SPX Daily Chart Showing Negative Divergence Smackdowns

The SPX daily chart clearly shows this rolling top in progress with four negative divergence set-ups, each creating a spank down as would be expected. The teal negative divergence formed during Monday's trading, price is now at a higher high and all indicators are sloping down, this will create a spank down now and we will finally see if the bears have any kind of downside juice, or not. Note the lower volume participation as price heads higher and the volume candles show spots of distribution as larger volume sell days follow a few of the up days. The teal lines are set up for the market bears now; starting tomorrow they need to show what they got. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Keystone's Evening Nightcap 4/2/12

At the 10 AM pivot on the ISM data, the dollar weakened from that point on and copper, commodities, gold, silver and oil headed higher. Bullish traders love the weak dollar trade. Things are comical when markets now run higher without Chairman Bernanke saying 'accomodation'; the markets run higher simply because traders think that stimulus and quantitative easing will continue indefinitely. If not the Fed, surely a China triple R cut is perhaps coming at any time? The weak dollar, strong commodities, strong equities move is the standard quantitiative easing trade.

Tomorrow provides an interesting backdrop for this macro view since the FOMC Minutes will be released at 2 PM EST.  Traders expect the word 'accomodation' to show up many times in the minutes, over and over, perhaps an analyst will count them, The market reaction will be interesting if there is very little mention of  'accomodation' and in fact perhaps the Fed had discussed how concerned they are over markets continually reacting to stimulus news like a crack ho reacting to a lit pipe (broad indexes moving up purely on the easy money policies ongoing around the world instead of actual growth).  Perhaps the Fed contemplates the end to Operation Twist? Perhaps the Fed does not mention QE3 directly at all? Thus, 2 PM Tuesday is an obvious market pivot point.

Motor Vehicle Sales will hit during the morning, at various times, and markets will react to the numbers. Are folks out there buying new vehicles? Housing and vehicles are the two largest users of copper. Rubber will respond to vehicle numbers and is an important economic indicator.  Factory Orders are at 10 AM which will serve as a market pivot point.

CRB is above 312 and helps the market bulls while UTIL is below 463 helping market bears. The markets will sell off if CRB drops under 312 and the markets will rally if UTIL moves above 463. A strong dollar sends the CRB lower and a weak dollar sends the CRB higher. Also watch JJC 49 and SOX 426.50 as bull-bear lines in the sand. Interestingly, Keystone's SPXA150R Indicator remains under 90 at 89.58 despite the big market up day today.  Also the VIX was up with the market up strongly; the VIX should have dropped significantly for the rally.

For the SPX for Thursday, starting at 1419, the bulls need three points in the overnight futures to move back above the 1422 resistance it tested today, and an upside party will result.  The bears need to drive the SPX fourteen points lower to drop under 1405 to ignite strong selling, a difficult task but in the realm of possiblity.  A move thru 1406-1421 is sideways action. Bears want to see a strong dollar and CRB drop under 312, bulls want to see a weak dollar and UTIL move above 463. Interestingly, today, the SPX was within three points of filling the gap at 1425.

Keybot the Quant, Keystone's algorithm, remains short overnight into Tuesday.  If UTIL moves above 463, Keybot will likely flip back to the long side. CRB and UTIL will tell the tale tomorrow.

Keystone's Midday Market Action 4/2/12

The give and take with the positive China PMI but negative China HSBC PMI resolves with flat to down futures.  The Nasdaq is a hair lower than the S&P's so this provides the bears a tiny advantage.  The CRB is maintaining a 307 handle, well under the critical 312 level that Keystone's algo is tracking, so the broad markets will remain weak as long as the CRB stays sub 312. Watch copper, JJC, the 48.83 level.  The bulls have the JJC on their side now and there may be some slight buoyancy as the bell rings, but a move under 48.83 and the broad market selling should substantially increase.

The other sector to watch is utilities, UTIL. As long as UTIL stays under 463, this will foster increased negativity in the broad markets moving forward. Pay attention to UTIL during the first ten minutes of trading.  The SPX needs less than three points higher, to touch the 1411 handle, to set up an upside run, but the futures are currently not obliging.  The bears need to push down to 1401 to ignite strong market selling.  A move thru 1402-1410 is sideways action. The ISM at 10 AM will cause a market pivot point.  Watch the energy markets closely since they will react the most to the ISM.  The trading week is only four days this week due to the Good Friday holiday. Markets tend to be buoyant the two days in front of the three-day holiday weekends so if market bears want to make a move lower they will need to get things rolling early in the week.

Watch CRB 312, JJC 48.83 and UTIL 463 since these three muskateers will dictate broad market direction today. The dollar just turned positive which is bear-friendly, although it is flat for the most part. Euro printing lows of the session.

Note Added 4/2/12 at 10:20 AM:  UTIL remains under 463 although it keeps trying to recover today. Thus, utes have now moved into the bear camp with CRB and these two will create increased market negativity.  The broad indexes bounced and continue to recover today from the 10 AM data pivot point with the SPX touching 1411 so an immediate move to 1412 occurs, and perhaps more on tap. Next resistance is 1413 and 1414. As long as the CRB is under 312 and UTIL under 463, however, market bears are fine. JJC is printing 49.82 well above the 48.83 market danger level as traders boost copper trying to front run any coming quantitative easing move. Keep watching CRB 312 and UTIL 463.

Note Added 4/2/12 at 12:38 PM:  UTIL remains under 463 but it came up to place a HOD at 462.22. So the bulls are pushing hard to turn things around but the bears still control the utes. Likewise, the CRB remains under 312.  JJC, copper, is running higher today, so traders believe in the growth story. AAPL is up 15 bucks so say no more, Apple is the markets. SPX accelerated higher after it broke thru the 1411 level identified for today and took out the previous intraday high this year at 1419.15. SPX S/R is the gap fill at 1425, 1424, 1422, 1419.15 (intraday high this year), 1417, 1416.51 (intraday closing high), 1414, 1413, 1410. SPX HOD is 1420.82 so the 1422 R is the next key resistance. Keep watching CRB 312 and UTIL 463. This is high drama to start the week.

Note Added 4/2/12 at 2:53 PM:  UTIL remains under 463 but CRB pokes above 312, so the bulls pulled the CRB back into their camp.  AAPL is up over 16 bucks and causing tech to lead the broad markets. SPX testing the 1422 R right now, wild price movement, see if it punches thru 1422 R, or not.   UTIL is at 461, see if the bulls try to goose it into the close, they need the utes to cooperate and currently the utes remain in the bear camp.

SPX 30-Minute Chart Rising Wedge Overbot Negative Divergence Support and Resistance Levels 8 MA and 34 MA Crosses

Note the 8 MA and 34 MA crosses that indicate short-term bull and bear moves; currently the 8 MA is above the 34 MA which verifies the market buoyancy last Friday although price is now dropping under the 8 MA which would curl the moving average back down. The red rising wedge from Friday resulted in late day weakness but it would not be surprising to see price come up to test 1410-1411 again to set up the negative divergence, and downside, more firmly. Continue monitoring the 8 MA and 34 MA crosses. The blue lines show the critical S/R for the SPX at 1419, 1417, 1414, 1413, 1410, 1408, 1406, 1403, 1401, 1399, 1394, 1391 and 1389. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

SPX Daily Chart Rising Wedge Overbot Negative Divergence Channel Potential H&S

SPX daily chart shows a rolling top continuing to play out. The money flow has been negatively diverged for over two months. The thin black lines show the rising wedge nature of the price action which is bearish. RSI and stochastics are coming off their overbot levels. The red lines show hte last price move higher which results in universal negative divergence across all indicators creating the pull back from Tuesday thru Thursday last week. The neon green lines sloping downwards show that they want to see lower prices for the SPX moving forward.

The neon blue lines show a potential head and shoulders pattern setting up; a head at 1419 and 1390 neckline would target the 1350-ish area. The pink trend line is also important, it serves as a bottom rail for this upward channel in place the last four months. A failure of the pink trend line is bearish, ditto a failure of the 20-day MA, ditto the failure of the 1390 H&S neckline. Note how volume continues to trail away as price moves higher. Projection is lower prices moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

SPX Weekly Chart Overbot Negative Divergence

The red lines show negative divergence now in place for the weekly chart with the exception of the MACD line that would like to see another matching price high after a pull back. Negative divergence is also in place across the one-year time frame now which is bearish. The blue circles and line shows the QE2 (quantitative easing) launch and with Chairman Bernanke's verbal pumps let's simply call the blue line the Fed's QE. Note how it topped and ran out of gas a year ago. Last year as price started to slip away late summer again, the ECB released its LTRO1 and LTRO2 QE so call the teal line the ECB QE. The LTRO2 announcement a couple weeks ago does not have any juice, since it was announced that the LTRO2 would occur when LTRO1 was announced. When LTRO2 was announced, traders waited to hear about LTRO3 but all they heard were crickets so it appears a lot of the ECB juice is priced in. Projection is lower numbers moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

SPX Monthly Chart Secular Bull and Bear Markets Rising Wedge Overbot Negative Divergence

The SPX monthly chart with price crossing the 12 MA serves as one of Keystone's secular market indicators; you can see the moves from a secular bull to a bear and back again. The red circle shows the turmoil in summer 2010 when Chairman Bernanke had to step in to save the markets from collapse with QE2. Note the pink circles that are lower lows for the indicators that was never resolved, yet. Price will likely have to come back down to the early 2009 lows at some point over the next one to seven years. The 18-year cycle is the most reliable cycle and the secular bear would have began in 2000 so 2018 give or take is when the new 18-year bull should begin. Thus, price can come back down to test the lows at anytime before then.

The purple lines show a rising wedge, overbot conditions and negative divergence so the move up in markets is very long in the tooth and should roll over moving forward. It is also interesting to see the 10 MA under the 12 MA which is a bearish indication, in a strong up market the 10 MA should be above the 12 MA. Despite any upcoming selling that should occur, bulls will be fine unless they lose the 12 MA at 1293. Losing the 1293 level will indicate a move back into a secular bear, but this number sits over 100 handles lower. Projection is lower prices moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

European Bond Yield Summary 4/2/12

10-Year Yields:
Greece 20.96%
Portugal 11.62%
Hungary 9.06%
Spain 5.29%
Italy 5.06%
Belgium 3.38%
France 2.89%
Netherlands 2.35%
U.K. 2.26%
U.S. 2.22%
Germany 1.83%

Greece, Portugal and Hungary yields are up since Friday; Greece is headed over 21%, Portugal is headed towards 12% and Hungary now over 9%. The perceived safer haven countries U.S., U.K. and Germany also display yields higher than Friday.  The Eurozone PMI's are weaker indicating a contracting manufacturing sector in Europe. Even sturdy Germany says the manufacturing orders are falling. And this is the result after the LTRO1 and LTRO2 quantitative easing. The Euro area unemployment rate is 10.8%, highest in 14 years.  Germany is enjoying the lowest unemployment rate in 20 years but the other countries such as Spain and Italy are in trouble. A Germany bond offering is on tap shortly.

Japan Tankan Survey shows unenthusiastic manufacturing sentiment moving forward. The big story is the China PMI. This official number is a touch over 53 indicating a continuing expansion in the manufacturing sector, up five months in a row and now over 50 (the line between contraction and expansion) for four months.  China, however, has learned off the U.S. how to manipulate, fudge and massage data, so the numbers are suspect.  The HSBC PMI that follows after the official number, that is considered more reliable, shows contraction with a 48 handle and it has been trending down. The official China number gauges about 800 firms and is not seasonally adjusted. The HSBC is about 350 firms but incorporates smaller firms in its analysis. The Lunar New Year and March seasonality where higher PMI's should be expected is also in the mix.  The market reaction is difficult to forecast since the two China PMI's are diverging now, and also as manufacturing weakens, the liklihood for quantitative easing (triple R cuts) becomes more likely and that will pump copper, commodities and equities.  The cross currents continue since China says it wants to stay a prudent course, meaning that it is in no rush to announce another triple R cut. China markets are on holiday until Thursday. Europe is China's largest customer.

Keystone's April Seasonality

The largest gains in the stock market typically occur between November and April each year. We are now only four weeks away from "Sell in May and go away." With the broad indexes up 12% or more this year, who would blame traders for taking profits and running away before May? Tech and biotech sectors receive the largest gains in Q4 but they kept on running higher thru Q1 this year, thus, considering the softness that should be expected, along with the elevated prices, a pull back in these sectors would not be surprising.  The month of April typically sees gains of about 1.2% for the broad markets. April is typically the best month of the year for OTC (over-the-counter stocks).

The first couple days of a month tends to experience new money inflows which creates market buoyancy.  Markets are closed for the Good Friday holiday 4/6/12. Markets are typically bullish the two days in front of a three-day holiday weekend which would be Wednesday and Thursday, 4/4/12 and 4/5/12.  Markets are typically up on the Monday of OpEx week, 4/16/12, and up from Tuesday into Wednesday during OpEx week which is 4/17/12 into 4/18/12. The third week in April is typically the best week for stocks during Q2 (perhaps the market selling occurs due to tax deadline day of 4/15/12 with market buying occurring after tax day passes). Markets will typically move the opposite direction on 4/23/12 as compared to the direction on OpEx Friday. OpEx Friday tends to be an up day.  The FOMC two-day meeting is 4/24/12 and 4/25/12 including a press conference by Chairman Bernanke. The Fed has to announce the plan for Operation Twist since it expires in June. The Fed tries to avoid the political season so the next two meetings are very important for policy decisions whereas from July forward the Fed may be hesitant to act to avoid appearing political.

Homebuilders tend to be weak in April. Small caps typically do well in April-May. Tax refund checks tend to help consumer spending. Markets tend to move down in front of the tax deadline since fat checks to Uncle Sam must be written. The tax day of 4/15/12 is a Sunday so the due day extends to Monday, 4/16/12 this year, thus, the potential for market weakness exists for the first half of the month.  Beef tends to rally from the first of the year into mid-April so TSN and HRL are viewed as potential shorts. There is typically a large biotech conference during April so this may supply some additional go juice for the biotech sector, although, considering the large run-up the last few months, perhaps the conference may serve as a top marker.

On the esoteric side, markets are typically up moving into a full moon (4/6/12) and down into a new moon (4/21/12). Two Bradley turn dates occur during April; on Wednesday, 4/11/12, and then on Monday, 4/23/12, so watch for market turns to occur on or near these dates.

Keystone's Key Events and Market Movers Week of 4/2/12

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Keystone presents the following underlying market currents, sometimes subtle, sometimes turbulent, that move global markets in real time.  The key dates and times below typically correspond to market pivot points.

Key Dates and Times for the Week Ahead:

·         Monday, 4/2/12:  The European debt crisis drama continues; Greece, Portugal, Hungary, Spain and Italy all remain at risk. Spain violence and budget requires watching. Congress is not in session until 4/16/12, thus a market positive for next two weeks then market negative from 4/16/12 and on. China PMI to be sorted out by the copper and commodities markets. China says a slower approach to easing is ahead and the PMI was slightly stronger backing up this notion, but, the more trusted HSBC  number, although both are manipulated, drops lower and remains under the 50 level showing contraction which would hint at triple R cuts which would be a stimulus to the copper, commodities and equities markets. First day of the new quarter, Q2, watch to see if money flows into the markets helping with market buoancy, or not. Construction Spending 10 AM-useful employment gauge. ISM Mfg Index 10 AM-watch the energy markets. Fed’s Bullard speaks 10 AM. Fed’s Pianalto speaks 12:35 PM. Earnings: PBY, TLB.

·         Tuesday, 4/3/12: Motor Vehicle Sales. Factory Orders 10 AM. FOMC Minutes 2 PM.  Fed’s Williams speaks 4:05 PM.  Earnings: CMVT, MIND.

·         Wednesday, 4/4/12: ECB Rate Decision and Press Conference--no change in rates expected. Markets are typically buoyant the two days in front of a three-day holiday weekend, also typically buoyant in front of the full moon. Mortgage Purchase Applications 7 AM. Challenger Job Report 7:30 AM.  ADP Employment Report 8:15 AM-provides an early read on Friday’s jobs report. ISM Non-Mfg Index 10 AM. Oil Inventories 10:30 AM. Fed’s Williams speaks 11 AM. Earnings: GPN, MON, NWPX, RT.

·         Thursday, 4/5/12:  Chain Store Sales. Jobless Claims 8:30 AM. Natty Inventories 10:30 AM. Fed Balance Sheet and Money Supply 4:30 PM.  Earnings: KMX, STZ, EFSC, PIR, SCHN, WDFC.

·         Friday, 4/6/12: Full Moon. U.S. Markets are Closed in Observance of Good Friday. Monster Employment Index.  Jobs Report 8:30 AM. SIFMA (Securities Industry and Financial Markets Association) Closes Early 12 Noon.  Consumer Credit 3 PM. Earnings: BVX, CNET.

·         Wednesday, 4/11/12: Beige Book 2 PM.

·         Thursday, 4/12/12: PPI 8:30 AM.

·         Friday, 4/13/12:  CPI 8:30 AM. Consumer Sentiment 9:55 AM.