatility. Whoa. As this missive is edited and finished the VIX actually turns a hair positive. For such a strong rally, the VIX is positive? Figure that one out? This is extremely odd market behavior. The Keybot algorithm identifies JJC 37.15 and VIX 13.94 as two critical bull-bear lines in the sand. The bulls need one or both of these levels to verify the upside market orgy and surprisingly neither has yet capitulated. The rally will be in question and likely top out and fail at these levels unless either JJC moves above 37.15 and/or VIX drops under 13.94 so watch these levels like a hawk (these general levels should be in play through next week).

The bulls play a trick on the bears today and take the treats. The bears only have rocks in their pillow cases like Charlie Brown. However, if copper remains low and volatility high, those rocks will turn into candy in the days ahead for the bears. JJC is currently printing at 36.82 and VIX at 14.53 both remaining in the bear camp. The stock market remains extremely erratic and unstable. 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 12:07 PM: SPX 2013. JJC 36.83. VIX 14.72.

Note Added 12:22 PM: SPX 2011.23. SPX all-time closing high is 2011.17 on 9/18/14. SPX is only 6 pennies from dipping under the all-time closing high. Price needs to close above 2011.17 at 4 PM to print a new all-time closing highJJC 36.79. VIX 14.81.

Note Added 1:16 PM: SPX 2014. JJC 36.83. VIX 14.50.

Note Added 1:40 PM: Keybot the Quant algo identifies VIX 13.94 as a bull-bear line in the sand but another metric you can always follow on your own as a market gauge is the 200-day MA for the VIX now at 14.08. VIX is now printing 14.51 on the bear side. So monitor both the 14.08 and 13.94 levels. If VIX 14.08 gives way the 13.94 will likely give way as well.

Note Added 1:56 PM: SPX 2011.72 teasing down towards the prior all-time high again. JJC 36.83. VIX 14.52.

Note Added 2:08 PM: SPX 2012.65. The bulls keep using the 2011.17 all-time closing high as a springboard of support. JJC 36.84. VIX 14.43.

Note Added 2:50 PM: SPX 2010.97. The bulls are trying to defend the 2011 level and are attempting to push copper higher to goose stocks higher. JJC 36.89. VIX 14.53. Referencing the S/R above, a failure of 2011 support will open the door to 2007 S.

Note Added 3:22 PM: The same action continues. SPX 2011.10 at the prior all-time closing high from September. JJC 36.85. VIX 14.46. The bulls are having trouble pushing copper higher and volatility lower so the upside in equities is stalled.

Note Added 3:50 PM: SPX 2015. JJC 36.83. VIX 14.18. The buy orders are stacked up into the closing bell adding lift to the broad indexes. High drama. Volatility drops towards the 200-day MA at 14.08 and the Keybot the Quant algorithm's value of VIX 13.94. Can the bulls push the VIX under to verify more upside in markets ahead or will the bears hold the line at 14.08?

Note Added 3:54 PM: SPX 2016. HOD is 2017.45. VIX 14.13.

Note Added 3:55 PM: VIX 14.13......... 14.12 ........ bulls and bears are battling with volatility......

Note Added 3:57 PM: SPX 2017. VIX 14.09 testing the 200-day MA at 14.08.... whoa... ho.... bears lose the 200-day MA ...... 14.04....... 14.01 .... Keybot's VIX 13.94 bull-bear line is critical.......

Note Added 3:59 PM:  SPX 2017. VIX 14.00....... 13.99 .... 14.00 .......

Note Added 4:08 PM: You cannot make this stuff up. High drama into the closing bell. The buyers on close were the largest seen in weeks pushing the SPX up to close at the highs at 2018.05 for a new all-time closing high. The SPX all-time intraday high remains at 2019.26 on 9/19/14. HOD today is 2018.19VIX is 14.03 under the 200-day MA at 14.08 so the bulls receive a feather in their caps and this market signal is bull-friendly going forward, however, Keystone's trading robot, Keybot the Quant, that carries more clout, wants to see 13.94 another dime lower, so the jury is out until Monday. VIX 14.03. JJC 36.85. So on Monday with VIX starting at 14.03, bulls will verify a strong upside rally ahead with VIX under 13.94 and bears will send markets lower if VIX moves above 14.08. Write these levels down and watch them after Monday's opening bell.

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