Tuesday, June 28, 2016

SPX S&P 500 Monthly Chart 12 MA Cross Battle Between Bulls and Bears for Cyclical Market Control

One of Keystone's key cyclical market signals triggered yesterday. The SPX drops under the critical 12-month MA at 2027 signaling a cyclical (weeks and months) bear market ahead. When this failed yesterday, a trap door opened to send the SPX sub 2K. Of course, as the chart displays, the battle continues and the bulls are trying to regain their cyclical glory. For now, the bears are in charge of the path ahead through the summer but the fight for the 12-mth MA is ongoing. The 10-mth MA is another key level used by old-timer's and programmed into many algo's. The 10-mth MA is at 2024. Bears are happy to see the 10 MA under the 12 MA albeit marginally. Bulls need to see the 10 cross above the 12 to point to higher prices ahead.

The 200-day MA is 2021 and the 50-week MA is 2021. Do you think the 2021-2027 cluster is key? Obviously, it is uber importante.  Bulls win big above 2027. Bears win big below 2021. Both sides suffer bloody noses between 2021-2027 as they battle for all the marbles determining the direction for stocks for the months ahead.

The chart is bear-friendly with price stalled at the top and indicators weakening (negative divergence). The indicators, however, are staggering sideways and as evidenced by today's rally, the central bankers are powerful and can rally markets at will. The RSI did not want to slip into bear territory under 50% so watch that as a key indicator for the months ahead. Also the MACD cross remains bearish; watch that closely.

The brown circles show distribution taking place. Each time that stocks rallied for the month, the following month the dumb retail money including Ma and Pa Kettle, Aunt Edna and Joe Sixpack, would rush in to buy the hype thinking that they are very smart. The institutions and hedge funds distribute shares to these suckers as reflected by the higher volumes. Rinse and repeat. After the last couple years, many retail investors are heavily exposed to the long side in stocks and comically very proud of the bag they are holding; they hope that the stocks will regain the levels where the long trades were entered. Hope is not a strategy. Any investor or trader hoping and praying for a stock market rally better see SPX above 2027, otherwise, you are toast.

The monthly charts receive new numbers on Thursday for EOM. The SPX started June at 2097 so the month may finish negative. Anything can happen, however, over the next three days. Watch the 12-month MA; this major cyclical signal tells you the market direction ahead for the intermediate term; currently bearish but only by a few dollars. The SPX is at 2021 at 10:40 AM EST Tuesday morning, 6/28/16. The battle continues. 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 10:58 AM EST: The SPX prints 2020. Are the bears planning to flex their muscles lower, or are they only teasing a failure of the critical moving average cluster at 2021-2027? Bulls need to push price higher immediately or they are going to fall down the basement steps.

Note Added 3:04 PM EST: Stocks launch higher in an afternoon rally. The SPX jumps 31 points, +1.6%, to 2032. Oil is rising helping to boost stocks. The bulls are now in charge with a cyclical bull market rally ahead with the SPX above 2027. Bears need to push the SPX under 2027 pronto or they got nothing. This battle may not yet be over.

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