Friday, December 30, 2016

VIX Volatility Daily Chart; Battle at the 200-Day MA Bull-Bear Line in the Sand

The VIX 200-day MA is a key market direction signal. Market bears win big above the 200-day MA while the bulls rule below the 200. A high VIX is fear, panic and worry while a low VIX is complacency, lack of fear and a relaxed attitude about the stock market. Buy when there is fear and blood in the streets (high VIX spikes) and sell the low points of complacency (low VIX).

The VIX is at 14.39 moving above the 200-day MA at 14.33 for the first time since early November before the Trump election. The bears will growl strongly if the VIX remains above 14.33. The bulls had better push the VIX lower under 14.33 pronto or they are going to begin the year by getting punched in the face. 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 3:33 PM EST: The VIX is printing 14.20 back under the 200-day MA. The bulls slap the bears in the face and are not giving up without a fight. Slap, slap.

Note Added 3:52 PM EST: The bears fight back. Whack, thwack. The VIX is at 14.37 back above the 200-day MA at 14.33 (albeit by 4 pennies) so the bears rule the markets going forward. The drama continues with only a few minutes remaining in the session and trading year. Stocks are sinking to the lows of the day.

Note Added 4:20 PM EST: The bulls win in the end with the VIX closing at 14.08. This battle will continue next week to begin the new year. Keep an eye on it.

Euro 15-Minute Chart; Flash Spike and Flash Crash

At 6:20 PM EST Thursday evening, 12/29/16, in the States (11:20 PM London and GMT; 12:20 AM Frankfurt Friday morning; 7:20 AM Hong Kong; 8:20 AM Tokyo), the euro flash spikes from 1.048 to a high print at 1.064 in a couple minutes time a move of over +1.5%. Several platforms show a high print at 1.07. Once price tagged the 1.05 resistance, the algo's kicked into high gear shooting the euro to 1.07. The euro then flash crashes down to 1.055 and trends lower to 1.052. The spike higher may not seem particularly large at +1.5% but for currencies and the Forex markets this is a big move. Those looking for euro parity with the US dollar are busy wiping egg off their faces this morning.

Thin liquidity and overactive algorithms are blamed for the mysterious spike. Humorously, algo's are now targeted as the bad boys in the markets and blamed when anything  goes awry. Other currencies such as the Japanese yen and Swiss franc tickers react to the move. As US traders rise from slumber, the euro is making its way higher towards the spike high level.

Is perhaps a flash crash ahead for global markets in 2017 as computers take over more and more trading activities from humans? 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:  The chart is provided courtesy of a very useful site for market information. The chart is annotated by Keystone.

Thursday, December 29, 2016

BPSPX Bullish Percent Index

The BPSPX remains on a double-whammy buy signal for the stock market. The BPSPX crossed above the 70% level, a key level, which continued the big rally party this month. The BPSPX tops out at 71.40. A six-percentage point reversal is key (71.40-6.00= 65.40) to issue a new market sell signal and the 70% level is important as well.

Thus, the market bulls are fine as long as the BPSPX stays above 70. This failed yesterday and the bear's were celebrating but today the BPSPX bounces higher above 70 keeping the bulls in business.

Market bears will receive a market sell signal if the BPSPX drops under 70 and a double-whammy sell signal if price drops below 65.40. Watch the 70 level since it will tell you if the bulls, or the bears, are winning the market direction battle. For now, the bulls are fine. 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.

TWTR Twitter Weekly Chart

Twitter serves as a punching bag these days. Many people make fun of the platform but those same detractors use Twitter every day. President-elect Trump tweets daily. Keystone called the Twitter bottom in May and price launched as expected. Back in the spring, Twitter was highly disliked kind of like now. Everyone was beating up on Jack Dorsey for running two companies (TWTR and SQ). Analysts said only a fool would buy the stock.

As that sentiment ran excessively negative, the green lines show the positive divergence that formed across all indicators. The falling wedge pattern is bullish. The RSI, stoch's and money flow were at oversold levels. Price was on the possie d launch pad and bingo, TWTR exploded higher. Keystone was out of the long trade far too early. Price kept on running higher to 25. Takeover rumors were rampant. The stock was heavily shorted so there was a short-covering rally creating additional upside oomph. It was a joyous run all summer into early Fall for the tweety bird.

However, ongoing poor earnings and executives continuing to leave the company, had traders hitting the sell button again and price gaps down in early October. Looking back at the positive divergence from earlier in the year, there is really no reason for price to come back down to the lows again. That set up was very strong. But price does leak lower as each day another analyst calls Twitter a POS (piece of sh*t).

Price may seek that lower band limit now at 15.44. This is also strong horizontal support. As stated, there would not be an expectation for price to come all the way back down to the May-June low although you never know. The stochastics are oversold. Twitter is probably worth playing on the long side especially since it remains a takeover target. One of the big league tech companies like Apple, Google, any of them, may grab Twitter as the price languishes. Of course if a takeover announcement occurs, there would be huge upside, depending on the deal.

Keystone has no position in Twitter and has not played it since the possie d launch from May into August. Keystone will probably buy TWTR on the long side in that 14.60-15.44 range. If it begins rallying before then, he will not chase it. But anything under, say, 15.50 is probably worth buying going forward. TWTR is placed on the potential buy list. 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 6:31 PM EST: Commentators and pundits are out in force this evening calling Twitter a piece of garbage. If you are long TWTR or contemplating a long position, that is music to your ears. TWTR is at 16.39. Price should move lower; wait until you see the whites of Twitter's eyes.

OVX Oil Volatility and WTIC West Texas Intermediate Crude Oil Weekly Charts; Complacency; Overbot; Negative Divergence

Everybody and his brother are long oil. Cousin Frank, who fancies himself as a smart trader, liquidated the college fund for his eldest son and went long oil with the money. Frank says he will receive huge gains in 2017 because all the analysts and television pundits say higher oil prices are guaranteed.

The OPEC and non-OPEC oil production agreement comes into play on Sunday. The oil cartel is a den of thieves. They pretend to set quotas to keep oil prices high. Every member cheats like a scoundrel thieving in the dead of night. All those oil producers including Russia will be producing oil like madmen but at the same time say they are participating in the oil production freeze. Thieves and liars.

The oil production freeze, which attempts to or at least maintains elevated oil prices, may cause some users to seek alternative fuels or methods and decrease oil use. Others, that filled empty reserves with the lower cost oil, may now choose to draw from those stocks instead of buying oil on the open market that is now higher in price. You can understand how the oil sandbox is a complex place to play. You can also understand that the world is awash in oil. A gallon of crude fetches one dollar far less than a gallon of milk. We have oil coming out our ears.

Once the first story of one of the Arab nations, or Russia, cheating on quotas occurs, which will likely happen fairly quickly, any hope of a uniform production agreement may crumble. The general risk to oil is more to the downside since everyone expects oil to move higher. What do the charts say? Do they back up or refute this thought?

The OVX is oil volatility. The red circles show tops in the oil market the green circles show bottoms. What do you think will happen? The OVX directly verifies the ongoing complacency and  lack of fear with the oil market. Everyone is basically guaranteeing that oil will never drop under 50 again. Won't they be surprised when it slips under 50, and perhaps 45, and even perhaps 40. Cousin Frank will be sleeping in the garage.

The stochastics are overbot and the indicators are lining up with neggie d. The chart is agreeable to a pull back. Oil will likely sell off in the weekly time frame until price finds the green circle in the right hand margin.  You will not be sure that a strong and robust tradeable bottom is in place for oil until the OVX prints above 50; then you can go long oil to your heart's content. For now, it appears smarter to go short oil contrary to the major consensus. Keystone currently does not have a position in oil but may enter a short trade, maybe going long the SCO inverse ETF. 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 6:35 PM EST: WTIC oil is at 53.93. It will be fun to watch oil over the coming days and week or three. Is Keystone's analysis correct above for a pull back or is all of Wall Street correct expecting oil to run to 60 in the near-term? Time will award one side a hero and the other a zero.

HYG High Yield Bond ETF Weekly Chart; Overbot; Negative Divergence

The HYG high yield corporate bond ETF is displaying negative divergence across all indicators (maroon lines).The red lines show Keystone's top call for high yield back in late September early October. The red rising wedge, overbot RSI and stochastics, and neggie d across all indicators made the top call a highly likely event, and it occurred. That was a nice short trade.

The HYG bounces after the Trump election and is now higher than the October top. The maroon lines show universal neggie d in play again with overbot stoch's. Thus, the expectation is for a pull back in this weekly time frame. Keystone has no long or short position currently in the high-yield arena but will short HYG and JNK going forward.

The monthly chart is in negative divergence but has some shorter term juice in the monthly time frame. Thus, the weekly chart may create weakness in January, then a recovery, but likely followed by a significant top for the high-yield ETF, a multi-year top in HYG and JNK, printing, say, in the January-March time frame.

JNK and HYG are the same charts and the same technical analysis holds for both. The HYG will likely seek the inside of the sideways channel and bump along through the 82-86 area for early 2017. 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 US Dollar Index Weekly Chart; Overbot; Negative Divergence Developing; Sideways Symmetrical Triangle; Sideways Channel

The US dollar weekly chart was posted the other day and the waiting game continues for the near-term top. The red lines for the indicators over the last two years display negative divergence. Ditto for the shorter term except for the RSI and MACD line (green lines) so price may jog for a couple-few weeks and then roll over once the two parameters turn neggie d.

The dollar has violated the upper standard deviation band so the middle band at 98.50, and rising, is in play. The blue sideways symmetrical breakout occurs at 96-ish. The vertical side that best fits the triangle is about 7 to 8 bucks high. Thus, the upside target area is 103-104 to satisfy the triangle pattern which is occurring now.

The tight bands squeezed out the upside move starting in September-October. Then the long shadow back kiss occurs as the US presidential election took place on 11/8/16 and bingo, the dollar catapults higher never looking back. The dollar pops so the euro drops which pumps the European stock indexes higher.

Everyone and his bro are calling for a higher dollar. In fact, many analysts pound the table and guarantee a higher dollar. The cab driver told Keystone this morning that the easiest trade in 2017 is for a higher dollar from start to finish. Many armchair technicians say the breakout from the two-year brown sideways channel guarantees a stronger dollar moving forward. Maybe they are all wrong?

The ADX shows that the upside move is not a strong trend; there is no sign of life with the ADX. The dollar needs to take a rest and the 100 level forms a logical confluence with the upward rising middle band and 20-week MA and the top rail of the long-term sideways channel. The dollar may jog to get the RSI and MACD line on the bear side so, on a weekly basis, price may move down, up, down, up, down for the roll over. So that is one month. The two years of universal negative divergence (red lines) harpoons the idea that the dollar is going to keep rising higher. There is no long term oomph. 

The USD monthly chart displays universal neggie d with its indicators and the dollar has violated the upper band on that chart. The forecast would be for sideways jogging action for a couple weeks maybe four through 102-104, then a drop down to 100 for a bounce or die decision say in late January. The thinking now is that the dollar will actually move sideways through 2017 confounding everyone that now thinks the dollar will go up here on out. 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.

HSI Hong Kong Hang Seng Index Daily Chart; Downward-Sloping Channel; Hang Seng is in a -10% Correction

The accepted technical definition of a correction is a negative -10% pullback in a stock or index. A bear market is a -20% off the top. The Hang Seng peaked in September at 24400 intraday and 24115 for a closing price. The 21960 and 21704 levels correspond to -10% moves off these high levels. The HSI dropped under 21500 a couple days ago.

The HSI was up overnight now at 21791. The downward-sloping channel is in play. Price is bouncing off the bottom rail right now. Price is trying to use the support from July as a springboard. If this fails, the HSI will seek the 21200-21300 support. Hong Kong property stocks have been taken to the shed out back and beaten creating the gloominess in the Hang Seng. 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.

FTSE London Index Daily Chart; New Record Closing High

The footsie prints a new record closing high yesterday at 7106 now printing at 7104. The prior intraday high for the FTSE from early October is 7130-ish so it will be interesting to see if it is taken out, or not. The pink arrows show standard deviation band squeezes resulting in big moves. Tight bands indicate a big move is at hand but do not predict direction. The August squeeze sent price higher, the November squeeze was lower and the December squeeze is a big-time upside rally.

Price has violated the upper band so the middle band at 6942, and rising, is on the table. The FTSE may want to retrace back to the 7K level over the coming days and couple weeks. The rising wedge pattern, overbot stochastics, near-overbot RSI, and negative divergence (red lines) all point to downside ahead. However, the RSI and MACD line is long and strong (green lines) in the VST so price may want to jog sideways for a day or four until both parameters can roll over with neggie d. So the 7130 remains on the table for a couple-few days. Then perhaps down to 7K.

The FTSE weekly chart shows negative divergence and is agreeable to a retracement ahead. The footsie popped this week on the recovery in the miners (the index is weighted with miners). The bulk of the upside move is due to the weaker pound since the Brexit vote in late June. A weaker sterling benefits UK exporters pumping their stocks and the broad indexes higher. 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.

Wednesday, December 28, 2016

Keybot the Quant Turns Bearish

Keystone's algo, Keybot the Quant, flips bearish today at SPX 2265. The utilities failed this morning and the SPX has been soggy ever since. Pay attention to UTIL 660.10. Also, the current fight is in retail stocks at RTH 76.60. The downside in stocks will accelerate if the RTH loses 76.60. Bulls will steady the ship if RTH recovers and moves higher. Bulls need UTIL above 660 to regain their mojo. Stay alert for a potential whipsaw back to the long side but for now, the bears are in charge. More information is found at Keybot's site;

Keybot the Quant

NYA (NYSE Composite) Index 5-Minute and Weekly Charts; Flash Spike and Flash Crash Behavior 12/27/16

Something fishy went on with the NYSE Composite on Tuesday, 12/27/16, but no one is talking. The light volume trading may be allowing the gremlins to wreak havoc. You can see the +5% flash spike in the NYA after the opening bell. That should have set off alarms; a major stock index moving 5% in a matter of minutes. There was probably a malfunction in the computers or someone slipped a digit. The assumption is that all trades will hold that took place at the elevated numbers in derivatives that key off the NYSE Comp.

The NYA retreats off the highs then flash crashes from 11550 to 11150, 400 points, -3.5%, in a couple minutes time returning to normalcy. Perhaps a major flash crash is on the come? That candlestick on the daily chart is humorously giving all market participants the finger. Watch your wallet. 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, December 26, 2016

Template to Record 2017 Market Predictions

Here is a template for anyone interested in recording your own predictions for 2017. The task is useful in developing your forecasting ability over the intermediate and longer term and as a side benefit will provide comic relief come December 2017; it is very difficult to forecast markets and the economy 12 months in advance. Closing Prices are end of year next year 12/31/17. The Price Range is the high and low during 2017.

Keystone will assess his 2016 Predictions over the coming days and post the final analysis and also post the 2017 Predictions. All the ticker symbols below can be typed into Stockcharts to view the charts.

2017 Predictions
SPX High for 2017:
SPX Closing Price for 2017:
SPX Low for 2017:
Dollar Range ($USD):  
Dollar Closing Price ($USD):
Dollar/Yen Range (USD/JPY):
Dollar/Yen Closing Price (USD/JPY):
Euro Range ($XEU):
Euro Closing Price ($XEU):      
2-Year Note Yield Range ($UST2Y):
2-Year Note Closing Yield ($UST2Y):  
10-Year Note Yield Range ($TNX):
10-Year Note Closing Yield ($TNX):  
2-10 Spread at End of Year (Starts at 133 Basis Points):
30-Year Note Yield Range ($TYX):
30-Year Note Closing Yield ($TYX):  
Will Yield Curve Flatten or Steepen?
Unemployment Rate % Range: 
Unemployment Rate % December 2017:
GDP Average for 2017: 
WTIC Oil Range ($WTIC):
WTIC Oil Closing Price ($WTIC):
Brent Oil Range:
Brent Oil Closing Price:
Natty Gas Range ($NATGAS):
Natty Gas Closing Price ($NATGAS):
Gold Range ($GOLD): 
Gold Closing Price ($GOLD): 
Silver Range ($SILVER): 
Silver Closing Price ($SILVER): 
Copper Range ($COPPER):
Copper Closing Price ($COPPER): 
Commodities Range ($CRB): 
Commodities Closing Price ($CRB):  
China Growth Rate % Average for 2017:
Technology Sector (XLK) Higher or Lower in 2017?
Semiconductor Sector (XSD, SOX, SMH) Higher or Lower in 2017?
Financials Sector (XLF) Higher or Lower in 2017?
Health Care Sector (XLV) Higher or Lower in 2017?
Biotech Sector (IBB) Higher or Lower in 2017?
Consumer Discretionary Sector (XLY) Higher or Lower in 2017?
Consumer Staples Sector (XLP) Higher or Lower in 2017?
Retail Sector (RTH, XRT) Higher or Lower in 2017?
Energy Sector (XLE) Higher or Lower in 2017?
Industrials Sector (XLI) Higher or Lower in 2017?
Materials Sector (XLB) Higher or Lower in 2017?
Utilities Sector (UTIL, XLU) Higher or Lower in 2017?
Telecom Sector (IYZ, VZ, T) Higher or Lower in 2017?
Transportation Sector (IYT, TRAN) Higher or Lower in 2017?
Homebuilders (XHB) Higher or Lower in 2017?

List Further Prognostications Below:

Saturday, December 24, 2016

Copper Weekly Chart; C&H; Sideways Symmetrical Triangle

The copper chart shows the cup and handle (C&H) pattern playing out in near textbook fashion. Typically, price will retreat after the breakout for a back test of the breakout line but in the chart above price broke out higher and never looked back. The base of the cup is 1.95. The top of the cup and handle pattern, the breakout line, is at 2.30. So when price broke up through 2.30, the 2.65 level is the upside target to satisfy the C&H (2.30+0.35); which was achieved.

The pink sideways symmetrical triangle pattern was highlighted in a previous post. The vertical side of the triangle is about 0.55 so the breakout from 2.20 targets 2.75; which was achieved.

Copper retreats to the 2.45-2.48 support level. The 200-week MA at 2.75, and dropping, serves as a firm resistance ceiling. Copper will probably stagger sideways waiting for further clarity in 2017 as to how much of an increase in global infrastructure spending will occur, especially in the United States. Copper stockpiles rise sharply last week so copper was punched in the face. 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, December 22, 2016

IBB Biotech ETF Daily Chart; Death Cross

The biotech stocks began the year tumbling lower and remain soggy ever since. IBB was washed out and recovered during the year and the joyous golden cross occurs in September with the 50-day MA piercing up through the 200-day MA. This move forecasts higher prices ahead, however, as Keystone always mentions, when a golden cross occurs, typically that is when price retreats since it already took weeks and months of energy to create the positive golden cross. That happens. IBB peaks in September and drops.

After a golden cross, the retreat is expected, as occurs, and if the golden cross remains, price will rally again and pursue the higher highs in the weeks and months ahead to honor the golden cross. But this did not occur. The price action weakened to the extent that a death cross is now generated a few days ago forecasting trouble ahead for biotech stocks.

Since the death cross just occurred, the expectation would be for prices to actually pop with a relief rally. At that point, if the death cross remains, prices will be lower for the weeks and months ahead. If instead the golden cross reappears, then biotech stocks will be a great investment going forward. For now, the biotech bears rule the intermediate term ahead although some buoyancy would be expected over the next week or two. IBB price will stagger sideways playing off the blue channel lines. 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 Saturday, 12/24/16, Christmas Eve: IBB ends the week at 272.32. Price and its moving averages on the daily and weekly charts all converge in the 270-279 range. Price is compressing sideways and will likely perform a radical price move in the near future from this range. Biotech bulls win huge if IBB moves above 280. Biotech bears win huge if IBB falls below 270.

UTIL Utilities Weekly Chart; Battle at 50-Week MA

Two key levels in the utilities are important to the old-timer's. First, the price from 15 weeks ago determines if utes are in a weekly uptrend or downtrend and this trend projects the direction of the broad stock market. Second, the 50-week MA for utilities is a key level for forecasting the intermediate term ahead for equities.

The comparison number from the weekly closing price 15 weeks ago is 656.19. This number remains important for today and tomorrow. Next week, the 15-week lookback number is 671.78 and for the week of 1/3/17 is 694.24. So the comparison numbers rise sharply. If the market bulls want higher stock prices they need the utes to remain in a weekly uptrend which requires price to be above 656 this week, above 672 next week and above 694 for the first trading week of the new year. Bulls need to begin rallying utes strongly higher to meet these loftier goals.

The action at the 50-week MA this week is a back kiss of the underside of the key moving average as seen from the chart above. Price came down for a test of the 50 in September and bounced. Price than came down for another test and failed through the 50-week MA which opens a trap-door for the stock market. The central bankers prove too powerful and will not permit stocks to properly correct as evidenced by massive stimulus from the BOE after Brexit and ECB QE over recent months. The BOJ and Fed also remain accomodative all year long although the Fed did squeeze in a rate hike last week. Utilities recover and come up for the back test of the 50-week MA.

The behavior at this 656-659 level is key today and tomorrow. Dow 20,000 and SPX 2300 are on tap if UTIL moves above this key zone heading higher. If the bears keep UTIL low and moving lower, and 656 fails, stocks are going to begin tumbling lower in earnest. At the closing bell tomorrow monitor where UTIL is at in relation to the 671.78 level mentioned above. If UTIL is in the neighborhood of 670-671 tomorrow and higher, the market bulls are going to rally stocks further into the new year with more record high prints.

If UTIL falls under 656, stocks are in trouble. If UTIL ends the week tomorrow under the 50-week MA at 658.55, that spells big trouble for stocks next week. Many algorithms have the above two parameters priced into their computer models. Both are programmed into the Keybot the Quant algorithm. The price action in UTIL is going to tell a lot about stock market direction ahead. 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 on Saturday, 12/24/16, Christmas Eve: UTIL ends the week at 660.81. The 50-week MA is at 658.58. Next week's lookback number is 671.78. The market bears will immediately receive a feather in their caps when trading resumes next week since UTIL is under the important 671.78 level which is important all of next week. Bears need UTIL to drop under 671.78 and the stock market will begin quickly falling like a rock. If the bulls can keep UTIL above 659 and heading higher towards the 672 level, the Dow will be printing 20K and the SPX will be on its way to 2300. Monitor UTIL, or DJU, the Dow Jones Utilities, closely next week.

VIX Volatility and SPX S&P 500 Weekly Charts; VIX 10-Handle; Record Multi-Year Low; Significant Market Top At Hand on Weekly Basis

The money managers, pundits, analysts and other talking heads are parading across television screens telling Ma and Pa Kettle to go long the stock market. Aunt Agnes is afraid to miss the big Trump Rally so she took her entire life savings and put it in the stock market this week. Uncle Johnny, that gets by each month with the help of his social security check, swore off the stock market after losing a bundle of money in the 2008-2009 financial crisis. He is now enthusiastic about stocks and placed his entire life savings into dividend stocks yesterday. The bullish prognostications are off the chart. Volatility agrees.

The VIX prints an epic 10-handle yesterday with a low at 10.93. There is no fear in the markets. Traders and investors are completely worry-free, sipping Fed wine and ECB champagne, buying stocks with reckless abandon and enthusiasm while cheering King Trump's policy path ahead. The future is so bright that you have to wear shades.

The red circles show significant market tops when traders are partying like its 1999 without a care or worry in the world. The green circles show significant bottoms when fear and panic is rampant and there is blood in the streets. What do you think will happen?

Looking at the double red circles that printed below the VIX 12 level, the selloff in the stock market began in short order afterwards, within a month or two. The VIX has been sub 12 now for about a month so the stock market may be peaking at any time forward. The double circles result in losses of 140 points, 90 points, 200 points and 110 points, over a period of from 1 to 3 months. The average loss is 135 points. The smallest drop is 90 points; the biggest 200 points. Dropping the smallest and largest numbers, the average drop is 125 points.

A projection of a 90 to 200 point loss in the S&P 500 say over the next month or two would place the SPX in the 2065-2175 range in January or February. Do you think it will happen? At that time, Aunt Agnes and Uncle Johnny will be eating cat food for dinner and burning junk mail for warmth. 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, December 20, 2016

INDU Dow Industrials 2-Minute Chart; The Battle for Dow 20,000 Continues

The Dow prints a new all-time record high at 19988 less than 13 points from the coveted Dow 20,000. The Dow 20K watch continues. Floor traders had already popped the corks on the Fed wine bottles, wheeled the confetti cannons into place and distributed the Dow 20K hats, but are left at the altar waiting for the historic 20K print. Investors complain that the wine is going flat so the bulls are trying to put the corks back in the bottles.

The Dow printed the high over two hours ago. Will INDU make a run higher this afternoon so the bulls can throw a Dow 20K party? The all-time intraday high for the Dow was 19966.43 from 12/14/16, now surpassed by the above print, and the all-time closing high is 19911.21 on 12/13/16. So the bulls need to keep INDU, or DJI, above 19911 at 4 PM EST to claim a new all-time closing high 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 Thursday Morning,12/22/16: The Dow prints the new all-time record highs as shown above on Tuesday, 12/20/16. The all-time intraday high is 19987.63 and all-time closing high is at 19974.62. On Wednesday, 12/23/16, the Dow retreats slightly. The Dow 20K watch continues into the Christmas holiday weekend.

SPX S&P 500 Daily Chart; Overbot; Rising Wedge; Negative Divergence In Play

The topping saga with the SPX daily chart continues. Keystone mentioned in the prior post about the price high occurring with the high in the RSI and stochastics. This slightly amount of long and strong strength is enough to keep stocks elevated in this sideways zombie state this week. Price is moving through a sideways triangle and will have to commit to an up or down direction today.

Market bears would have been best off if price would have simply came up to 2280, a higher high in price, with the negative divergence remaining in place across all indicators, since that would call the top. Instead, the RSI and MACD line had remained long and strong and price is teasing matching highs so on one hand you can say this is close enough for government work and the top is in.

Price is overextended above the moving average lines and needs a mean reversion lower. That bottom thin red trend line is being tested, also the bottom trend line of the rising wedge pattern. The money flow is weak and bleak. The selling volume was large on Tuesday.

The expectation would be for price to move lower from here, or, if another top occurs over the next couple days, and the neggie d remains in place, that will be the top at 2280-ish. Bulls need a positive news story or promises of more easy money from central bankers which would launch stocks higher ignoring the chart. Stocks need to correct lower to take a breather but comically, now everyone is calling for a pull back in stocks since the parabolic move was too much too fast. The expectation for a pull back likely helps create buoyancy in prices this week. 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 S&P 500 30-Minute Chart; 8/34 MA Cross; Sideways Symmetrical Triangle

The SPX 30-minute chart has been interesting to watch lately. The bulls create a positive 8/34 MA cross so the stock market should be bullish for the hours ahead. However, the SPX, 8 MA and 34 MA are all at the same confluence at 2261-2263; call it 2263. Price is at the apex of a sideways symmetrical triangle and has to make an up or down decision.

If price drops out of the triangle the downside target zone would be 2213-2233. If price breaks out to the upside, the 2293-2343 zone would be targeted. Today is an important and pivotal day. S&P futures are up 5 points with the opening bell less than one-half hour away. The bears created the spankdown off the top with the rising wedge, neggie d (red lines) and overbot conditions, however, bears do not have any gusto with volatility so low. The VIX has an 11-handle. The pivot from SPX 2263 today is very influential to the overall path of the stock market ahead. Let it play out a while today since the initial move may not be the true path forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

BPSPX S&P 500 Bullish Percent Index Daily Chart

The BPSPX moves above the important 70% level so the bulls win and the bears continue to receive slaps to the face day after day. Slap, slap. The BPSPX is on a double-whammy buy signal forecasting more joyous upside for bulls. However, price is stalling at 71.60. If BPSPX falls under 70, the bears will receive a market sell signal. If BPSPX falls under 65.60, stocks will be dropping in earnest with a double-whammy sell signal. The bulls simply need to keep the BPSPX floating higher. If the BPSPX moves above 71.60, the bulls will pop champagne corks and throw confetti since SPX 2300 and Dow 20K are likely. Bears need to hold the line at 71.60 and push below 70 asap, otherwise, they are in deep trouble.The drama continues; bulls win above 71.60 and bears win under 70This 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 12:26 PM EST: The BPSPX prints at 70.80. The bull-bear battle continues.....

Sunday, December 18, 2016

The Keystone Speculator Inflation-Deflation Indicator; US Remains Mired in Deflation Despite the Inflation Hoopla

Global commodities remain weak and the deflation that Keystone has talked about for the last few years remains a thorn in the economy’s side. With all the exuberance over inflation since Donald Trump won the presidential election on 11/8/16, it is a good time to visit Keystone’s Inflation-Deflation Indicator to see if it can shed light on the ongoing inflation-deflation debate.

The last posting of the inflation-deflation indicator has an extensive write-up on inflation, deflation and the Fed’s shenanigans over the last eight years. Type ‘inflation’ into the search box in the right hand margin and the March 27, 2016, article should come up if you are looking for further reading on the subject.

Keystone’s Inflation-Deflation Indicator chart shows the markets and economy remaining mired in deflation. What’s that you say!? Balderdash.! Blasphemy! President-elect Trump promises to cut taxes, reduce regulations and provide stimulus for physical and virtual infrastructure projects including a wall along the Mexican border. Traders view the platform and spending plans as inflationary so the US dollar index and Treasury yields run higher. Wall Street proclaims, “Inflation is here! Inflation has arrived!” What is this nonsense talk about deflation?

The majority consensus expects inflation to rise here on out and says deflation is in the rearview mirror. After all, the Fed is hiking rates. Keystone’s chart does not agree. The chart shows that more up in yields, and higher commodity prices, are needed for the indicator to move towards inflation.

Keystone's Inflation-Deflation Indicator remains in DEFLATION at 2.02 but at least it has risen out of the cellar. The low point was…. wait for it….. keep waiting for it since it is interesting…..1.70 exactly one year ago. That is the extent of this year’s inflation a small move on the indicator from 1.70 up to 2.02. That is hardly runaway inflation in fact the indicator remains in the deflation region.

The 10-year Treasury note price is used for the denominator of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 94.86 with a yield at 2.59%. Commodities are in the numerator. The CRB Commodity Index is 191.43. Taking a look at the numbers;

CRB/10-Year Price = 191.43/94.86 = 2.02

Over 4.40 = Hyperinflation
Between 3.60 and 4.40 = Inflation
Between 3.00 and 3.60 = Neutral; Inflationists and Deflationists Battle
Between 2.9 and 3.00 = Disinflation
Under 2.90 = Deflation

Despite all the hoopla and trumpets blaring, the economy and markets remain mired in deflation and inflation is no threat currently. The main reason is the lack of wage inflation. Inflation cannot exist without wage inflation (watch the Friday Monthly Jobs Report to see if any wage inflation occurs) and wage inflation is not occurring. Wage inflation is growing annually at about +2.6% a paltry amount. The Federal Reserve needs to see the annual wage growth at +4.0% to +4.5% to be comfortable knowing that inflation has taken hold and will be sustainable going forward but this is a dirty little secret they will not discuss in public.

When was the last time you had a raise? The United States remains in a deflationary funk since August 2014. Think back to the summer of 2008 if you want to relive the feeling of rising inflation. Rising prices were a common daily complaint at office water coolers, supermarkets and dentist offices in 2008; not now. When inflation occurs, you will feel it.

There is a whiff of services inflation occurring. The bulk of this is due to rising medical insurance (Affordable Care Act; ACA; Obamacare) and prescription costs, increasing college tuition and rising accounting, attorney and professional service fees. Home prices have also been inflationary but have been peaking and topping off lately perhaps ready to subside. Lower house prices would dampen inflation expectations.

The world is awash in oil and the OPEC and non-OPEC nations are colluding to limit production to artificially drive prices higher. All that oil sloshing around is oversupply and deflationary. People are not complaining about food prices like a couple years ago during the bad crop year. Commodities remain subdued. A large increase in commodity buying and shipping is needed to prove that inflation is on the rise and that is not occurring. The BDI remains subdued.

Retailers are punched in the face this weekend in the States. This weekend is the largest sales days of the entire year but much of the United States is hit with nasty winter weather. People are staying home so retailers are crying into their empty cash registers. The retail bankruptcies coming in 2017 are going to knock your socks off.

The US is grossly overstored and will cut back in a big way beginning the New Year. Consumers would be smart to wait until January to buy expensive gifts since prices will likely be far cheaper as stores ditch inventory before they close the doors for good. The retail carnage coming is an untold story on Wall Street. This is deflationary since it will drop prices as inventory is liquidated.

There is no demand in the sick stagnant economy that is only pumped by fits and starts of central banker and/or government stimulus. If consumers decide to wait for the future to buy something since they believe it will be cheaper; this is the very definition of deflation.

Another subject no one is talking about is a recession that is long overdue. Economists and analysts were polled on the likelihood of a recession and every one said there was a 30% chance or less of a recession over the next year. That is an optimistic bunch. What are they smoking?

A recession will usher in deflationary behavior and is likely on the come faster than anyone realizes. Treasury yields will fall as investors seek safety in notes and bonds (price up yields down). Keystone’s indicator then drops as the price in the denominator moves higher. Likewise, demand for commodities decreases in a recession so the CRB index drops and a lower numerator in the indicator will send the number lower. You should be getting a feel for what moves the indicator up and down and perhaps you are not as enthusiastic about inflation appearing now and forever forward?

The structural unemployment problem remains in the U.S. and the current stagnant wage growth (wage deflation) reinforces an ongoing deflationary and disinflationary theme. Technology, computers and the Internet are huge deflationary machines. Robots continue to replace human's on the job.

The GOOGL driverless vehicle technology already has trucks operating on the road in California for several months and only one accident has occurred--and that was comically a human driver that hit the driverless vehicle. Just think of the impact to the trucking industry. Trucks could transport goods driverless allowing companies to drop-kick more workers across the parking lot. The pattern of 'more tech--less human's' will continue. Fast-food restaurants are introducing kiosks that eliminate more jobs. Automation is deflation.

The structural unemployment problem will continue in the US for years and perhaps decades forward. The unemployed and underemployed create a burden on the economy over time. The wealthy on Wall Street, in bed with the Fed, made themselves wealthier taking advantage of the 2008-2009 crash while the middle class and poor (that do not own stocks) were thrown under the bus over the last eight years.

Companies are meeting EPS (earnings-per-share) by laying off workers and squeezing more production out of existing workers (as evidenced by flat to lower top line revenues for companies across all sectors for the last couple years!).

Watch Keystone's formula above; you can crunch the numbers to check the indicator every few weeks. It was shocking to see equity markets print new record highs in recent months against a disinflationary and deflationary back drop. This behavior can only be chalked up to the amazing power of the central banker money-printing.

The Brexit stock market crash in late June was stopped by the BOE promising easy money. The PBOC keeps pumping China’s economy and markets. The Fed had remained accommodative all year long keeping stocks elevated. The BOJ keeps implementing stimulus programs. Last week, the ECB announced an extension of the QE program pumping more money into markets so the wealthy can become richer before the whole outhouse goes up in smoke. All-time highs print in the stock market. The wealthy light expensive cigars and dab the ashes on the lower middle class.

Inflation is not in sight currently. The inflation-deflation indicator moving a touch above 3.00 in early 2014 was due to rising food and beef costs. Corn and wheat prices have plummeted back to earth. Crops are producing yields at record highs this year so the food inflation will continue subsiding. The cheaper grain prices will bring down the cost of beef especially as herds increase after the culling due to drought a couple years ago.

Stagnant wages in America will prevent inflation from occurring. When wages rise, that will tell you inflation is coming fast and Treasury yields will then rise strongly. As long as wages remain flat or lower, inflation will not exist. Focus on the wage data in the jobs report on 1/6/17.

Think back to the last period of rampant inflation in 2006-2008; you were likely enjoying happy raises at work, right? And probably not so much from 2009 to present? Food price increases tend to be seasonal and weather-related and work through the system over time. Fewer folks are complaining about high food prices anymore.

What does all the wind-bag mumbo-jumbo above say in a nutshell? The current answer to the ongoing inflation-deflation debate is DEFLATION as much as everyone tries to ignore it and say that inflation is here to stay. After eight years of obscene Fed and other central banker money-printing, the United States economy remains mired in deflation proving that Bernanke's grand Keynesian experiment, blessed and implemented by Fed Chair Greenspan, and now controlled by Fed Chair Yellen, as well as dovish Fed members such as Evans, may be tragically failing.

It is prudent to prepare yourself and your family by raising as much personal cash as possible and paying off debt. Avoid taking on new debt. Cash is king in deflation.

Many analysts argue against the overall ongoing global deflation hypothesis saying the view on services inflation versus goods inflation must be explored in more detail. Services are experiencing some inflationary effects while goods are in a deflationary trend. The Trump enthusiasm is creating the bump in inflation to end the year. The chart above hints that the deflationary funk will likely continue. All of you inflation enthusiasts do not fear, however, inflation will arrive soon perhaps in the 2018-2020 time frame and then hyperinflation in 2020 and beyond. That will be a whole new set of problems, that is if we survive the last of the disinflation and deflationary environment over the next couple years.

Friday, December 16, 2016

SPX S&P 500 30-Minute Chart; 8/34 MA Cross

Here is the SPX 30-minute showing the 8/34 MA cross which is a very useful short term market direction indicator. Scroll down and review the prior chart for further analysis. The bears are winning now with the negative 8/34 cross. Price is at 2263. The 8 MA is at 2263. Bulls need to curl the 8 MA upwards to create a positive cross with the 34 MA while bears need the 8 MA to sink lower and drag the broad stock market lower. Thus, use the 2263 as the rudder that steers the market ship today. If the SPX prints above 2263 and trends higher the bulls will celebrate into the weekend and Dow 20K may occur today.

If the SPX drops under 2263 and moves lower, the bears will reverse the tables on the bulls and growl strongly into the weekend. Who will win the fight at the 2263 pivot?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 on Saturday, 12/17/16: The bears push the SPX below 2263 and lower starting at 11 AM EST yesterday so equities trade weaker into the weekend. With the VIX sporting a 12-handle, however, the bears got nothing. The 8/34 MA negative cross is maintained in the chart above so bears are in control for the hours ahead. The 8 MA is now at 2258 and price is...... wait for it...... at 2258. Thus, use 2258 as the key pivot point for Monday morning with bulls winning above and bears winning big if price fails below. The SPX LOD is 2254 which is testing the neckline of the H&S pattern that is in play (see previous chart). If price loses 2254, the market should flush lower towards 2230. Bulls simply need to push the SPX above 2258 and higher to curl the 8 MA upwards and set up a positive 8/34 MA cross and record-breaking highs for stocks, Dow 20K, will be on the way.