Thursday, July 27, 2017

SPX S&P 500 2-Hour Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended

Here is the S&P 500 2-hour chart to supplement yesterday's chart. The red lines highlight the neggie d and rising wedge that wanted a spankdown. Price did begin retreating and came down to barely kiss the middle band but then the FOMC announcement occurred at 2 PM EST on Wednesday, 7/26/17, creating stock market joy. The Fed is in no hurry to raise rates since they acknowledged the lack of inflation (reference Keystone's prior inflation-deflation article). Thus, easy money continues. The central bankers are the market.

The SPX continues printing new all-time record highs including today at 2482.76 the highest number ever for the S&P 500. Strike up the band. The jugglers and dancing girls are already entertaining the crowd as the bread and circus days rage on.

Price prints another higher high even though technically it did not have the juice to move higher. The lift can be directly attributed to the Fed and the US dollar index dropping which pumps commodities and commodity stocks higher which pumped the broad stock indexes higher.

With the higher high in price, the indicators remain negatively diverged. Keep an eye on the RSI trying to sneak to a new high. Overall the chart has reset since the FOMC announcement and remains neggie d wanting to see a pull back. Give it one more candlestick with that RSI to make sure the newly found Fed joy is all priced in.

The chart should spank price lower in this 2-hour time frame going forward as long as the RSI does not move any higher. The low put/calls have been forecasting a pull back for the stock market for the last week. Price violated the upper band so the SPX should print at the middle band at 2475 for starters and the lower band at 2465 is also on the table. The SPX may want to come down and explore that huge gap at 2460-2465. If price falls through the gap at 2465 to 2460 and lower, that would be an island reversal pattern.

It looks like the bears will have a turn at bat after a delay due to more central banker pumping. 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.

VIX Volatility 5-Minute and Daily Charts; Record Low 8.84; Record 10 Days Under 10


The VIX is at 9.40 on Thursday, 7/27/17. Yesterday, on Wednesday, 7/26/17, the VIX plummeted to 8.84 a minute before the FOMC rate decision at 2 PM EST. The VIX also closes under 10 for 10 consecutive days a new record that will last a lifetime. The VIX prints an 8-handle.

These are epic and historic times. Market history is being written each day but most people have a laissez-faire attitude. The non-stop upside in the stock market is taken for granted. The central bankers are the market maintaining their jackboots on the neck of volatility. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Wednesday, July 26, 2017

SPX S&P 500 2-Hour Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended

The SPX continues printing new all-time record highs including today at 2481.69 the highest number ever for the S&P 500. Strike up the band. Cue the dancing girls.

The rising wedge pattern is bearish. Stochastics are overbot agreeable to a pullback. The red lines show universal negative divergence across all indicators so the expectation is that the pull back for stocks begins now. It may be timed with the Fed statement at 2 PM EST. The only thing that could override the negative technical set-up is a positive news event so perhaps the FOMC may surprise markets creating more upside juice. If so, the chart will need a few candlesticks to price in that new joy.


But if the Fed announcement is uneventful, the chart should override and spank price lower. The low put/calls have been forecasting a pull back since last Friday. Price violated the upper band so the SPX should print at the middle band at 2473 for starters and the lower band at 2465 is also on the table. The SPX may want to come down and explore that huge gap at 2460-2465. If price falls through the gap at 2465 to 2460 and lower, that would be an island reversal pattern.


It looks like the bears will finally have a turn at bat after the bulls slap them around day after 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.

VIX Volatility Daily Chart; Epic Lows; Historic 9 Days Below 10; Pennies from an 8-Handle

The VIX is at 9.43 on 7/25/17. VIX LOD is 9.04 only 4 pennies from an 8-handle. These are epic and historic times. Market history is being written each day but most people have a laissez-faire attitude. The non-stop upside in the stock market is taken for granted. The central bankers are the market. The VIX has closed under 10 for nine consecutive days a record that will outlive everyone.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, July 25, 2017

WTIC Crude Oil and COT (Commitments of Futures Traders) Weekly Charts


The red circles identify the tops and the green circles the bottoms for oil over the last year. The COT bars are moving outwards hinting that a top is closer for oil price than a bottom. The COT data lags by a week or two. The downward-sloping channel is in play with lower lows and lower highs (white dots). Price may want to test the top rail that forms a confluence with the 20 and 50-week MA's at 47.86-49.07. WTIC oil price is 46.84 as this message is typed on Tuesday morning. 

The indicators are not providing any clues simply stumbling and bumbling sideways. Oil may want to poke around at the 47-49 level going forward. The US dollar index is due for a rebound, at the least a dead cat bounce, so that would occur in concert with oil pulling back. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note: The COT chart is from Cot Price Charts and annotated by Keystone.

Note Added 6:05 AM EST Wednesday Morning, 7/26/17: Oil jumps +3.5% higher yesterday with West Texas at 48.50. Price wasted no time popping up into the range described above. WTIC HOD is 48.66 testing the resistance from late May early June and is spanked down on the first try. The 50-week MA at 49.10 is resistance and the 20-week MA is support at 47.94. Oil bulls win above 49.10 while oil bears win under 47.94.

Monday, July 24, 2017

BSE Sensex India Daily Chart; New Record High at 32,246

India's BSE Sensex finishes today up 217 points, +0.7%, to 32246 a new record. The chart still needs updated for today's action. The negative divergence (red lines) is in play so price is in need for a pull back and rest. The middle band at 31505 is a downside target going forward in the near term but global traders are throwing money at India and this will likely keep the party going ahead. The tight standard deviation bands (pink arrows) are interesting squeezing out an initial move lower in price but once the lower band was violated price shot skyward and never looked back. It would be prudent to begin scaling out of India if you have enjoyed the nice rally. 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, July 23, 2017

USDJPY Dollar/Yen Daily Chart; Death Cross; Downward Sloping Channel

Last week after King Draghi sent the euro to the stratosphere above 1.16, the US dollar index drops like a rock to 93-95. The US dollar index is lower so the yen is higher and the dollar/yen currency pair moves lower. As the pair moves lower the 50-day MA stabs down through the 200-day MA creating a death cross (black circle).

The death cross forecasts lower numbers ahead as long as the death cross remains in play, however, right when the negative cross typically occurs, now, there is usually a counter trend bounce that occurs for price. The stochastics are agreeable to a bounce but the other indicators are weak and bleak wanting to see lower numbers for the USDJPY pair going forward after any bounce may occur in this daily time frame.


The purple downward-sloping purple channel is in play. Ditto the blue channel. Governor Kuroda pours a shot of sake into his cafe latte to ease the pain. Japan needs a weaker yen (higher dollar/yen currency pair) so its exporters and manufacturers can outperform and help the economy recover. A stronger yen will hurt Japan just as the stronger euro hurts Europe. 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.

XEU Euro Daily Chart; ECB Stealth-Tapered in April and No One Noticed

The euro has trended upwards since April from 1.06. The ECB lowered the monthly asset purchase QE program from 80 billion euros per month to 60 billion euros ($70 billion) in April (blue circle). President Draghi announced this move last December to prepare the markets and he was adamant that the reduction in QE did not constitute a taper. Draghi said that 60 to 80 billion euros was always a range so the monthly purchases simply moved to the bottom of the range and it is not a taper.

The euro trending higher from April and the European stock indexes flat to lower since April verify that the the reduction in QE purchases that began in April is perceived as a tapering of the ECB's quantitative easing program whether Draghi calls it that or not.


Everyone went wild when Draghi hinted last Thursday, 7/20/17, that the tapering of the QE program would begin to be discussed in the autumn. This creates that move from 1.14 to 1.16 and higher but the euro had already moved from 1.06 to 1.14 due to the QE purchases tapering from 80 billion euros to 60 billion euros per month in April. 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.

DAX Germany Weekly Chart; ECB Stealth-Tapered in April and No One Noticed

An interesting market event occurred in March-April that no one is talking about. At the end of last year, European Central Bank President Mario Draghi said he would lower the monthly asset purchase program, quantitative easing, to 60 billion euros from 80 billion euros per month in March-April. The European and global stock indexes were accustomed to the 80 billion euros per month QE program and a drop to 60 billion euros of monthly purchases is a taper.

However, Draghi pounded his fist on the table from December of last year into April of this year that the move to the lower part of the 60 to 80 billion euro QE range does not constitute a taper. At every ECB meeting through the meeting last week on Thursday, 7/20/17, Super Mario stands with his index finger pointed skyward proclaiming that there has been no discussion by members, zero, nada, zilch, over the tapering of QE. Last week, Draghi did hint that the discussion about tapering QE in the future would begin in the autumn which sent the euro catapulting higher above 1.16.

But back to the critical March-April time frame. Global investors have become Pavlov's dog since the central bankers are the market. Traders are trained to buy stocks as long as the easy money flows like water. Draghi forced his will onto traders that had accepted the line from the ECB since last December that the move from 80 billion euros to 60 billion euros ($70 billion) in QE in April was not a taper. However, the chart above says it was a taper (blue circle).

The European charts are all the same. Once the ECB began its stealth tapering in April lowering its asset purchases (less easy money) to 60 billion euros per month, the major stock indexes are moving sideways with a downward bias ever since. Germany is the economic powerhouse across the pond. The DAX has petered out for the last month after the negative divergence spankdown (red lines).

The indicators are weak and bleak with lower lows so even if a bounce occurs in price in the weekly time frame, the DAX will likely want to come back down a gain for lower lows say one week out. Isn't it interesting that everyone is wondering when the ECB will taper when they already stealth-tapered the QE program starting in April. It is obvious that the central bankers are the market and as seen in the chart above, once the easy money slows, stocks stall.

The purple lines show a C&H pattern with a breakout line at 10750. The base of the cup is at 9000 which is a difference of 1750 so the upside target would be 12500 which was tagged satisfying the cup and handle. Humorously, those purple lines are very funky and suggestive and can serve as a Rorschach test that Sigmund Freud would cheer.

The top may be in for European stocks unless Draghi starts printing more easy money again. This will be difficult since he said the ECB will begin discuss tapering (purchasing less than 60 billion euros per month of assets) in the autumn. The chart says the ECB tapering has already begun as of April. The euro has trended upwards since April from 1.06 further verifying that the reduction in QE purchases that began in April is perceived as a tapering of the ECB's quantitative easing program whether Draghi calls it that or not. 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.

VIX Volatility and SPX S&P 500 Daily Charts; VIX Historic Low


Stock market history is written each day not only with new stock market highs but with historic multi-decade lows in volatility. VIX drops to 9.36. Traders are completely fearless. Investors drink Fed wine all day buying stocks without a care in the world. Each trader is congratulating the other at how smart they are as stock pickers. One trader puffs his chest out and brags that he is Jesse Livermore incarnate and says the stock market rally will continue for many more weeks and months. He takes another swig of wine.

Another trader exclaims that trading is the easiest thing to do in the world. He told his family that he will retire next year on all his ongoing never-ending profits. Joe, the local cab driver, took his entire life savings and bought blue chip stocks like the guy on television advised. Aunt Martha poured her whole life savings into utility stocks. Life is so simple and care free. The uber low historic readings in the VIX and low CPC and CPCE put/call ratios verify the off-the-charts complacency in markets. No one believes that stocks can ever go down again.

The red circles show stock market tops when complacency is in play. You can never time a market top using low VIX numbers since the VIX can remain complacent for a long time (too long for a short trade to play out). The green circles show stock market bottoms and they are easier to call using the VIX since they are short term events. The low CPC and CPCE put/call ratios are useful for calling tops like now with their low numbers although this is more for VST (very short term) trading.

When the VIX spikes higher especially above 35 you want to start nibbling on longs and getting ready to buy more longs the higher the VIX moves. The elevated VIX represents panic and fear in markets; you want to run into the fire as a trader not away from it. This is when traders are screaming at the computer screens and exclaiming pain and misery. Some traders run to the window and jump out unable to watch their stocks fall anymore; hopefully the window is on the first floor. Of course all this blood in the streets is when you want to go long the stock market, not now with the rampant complacency when everyone is at the party drunk as skunks buying stocks with total disregard for price. 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 Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended

The monthly charts will receive new data points in six trading days. The month of July ends on Monday, 7/31/17, and the bulls remain on track to print another happy upside month. July began at SPX 2423.41 so  you may want to jot this number on  sticky note and keep it next to the computer for the week ahead. Bears need 50 points of downside in 6 days to create a negative month for July.

Keystone has been posting this S&P 500 monthly chart monitoring the progress of the multi-year stock market top in play. Look at the bulls trying to squeeze out more juice with the RSI and MACD line. If the RSI moves higher than the peaks in 2013-2014, the stock market top will likely extend towards the end of this year and perhaps early next year. If the RSI and MACD remain neggie d (negative divergence; the indicator is sloping downwards as the price makes new highs sloping upward) the multi-year top is at hand say anytime over the next three months; this outcome is expected.

Remember, the central bankers are the market so if they decide to goose the stock market with more easy money that can further extend the upside joy. The May 2015 top was a textbook multi-month and/or multi-year top as Keystone forecasted and described back then, however, the central bankers are powerful and the un-Godly Keynesian goosing of equities occurred in early 2016 at that Tweezer Bottom (blue circle) by the central bankers that always save the day.

Keystone can update the chart with the July data point and the month of August underway perhaps next week some time if the US and international audience is supportive and would like to see the updated analysis.

The expectation is that a major multi-year stock market top is in progress of printing. It would not be surprising if the stock market top prints now through October and these prices are not seen again for several years. Plan accordingly.

The rising wedge pattern remains ominous ready to completely crush all bullish hope at some point forward. The collapses from rising wedges can be quite dramatic. Price is testing the upper trend line. The RSI and stochastics are overbot agreeable to a pull back in this monthly time frame (which means it can last several months and longer). The red lines for the indicators show the neggie d in play that wants to spank price lower. Price is extended above the moving averages requiring a mean reversion lower.

Price has tagged the upper standard deviation band over the last few months but has not yet shown respect to the middle band. The SPX should move lower to show respect and kiss the middle band at 2201, and rising, as time moves forward. The lower band at 1886 is also in play for the months and year or two ahead and is definitely on the table considering the ominous and dangerous rising wedge pattern. Watch your wallet.


If you are a  young person new to trading, do not get caught up in the television cheerleading and bull market hype. You are simply being fattened up for slaughter. Place and keep your money in cash despite the naysayers and television commentators calling you a fool. Relax and take a trip to the beach. In the months ahead you will deploy that cash at more reasonable valuations as everyone else is crying and moaning about all the money they lost. 

A disproportionate amount of the FAANG stocks are owned by investors under 30 years old. If you have enjoyed big profits in FB, AAPL, AMZN, NFLX and/or GOOGL, scale-out of those plays going forward and park the money in cash to keep your powder dry for the future. 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 Weekly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended

The SPX weekly chart is agreeable to downside ahead. The rising wedge pattern remains ominous hanging over the stock market like the sword of Damocles. The collapses from rising wedges can be quite dramatic. Price is testing the upper trend line. The RSI and stochastics are overbot agreeable to a pull back. The red lines for the indicators show the neggie d in play that wants to spank price lower. 

Price has tagged the upper standard deviation band at 2478 so a move back to the middle band at 2399 is on the table as well as the lower band at 2320. The lower number could easily print if price finally collapses from the ominous and dangerous rising wedge. If the rising wedge plays out as most do, a price drop to the 200-week down at 2060 would easily be on the table in the months ahead.

Note the pitiful volume last week. Stocks may be printing new highs but no one is excited about it. The long term buy and hold crowd are hanging on to their stocks and not selling but at the same time the buyers are thinning out. The expectation is for a topping out at anytime in this weekly time frame and then several weeks of lower prices ahead. August and September are typically seasonally weak months for the stock market. 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 Daily Chart; Upward-Sloping Channel; Overbot; Negative Divergence; Upper Band Violation; Price Extended

The S&P 500 daily chart shows the upward-sloping channel in play with price bumping its head against the upper rail. The red lines show the negative divergence in play that wants to see a spankdown. The short green lines show some VST juice that may create another jog move (up one day then down) but the overall neggie d should create weakness going forward. The stoch's are overbot agreeable to a pull back.

Price has violated the upper standard deviation band so a move back to the middle band at 2441 is in play and even the lower band at 2403. Price is extended above the moving averages needing a mean reversion lower. Note the distribution taking place (brown circles) as price moves higher one day, the institutions are selling out of long positions the next day, taking advantage of the happy mood, creating larger selling volume. The smart money is passing off shares to Joe Sixpack, the sucka, that is caught up in the television hype and buying the shares the institutions are unloading. Every top needs a sucka.

The low CPC and CPCE put/calls say a near-term top is at hand; this jives with the chart above that is agreeable to downside ahead in the daily time frame. The bulls can extend the upside stock market joy a few more days if they can keep that MACD line moving higher. The expectation is for the SPX to roll over in the days ahead. Perhaps the NYMO, McClellan Oscillator, will finally move lower into deep negative numbers that have not been seen for months.

The historic low VIX and low put/call ratios verify the rampant complacency in the market right now. No one cares if stocks sell off since they will buy the dip. If stocks sell off a lot, all the better, because everyone knows the Federal Reserve will step in and save the stock market as it has every time since March 2009. The central bankers have created a sick world.

The new moon peaked yesterday and stocks are typically weak through the new moon, however, stocks are usually bullish into the FOMC meeting which is Tuesday-Wednesday. Stocks have rallied strongly in July so typically prices would be expected to be soft to finish the month. The EOM is Monday, 7/31/17, so there are six trading days remaining in July with the bulls on track for another winning month. 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, July 21, 2017

$CPCE $CPC Put/Call Ratios and SPX S&P 500 Daily Charts; Near-Term Top At Hand



The CPCE and CPC put/call ratios remain complacent. The stock market (SPX) takes a little jog the last few days up down up and today down. Everyone is drunk as skunks off Fed wine, BOJ sake and ECB champagne expecting never-ending stock market highs. The low put/calls verify the rampant complacency consistent with market tops.

The bears have been screwed over the last few months with rarely a 0.80 or higher signal in the CPCE occurring or a 1.20 or higher signal in the CPC occurring which identifies a very attractive tradeable stock market bottom. With the rampant complacency and the SPX weekly chart showing neggie d, you do not want to be long right now. A near-term pull back is at hand it is simply a matter of how much the SPX will drop.


If you have been contemplating exiting longs concerned about a pull back today would be a good day to exit as well as early 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.

Wednesday, July 19, 2017

TNX 10-Year Treasury Note Yield Daily and Weekly Charts; Death Cross; Downward-Sloping Channel


The moving averages are playing a key role with the direction in the 10-year Treasury yield. The TNX fell through the 100-day MA at 2.32% and then made a beeline for the confluence of the 20, 50 and 200-day MA's. A death cross occurs with the 50-day crossing down through the 200 (black circle). The blue lines show the downward-sloping channel in play.

The bracket formed by the 20-week MA at 2.31% and 50-week MA at 2.18% is key. These two moving averages are converging so yield is going to have to make a decision and that will likely set the path forward for the TNX. Yield gapped above the 100-week MA at 2.05% when President Trump was elected in early November. Yield never came back down to back kiss the 100-week as yet and it should show respect to the 100 at some point forward.


Use the MA's as a guide going forward;

100-day MA 2.32%; inflation is increasing and higher yields are coming
20-week MA 2.31%.
200-day MA 2.27%
20-day MA 2.27%
Yield is at 2.27% as this message is typed
50-day MA 2.26%
200-week MA 2.23%
50-week MA 2.18%
100-week MA 2.05%; deflation sends the US into a tailspin

Treasury note and bond bulls (higher note prices lower yields) will cheer if yield slips under the 50-day at 2.26% since a move to the 200-week at 2.23% will be on tap. If 2.23% fails, yield will next test 2.18%. If that fails, 2.05% is the next support. If the 2.05% level fails, serious trouble begins for the US economy and markets since the country will be falling into a deflationary spiral that the vast majority of Wall Street says will not occur.


Treasury note and bond bears (lower prices higher yields) will cheer if yield punches back up through that gauntlet at 2.27%. Yield will immediately run up to 2.31%. If yield moves above that 2.31%-2.32% resistance, yield will run far higher and the inflation proponents will throw a party. 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 7:26 AM EST: The 10-year yield bumped higher to 2.28% but is spanked back down to 2.27%. Yield is chomping away at that formidable resistance at 2.27% trying to break out higher. Yield may dance in that 2.27%-2.31% range today.

Note Added on Sunday, 7/23/17: The 10-year yield tried to break out above that 2.27% gauntlet late last week but was spanked lower. Yield then fell through the 50-day MA at 2.26% and sits exactly at the 2.23% support (the 200-week MA) this weekend. Yield will bounce or die from this level on Monday. A failure sends yield to 2.18% while a bounce will send yield back up to test the 2.27% gauntlet.

Monday, July 17, 2017

NYMO McClellan Oscillator Daily Chart

The McClellan Oscillator remains elevated refusing to print under -30 for the last four months. The NYMO comes up to tag the upper standard deviation band. Price respects the bands moving from the lower band to the upper band and then back to the lower band and so on so a move to the lower band would be expected over the coming days say during the next week or two.

The elevated NYMO is indicating a stock market top is likely at hand. Stocks are not attractive on the long side until the NYMO prints in the green box. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

USD US Dollar Index Daily Chart; Oversold; Falling Wedge; Positive Divergence; Lower Band Violation; Price Extended to Downside

The number of shorts against the US dollar index is at a three-year high. The boat is fully loaded to the downside with the Wall Street pundits expecting a further drop in the dollar. You know what happens when the consensus moves in one direction, yes, the stock or index tends to do the opposite that is expected.

The USD is set up for a nice bounce in the daily time frame. RSI and stochastics are at oversold levels agreeable to a bounce. The falling wedge pattern is bullish. The indicators are universally positively diverged against the falling price (green lines) wanting to see a nice bounce in price occur. The USD has violated the lower standard deviation band so the middle band at 96.16 is on the table as an initial upside target. Price is extended below the moving averages and requires a mean reversion higher. All of these indications are bullish. Considering the strong number of shorts, once price begins to elevate it may shoot higher like a rocket as the shorts panic and cover. A higher dollar will likely boost emerging market stocks and small caps.


So the dollar bulls are likely winners in the short term in the daily time frame, however, the weekly chart remains weak. The stoch's are oversold on the weekly chart and agreeable to the bounce which will likely occur on the daily time frame as described. The RSI is not yet oversold on the weekly chart and the MACD line remains weak and bleak wanting to see lower lows in the dollar after the short term bounce occurs. 93 is a key support level. The USD monthly chart is favoring sideways movement with a slight downward bias.


Thus, the dollar is expected to bounce in the daily time frame, say it moves higher to the 96-97 level over the coming days or week or two but then price will likely roll back over again in the weekly time frame to come back down and test the lows in the 93-95 area say in early August. Keystone does not hold any positions in the dollar. 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 at 8:36 AM EST: The USD is printing at 95.14 receiving pressure from the dollar bears. What do you think will happen?


Note Added at 7:13 PM EST: The USD finishes the session at 94.90 with the dollar bears in control. Interestingly, the Russell 2000 small caps set a new all-time record so traders may be sniffing out a rise in the dollar.


Note Added on Tuesday Morning, 7/18/17, at 8:13 AM EST: Senate Leader McConnell cancels the proposed vote for the new Trumpcare healthcare bill called the Better Care Act. Two additional senators did not like the plan so it would not pass if put to vote. McConnell changes the strategy and will now seek a repeal vote for the Affordable Care Act (Obamacare). A repeal, if approved, will allow two years to come up with a replacement healthcare plan for the ACA. McConnell previously and unequivocally stated that he would not back a repeal bill. President Trump loses credibility since he bragged for the last year that the repeal and replacement of Obamacare would be easy and occur on day one of his presidency. Trump’s approval rating will slip lower in the polls. The republicans blew it by boasting for eight years that they had a great healthcare insurance bill ready to go that would replace Obamacare. That was a lie. They had no plan ready. Trump either blindly cheerleaded the new healthcare bill without ever understanding that there was no republican plan, or, he chose to lie about it to get elected. The president loses face. The demopublicans and republocrats are proficient at one task; lying. The US dollar index drops like a rock from 95.2 to 94.7 sending the euro currency basket higher. The euro moves above 1.15. The USD is down -8.2% from the top in early January. The Senate is not out of the woods since a repeal bill for the ACA may not have enough votes to pass. Obamacare may remain in place forever. The analysis above should hold but give the daily chart a day or two to price in this news.

Note Added on Wednesday Morning, 7/19/17, at 6:00 AM EST: The USD prints a low at 94.28 yesterday and is currently at 94.75. The ECB is on tap tomorrow morning. The euro moves inversely to the US dollar.

Sunday, July 16, 2017

CPCE Put/Call Ratio and SPX S&P 500 Daily Charts; Near-Term Top At Hand


The complacency is off the charts. Traders are drunk as skunks from Fed wine and ECB champagne buying stocks at the ask. Investors are smoking BOJ crack and buying stocks with total disregard for price. The VIX is at 9.51 basically the lowest number in its history which verifies rampant fearlessness. No one is concerned that the stock market will ever sell off again. Even if it does, the central bankers are the market and they will step in to save the day.

Aunt Agnes, usually a frugal soul, took her entire life savings to the broker in town and placed it all in the stock market. She says the stock market will go up forever. Moe, the local cab driver, says he also invested his entire life savings in stocks proclaiming that in a few years he will retire with all his profits. The low CPCE verifies the rampant complacency and lack of worry or fear.

The red circles show market tops when everyone is partying and complacent. The green circles show fear and panic, when there is blood in the streets. Note how the CPCE does a good job calling the near-term tops but the market bears continue to be screwed by the central bankers with stock market bottoms occurring at unimpressive levels in the 0.65-0.73 range. A notable stock market bottom typically occurs at 0.80 and above, that is when you can start buying stocks and going long.

So what are you going to do in the near-term? Ride the drop lower in equities or cash-out and move to the sidelines? The early June low pretty much nailed the market top to the day but the move lower did not amount to much. The low CPCE print in the middle of the month results in the trend of lower lows and lower highs for stocks into the bottom eight days ago.

The SPX prints an all-time record high at 2463.54 and all-time closing high at 2459.27 the highest numbers in the history of the stock market. Traders are singing "Happy Days Are Here Again" while dancing jigs of joy. What do you think will happen?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.

Saturday, July 15, 2017

The Keystone Speculator Inflation-Deflation Indicator Remains Mired in Deflation

The Keystone Speculator Inflation-Deflation Indicator remains mired in deflation. We live in special times. Typically, a deflationary quagmire would correspond to depressed and falling stock market prices but not in this age of obscene Keynesian money printing by the Federal Reserve and other major global central bankers. The power of the central bankers is astounding.

There is an ongoing battle between goods inflation/deflation and services inflation/deflation. Generally, the goods and services should track in relatively the same direction but something special has been occurring. The central bankers have destroyed price discovery over the years and global markets are twisted into knots; no one truly knows the correct price for anything anymore.

The chart above is weighted for the goods-oriented inflation/deflation since the CRB commodities index is used in the numerator of the ratio. The internet and computers are huge deflationary machines eliminating jobs and continuing to lower prices. Electronics and other products are cheaper each passing year. Corn and wheat crops are at bumper yields. The world is awash in oil maintaining a lid on fuel prices.

On the services side, however, prices are flat or in some cases rising. Those of you paying college tuition bills see prices rise each year. Heath insurance (ACA; Obamacare) and medical costs are out of control. Prescription drugs are expensive; many Americans over 50 years old take a palm-full of pills each day. Utility bills consistently sneak higher. Haircuts cost the same or more each year. Home prices continue rising which creates the vibe that inflation exists in the economy when in reality it does not. This gap between goods and services inflation/deflation is occurring around the world.

The expectation is that the US and the world will enter a recession at some point forward and the services inflation/deflation would be expected to roll over to the downside to join the goods deflation sitting in the basement. When the recession hits, people lose jobs, they do not spend money, prices drop. Customers begin delaying services that they routinely used before the recession. Once you lose your job, your whole life will change.

Inflation proponents need the chart above to start ramping higher to prove their thesis correct, however, that appears a tougher row to hoe. It is less likely that goods inflation will all of a sudden begin moving higher to join services rather than services dropping lower to join goods, especially with a recession on the come.

The US may remain mired in deflation for a couple more years but sure as night follows day and day night, inflation will arrive again. The last time that a notable whiff of inflation existed was back in early 2011 now six years in the rear view mirror. You will know inflation when it arrives since every day all day long, coworkers, family members and strangers will complain to each other about prices of everything including milk, gasoline, food, services, utility bills, etc....; this is not happening. After the chart moves higher in the months and years ahead, the velocity of money will kick in and the money sitting idle at banks will be put to work. A multiplier effect will accelerate business activity and inflation will leap higher and then the country will likely shoot up into hyperinflation say in the 2020-2025 time frame. That will be a different problem and a future bridge to cross. For now, deflation remains in charge.

Further discussion on inflation and deflation continues below.

Previous postings of the inflation-deflation indicator have extensive write-ups on inflation, deflation and the Fed’s shenanigans over the last nine years. Type ‘inflation’ or 'inflation-deflation' into the search box in the right hand margin to study prior articles.

Keystone’s Inflation-Deflation Indicator chart shows the markets and economy remaining mired in deflation. What is that you say!? Balderdash! Blasphemy! Wall Street proclaims, “Inflation is here! Inflation has arrived!” What is this nonsense talk about deflation?

The majority consensus on Wall Street continue to tout inflationary forces ahead. After all, the Fed is hiking rates. They have to cheer lead this line since they all are heavily invested in the banks hoping for a steeper yield curve. The Federal Reserve has called the current lack of inflation "transitory" although humorously, the so-called transitory disinflation/deflation is now running strong for four months into the fifth (from CPI data). Comically, in Chair Yellen's mind, when does transitory become a trend?

Inflation is Godot. Inflation has been pictured on a milk carton for the last few years (missing). Deflation rules the roost. The chart shows that more up in yields, and higher commodity prices, are needed for the indicator to move higher towards inflation.

Keystone's Inflation-Deflation Indicator remains in DEFLATION at 1.76The low point on the chart above was in December 2015 at 1.70 so we are teasing those lows. The 10-year yield back then was at 2.19% and currently at 2.33%. The CRB back then was at 170.70 and now at 176.28. The Keystone Speculator Inflation-Deflation Indicator remains mired in the deflation region.

The 10-year Treasury note price is used for the denominator of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 100.34 (100 11/32) with a yield at 2.33%. Commodities are in the numerator. The CRB Commodity Index is 176.28. Taking a look at the numbers;

CRB/10-Year Price = 176.28/100.34 = 1.76

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

Despite all the hoopla and trumpets blaring that inflation has arrived, the economy and markets instead remain mired in deflation. The main reason is the lack of wage growth. Inflation cannot exist without wage inflation (watch the Friday Monthly Jobs Report to see if any wage inflation occurs) and wage inflation is not occurring. Wage inflation is growing annually at about +2.5% a paltry amount. When is the last time you had a substantive raise?

The Federal Reserve needs to see the annual wage growth at +4.0% to +4.5% to be comfortable knowing that inflation has taken hold and will be sustainable going forward but this is a dirty little secret they will not discuss in public. Yellen would likely perform cartwheels in the hallway of the Eccles Building if wage growth at least breached the +3% level.

The United States remains in a deflationary funk since August 2014 about three solid years. Think back to the summer of 2008 if you want to relive the feeling of rising inflation. Rising prices were a common daily complaint at office water coolers, supermarkets and dentist offices back in 2008; not now. When inflation occurs, you will feel it and you will hear about it and you will be complaining about the huge costs for everything.

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

The world is awash in oil and the OPEC and non-OPEC nations are colluding to limit production to artificially drive prices higher. All that oil sloshing around is oversupply and deflationary. People are not complaining about food prices like 2-1/2 years ago during the bad crop year. Commodities remain subdued in price. A large increase in commodity buying and shipping is needed to prove that inflation is on the rise and that is not occurring. The BDI (Baltic Dry Index) remains subdued.

The retail bankruptcies and store closures increase. The US is grossly overstored by a factor of 3 to 1 compared to other Western nations. The retail carnage is disinflationary since racks of clothes and other products will be sold pennies on the dollar to liquidate inventories. A recession would exacerbate this activity.

There is no demand in this sick stagnant economy that is only pumped-up by fits and starts of central banker and/or government stimulus. Deflation is defined as consumers deciding to wait for the future to buy something since they believe it will be cheaper. This mindset continues.

Another subject no one is talking about is a recession that is long overdue. Economists and analysts were polled last December on the likelihood of a recession and the consensus was only for a 30% chance or less of a recession over the next year.  Canaccord strategist Tony Dwyer proclaims that a recession is two or three years away at the earliest. That is an optimistic bunch on Wall Street. What are they smoking? They should pass it around to everyone else.

A recession will usher in deflationary behavior and is likely coming far faster than anyone realizes. Treasury yields will fall as investors seek safety in notes and bonds (price up yields down). Keystone’s indicator then drops as the price in the denominator moves higher although the indicator probably does not have much further to drop. Likewise, demand for commodities decreases in a recession so the CRB index drops and a lower numerator in the indicator will send the number lower again, a 170-handle on the CRB is an extremely low and deflationary number already.

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

The GOOGL driverless vehicle technology already has trucks operating on the road in California and other states and auto manufacturers are pouring billions into this technology that will eliminate more jobs. Driverless vehicles will greatly impact to the trucking industry. Trucks could transport goods driverless allowing companies to drop-kick more workers across the parking lot. The pattern of 'more tech--less human's' will continue. Fast-food restaurants are introducing kiosks that eliminate more jobs. Automation is deflation.

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

Companies are meeting EPS (earnings-per-share) by laying off workers and squeezing more production out of existing workers (as evidenced by flat to lower top line revenues for companies across all sectors for the last couple years). Instead of creating jobs and buying equipment with the central banker easy money, companies use the dough for stock repurchase programs (buybacks) that artificially pump stock prices higher. Yes, they are greedy b*stards.

Watch Keystone's formula above; you can crunch the numbers to check the indicator every few weeks. It is shocking to see equity markets print new record highs against a disinflationary and deflationary back drop. It is unprecedented perhaps a 1930's redux. This behavior can only be chalked up to the amazing power of the central banker money-printing. The central bankers are the market. They are modern day money Gods in charge of the Temple. Kneel before their Power and Majesty.

The Brexit stock market crash in late June 2016 was stopped by the BOE promising easy money. The PBOC keeps pumping China’s economy and markets. The Fed had remained accommodative all year long keeping stocks elevated and will likely retreat from its gradual hiking path. The BOJ keeps implementing stimulus programs and defended the 0.10% level on the 10-year JGB last week by printing more money.

The ECB continues its QE program pumping more money into markets so the wealthy can become richer before the whole outhouse goes up in smoke. All-time highs are printing in global stock markets. The wealthy light expensive cigars and dab the ashes on the faces of the lower middle class.

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

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

Think back to the last period of rampant sustainable inflation in 2006-2008; you were likely enjoying happy raises at work, right? And probably not so much from 2009 to present? 

What does all the wind-bag mumbo-jumbo above say in a nutshell? The current answer to the ongoing inflation-deflation debate is DEFLATION as much as everyone tries to ignore it and say that inflation is here to stay. After 8-1/2 years of obscene Fed and other central banker money-printing, the United States economy remains mired in deflation proving that Bernanke's grand Keynesian experiment, blessed and implemented by Fed Chair Greenspan, and now controlled by Fed Chair Yellen, as well as dovish Fed members such as Evans, may be tragically failing.

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

Many analysts argue against the overall ongoing global deflation hypothesis saying the view on services inflation versus goods inflation must be explored in more detail. Services are experiencing some inflationary effects while goods are in a deflationary trend. The Trump enthusiasm is creating the bump in inflation over the last few months. The chart above hints that the deflationary funk will likely continue.


All of you inflation enthusiasts do not fear, however, inflation will arrive soon perhaps in the 2018-2020 time frame and then hyperinflation in 2020 and beyond. That will be a whole new set of problems, that is if we survive the last of the disinflation and deflationary environment over the next couple years.

Thursday, July 13, 2017

SPX:VIX Ratio and SPX S&P 500 Daily Charts


The SPX:VIX ratio is useful in identifying key stock market bottoms. This is because the ratio emphasizes large spikes in volatility which reflects panic and fear the best time to go long. The VIX is a useful signal when it spikes higher since it can identify a bottom in the stock market but is not as much use when it is low, like now at sub 10, since the VIX can remain low a long time and calling a market top can be more elusive. Use the low CPCE and CPC put/call ratios to help identify market tops.

Think back to your high school days and fractions. A ratio is a fraction. For the SPX:VIX ratio, it is a fraction of the S&P 500 price in the numerator (top number) divided by the VIX volatility number in the denominator (bottom number). When the S&P 500 rallies and price is moving higher and higher, like the last nine years, the SPX:VIX ratio will move higher. If the SPX moves lower, the ratio will move lower. If the VIX (volatility) moves higher (bearish for stocks), the SPX:VIX ratio will move lower and if the VIX moves lower (bullish for the stock market), the SPX:VIX ratio will move higher.

The SPX is at record highs and the VIX is at multi-decade uber lows. Therefore, the ratio should be at nosebleed stratospheric levels, which it is at 247. The green circles show the key bottoms in the stock market over the last year (timie to go long). Once the market starts to sell off and accelerate lower, the VIX is spiking vertically higher, traders are panicking throwing stocks overboard with reckless abandon, some investors screaming that the end is near, this sends the SPX:VIX ratio lower and that spike lower in the ratio identifies the stock market bottom. You always buy when there is blood in the streets. Therefore, you do not want to be long stocks right now. Keep your powder dry and be patient and do not start nibbling on the long side until the SPX:VIX ratio begins printing inside the  green box in the right margin. 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.