Tuesday, May 30, 2017

USD US Dollar Index Weekly Chart; Long-Term Sideways Channel; Near-Term Downward-Sloping Channel; Lower Band Violation

The US dollar index has been trending lower ever since the top in December. The negative divergence with the indicators told you that the 103-104 high in the dollar is all she had late last year. This was at the same time as the US dollar bulls and television pundits were wildly enthusiastic for a higher dollar predicting price targets at 110, 115 and even 120. Of course the consensus was wrong as usual. All they had to do is look at the neggie d and they would have bit their tongue.

Note the downward-sloping red channel this year. Price is trying to bounce off the lower rail which is also a price support area over the last couple years. Price may want to head higher towards the top rail of the channel. The USD fell through the 50-week MA at 98.69 and a back kiss would be expected. This area at 98.70-98.80 is an upside target should the dollar begin recovering. Then the one hundo level, the thick blue line which is the top rail of the long-term sideways blue channel, may be tested.

On the downside, the USD may test the 96 level which is price support and the bottom rail of the red channel. Then a slide to test the lower long-term blue channel trend line at 93.50 would be on the table.

The USD collapses under its lower standard deviation band over the last two weeks. This lower band violation forecasts a move higher to the middle band at 100.00, and falling. The stochastics are oversold which helps create a bounce in price. Overall, the indicators are weak and bleak with the MACD line, histogram and ROC continuing to trend lower. This hints that price will come back down for lower lows after any recovery move occurs in this weekly time frame.

The RSI has not reached oversold territory so the US dollar index may be in for a very slow and long grind lower over many  months; a sideways to sideways lower trend; a very slow bias lower. The USD may travel through 96-99 through the summer and then continue a very slow downward bias.

The euro chart is the mirror opposite of the dollar since the currency baskets contain a majority of each other's currency. Thus, the euro will move sideways to sideways higher. Interestingly, ECB President Draghi promises never-ending QE easy money yesterday, and the euro sags from 1.1180 to 1.1125 as would be expected but is already recovering to 1.1168. Despite the promises of easy money forever from the European Central Bank, the euro is not moving any lower. Are the central bankers losing control? That is a question for another day. 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 Monday Morning, 6/5/17: USD is at 96.77 with a low last week at 96.58.

BPSPX S&P 500 Bullish Percent Index Daily Chart

The BPSPX remains on the double-whammy sell signal forecasting weaker stocks ahead. Price reversed by the key six percentage-points from 80-ish to 74-ish issuing a market sell signal. Then the BPSPX fell through the important 70% level creating the double-whammy sell signal. The market bulls need to move price above 70 to end any potential stock market weakness. Then bulls would benefit above 73.5-ish (a six percentage-point reversal to the upside) receiving a double-whammy buy signal.

For now, however, the market bears are in control. As long as price maintains the downward bias, the bears will create weakness in stocks. Note the textbook H&S pattern (brown lines); it could have been pulled straight out of a technical analysis manual. The head at 80 and neckline at 70 forecasts a target at 60. Price typically back kisses the neck line after it fails giving the bulls one last chance to recover. Sometimes price simply collapses once it loses the neckline. Watch the 70 level. Bears win below. Bulls win above 70. 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 Monday Morning, 6/5/17: BPSPX finishes last week and begins the new week ahead at 69.20 a hair from the coveted 70% level. The drama continues. For now, the bears remain on a double-whammy sell signal for the stock market.

TNX 10-Year Treasury Note Yield Weekly Chart; M (Double) Top; Gap; Potential Island Reversal

The TNX chart highlights the 10-year Treasury yield trading this Tuesday morning at 2.24%. Keystone pointed out the M Top or Double Top in March (red circles). As yield printed a matching high compared to December, all the indicators were negatively diverging showing that the move higher in yield was out of gas, and, as expected, falls away to the downside (notes and bonds are bought as yields drop). In March, the consensus on Wall Street was proclaiming the 10-year yield to 2.75% then 3% and then maybe even towards 4%. So much for that. All the consensus had to do is look at the chart and the neggie d would have changed their minds.

The current battle is at the 200-week MA support/resistance at 2.25%. Yield sat at this level all weekend long during the Memorial Day holiday and begins trading again today down one tick at 2.24%. Bond bulls want higher note prices and lower yields sending yield under the 200-week MA at 2.25% and much lower. Bond bears want lower note prices and higher yields with the yield remaining above the 200-week MA at 2.25% and moving higher.

Note the big gap higher after the Trump election in November (brown circle) placing the 10-year yield on an island above 2.20% for the last seven months. Price will want to revisit that gap at some point in the future. An island reversal pattern may play out where yield falls to the 2.20% level (the top of the gap) then immediately collapses to 2.12% and lower (at and below the bottom of the gap). Otherwise, yield may simply choose to trend slowly lower and fill the 2.12%-2.20% gap.

The TNX monthly chart hints at lots of sideways ahead for yield. The bond bears looking for 3% and more for the 10-year such as Citigroup strategist Tobias Levkovich naming that target on Bloomberg as this message is typed will likely be disappointed. Likewise, those expecting far lower yields may also be disappointed. Sideways is likely the order forward.

Note how the moving averages are lining out sideways as yield travels sideways. The red channel was in play at 2.30%-2.60% for November though March but now replaced with the purple sideways channel at 2.24%-2.38% for April and May. The 20-week MA is at 2.38% so a move above will send yield to 2.62% and perhaps higher. The 50-week MA is 2.07% so a move under that level and yields will collapse (likely with a collapsing economy and markets). Note how the 20-week MA is sloping downwards and the 50 upwards. This bracket will be key going forward. It not only funnels yield sideways through this bracket but the ends are squeezing inward so yield will have to choose a direction as the next couple months play out.

There are two potential outcomes. Either the economic data improves greatly showing an expanding economy with inflation taking hold, with higher wages, and yields move higher jumping above the key 2.62% and towards the 3% touted by Wall Street pundits, or, yield collapses through the 200-week MA at 2.24%, through the critical 2.20% support, then through the 2.12% support and the 50-week MA, predicting major stock market trouble, inflation is not occurring, economic data is quickly deteriorating and talk of recession increasing. Which will happen?

As yield dropped to print the double bottom in April and May, the indicators are mixed. RSI and ROC are flat sideways. Stochastics are oversold and positively diverged which created the slight lift in the yield last week. The MACD line, however, is weak and bleak and wants to see a lower low in yield (2.20% and lower).

The near-term story on the 10-year is dictated by the 2.20%-2.24% support/resistance level. Yield will want to move lower if it begins printing under the 200-week MA. Going forward through May, June and July, the move above the 20-week MA, or, the collapse under the 50-week MA, will tell the tale for Treasuries ahead. Keystone does not hold any positions related to Treasuries. 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 Monday Morning, 6/5/17: TNX is beginning the week at 2.17%.

Monday, May 29, 2017

XLF Financials Daily Chart; H&S

The financials exploded higher after the Trump election in early November. The president promises to cut regulations to reward the large investment banks. At the same time, the consensus of traders expect inflation on the come which would create higher Treasury rates and a steeper yield curve benefiting the banks especially the regionals. (Keystone does not agree with the consensus and instead expects continued global disinflation and deflationary behavior; overall inflation will not occur since wage inflation is not occurring.)

XLF price creates several gaps on the way up which will need filled at some point in the future. The head and shoulders (H&S) pattern sticks out like a sore thumb. Traders are indecisive as there are already two right shoulders in place and a third one in progress now. The bank bulls have been successful in preventing the failure at the neckline. The neckline is at 23.0 and head at 25.2, which is a difference of 2.2 so the downside target is 20.8 if the 23.0 neckline fails.

In early March, price was spanked lower off the top by the negative divergence clearly displayed with the chart indicators. The overbot RSI and stochastics were also agreeable to a pull back at that time.

The chart is not giving up much in the way of forecasting potential. Note the sideways stagger of price for the last 2-1/2 months through 23.0-24.0. Obviously, bulls win big above 24.0 (since price will likely want to retest the head at 25.2) while bank bears win big if price fails at 23.0 the line in the sand.

The 20 and 50-day moving averages are lining out sideways reflecting the price movement. Price, the 20-day MA and the 50-day MA are all at 23.59-23.62 so obviously bank bulls win above 23.62 while bears win below 23.59. A future death cross may print in June or July if the H&S neckline fails. The 50-day MA is already heading lower while the 200-day MA is moving higher. Financial bears need the XLF price to move under the 50-day MA at 23.59 and head lower since this will drag the 50-day lower. Bulls benefit if they can keep price above the 50-day.

The XLF weekly chart is also lining out sideways. The 20-week MA is at 23.74 and the 50-week MA is at 21.59. Thus, bulls win big if they can poke up through the 23.74-24.00 resistance. Bears will rejoice if the XLF slips under 23.00 since the target zone becomes 20.8-21.59. If XLF loses 23.00, all Hades will break out in the broad stock market. US stocks are not trading today (Memorial Day) but the banks in Europe are weak especially Italy. 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 Monday Morning, 6/5/17: XLF finishes last week at 23.45. The drama continues.

Sunday, May 28, 2017

UTIL Utilities Weekly Chart; Potential M (Double) Top; Overbot; Negative Divergence

Utilities catapult +2.4% higher last week as yields and rates remain subdued. The red lines show price at the summer 2016 highs  with the chart indicators negatively diverging. The RSI line is sneaking out some additional upside juice over the last couple months which may lead to another jog move in price (down-up) for a higher high in this weekly time frame. The monthly chart is negatively diverged across all its indicators and ditto the weekly chart above over the one-year time frame. The stochastics are overbot agreeable to a pull back in price.

UTIL violated the upper standard deviation band during February and March so the middle band and lower band are in play, however, price shows disrespect by ignoring the middle band. The upper band is at 728 so price may want to spurt up to touch that but considering that price has not yet shown respect to the middle band, which is also the 20-week MA, at 690 and rising, the bears likely have a slight edge in trying to pull price down to at least touch this middle band. You can see a distinct M Top or Double Top in play with only the last downleg of the M needed.

Keystone highlights the UTIL chart when it is impacting broad stock market direction. The old-timer's watch the price from 15 weeks ago and the 50-week MA as two key intermediate and long-term signals for the broad stock market. When utilities roll over to the downside, the stock market will typically be dropping as well, or, after the utes roll over and begin trending lower, the broad stock market should roll over within a couple months. Thus, the utilities must be watched closely going forward. You may be witnessing a multi-year topping process for the stock market playing out.

The blue circle and line show the price at 672 for 15 weeks ago. The 50-week MA is at 679. With the UTIL price way up at 720 it is unlikely the market bears can send utilities below either number. However, for the following week, the week of 6/5/17, the important numbers to watch will be 699.49 and the 679-ish. The UTIL 699.49 number is key come 4 PM Friday, 6/2/17. If UTIL ends the week under 699.49, the stock market will be in trouble beginning Monday, 6/5/17. The market bulls must keep the UTIL price basically above 700 going forward otherwise, there will be trouble coming for the stock market. Keep an eye on utilities. 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 Monday Morning, 6/5/17: UTIL explodes +1.7% higher last week to 732.63. Traders are buying utilities with both hands. Comically, the major indexes are printing new all-time record highs with utilities at record highs.

WTIC West Texas Intermediate Crude Oil Daily Chart; Death Cross

Oil prints a death cross with the 50-day MA stabbing down through the 200-day MA forecasting lower prices for oil ahead. Typically, however, price will tend to bounce when a death cross occurs (since a long trend lower already occurs to push the 50-day MA under the 200) but prices will be lower in the weeks and months ahead if the death cross remains in play.

The death cross occurs by only 2 measly cents. The 50-day MA is 49.60 and the 200 is at 49.62. Note how the two moving averages have been hugging each other for the last week or two waiting to see which way the 50-day will move. Oil bears will be happy as long as the 50 remains below the 100. Oil bulls will celebrate if the 50 starts running higher above the 200 again which will nullify the death cross. 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 Monday Morning, 6/5/17: WTIC oil finishes last week at 47.66 and is at 47.63 to begin the new week.

Gold Daily Chart; Golden Cross

Gold prints a golden cross with the 50-day MA moving up through the 200-day MA forecasting higher prices for gold ahead. Typically, however, price will tend to retreat when a golden cross occurs (since a long rally already occurs to push the 50-day MA  higher) but prices will be higher in the weeks and months ahead if the golden cross remains in play.

The death cross occurred in November with the 50 stabbing down through the 200 forecasting trouble ahead. Price continued dropping for another month. Typically, you would expect a bounce as the death cross occurred but price simply kept on cratering. Gold price remained under the early November highs since the death cross was in play; until now. The golden cross is taking over.

Gold bulls will be happy as long as the 50 remains above the 100. Gold bears need the 50-day MA to roll over to the downside which means price would need to drop under the 1255 level and heading lower. 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 Monday Morning, 6/5/17: Gold oil finishes last week at 1280 and is at 1281 to begin the new week.

Tuesday, May 23, 2017

HYG High-Yield Corporate Bond ETF Weekly Chart; Overbot; Rising Wedge; Negative Divergence; Price Over Extended; Upper Band Violation

The high-yield bond ETF's such as HYG and JNK are at record levels. The party is in full swing with bankers in custom-tailored Armani suits drunk as skunks swinging from chandeliers and dancing on the conference room table while donning lampshades on their big heads. Investors are euphoric and optimistic about higher prices ahead. The boat is fully loaded to one side.

That rising red wedge is ominous. The collapses from rising wedges can be quite dramatic. If you are in these or similar instruments start leaving via the back door do not stick around anymore. Stochastics and the RSI are overbot open to seeing some downside ahead. The red lines show negative divergence with all indicators as price prints new highs. This is the same on the daily and 2-hour chart and the HYG and JNK charts are interchangeable. Neggie d forecasts a spankdown for price coming at anytime.

Price is over extended to the upside well above the moving averages needing a mean reversion lower. Price has violated the upper standard deviation band (pink) so a move back to the middle band, now at 86.88 and rising, is on the table, as well as the lower band at 85.25 and rising.

Keystone does not hold a position as yet but will be shorting HYG and/or JNK or similar instruments starting 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 Monday Morning, 6/5/17: HYG gains +0.4% last week to 88.58. The upside party in HYG continues.

Keybot the Quant Turns Bullish

Keystone's trading algo, Keybot the Quant, flips back to the bull side on Monday at SPX 2390. Watch JJC 29.47 and XLF 23.55 to gauge broad market stock direction. The sideways choppy markets for the last three months keep chewing up bulls and bears alike. Keybot may whipsaw back to the short side at anytime considering these unstable markets. As always, more information is available on Keybot's site;

Keybot the Quant

Monday, May 22, 2017

INDU Dow Jones Industrials and TRAN Dow Jones Transports Daily Charts; Dow Theory; H&S

From a Dow Theory perspective, the trannies are printing lower lows and lower highs (red dots). If the Dow Industrials confirm this negative trend, it forecasts troubled times for the stock market ahead. If the Dow continues sideways and sideways higher and TRAN moves above 9300 the upside bull market party will continue.

If the Dow Industrials drop under 20404, that would be a lower low (red dots) and confirm the downtrend in the trannies as per Dow Theory. At that point, the stock market would be expected to roll over to the downside. TRAN exhibits a H&S pattern with head at 9600-ish, and neckline at 8875, so the downside target is 8150 if 8875 fails. The upper sideways channel behavior started later with INDU after February so its downside target is 19638 if 20404 fails. 

Note how INDU was making lower lows in 2016 going into the presidential election. The trannies were trending higher but in an ominous rising wedge pattern. Since the Dow was not confirming the strength in TRAN, the expectation would be for both the industrials and transports to drop like a stone, but alas, President Trump wins the election and everyone touts easier banking regulations, lower taxes and huge infrastructure spending ahead so it was immediate party time.

Stocks leap higher from November forward both indexes printing higher highs confirming more stock market upside (green dots), until the trannies collapse in March. Watch the 20404 level on the Dow very closely. Ditto the 8875 level on TRAN. These are bearish levels where bad things will happen to markets if they fail. 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 18, 2017

Keybot the Quant Turns Bearish

Keystone's proprietary algorithm, Keybot the Quant, flips to the short side on Wednesday at SPX 2376. For Thursday (today), watch RTH 80.15 as an important bull-bear line in the sand. As always, more information is available at Keybot's site;

Keybot the Quant

Tuesday, May 16, 2017

UPS United Parcel Service Weekly Chart with 20/50 MA Cross; Negative Market Signal

One of Keystone's key intermediate term stock market signals is the 20 and 50-week MA cross for UPS. UPS and FDX are shipping giants that serve as global bellwethers for the stock market. When times are booming, parts, contracts and packages are flying back and forth via United Parcel Service generating big profits for the shipper. When consumers spend money, nowadays it is Amazon that benefits, and those products are shipped by the men and ladies in brown short pants. Robust activity at UPS verifies a healthy and strong economy; or visa versa if UPS falters.

The 20-week MA crosses down through the 50-week MA for UPS a negative market signal. This portends weak stock markets and a weak economy going forward.

Note the soft period in 2015 but the cross would not stay negative. That told you that the stock market would recover after the early 2016 selloff, and it did. UPS rallied big last year as everyone believes the global economy is reinflating and accelerating. The 20/50 cross remains positive signaling party times ahead for bulls. Until now. The punch bowl appears to have gone dry and people are passed out on the couch and floor. 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, May 9, 2017

SPXA150R S&P 500 Stocks Above 150-Day MA and SPX S&P 500 Weekly Charts

The SPXA150R is one of Keystone's favorite indicators. When it moves above 85 and 90, you can bet the farm on the short side. When the price drops below 20%, you can typically bet the farm on the long side. After over eight years of central banker intervention goosing markets higher, the SPXA150R obviously remains at elevated levels currently at 72.60.

When stocks bottomed during the financial crisis, note how the SPX price made a new low in early 2009, as Federal Reserve Chairman Bernanke contemplated a quantitative easing policy that would prevent stocks from dropping further (spitting in the face of capitalism and free markets), the SPXA150R made a higher low. This divergence identified the bottom in the stock market in 2009 and the central banker money printing, now on a global basis, continues pumping equities higher over eight years later. The central bankers are the market.

For this year, the SPX makes a higher high in price as the SPXA150R makes a lower high. Is this divergence identifying the multi-year top? (it is likely very near over the coming weeks and months)

If you are a retail investor new to stock trading and are patting yourself on the back at your great gains on the long side, in fact, you are thinking that you may be one of the best investors of all time, you had better get a reality check. These are not your grandfather's markets. The likely smartest approach going forward is to cash out of all your longs and simply remain in cash through the summer. Enjoy the nice weather. Take a trip to the beach. Look at things again in the late summer and Fall. Going forward it is likely more prudent to steadily and slowly bring on shorts against the indexes.

Pundits will cite great data and a calming geopolitical scene as reasons to buy the long side. Of course these money managers and analysts are pumping and hyping stocks because they are distributing shares to the retail sucka's now showing up to buy (pump and dump). In reality, the economic data remains soft and wage inflation is not occurring thus overall inflation will not occur shooting the Fed's plans for ongoing rate hikes in the foot. Most importantly, a recession will hit at anytime and you will see the economy and markets drastically deteriorate in a matter of weeks and a few months once it begins.

The stock repurchase programs are a virus that has entered markets. The buybacks take advantage of the Fed's easy money, and company cash reserves, to buy back stock (which is not the best idea with prices at record highs). This behavior has artificially boosted stock prices by at least +30% and more. The PE ratio, generally around 18 and 19 for the broad stock market is deceivingly low because of the buybacks. If none of the buybacks had occurred over the last few years, the PE ratio would be well beyond 20 (small caps have been above 20 for the last three years).

Looked at another way, the earnings at, say 130/share right now would be at least -30% lower or more. A 130 earnings and 18.5 PE gets you SPX 2400 right where we are at with the broad stock market. Earnings are only boosted because shares are disappearing from the buybacks. If the buybacks never occurred, earnings may be around 90 or 100 which would equate to 1765-1850 on the SPX. This will get everyone's attention when it likely occurs at some point over the next couple years. When everyone looks back a couple or more years from now, they will say how could we miss the impact of massive stock repurchase programs that went on for years?

The 18-year secular cycle has been mentioned often by Keystone. This is a very reliable stock cycle. The stock market is in the secular bear cycle from 2000 to 2018 so the last couple years or so should play out negatively for stocks considering the recent years of upside joy. It is very common, actually expected, to see dramatic and strong countertrend cyclical rallies inside the secular bear such as 2003 to 2007 and 2009 to present. Also, remember, the markets are artificially goosed for the last eight years by the central bankers.

A secular bull 18-year cycle will run from 2018 through 2036 which makes sense since inflation and hyperinflation in the coming years will drive stock prices strongly higher, such as Dow 30K and SPX at 4 or 5K years down the road, however, the US dollar will be toilet paper so the gains will not equate to much purchasing power for the average citizen in the 2020's. This will be a new set of problems for a future day. Even though stocks will be strongly higher in the 2020's, it will not be much fun paying 10 bucks per gallon for gasoline, or 6 dollars for a loaf of bread or 10 dollars for a gallon of milk.

Back to the present, due to the obscene central banker Keynesian intervention for many years, the current 2000-2018 secular bear cycle may become right-translated and extend to 2019 even 2020. Time will tell. Those expecting inflation, the vast majority on Wall Street, will be disappointed as disinflation and deflation likely remains on the table for another one to perhaps four years. 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.

Sunday, May 7, 2017

BPSPX Bullish Percent Index Daily Chart

The BPSPX is on a market sell signal currently and the sideways action for the last six weeks shows an ongoing bull-bear fight. Markets reversed by six percentage-points in November (Trump election rally begins) to create a market buy signal. When price moved above the key 70% level that was a double-whammy buy signal for stocks. The BPSPX came down for a back kiss of the 70 level to begin the new year and bounced rewarding the bulls. Price then threatened to fail through the 70 again in February but bounced creating another bull party.

The key signals for the BPSPX are the six percentage-point reversals and the 70% level. As March began, the BPSPX was near 80 thus, a six percentage-point reversal is 74. Price fell through that level (note the sharp drop when it occurred since the computers were looking for the reversal) issuing the current market sell signal. The bears puffed their chests out and pushed price down to test the 70 level which would then create a double-whammy sell signal and all systems go for major market selling, but alas, the bulls bounce back and prevent the failure at 70.

The bulls and bears are battling in a sideways choppy market that chews up both sides. The bulls need a six percentage-point reversal higher, to push above 76, to receive the double-whammy buy signal and lots of upside ahead for the stock market. The bears need to push under 70 to receive the double-whammy sell signal and send the stock market strongly lower. Who will win? Watch the 76 and 70 levels and you will receive an answer on market direction ahead. Note the H&S (head and shoulders) pattern in the chart, now forming the right shoulder, which would target 60 if the 70 neck line fails (head is at 80). 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 Tuesday Morning, 5/9/17: The BPSPX drama continues with price at 71.40. Which side will win?

Note Added on 5/17/17: The BPSPX falls under the 70 level to 69.00 issuing a double-whammy market sell signal.

April Publication of the Daily Chronology of Global Markets and World Economics 2017-04 is Available from Amazon; COMPQ, NDX and RUT All-Time Highs; COMPQ (Nasdaq Composite) Tags 6,000; Bitcoin Record Highs; Germany’s DAX 12,500; India’s BSE Sensex 30,000; Paltry 98K Jobs Report; Bank Earnings GS Disappoints; North Korea Turmoil; Article 50 Begins Brexit Process; Macron Likely Next President of France

The April Publication of the Daily Chronology of Global Markets and WorldEconomics 2017-04 is available through Amazon. The epic market action continues with more all-time stock market highs in the major indexes. The one-half of the United States that own stocks are joyous day after day while the other half of the United States struggles through eight years of high unemployment and debt. The gap between rich and poor in America is the widest in five decades. The United States is experiencing a gilded age (created by the Federal Reserve and other global central bankers); a society of the have’s and the have not’s.

April Cover Highlights;

The chronology explains the activity in global stock, bond and currency markets to key geopolitical events, central banker monetary policies and economic data releases. If you are trying to make sense of the markets this is the resource for you. No other publication exists where the stock, bond and currency moves are detailed and explained as world events take place in real-time.

You can re-live the real-time price moves and excitement in markets for any past event including Brexit (2016-06 and 2016-07), the US election (2016-11), the drama behind the French election (2017-04), economic data releases, monthly jobs reports, Fed meetings, etc...

As always, all monthly publications of the Daily Chronology of GlobalMarkets and World Economics are available from the links in the margins of the K E Stone blog sites or simply searching on Amazon or Google. The monthly publication contains updated information not posted on the Keystone the Scribe web site as well as clarifications, edits and refinements to the ongoing daily blog text. The April publication includes the Friday, 5/5/17, jobs report action.

The May 2017-05 chronology is tentatively set for publishing by Amazon on Saturday, 6/3/17.

Friday, May 5, 2017

US Monthly Jobs Report 5/5/17 Explained Simply for the Non-Economist

(below is an excerpt from the Keystone the Scribe website that chronicles the daily market action and events)

The consensus expectation for the US Monthly Jobs Report is 185K jobs. Last month was the disappointing and paltry 98K jobs that cannot even keep up with new entries into the workforce. The unemployment rate is expected to bump higher to 4.6% versus the current 4.5%. Private Payrolls are expected to come in at 180K jobs versus the prior 89K jobs.

The Average Hourly Earnings are expected to rise +0.3% month-on-month versus the prior +0.2%. Year-on-year is expected to rise +2.7% in line with the prior +2.7%. The wage data is more important than the headline jobs number and unemployment rate since it dictates whether overall inflation will occur going forward, or not.

The dirty little secret the Fed will never mention in public is that wage growth of +4.0% to +4.5% year-on-year is needed to sustain an inflationary trend. Even if wages increase to +2.8%, +2.9% or even +3.0% they remain a ways away from +4.0% and higher. This is why Yellen has always maintained her dovishness and hesitancy with rate hikes. If wages do move above +3.0%, however, that may lead to an acceleration higher. Inflation will remain elusive if wages remain below +3.0% year-on-year.

The Federal Reserve’s grand eight-year Keynesian experiment will be proven a failure if inflation does not materialize. Fed Chair Yellen will be clicking her heels with joy if wages outperform to the upside but will cry and search for a shot of booze if wages disappoint. If wages are weak, inflation is not on the come, Treasury yields will not move higher and the Fed will delay future rate hikes. If wages meet or beat expectations, inflation is coming and the Fed will look like geniuses proceeding with their plans this year for at least two more rate hikes with a growing economy.

The Average Workweek is expected at 34.4 hours a tiny tick higher from the prior 34.3 hours. The Labor Participation Rate is at 63.0%. The revisions are important in this morning’s data especially any adjustment to last month’s low 98K jobs. Traders are fixated on the wage data.

With the jobs report imminent, US futures are flat. S&P flat. Dow -23. Nasdaq -1. Russell -1. VIX 10.46. WTIC 45.05. Brent 48.03. Natty 3.22. Gold 1231. Silver 16.37. Copper 2.5115.

DAX -0.3%. CAC +0.1%. FTSE -0.1%. MIB +0.5%. IBEX flat. PSI -0.3%.

Euro 1.0967. Euro/yen 123.32. Dollar/yen 112.45. Pound 1.2940. Euro/pound 0.8475. Mexican peso 19.0613. Canadian dollar 1.3766. Dollar/yuan 6.9022. Indian rupee 64.375. Aussie dollar 0.7387. USD 98.90.

Treasury yields are; 2-year 1.31%, 5-year 1.89%, 10-year 2.36%, 30-year 3.00%. The 2-10 spread is 105 bips.

At 8:30 AM EST (1:30 PM London; 2:30 PM Frankfurt and Paris; 9:30 PM Tokyo), the US Monthly Jobs Report is 211K jobs and an unemployment rate of 4.4%. Both headline numbers beat their respective 185K and 4.6% forecasts. The prior month is revised lower from 98K to 79K jobs. Ouch. The previous two months are revised lower for a net 6K job loss. Jobs are averaging 185K per month this year. Private Payrolls increase by 194K jobs beating the 180K expected and above the prior revised-lower 77K jobs (prior number was 89K).

The unemployment rate is at 4.4% a decade low. If the economy was going like gangbusters, an economic phenomena should be occurring where the unemployment rate temporarily climbs instead of falling. When the economy is recovering and doing well, people become excited and start to actively look for work again. These folks coming back into the labor market are then once-again counted in the unemployment rate statistic which will send the rate temporarily higher.

The bump higher in the unemployment rate is typically a temporary phenomena that occurs as an economic recovery begins and proceeds forward. The rate will then begin trending lower again after a few weeks or months to reflect the better economic conditions going forward. Thus, this morning’s data showing a further drop in the unemployment rate is more indicative of a stagnant economy with businesses holding on to bare bone staff levels hoping for more work to come in the door.

Leisure and hospitality gain 55K jobs. Healthcare adds 37K jobs. Business and professional services add 39K jobs. Government jobs increase by 17K. Manufacturing is up a small 6K jobs. Construction gains 5K jobs. Note that the higher paying manufacturing and construction jobs lag the lower paying burger-flipping, bed-making, sheet-washing, bathroom-cleaning and table-waiting jobs. “Do ya want some fries wit dat burger?” And of course the government bureaucracy grows.

The Average Hourly Earnings are in line at +0.3% month-on-month but are up +2.5% year-on-year falling short of the +2.7% expectation. Yellen pours a shot of whisky into her café latte. Wages are stagnant which means inflation will remain subdued. Interestingly, however, the joyous headline numbers are sending the Fed Funds futures higher and a June rate hike is being priced in and expected.

Yellen is in between a rock and a hard place because market participants expect a June rate hike and more on the way but in her heart of hearts she knows that inflation will not appear since there is no wage inflation. Yellen gulps down her spiked coffee and signals to Charlie Evans to bring her the bottle. The 2-year yield is at 1.32%.

The Labor Participation Rate drops a tick to 62.9% so President Trump will quickly sweep this statistic under the BLS rug (less, not more, people are participating in the workforce). The U-6 rate is at 8.6% at levels not seen since November 2007. Average Workweek is in line at 34.4 hours.

US futures react calmly. It is one of the more non-eventful jobs reports in recent months. S&P +2. Dow -4. Nasdaq +6. Russell +2. VIX 10.36.

WTIC 45.27. Brent 48.22. Natty 3.21. Gold 1230. Silver 16.37. Copper 2.515.

DAX -0.1%. CAC +0.3%. FTSE +0.1%.

Euro 1.0981. Euro/yen 123.46. Dollar/yen 112.41. Pound 1.2953. Euro/pound 0.8476. Mexican peso 19.00. Canadian dollar 1.3764. Dollar/yuan 6.9022. Indian rupee 64.375. Aussie dollar 0.7395. USD 98.73. The US dollar is lower and euro higher.

Treasury yields are; 2-year 1.32%, 5-year 1.88%, 10-year 2.35%, 30-year 2.99%. The 2-10 spread is 103 bips (flatter yield curve than before the jobs data).

At 9 AM, S&P +4. Dow +1. Nasdaq +11. Russell +5. VIX 10.21. DAX -0.1%. CAC +0.6%. FTSE +0.3%.

Treasury yields are; 2-year 1.32%, 5-year 1.90%, 10-year 2.36%, 30-year 3.00%. The 2-10 spread is 104 bips.

WTIC 45.39. Brent 48.35. Natty 3.22. Gold 1229. Silver 16.33. Copper 2.521.

Euro 1.0971. Dollar/yen 112.60. Pound 1.2941. Mexican peso 19.0159. Canadian loonie 1.3758. Aussie dollar 0.7401.

At 9:30 AM EST, US stocks begin trading flattish. The SPX gains 5 points to 2394. The Dow is down 10 points to 20941. The Nasdaq Composite begins up 16 points, +0.3%, to 6092 only 10 points from another new all-time high. VIX 10.20. Market bears do not have any hope with volatility so low. USD 98.79.

REV is not looking pretty crashing more than -20% after reporting earnings at the opening bell. Revlon will need a lot of makeup to cover the bruises from the beating. NFLX +0.666%. TSLA +0.8%. TTWO +0.6%. GIS is up +1% after spiking +5% higher on takeover rumors. VIAB +2%. OLED +18%. Universal Display rallies from 50 last Fall to 106 today.

DAX +0.1%. CAC +0.666%. FTSE +0.3%. MIB +1.1%. IBEX +0.5%. PSI +0.1%.

WTIC oil 45.58. Brent 48.53. Natty 3.23. Gold 1228. Silver 16.28. Copper 2.508.

Treasury yields are; 2-year 1.32%, 5-year 1.89%, 10-year 2.35%, 30-year 2.98%.

Utilities are higher. XLU +0.5%. Financials are marginally negative. Energy stocks are recovering from yesterday’s losses. XLE +0.5%. APA +1.8%. OXY +0.9%. SLB +0.2%. MUR +1.8%. RRC +0.6%. XOM +0.2%. XOP +1.7%. OIS +1.3%. Tech and chip stocks are flat reflecting the flat broad indexes.

The BDFC IPO, a fracking company, is postponed ‘due to market conditions’. The fracking IPO’s are not doing well this year. FRAC debuted a few months ago and has moved from 22 down to 12. There are a lot of sucka’s holding that bag.

At 10 AM, markets are finding their footing after a happy jobs report beating on the number of jobs and unemployment rate but falling short with wages. SPX 2391. INDU 20929. COMPQ 6077. RUT 13989. VIX 10.25.

At 10:37 AM, SPX 2390. INDU 20911. COMPQ 6068. RUT 1386. VIX 10.24. European indexes are floating higher. DAX +0.2%. CAC +0.4%. FTSE +0.4%.

(the Daily Chronology of Global Markets and World Economics continues at Keystone the Scribe's website)

VIX Volatility and SPX S&P 500 Monthly Charts; VIX at 10-Year Lows Reflecting Complacency in Markets

The VIX drops to 9.90 this week reflecting a complete lack of fear that the stock market can ever go down. Low volatility indicates rampant complacency. The green circles show the uber highs in stocks when volatility is uber low; the booze party rages on into the wee hours (when you sell the market). The red circles show the sadness and depression in stock prices when volatility spikes higher; there is blood in the streets and traders are jumping from windows (when you buy). What are you doing?

The Keybot the Quant algorithm identifies VIX 12.00 as the key bull-bear line in the sand. VIX is at 10.46 so the bulls are winning. If stocks selloff but VIX remains under 12, the bears got nothing and stocks will rally. If stocks sell off and the VIX moves above 12, there is lots more market selling on tap.

You can also watch the important 200-day MA now at 12.94. The stock market will be collapsing in earnest if VIX moves above 12.94. Market bulls can recover after a selling event if the VIX remains under 12.94 and begins dropping again to 12 and lower. There is no hope for bulls if the VIX moves above 12.94 since the selling will be extensive and ugly (until the VIX spikes to a high identifying a tradeable bottom like the red circles above). 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 11:55 AM EST: The VIX is at 10.15 with a LOD at 9.99, a 9-handle printing again! HOD is 10.52. Bears do not have any hope with volatility so low.

Note Added Tuesday Morning, 5/9/17: The VIX drops to 9.67 at a 24-year low not seen since 1993. The fearlessness and complacency is off the charts. Traders are drinking Fed wine and Trump champagne each day, drunk as skunks, buying stocks with reckless abandon and total disregard for price. The joyous stock market party continues. Traders high-five each other proclaiming that stocks will never go down ever again. Television pundits shout, "buy, buy, buy!"

COMPQ Nasdaq Composite Prints Above 6,000 at Record Highs; Major Indexes At or Near Record Highs

On Tuesday, 4/25/17, the Nasdaq Composite gaps up at the opening bell printing above 6,000 for the first time in history. Several more days of new all-time record highs follow through Tuesday, 5/2/17, two days ago. The all-time high in the COMPQ is 6102.72 on 5/2/17 and the all-time closing high is 6095.37 on 5/2/17.

The Nazzy 100 Index prints new all-time record highs in concert with the Nasdaq Composite since the high-flying tech stocks such as FB, AAPL, AMZN, NFLX, GOOGL, INTC and MSFT pump the indexes higher. The NDX all-time high is 5645.08 on 5/2/17 and the all-time closing high is 5644.07.

The small caps print new all-time highs in late April but are trending lower for the last six days after the top. The Russell 2000, RUT, all-time high is 1425.70 and all-time closing high is 1419.43 both printing on 4/26/17.

The S&P 500 and Dow Jones Industrials are near record highs but not yet able to move above. The SPX all-time high is 2400.98 and all-time closing high is 2395.96 both from 3/1/17. The INDU, or DJI, all-time high is 21169.11 and all-time closing high is 21115.55 both from 3/1/17.

Trannies remain uncooperative with TRAN, or DJT, the Dow Jones Transportation Index, at 9138 well below its all-time high at 9639 from 3/1/17. The NYA, NYSE Composite, is at 11535 trying to venture higher to its all-time high at 11687 from 3/1/17. It remains interesting that the flash spike high at 11688.45 on 12/27/16, that was swept under the rug by the exchanges and regulators, ended up printing as the NYA's record high at 11687 on 3/1/17 two months after the flash spike high occurred that was expunged from the record. What does that tell you about the rigged stock market?

Watch to see if COMPQ can move above 6103, NDX above 5645, RUT above 1426, SPX above 2401 and/or the Dow above 21169. Bulls win if any of the numbers are printed. Bears win if they make a stand and never allow higher numbers for these key indexesThis 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.