Tuesday, May 31, 2016

SPX S&P 500 2-Hour Chart Rising Wedge Overbot Negative Divergence

The 2-hour chart was posted at the end of last week before the holiday. A top is expected due to the negative divergence that is printing right now and remains in flux (tiny red lines). The MACD line kept moving higher by a hair, long and strong, so price keeps coming up for a matching or higher high. The tiny red lines say all systems go for downside but let a couple more hours play out to note the price action and response in indicators. The overbot RSI and stochastics, red rising wedge pattern, and neggie d are all agreeable to a move lower.

The projection is that a near-term top is in place now at 2103.48, or, price may make one more poke to 2102-2104 over the next hour or two and roll over. Price is cooked now if the neggie d remains in place across all indicators as shown in the chart above. The only thing that would save the day is a positive news event or more central banker pumping. It is not known on what half or whole hour a new 2-hour candlestick will begin printing. 10:30 AM EST just passed and the same candle is in play so maybe it is at 11 AM. When the new candlestick begins you will know what time the 2-hour intervals are running from and to.

Price violated the upper standard deviation band so a move back to the middle band, at a minimum, at 2084 and rising, is on the table and also the lower band at 2056 and rising. If you have nice gains on a long play that you are not married to for the very long term (years and years), it may be prudent to jump ship and take profits. A near-term short play is attractive. Keystone bot some RWM. Watch to see if the MACD line rolls over and if a negative cross occurs (black line down through red line). The monthly charts receive new prints today for EOM today. May should finish positiveThis 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 12:08 PM EST: Stocks drift lower with SPX at 2094. A new 2-hour candlestick is printing starting at 12 noon so the next 2-hour candlesticks will begin at 2 PM, then 9:30 AM tomorrow morning then 11:30 AM tomorrow and so forth. The negative cross occurs on the MACD line for the 2-hour chart pointing to bearishness ahead. Looks like stocks should trail lower receiving the spankdown from the negative divergence, however, if Fed Chair Yellen grabs a microphone and coughs, and it sounds like she said "stimulus" or "rate hike delay" the bulls will be back in business. At 2 PM, you can check to see if the indicators are sloping lower with price moving lower.

Sunday, May 29, 2016

VIX Volatilty and SPX S&P 500 Weekly Charts

The red circles show significant market tops when volatility reaches uber lows representing complacency and lack of fear. What do you think will happen on this weekly basis? The peaks in VIX represent rampant fear when market participants are jumping out of windows and swearing they will never own a stock again. Of course that is when you buy when the blood is flowing in the streets and everyone is panicking (VIX above 30). The spikes higher in the VIX are very useful for timing an entry back into the long side and are actually a better tool for the VIX chart rather than using the complacency (low VIX), as is in place right now, to call a market top. The CPC and CPCE put/calls are a slight bit better at calling market tops and the uber low 0.61 on the CPCE is something to respect if you are long the market and not worried.

The VIX drops to lows not seen since last summer when stocks had topped out. The VIX under 12.2-ish has forecasted every significant pull back over the last three years. Volatility becomes low indicating complacency and lack of fear by traders so the stock market sells off hard to slap them in the face and bring them down to Earth again.

The stock market top that formed late last year occurred with the VIX reversing higher from 14-ish. Two recent tops are called by the VIX at the current level at 13.12. The VIX may venture down to the magical 12.2 line but as seen with the Fall stock market reversal, the VIX can reverse higher at anytime causing a market selloff. It is worthwhile to monitor the VIX each day forward to see how the chart plays 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.

BPSPX S&P 500 Bullish Percent Index

The BPSPX remains on a double-whammy sell which is surprising considering the euphoric stock market rally last week. For the BPSPX tool, the six percentage-point reversals and the 70% line are key components. The BPSPX topped at 79.5 so six points lower is 73.5 which initiated a sell signal on the stock market. Then price fell under 70 for a double-whammy sell signal.

Price bottoms at 66.5 last week, so a six percentage-point reversal would be 72.5. Since the important 70 level is under that target, it serves as the first key for bulls to prove they have the beans to take stocks strongly higher. The BPSPX is at 69.60 only a whisker away from the 70 level that would issue a market buy signal. If the BPSPX then moves above 72.5, the bulls will be popping champagne corks as the stock market marches to new all-time highs.

Market bears must hold the 70 level with all their might to continue the double-whammy sell signal. Otherwise, the bears will begin slipping down a slippery slope as the bulls take control. The BPSPX will be worth monitoring all week long since it will verify broad stock market direction 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.

Note Added 11 AM On Tuesday, 5/31/16: US stocks reopen for trading today after the Monday holiday and drift higher. The BPSPX is at 70.20 above the critical 70. The bulls are slapping the bears in the face; watch to see if the bulls can hold the 70% level today.

Saturday, May 28, 2016

CPCE Put/Call Ratio and SPX S&P 500 Weekly Charts Signal Significant Market Top Near

The red circles show significant stock market tops over the last two years while the green circles show significant market bottoms. What do you think will happen on this weekly basis?

Traders have not been this complacent, fearless, and relaxed about the stock market for 18 months; not since the market top in late 2014. Everybody and his brother are going long the market. The taxi cab driver, door man and even the guy who sells newspapers and magazines on the corner all went long the market. Aunt Nellie, who is typically frugal, took her entire life savings and went long the spiders (SPY). Bullish traders high-five each other believing that the central bankers will support markets forever; after all, they have for seven years so why not another seven? Of course, when complacency rules the day, long traders are smacked in the face and brought down to earth off of their euphoric clouds.

Looking at the prior market tops, assessing the CPCE, two occur with a single spike lower and four occur with two or three low prints. Friday's end-of-week print just occurred so this is one spike lower (there may be a second spike low in a week or three). For all the tops, the CPCE prints the low either coincidentally with the stock market top or, say, within one month. This hints that June, perhaps early June, or maybe as the FOMC rate decision occurs on 6/15/16 and/or the Brexit referendum on 6/23/16, the top may form or may already have formed in the stock market. A Bradley turn date is on 6/1/16 so markets are agreeable to a trend change.

Looking at the SPX for each pull back that was forecasted by the CPCE, the S&P selloffs are 60 points, 130 points, 100, 215, 240 and 40. The average is 131 points. Throwing out the smallest loss and largest loss is an average loss of 126 points. The smallest loss is 40 points which is the last pull back so it may be unlikely that this mild move occurs again. The largest pull back is about 240 points for the crash from late last year into early this year down to the mid-February bottom.

If you made profits during the three-month rally, take your winnings and go home. You can scale out in stages if you are afraid of missing any additional shorter term upside say now into mid-June. At the same time, shorts can be brought on against the indexes in the same method, scaling in over the next three weeks.

The CPCE uber 18-month low, also verified by the low VIX, indicates rampant market complacency and lack of worry or fear and the expectation is that a significant market top forms over the coming days and couple-three weeks (June). The pull back in the SPX should be from 50 to 250 points, say about 100 points as a target for starters which would be the 2000-ish area for the SPX. The prior pullbacks occur over a 1 to 3-month period typically thus, say, around Labor Day, August/September, it would not be surprising to see the SPX sub 2000. 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, May 27, 2016

CPCE Put/Call Ratio Daily Chart Signals Near-Term Top At Hand

The CPCE put/call drops to 0.55 indicating rampant complacency and a near-term top at hand for anytime any day forward. The CPC put/call is at 0.93 lower but not down to recent lows like the CPCE so keep an eye on that over the next couple days. The VIX is down to 13.43 also verifying the lack of fear in markets. When traders are relaxed with their feet up on the desk, smoking cigars, that is when they are whacked in the head. The SPX 2-hour chart hints that a near-term top is likely perhaps today. SPX daily and weekly charts are agreeable to more upside after any pull back so stocks may flounder sideways into June when the Fed rate decision and Brexit vote will dictate the path ahead; in other words, more sideways slop may be on tap until the June drama is known. 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 2-Hour Chart Negative Divergence Developing Upper Band Violation

The 2-hour chart shows the bottom printing with the positive divergence green lines. The red lines show negative slopes for the indicators but not negative divergence since price did not print a matching or higher high as compared to 5 or 6 candlesticks ago (10 or 12 trading hours ago). You can get cute and say the spike high late yesterday is almost a matching high but chances are, price may want to come back up to that thin red line and the blue line that is price resistance from late April. This would actually be great for bears, as long as the red lines all remain sloping down, which would then be neggie d, and a spankdown would begin in this 2-hour time frame.

Price has violated the upper standard deviation band so a move to the middle band at 2071 and rising is on the table and also the lower band at 2037 and rising. Thus, price may soften and move towards the middle band now, or, price will top out today to tap that thin red price line, and then, if neggie d is in place as shown by the red lines, price will begin lower. After today, markets will be closed until Tuesday so the bears may have to wait for Tuesday or Wednesday to receive something they can sink their teeth into.

Note the neon blue bull flag. That ran from 2028 to 2058, 30 points, then sideways consolidation while drifting lower to form the flag, this behavior is textbook, then when price starts to move higher again from 2048 for the second leg of the pattern, you know the target is 2078, which occurs. Price gaps up from there and is now sitting on an island above 2080. If price retreats to 2080, then immediately falls back down through the gap to 2076 and lower, that would be an island reversal pattern. Price may also simply choose to retreat and fill the gap at 2076-2080.

The 2-hour indicates that price will likely top out today perhaps this morning in th is 2-hour time frame. Stocks are typically bullish the two days in front of a three-day holiday weekend but have already rallied big this week. Markets will become more dicey with each day forward as the march to June and the Jobs Report, Fed rate decision, Brexit vote and Spain elections begins. The CPCE put/call is down to 0.55 indicating rampant complacency so a near-term top is at hand at anytime. 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 10:53 AM EST: About 90 minutes into Friday trading, the SPX is up 5 points to 2095. HOD 2096.16. So price seeks that thin red line and blue line as explained and highlighted in the chart above. Now that price is at a higher high than 6 or 7 candlesticks ago (12 to 14 trading hours ago), check the indicators to see if they are all negatively diverged, or not. All are neggie d except for the MACD line that has a hair of upside slope to it. The RSI is flat this can be considered negatively diverged. So the MACD may want one more jog move in this 2-hour time frame, which would be a down move then back up then roll over. So, marrying this behavior with the low CPCE put/call, a near-term stock market top is likely right now, say now through the next four hours which says perhaps by the closing bell the top will be in place for stocks in this two-hour time frame. This opens the door to weekend drama since, based on technical's, stocks will sell off to begin next week on Tuesday, however, if there is a positive news event, that may create lift to stocks to begin next week temporarily negating the technical's. Of course a negative news event on the holiday weekend would tank stocks with extra juice (due to the technical's) come Tuesday.

EEM Emerging Markets (EM) and SPX S&P 500 Daily Charts EM Leads Lower

The charts show how the roll overs in the EEM ETF forecast a roll over in the US stock market. In late 2013, it took about three months for US stocks  to respond lower after the EEM pull back began. In 2014, about one month after the emerging market top. In 2015, it took about three months for the US to roll over after the EEM had already done so. In late 2015, EM and US stocks rolled over at the same time. Ditto the April top.

Emerging markets trend lower but US stocks are celebrating upside joy. Will the same pattern repeat and take US stocks lower? If EEM recovers higher, the tail may start wagging the dog. 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.

RUT Russell 2000 Small Caps Daily and Weekly Charts

Over the last couple weeks, Keystone has been highlighting the moving average cluster on the daily. Three days ago, price, the 20-day MA, 50-day and 200-day were all at 1112-1118. A loser and a winner required crowning. The bulls win and the bears lose with the RUT rocketing higher on Tuesday.

The next contest is the bracket formed by the 20 and 50-week MA's. Two weeks ago, price tested the 200-week and 20-week MA support area and bounced. The overhead resistance was the 50-week MA at 1138, which is now support since price took it out to the upside. This level is extremely important. Since the bears got punched in the face with the outcome from the daily chart drama, bears have a last-ditch chance to stop the rally as long as the RUT stalls here and returns under the 50-week MA so watch 1138 closely.

The red lines show negatively-sloped indicators. This is not negative divergence since price has not yet made a new high. The only way a negative divergence can exist is while price makes a new high while the indicators slope negatively. The negative slopes, however, will introduce softness into price on the weekly basis. The MACD line is long and strong so any softness, say a week's worth, will result in price floating higher again to honor the bullish MACD. The RSI will likely become long and strong again when price comes back up which would further extend the move higher in price. The RUT will not roll over until the indicators print negative divergence.

Thus, say one week of down for the RUT, then back up again to current levels, then reassess. A guess would be that the RUT will top out 2 to 4 weeks ahead, say in early or mid June on the weekly basis. Interestingly, that is when the Fed rate decision, the Brexit referendum and Spanish elections all hit the fan.

A poke through 1150-1160 likely leads to 1180. The green expansion pattern is in play; also called a megaphone pattern (The mouthpiece and handle is added to create the illusion of a megaphone in the chart). If price does stall over the next month in this area and begins downward again, that is a long, long, long way down; the 700's and 800's. Watch the weekly chart and monitor the development of the neggie d. RUT 1138 is one of the most important numbers to watch through next 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.

Sunday, May 22, 2016

SPX S&P 500 60-Minute Chart 200 EMA Cross

The SPX remains under the 200 EMA on the 60-minute at 2059 signaling bearish markets for the hours and days ahead. The 200 EMA cross on the 60-minute is one of Keystone's key short term market signals. Bulls came up five days ago to tap on the 200 EMA but the bears quickly spanked price back down. That high is interesting since it also occurred directly at the top trend line of the downward-sloping channel.

The 2059 is a very big deal for the week ahead. Market bulls win big if they move above 2059. Bears will maintain pressure on markets and cause them to break down again the longer that price remains under 2059. The last hammer candlestick hints at a trend change so price may float higher to begin Monday morning. Watch the upper trend line at 2055-2057; this would be the first clue that the SPX wants to battle at the critical 2059 level. Bears need to maintain price inside the downward-sloping channel.

The strongest price support/resistance is 2072, 2067, 2061, 2057, 2046, 2042, 2032, 2022, 2019 and 2011. Combining the 200 EMA with price resistance sets up a key 2057-2061 resistance gauntlet; a key bull-bear battle ground. 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 Friday Morning, 5/27/16, Before the Market Open: The market bulls punched the bears in the face this week; the SPX catapults above the 200 EMA (now at 2063.30) sealing the bear's fate. The SPX is at 2090 ahead of Friday's trade.

SPX S&P 500 Support, Resistance (S/R), Moving Averages and Other Important Levels for Trading the Week of 5/23/16

SPX (S&P 500) support, resistance (S/R), moving averages and other important levels are provided for the trading week of 5/23/16. Levels shown in bold are strong resistance and support. Bold and underlined levels are very strong and important S/R.

For 2016, the intraday high for this year is 2111.05 on 4/20/16 and the closing high for this year is 2102.40 on 4/20/16. The intraday low for this year is 1810.10 on 2/11/16 and the closing low thus far this year is 1829.08 on 2/11/16. The intraday low in 2015 was 1867.01 on 8/24/15 and intrayear closing low for 2015 was 1867.61 on 8/25/15. Obviously, a failure under the 1810-1868 zone would lead to a catastrophic path ahead for stocks.

The SPX has exploded higher over the last three months due to the central banker intervention especially the BOJ, ECB and Federal Reserve. The highs for the year thus far printed on Wednesday, 4/20/16, one month ago. The SPX topped at the 2110-2114 resistance area and then retreated. Note how price got tangled up in the closing and intraday highs from last November and last December and did not have the energy to move up through; at this time. The 2102 R is very strong and important. If 2102 gives way to the upside new all-time highs may be coming. Pay close attention to the 2110-2116 resistance zone; this would be the last chance area for bears to stop the stock market from marching towards new all-time highs. Bulls will throw confetti and drink Fed wine if the SPX moves above 2116.

The VIX remains under the 200-day MA so the bears are not a huge threat to the bulls. The SPX is attacking the important 200 EMA  on the 1-hour chart at 2058.74. This is a very critical level for price. The market bulls will rejoice with a strong rally higher if 2059 is taken out. The market bears must fortify positions and prevent 2059 with all their might. The SPX under the 200 EMA on the 60-minute chart at 2059 signals bearish markets for the hours and days ahead. Thus, it is imperative for the bulls to push above 2059 to prove they got the beans to take equities higher. Market bears will win if SPX fails to climb above 2059.

The full moon peaked for the month yesterday and stocks are typically bullish moving through the full moon. Markets are closed next Monday, Memorial Day, 5/30/16, so stocks may be buoyant to end the week. Typically, stocks are bullish the two days in front of a three-day holiday weekend. Thus, only based on seasonality factors, stocks may be elevated to begin the week, then sluggish mid-week say Tuesday to Thursday, and then rally into the holiday weekend on Thursday and Friday.

The SPX began May at 2065 so this level is key for the days ahead. The month ends, EOM, on Tuesday when traders return from the holiday on Monday. There are only 6 trading days remaining in May and 2065 determines if the month finishes positively or negatively.

The SPX begins Monday at 2052 eight points above the starting year number at 2044. The bulls need to push above 2058-2059 to accelerate the upside. The bears need to push under 2042 to accelerate the downside. A move through 2043-2057 is sideways action for Monday.

If the SPX pushes up through 2052-2053 resistance, price will tackle the 2057-2061 resistance gauntlet which is extremely strong. Bulls would win big above 2061.

If the bears push under the 2038-2042 support floor, 2032 will occur very quickly, then price will bounce or die. If price continues lower under 2032, the very strong 2024-2029 support gauntlet is in play. If 2024 fails, bad things will happen to the stock market and the 2K level is likely on tap.

Looking at the near-term picture the strongest price support/resistance is 2110-2114, 2102 (extremely strong resistance; if 2102 gives way new all-time highs are likely), 2094, 2089, 2079-2084, 2074, 2072, 2067, 2061, 2057, 2046, 2042, 2032, 2022, 2019, 2011, 2002, 1997, 1993 and 1985-1988.

Note: If the list below displays any blank spaces, view it in a different browser.

2135 (5/20/15 All-Time Intraday High: 2134.72)
2133 (7/20/15 Intraday High 2132.82)
2131 (5/21/15 All-Time Closing High: 2130.82)
2130 (6/22/15 Intraday High 2129.87)
2128 (7/20/15 Closing High: 2128.28)
2126 (4/27/15 Intraday High: 2125.92)
2124 (6/23/15 Closing High: 2124.20)
2121 (4/24/15 Intraday High: 2120.92)
2120 (2/25/15 Intraday High: 2119.59)
2118 (4/24/15 Closing High: 2117.69)
2117 (3/2/15 Closing High: 2117.39)
2116 (11/3/15 Intraday High: 2116.48)
2111 (4/20/16 Intraday High for 2016: 2111.05)
2110 (11/3/15 Closing High; 2109.79)
2104 (12/2/15 Intraday High: 2104.27)
2103 (12/2/15 Closing High: 2102.63)
2102 (4/20/16 Closing High for 2016: 2102.40)
2094 (12/29/14 Intraday High: 2093.55)
2091 (12/29/14 Closing High: 2090.57)
2079 (12/5/14 Intraday High: 2079.47)
2076 (11/28/14 Intraday High: 2075.76)
2075 (12/5/14 Closing High: 2075.37)
2073 (11/26/14 Closing High: 2072.83)
2071.88 Previous Week’s High
2071 (11/21/14 Intraday High: 2071.46)
2065.30 May Begins Here
2064.58 (20-day MA)
2060.54 (50-day MA)
2058.74 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)
2058.35 Friday HOD
2056 (11/18/14 Intraday High: 2056.08)
2052.32 Friday Close – Monday Starts Here
2046 (11/13/14 Intraday High: 2046.18)
2044 (12/31/15 Closing High: 2043.94)
2043.94 Trading for 2016 Begins Here
2041.88 Friday LOD
2040.87 (20-month MA)
2029.37 (100-week MA)
2026.06 (12-month MA; a Keystone Cyclical Signal) (the cliff)
2025.91 Previous Week’s Low
2024.43 (50-week MA)
2019.53 (150-day MA; the Slope is a Keystone Cyclical Signal)
2019 (9/19/14 Intraday High: 2019.26)
2014.58 (10-month MA)
2011.07 (200-day MA)
2011 (9/18/14 Closing High: 2011.36) (9/4/14 Intraday High: 2011.17)
2007 (9/5/14 Closing High: 2007.71)
2005 (8/26/14 Intraday High: 2005.04)
2003 (8/29/14 Closing High: 2003.37)
1996.72 (100-day MA)
1994.10 (20-week MA)
1993 (1/15/15 Closing Low: 1992.67)
1991 (7/24/14 Intraday Top: 1991.39)
1988 (7/24/14 Closing High: 1987.98)
1986 (7/3/14 Intraday Top: 1985.59)
1985 (7/3/14 Closing High: 1985.44)
1981 (2/2/15 Intraday Low: 1980.90)

SPX S&P 500 Daily Chart Showing Keybot the Quant Algorithm Turns in 2016

Here are the turns thus far this year for the Keybot the Quant algorithm. The red line is where the Keybot algo went short and the green line is where Keybot goes long. The year was off to a wild start. As you will recall, Keybot flipped short on the very last trading day of 2015 during the last one minute of trading. That was interesting. The algo benefited from the losses in stocks early in the year. The choppy sideways activity, that chews up bulls and bears alike, continues. Last December was a mess; look at all that back and forth choppy slop that ultimately resolved to the down side. As per the algorithm, the bulls are in charge as the week of 5/23/16 begins.

Saturday, May 21, 2016

VIX Volatility Daily Chart

The VIX remains  under the 200-day MA sending the stock market higher. Low volatility is the bulls best friend and the corrupt central banker's maintain their jack boots on the neck of the VIX holding it down so stocks can rally. The stock market rally began mid-February as was expected due to the elevated fear with the VIX above 30. As March began, the VIX lost the 200-day MA so the bulls win and bears lose. Note the textbook back test of the 200-day in early March the VIX coming back up for a bounce or die decision and deciding to fail. Lower volatility creates a higher stock market.

The purple sideways channel represents the market bulls punching the bears in the face. Bears got nothing unless the VIX moves above the 200-day MA at 18.74. The Keybot the Quant algorithm is on the long side currently and tracking the VIX 18.22 level as a key bull-bear inflection point (red bar). Thus, the market bears need to move above 18.22 and you will see the stock market deteriorate extremely fast. If the VIX remains below 18.22, the bulls have their feet up on the desk relaxing, smoking cigars, and dabbing the ashes in the bear's 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.

Keybot the Quant Turns Bullish

Keystone's proprietary trading algorithm, Keybot the Quant, flips long at SPX 2054 shortly after Friday's opening bell. The chips, SOX, catapulted above its key 649 level which sent stocks wildly higher. The algorithm is tracking three key parameters currently controlling stock market direction; retail stocks, chips and financials. Market bulls need stronger retail stocks to prove they got the beans to take stocks higher. Market bears need weaker semiconductors and banks to mount a charge lower for equities. As always, remain alert for a potential whipsaw move back to the short side early next week. More information is found at Keybot's site;

Keybot the Quant

Thursday, May 19, 2016

CPC Put/Call Ratio Daily Chart Signals Near-Term Bottom

Traders are experiencing rampant fear and panic which indicates that a near-term stock market bottom is at hand. Traders have not been this fearful since the mid-February bottom. The market bulls are happy to see this chart. The CPCE put/call ratio has not jumped higher as yet. Thus, stocks may perform a rally move and then retreat again after a few days to reset for another bounce after the CPCE spikes higher to match the CPC.

Stocks will likely begin a rally at anytime any day ahead so if you are not short the stock market already then it is likely not worth chasing stocks lower and consideration should be given to cover shorts in the hours and couple days ahead and put on a couple longs (for VST trading and day trading). Market bears need bad geopolitical or other news which would create negativity, otherwise, the bulls are going to get a turn at bat going forward in the very short term. 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 Morning, 5/21/16: Stocks launch higher in the Friday trade due to the excessive negativity as evidenced by the elevated CPC put/call above. 

SPX S&P 500 2-Hour Chart H&S (Head & Shoulders) Downward-Sloping Channel Positive Divergence Lower Band Violation

The bears keep trying to push lower but the bulls are not giving up the fight. Keystone's prior H&S chart receives a lot of interest on the web so let's take a closer look at the head and shoulders chart pattern with a 2-hour chart. All those lines look like spaghetti. The blue lines clearly show the head and shoulders pattern that is in play with neckline at 2040, which is also very strong price support, and head at 2111. This is a difference of 71 points so a downside target of 1969 is in play if the 2040 fails and the SPX stays under the 2040 level.

The neckline failed today but price recovered due to the positive divergence (green lines) and oversold stoch's. The move today is a textbook back kiss of the neckline of a textbook H&S pattern. Price has to make a bounce of die decision from 2040 tomorrow morning. The SPX violated the lower standard deviation band so a move back to the middle band at 2051 is on the table and also the upper band at 2074 (pink). The downward-sloping channel (purple) clearly shows a pattern of lower lows and lower highs a bearish indication.

Considering the possie d, oversold conditions, lower band violation and bottom channel trend line support, the bulls likely have the advantage in the hours ahead. If the top standard deviation band moves lower and joins the upper channel trend line, price may seek the top of the channel at 2060-2070 to confirm the pattern of lower highs before potentially resuming the downward path which remains in play on the daily time frame.

The full moon peaks on Saturday and stocks are typically bullish moving through the full moon another plus for bulls. OpEx is tomorrow so volume will be robust after the opening bell and before the closing bell adding to the excitement.

Note that price did not come down to oversold conditions for the RSI and money flow. Typically, when price eventually washes out at some point in the future you will see the RSI and money flow print very low into the oversold zone.

Keybot the Quant trading algorithm remains on the short side and is tracking SOX 649.27 (semiconductors) and XLF 22.79 (banks) s the two key drivers of stock market direction currently. The market bulls need SOX above 649.27. The bears need XLF under 22.79. If the status quo remains with bearish chips and bullish banks, the stock market will float along sideways with an upward bias into the weekend.

The strongest price support/resistance levels are; 2071, 2067, 2061, 2057, 2046, 2040, 2032, 2022-2023, 2019, 2011, 2002 and 1997. The 20-day MA is 2067. The 50-day MA is 2059. The 12-month MA is 2025 ( a critical cyclical market signal).  The 50-week MA is 2024. The 200-day MA is 2011. The S&P 500 started the year at 2044 and is negative by four points; the SPX benchmark index is down -0.2% in 2016.

What does all this mumbo-jumbo mean? Boiling things down to a simple level for Keystone's simple mind, if the SPX heads lower from 2040 and if the XLF loses 22.79, stocks will be in huge trouble with lots more downside ahead. At that point, watch the SPX 2025 level a major line in the sand where market mayhem and carnage would begin. The SPX will likely target the 1997-2002 landing zone if 2025 fails and then price would continue lower to the 1969 H&S target as time moves along.

If stocks sell off but the XLF does not go under 22.79, then bears got nothing and stocks will recover and rally. If stocks move above 2040 heading higher, but the SOX does not go above 649.27, the bulls got nothing and stocks will reverse and head lower intraday. If stocks trade higher and the SOX 649.27 is taken out to the upside, the rally will gather strong steam and stocks will be rocking and rolling higher into a triumphant and glorious weekend.

The bulls are favored in the hourly time frame ahead as per the above discussion; the bears need either negative geopolitical news or bad news with the banks. Watch SOX 649.27, XLF 22.79 and SPX 2025 since these three parameters determine market direction for Friday and the fate of bulls and bears going 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.

Note Added Saturday Morning, 5/21/16: The chips catapulted higher so the bear's fate was sealed. The scenario, ' if stocks trade higher and the SOX 649.27 is taken out to the upside, the rally will gather strong steam and stocks will be rocking and rolling higher into a triumphant and glorious weekend' occurs. Market bulls will need stronger retail stocks to continue the stock market rally. Market bears will need weaker semiconductors and financials to take stocks lower.

Wednesday, May 18, 2016

BPSPX S&P 500 Bullish Percent Index Daily Chart

The BPSPX is on a double-whammy market sell signal. The BPSPX peaked at 79.70. A six percentage-point reversal constitutes a trend direction change and 79.70-6 = 73.70, which failed issuing a market sell signal. The drop under the important 70% level is very key and creates the double-whammy sell signal.

Check the BPSPX each day forward. If the BPSPX remains under 70, the stock market is toast and will begin tumbling lower going forward. If the BPSPX regains the 70 level, the bulls will recover and markets will at least remain in a choppy sideways direction. 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 8 PM EST Thursday Evening: The BPSPX continues lower to 66.6 so the bears cheer. Price under the 70% level is a major win for bears. The only way the bulls can confirm a trend change back to the upside is if a move above 70% occurs. Bulls would receive big time juice higher if a six percentage-point reversal occurs which would be above 72.6 (66.6+6). For now, the bears are driving the bus as per the BPSPX tool.

SPX S&P 500 Daily Chart H&S (Head & Shoulders)

The sideways choppy market action continues chewing up bulls and bears alike. If you do not like the market direction, wait until the next day since stocks will move the opposite way. The blue lines show a head and shoulders (H&S) pattern in play. Keeping it simple for Keystone's simple mind, the neck line is 2040 and head at 2100 (the intraday top was 2011) for a difference of 60 so the downside target is 1980 (2040-60) if the 2040 level fails. Note the intraday lows from early March that create a strong downside support target for the H&S at 1965-1970. If price moves lower the 200-day MA at 2012 will create support on the way down.

The 20-day MA is 2072, the 50-day MA is 2057 and price is below at 2047. The year began at 2044 so the S&P 500 is only positive by 3 points this year. You could have went on vacation and ignored all the market drama this year and you would have not missed a thing. Pay attention to the 50-day MA resistance.

The MACD line and money flow remain weak and bleak hinting at lower lows ahead for price. The tiny red circles clearly show steady distribution taking place for the last six weeks. After stocks move higher one day, stronger volume comes in on the sell side the next day; this is institutions and funds handing off shares to the dumb money like Ma and Pa Kettle and Joe Sixpack. Amazon is printing record highs so many blindly confident retail investors are touting their stock market expertise at the office water cooler announcing that they have placed their entire life savings in AMZN stock.

The ADX is down to 14 verifying that the big rally move higher in the stock market is not a strong trend. When stocks tumbled lower to begin the year, the ADX ran above 25-ish which indicated that the trend lower in price was very strong. That strong downtrend petered out in late February as the rally began so you knew the bulls had legs. As stocks moved higher, the ADX tried to sneak above 25 as April began to signal that the upside trend was strong, however, it did not. According to the ADX, there is no strong uptrend.

The green lines show the possie d launch off the February bottom as forecasted. The falling wedge and oversold conditions also create the recovery move for stocks. The purple W pattern bottom is very powerful, especially since it formed under both the 50-day and 200-day MA's, and this proved correct with the SPX nailing the 2050-ish upside target in quick order. The red lines show the neggie d that created the spankdown off the top as forecasted. The rising wedge and overbot conditions also signaled the top. For the last two months, sideways choppy slop continues.

Watch the H&S neckline at 2040-ish since big trouble begins below. Bulls need to push the SPX above the 50-day MA at 2057 to celebrate. The FOMC Minutes at 2 PM EST (7 PM London; 8 PM Frankfurt; 2 AM Tokyo) may act as a pivot point today. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Monday, May 16, 2016

CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts

The sideways choppy behavior continues for the stock market chewing up bulls and bears alike. The low put/calls (red circles) at the end of April identified the market top, which occurred, and then some selling action takes place into the near-term bottom about one week ago with the elevated put/calls. Markets move choppy sideways and then rally big today.

Note, however, that traders went from fear and panic back to complacency in a heartbeat. Today's trading took on a party atmosphere. Goldman Sachs pumped the oil markets higher, perhaps to help their own positions, which created a rally in energy stocks and the broad indexes. Warren Buffett is buying tech stocks like Apple so the party was in full swing. Strong semiconductors helped the party continue.

Over the coming days the complacency will be at the point where it identifies a stock market near-term top again and stocks will retreat. The put/calls are already low enough to create s snap back move tomorrow to the downside for equities but there is likely a couple-three days of sideways choppy slop ahead. The put/calls tell  you that the stock market is probably not worth trading form the long side; stocks can definitely run higher but price will be running into a near-term top due to the low put/calls. 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.

Sunday, May 15, 2016

YC2YR Yield Curve Weekly Chart 10-Year Yield Minus 2-Year Yield Record 9-Year Low

A flattening and/or inverted yield curve (where the 2-year yield rises above the 10-year yield) are harbingers of a recession ahead. The 2-10 yield spread is a useful indicator in assessing whether the yield curve is steepening or flattening. Traders love a steepening yield curve since it typically occurs in conjunction with an improving and robust economy. Financials are bot since the larger spread makes it easier for banks to make money on the rate differences; borrowing low and lending high. When the yield curve steepens, you will typically see the banks rallying and visa versa, as the yield curve flattens, the banks are beaten.

The 10-year yield is 1.70% and the 2-year yield is 0.75% (1.70-0.75= 0.95; 95 basis points). The yield curve has not been this flat since late 2007, nearly 9 years ago; call it 8-1/2 years if you want to be exact. When the yield curve was steep in 2009 into 2011, the banks celebrated but the red lines show the negative divergence, overbot conditions and rising wedge pattern that created the spank down in the spread.

Yields are moving sideways for a few years. The inflation the Federal Reserve is trying to create via the obscene Keynesian money printing remains on a milk carton (missing). Global disinflation and deflation continue to rule the roost around the world. There is a huge gap in 2007 at 84-87 bips; big enough to drove a truck through. Thus, the spread is on an island for the last 9 years (above 87 bips) and if the spread drops to say, 90 bips then immediately collapses back down through the gap to 84 bips and lower, that would create an island reversal pattern. If price simply comes down to fill the 84-87 gap that is termed a gap-fill.

Another scenario is the spread stopping in this current 87 to 95 bip range, building a base, and then moving higher staying on the island created by the gap-up move in 2007. The green lines show a falling wedge, oversold conditions and positive divergence with the indicators, thus, the spread should base going forward on the weekly basis and trend higher. The question is where does it print the low spread; either now in the 87 to 95 bip range, or, if 87-90 fails, the 84 and lower will likely occur very fast.

Fed Chair Yellen holds the answer. If there is a threat of a rate hike occurring sooner rather than later (market participants do not expect a hike this year and those that do say December may be a possibility; the Fed says two hikes are on the table this year), the 2-year yield will spike higher and that may flatten the yield curve placing the gap fill and perhaps much lower spread numbers on the table. The standard expectation for a rate hike cycle, however, would be that all yields are moving higher with the long end rising faster and the yield curve steepening making for a happy financial sector and overall economy. Seven years of obscene central banker Keynesian policies, however, have distorted markets and destroyed price discovery so no one really knows what any asset is truly worth anymore.

After the BOJ went into negative rate territory, money outflows from Japan are increasing and that capital is being exported to the United States. The dough is buying the long end of the Treasury curve so the higher bond and note prices drive the yields lower. This drama is occurring on the long end (pushing yields lower) while Yellen is steering the 2-year yield. If a rate hike remains unlikely this year, the status quo of sideways moves in yields is likely. 

The Fed decision on rates is 6/15/16, then the Brexit vote 6/23/16 then the Spanish elections 6/26/16. Puerto Rico needs a $2 billion and more bailout package by 7/1/16 to simply keep the sinking ship afloat (the troubled territory is mired in over $70 billion in debt). The US republican and democrat conventions are in July with tempers increasing as the temperatures increase. The US may be impacted by riots and social unrest in July. A lot of drama will hit the markets over the next 7 weeks. 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, May 12, 2016

COMPQ Nasdaq Composite Daily Chart Fibonacci Retracements

As was previously highlighted, the red rising wedge, overbot conditions and neggie d (red lines) set up a smack down, which occurred. The collapses from rising wedges can be quite dramatic. Note how price dropped directly to the first Fib retracement at 38% at 4680 and bounced. The indicators hint at a sideways to sideways lower pattern for price ahead but this is not cast in stone.

The pink box shows the strong downward trend that was in place during the selloff to begin the year. Interestingly, the big rally from February to April was not a strong trend (ADX stays under 25-ish). The moving averages are of great interest. Note how they are lining out sideways hinting at more sideways movement in price. The 20, 50 and 200-day MA's are at 4815-4845 so this range is uber important. Note how this range is squeezing in tighter as well. Price was rejected at the 50-day MA resistance at 4815 yesterday.

Bulls win big above 4845. Bulls and bears fight between 4815 and 4845. Bears win big below 4815. 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.

WTIC West Texas Crude Oil Daily Chart Golden Cross Rising Wedge Negative Divergence

WTIC oil prints a golden cross with the 50-day MA rising above the 200-day MA; a bullish chart pattern. As Keystone often says, however, typically a pull back occurs in price when a golden cross occurs and typically a rally when the death cross occurs. This is due to many weeks of trending price action that needs to take a rest once the golden or death crosses occur. If the golden cross remains in play then prices will be higher in the weeks ahead after a short term pullback.

The energy sector, XLE, prints a golden cross last week. Brent oil will likely print its golden cross in a couple days. OIS printed the golden cross three weeks ago. XOM printed the golden cross in early March and CVX printed the golden cross in March as well.

The red rising wedge is a bearish pattern. The red lines show negative divergence in place so oil prices would  be expected to roll over in this daily time frame and target the lower trend line of the rising wedge. The green lines show the falling wedge, oversold conditions and possie d that launched price off the February bottom.

The weekly chart would like to see higher highs in oil price after the negativity in the daily time frame plays out say over the coming days or week or three. The monthly chart is also open to higher highs in price on the monthly basis. Thus, on the daily chart above, a pull back in oil to say 44 is on the table but about 3 or 4 weeks from now, say early June, oil prices will likely be back up to current levels at 46-47. Oil price may tease 48-52 for the coming few months which may hold as the high for the year. Keystone has no position in oil currently. 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.

AMZN Amazon Monthly Chart Overbot Rising Wedge Negative Divergence

Amazon prints above 700. Bernstein targets a $1000 price. CEO Jeff Bezos is carried around the lobby on the shoulders of happy employees watching the stock price grow to the sky.

The negative divergence across all indicators on the AMZN weekly chart was highlighted at the end of last year with a spankdown predicted, which occurred. However, Amazon was expected to come back up since the monthly chart had long and strong profiles for the indicators into the doji top in December (green lines). Price has come back up after the spankdown from the weak weekly chart.

AMZN appears to be printing a significant multi-year top moving forward. The red price candlesticks show the smack down from December to February corresponding to the neggie d on the weekly chart. That played out and price now came back up for higher highs. Note the indicators are all neggie d (red lines) on the monthly chart above except for the MACD  line that wants to see another matching or higher high in price after a pull back occurs in this monthly time frame. With price now above the December highs, the negative divergence with the RSI, histogram, stochastics and money flow is ominous.

So two potential paths are forecasted both call for a significant multi-year top to occur in Amazon say between now and August. The blue line in the margin represents a sharp drop, similar to the drop from December, which would occur due to the neggie d. The blue line then recovers for THE top in June-August when the MACD line will negatively diverge representing the peak for AMZN. The purple line shows a path for price to make a quickie pull back, say during the rest of May into early June, then price comes back up to satisfy the MACD positivity in a quicker time frame. So the higher high in price occurs, say in June printing the multi-year top with the MACD turning neggie d.

It is never wise to short a hot momo stock. But the most speculative and risk-taking traders could consider a short play on Amazon. Simply be aware that the monthly MACD line wants price to come back up again after any pull back in the monthly time frame. Keystone does not hold a short position in AMZN currently. If you enjoyed the ride up in Amazon on the long side, it would be prudent to scale out of the position, say in three or four exits between now and July. Keystone will likely wait for the MACD line to turn neggie d, probably in June or July, and consider a short on AMZN at that time.

The Amazon party is peaking out over the coming weeks. By the end of this year, Amazon employees will ignore Bezos and talk negatively behind his back as the stock price continues sideways to sideways lower. Note how price likes to back kiss the 20-week MA, now at 499 and rising. Thus, 500-550 is a downside target and with all the bounces off the 20 over the last few years, AMZN is due for a failure that could get quite ugly. Do not enter AMZN on the long side. 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.