Wednesday, November 11, 2020

SPX S&P 500 Monthly Chart; Upward-Sloping Channel; SPX Prints All-Time Record High at 3646; Overbot; Rising Wedge; Negative Divergence Developing; Upper Band Violation; Price Extended; Loss of Trend; Significant Long-Term (Months and Years) Stock Market Top is Occurring



Wheeee! Whooopie! Wheeee! Everyday is a par-tay! Virus, schmirus. Election, schmection. Transfer of power, schmower. Economy, schemonomy. Investors and traders have been boiled slowly over the last 11 years, like the proverbial frog, so no one sees the trouble coming in the stock market. Traders are complacent and carefree universally believing that stocks will go up forever (a sign of a stock market top) on vaccine hype, fiscal (US government) stimulus and monetary (Federal Reserve; central banks) stimulus.

In fact, today there are more new analyst calls for SPX 3700, 3800, 4K and higher. GS analyst David Kostin says the S&P 500 will be at 3700 by year-end (only 35 trading days are remaining so the SPX would need to gain 4.4 points per day, every day, into the new year) and a 4300 target in 2021. Kostin is calling for SPX 4600 in 2022. JPM targets SPX 3600 by year-end and 4500-plus in 2021. What are these guys smoking? They should pass it around for everyone else to enjoy. No wonder they wear rose-colored glasses.

They may very well be correct, however, the SPX monthly chart tells the complete opposite story. The only thing that could save the stock market in the months, and likely couple-few years ahead, is more Federal Reserve and other global central bank money and fiscal stimulus from the government. The US is so far down the Primrose Lane of debt, however, the game will be exposed as a house of cards. Perhaps a currency crisis will kick things off a la the Asian Contagion?

The bulls expect the blue upward-sloping channel to go on forever. The central banks are the goose that laid the perpetual golden eggs. Stocks will always go up and never go down again. The central bankers are the market. Oh what a sad tangled web of future misery they have created. Price is at the top of the blue channel with the all-time record high, the highest number for the S&P 500 Index, the US stock market, at 3645.99 on 11/9/20; call it 3646. SPX 3646 is a historic number since it may be THE top. The all-time closing record high is 3580.84 on 9/2/20. The SPX is printing a triple-top right now on the daily chart so price will either bounce or die from here (peaks on 9/2/20, 10/12/20 and 11/9/20).

For the monthly chart above, the stochastics are overbot and the money flow and RSI are coming off overbot levels from a couple years of so, all agreeable to sogginess ahead. The red lines show the rising wedge patterns with price near the apex. The collapses from rising wedges can be quite dramatic. Price is extended above the moving average ribbon requiring a mean reversion lower. Just think, at some point in the future, price will correct to below the 200-mth MA at 1776, a great year. The 10-mth and 12-mth MA's are a super-critical level at 3155-3167 where the market could crash below.

Price has violated the upper gold band so the middle band, the 20-mth MA, at 3085 is on the table and the lower band at 2622. Remember, this is a monthly chart, so think long-term. The ADX is down at 18 and fading indicating that the bigtime rally higher this year is NOT a strong trend higher. The assumption can be made it is all fiscal and monetary stimulus pumping that creates the joy and it will lead to a hangover. Right now, the stock market is donning a lampshade and dancing a drunken jig on top of a folding table, and equities are about to slip on the shiny banquet paper. The pink boxes confirm that the rallies in 2014 and 2018 are strong trends higher but both petered out. Keystone often mentions how the last legitimate top in the stock market was May 2015 so do not be surprised to see price down in that 1800 to 2200 range a year or two out. Holy smokes. Keystone's target is one-half the target of the Wall Street bigwigs above. Which path are you going to bet on?

The neggie d was saved for last. It will tell you exactly when she tops out. The red lines are all negatively diverged against the rising price that just prints the epic all-time record high at 3646, except, the MACD. The MACD (mack-dee) is typically the last girl that wants to dance. Note how the MACD pokes a tiny hair higher than the previous highs; it is long and strong even if it is only fumes. This must be respected. If the MACD remains long and strong as of the final print for the month on Monday, 11/30/20, stocks will sell off for a month or so but price will come back up again for another matching or higher high. At that time, the MACD will go neggie d so the long-term top would be in, say, during the December-January time period, maybe February to hedge the bet.

But here is the twist and what requires close watching. The uber low CPCE put/call ratio guarantees a pullback in stocks it is only a matter of when the top occurs in the hours or days ahead (on a short-term basis). If equities tumble enough, that MACD line will drop. If, on 11/30/20, when the chart is cast in concrete, the MACD is below the prior highs and the red line is correct indicating negative divergence, it's over now, the top is in now.

If the MACD remains long and strong on the monthly basis, stocks will still sell off due to the low put/calls (uber complacency) in the daily time frame but come back up again probably to print exactly in the apex of that rising wedge during December-January. So the MACD tells the tale. The stock market is printing a significant long-term top currently in this period now through January. Plan accordingly.

The current prices you see in stocks may not be seen again for several years. Other major tops have been called by Keystone and have been subsequently papered over by the Fed and other central bankers so that would be expected again as well once the downside kicks in, however, the Fed is likely out of bullets at this stage. This is the end game. Stay away from stocks on the long side, otherwise you will regret the pain and agony you will feel over the coming months and year or two, maybe longer. As said several times over the last couple months, be on guard for a flash crash or overnight crash event; either is easily possible with this ongoing erratic price behavior. And the potential flash crash event may only be one-way; if it occurs, it likely will not print the recovery spike. 

Keystone does agree with the analysts on those high SPX targets for the future but those numbers are several more years ahead when the hyperinflation kicks in. At that time, however, the dollar will be toilet paper so the higher stock index numbers will not translate into spendable wealth. The SPX monthly chart says nothing but pain and misery ahead for a long time after we top out by year-end, or January, or, the 3646 top is already THE top (depends on the MACD as explained above). There's lots of fun ahead. The long-term stock market top is not in until that MACD goes neggie d. Watch it closely. 

Today is Veterans Day/Armistice Day/Remembrance Day, November 11th. This year is a unique date; 11112020. Hoorah for the vets and many thanks. Keystone's dad fought in the 39th Infantry Regiment, Company G, that landed in Europe in World War II and beat back the bastards. President Trump wishes he could turn back time to before the election, maybe Cher can cheer him up like she did for the sailors. 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.

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