The Dow loses the 200-day MA at 15470; a very bearish indication and the first time this occurs since late 2012 over one year ago. The Dow is now down -7.4% off the market top at the start of the year. The stochastics and money flow are developing positive divergence so a recovery rally would be expected, however, the weak and bleak RSI, histogram and MACD line all want to see lower lows after any bounce occurs. The RSI sneaks into oversold territory now but money flow still has not. There is strong support for the Dow at 15150-ish.
Use the 200-day MA as a simple guide forward. Bears are happy campers if price stays below 15470. Bulls will stage a come back rally if they can regain the 200-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 11:05 AM: The Dow remains under the 200-day MA at 15474.12, now printing 15434.13, nullifying hopes for a recovery rally, so far.
Keystone's NYA 40-Week MA Cyclical Market Signal indicates that equities have fallen into a Cyclical Bear Market. Will this remain since the failure is only by 9 points? Time will tell.
For the cyclical time period, weeks and months, markets are bullish and in a cyclical bull market when the NYA is above the 40-week MA. Markets are in a cyclical bear when the NYA is below the 40-week MA. Note the long cyclical bull trend for the last year and one-half. The September-October 2012 selloff teased the 40-week MA, as well as the June 2013 market bottom, but the bulls held the line and the bears folded like a cheap suit, unable to create a sustainable downside failure.
The red lines show the rising wedge, overbot conditions and negative divergence that created the market top and smack down as forecasted here as the year ended. At the same time, 95% of the analysts and traders were telling people to invest in stocks. The spank down occurs as expected and the collapses out of rising wedges can be quite dramatic. Aunt Edna took her entire life savings and placed it in dividend, biotech, high-yield and small cap stocks at SPX 1850 just like the nice gentlemen said to do on television as the eggnog was flowing like water. Now she has lost -10% of her money and huddled around the wood stove for warmth, using junk mail to provide heat while eyeing the cat food.
The jury remains out but the bears struck a blow yesterday stabbing under the 40-week MA to create serious market bleeding. Will the bulls sew up the wound and mount a comeback relief rally, or, will the bears slash further wounds and create more bleeding if the NYA stays under the 40-week MA maintaining the new cyclical bear? Simply monitor this chart moving forward for the answer. Bulls must send the NYA back above 9750, otherwise, the beatings will continue indefinitely into the future. Many traders are lulled into complacency and drunk on the Fed and BOJ wine so a shift into a bear market pattern may be quite surprising for many. 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 11:03 AM: The bulls send the NYA back above the 40-week MA at 9751.45 maintaining the Cyclical Bull Market. The NYA is now printing 9784.34 about 30 points above the danger line. The attempt by the bears to push price under the 40-week and create a cyclical bear market yesterday fails. Bulls are staging a come back relief rally.
VIX jumped above 20 yesterday, check that, actually well above 21. Price exceeds the October market bottom but not the June market bottom that was identified by VIX 22. Thus, the 22 level has street cred moving forward. The June bottom occurred with the VIX topping and printing negative divergence (red lines for indicators). Note, however, the October market bottom occurs with the VIX more agreeable to seeing new highs with long and strong profiles for the indicators (green lines). The new VIX highs now occur and note the continued long and strong behavior of the indicators. The indicators are very overbot, however, so a move lower would be needed simply to provide the stock market some relief from the selling, a dead-cat bounce, at a minimum. The enthusiastic indicators hint that higher highs in volatility are likely required in the future.
As mentioned often, the VIX 200-day MA is an important short term market signal. The red circles show the market sell signals and the green circles show the market buy signals. Remember, volatility moves inversely to the markets. This is why it is also called the 'Fear Gauge'. A spike in volatility means a spike in fear and a stock market that is selling off. Volatility will likely plot a path higher through 2014 as the brown channel indicates. As long as the VIX remains above the 200-day MA at 14.49, the market beatings will continue. If the VIX drops under the 200-day MA at 14.49, the bulls have a strong relief rally underway. 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.
The put/call ratios have been highlighted extensively on the blog over the last couple months. The uber low numbers signaled a significant market top at hand and fortunately, all the loyal readership is fine since you already threw any long overboard that you are not willing to hold for a few years. Those that fought the put/call signal are now -10% lower. Your long shopping list should be ready to go, however, you may want to push that list aside and have an extra cup of coffee or tea instead.
The CPC prints a remarkable 0.80. After the stock market bludgeoning yesterday and the Nasdaq losing triple digits, the general sentiment remains relaxed and complacent. Most traders are simply deciding what level to reenter the markets and expect new highs in the future again. Typically, with such a dire negative day, the CPC should be at least above 1.00 if not above 1.10 and higher. The market bears salivate at such action since the majority of traders believe that the selloff is nothing to worry about. Typically, this behavior indicates there is much more market downside ahead until the panic and fear appears above 1.20.
Keep the long shopping list handy. Continue to research companies and fine tune your desired long play ideas. Wait until the CPC runs to 1.20 and higher before scaling in on the long side especially if you prefer to play the intermediate, multi-week and multi-month, time frame. 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.
Keystone's trading algo, Keybot the Quant, flips short this morning at SPX 1768 and the weak utilities and semiconductors are driving markets lower. Bulls need either UTIL 506.57 and/or SOX 523.89 to stop the market bleeding. Bears need NYA 9750 to create more market mayhem. One of these three parameters should flinch providing the market direction answer. If utes and semi's remain bearish, and the NYA remains bullish, equities will stagger sideways. As always, stay alert for a whipsaw but with semiconductors breaking down today, the bears are biting hard and creating extended market weakness. More information is found at Keybot's site;
Keybot the Quant
Note Added 3:40 PM: The NYA loses the 9750 level now printing 9746. "Houston, we have a problem." Equities are in serious trouble now. Watch the 40-week MA on the NYA, 9750.49. Bulls must move the NYA back above 9750 before the closing bell or the carnage will accelerate tomorrow. Bears must keep NYA under 9750 through the closing bell to continue the market mayhem and bloodbath tomorrow.
Note Added 3:44 PM: NYA 9756.39. The bulls realize the seriousness of this important level. Utilities collapse with UTIL at 501. The semiconductor chips crumble like potato chips with the SOX at 516 down -2.3% today.
Note Added 4:04 PM: The NYA collapses in the final two minutes closing at 9733. "Houston, we have a problem, and it just got significantly worse." The NYA 40-week MA is one of Keystone's Cyclical Market Signals. The NYA gained the 40-week MA in July 2012 and has signaled a cyclical bull market ever since, for 18 months, until a few minutes ago. This signal says equities are now in a cyclical bear market. Watch the NYA 9750 level like a hawk tomorrow since all hope is lost for bulls unless the NYA 9750 is regained pronto. If NYA remains under 9750, the bears will look like Mr. Niceguy today considering the carnage that is about to come.
The failures from rising wedges can be quite dramatic. On Friday, AMZN collapses -11% immediately plunging into a Correction Market (down more than -10%). Note how price fell out of the wedge six days ago, then bounced off the 50-day MA and horizontal support and H&S neck line at 383, back kissed the lower rail of the wedge, and collapsed. The H&S pattern shows a head at 410, neck line at 383, which targets 356. Bingo, price fell there in one fell swoop. The chart is weak. The weekly chart shows weak and bleak indicators pointing to lower lows as the weeks play out. Price is on an island above 345 so a potential island reversal is in play where price would drift lower to 345, then collapse down through the gap to print at 330 and lower to create the island reversal.
Note the strong volume, traders did not hesitate to throw Amazon overboard. Funny how these same traders told Ma and Pa Kettle in December that it has legs and it is a great stock. Someone had to be the sucka and hold the bag. If fortunate to ride this high-flyer for many months, take the money and move on to other opportunities. Price will likely want to fill the gap at 375-383 moving forward, back kissing the H&S neck line, however, it would be surprising to see AMZN regain 4 hundo this year. A steady sideways to sideways lower move for Amazon is most likely as the year plays out. Bezos' delivery drones are sputtering in the air and like Icarus, they fall back to earth as packages splash into the neighbors swimming pool. 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.
The dollar/yen is printing 101.75 falling through the 102 level about one hour ago. The Nikkei is puking another -300 points now at 14620-ish to begin the new week. The stronger yen, which sends the dollar/yen lower, sends the Nikkei and Japan and US stock markets lower. This is a reversal of the weaker yen during the Fall that sent Japan and US stock markets wildly higher into the end-of-year orgy. The thick purple lines show the -10% level now breached officially ushering in a stock market 'Correction' for the Nikkei. (A negative -10% market, index or stock move is considered a 'Correction' and a -20% move is considered a 'Bear Market'.)
The top was about 16300, now at 14620, so a drop of 1680 points in the last 4 weeks occurs. Funny how 95% of the pundits and analysts told Ma and Pa Kettle to place their entire life savings in the Nikkei, DXJ and other such vehicles as the year ended, only to see -10% disappear in a heartbeat. Ma an Pa now huddle around a Bunsen burner heating a can of beans for dinner.
The blue lines show an H&S pattern that targets 14100. The 200-day MA is 14400 which should be tested since price is now in the neighborhood. Back kisses will be needed to the 20 and 50-day MA's. The red lines show the rising wedge, negative divergence and overbot conditions that easily forecasted the spank down in price. In addition, note the text book bull flag during November and December (thin blue lines) that also signaled a top. Stochastics are oversold needing to see a price bounce. RSI is not yet oversold. MACD line remains weak and bleak. Price may explore the 200-day MA and then bounce to play around at the 14800 resistance and the top channel line at 15K. If this occurs, and the RSI does not reach oversold territory, price may want to come back down to the H&S target at 14100.
Moving forward, price may try to regain its composure and move through the sideways brown channel at 14750-15700 since this will serve to honor the back tests of the 20 and 50-day MA's. Overall, best guess, is that price will slowly recover as the 20 and 50-day MA's continue lower and price may move through the sideways 14100-15200 for the weeks and months ahead. Remember, stronger yen = lower dollar/yen = lower Japan and US stock markets. Weaker yen due to BOJ money printing = higher dollar/yen = higher Japan and US stock markets. Correction-wise, will the Nikkei lead world markets lower or is Japan a special case? 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.
The Super Bowl Indicator is always a fun and interesting signal to watch this time of year. The Super Bowl Stock Market Predictor is if an original NFC team wins, markets will be bullish for the year. If an original AFC team wins, the markets will print a bearish year. Statisticians estimate the correlation to be about 75% accurate so it is something fun to follow. The Denver Bronco's are the AFC entry this year and the Seattle Seahawks are the NFC entry. Thus, if you are a market bull, you are rooting for the Seahawks and if bearish the markets, you are rooting for the Bronco's. Comically, the two Denver wins in 1998 and 1999 resulted in two strong stock markets years rather than weaker years.
The indicator becomes very subjective and wishy-washy time to time since the football league restructured in 1970 and sometimes there are two original NFC teams in the big contest providing the market bulls a happy outcome no matter what. The original National Football League teams Cleveland Browns, Baltimore Colts and Pittsburgh Steelers joined the newly formed AFC when the leagues restructured. Wins by these teams favor a bullish stock market.
For last year's 2013 Super Bowl, the Baltimore Ravens, AFC but an original NFL team, and San Francisco 49er's (NFC) were both forecasting a bullish market for 2013 no matter what the outcome. Since Baltimore is in the present day AFC, and won, to choose sides, the AFC win pointed towards a bearish stock market for 2013. Instead, the broad indexes catapulted +30% higher last year. So much for the worth of the indicator although, as mentioned, the original intent and guidelines of the indicator (both are NFC teams) did correctly provide the nod to the bulls for 2013. This example describes the wishy-washy subjectiveness that sometimes occurs.
For this year's twist, Seattle actually flip-flopped back and forth from AFC to NFC for a few years before landing in the NFC so the case can be made that there are actually two AFC teams in the big game today which provides the bears the winning hand no matter what the outcome. To phrase it a different way, Denver is AFC and Seattle was a later expansion team so there is 'no original NFC team' in the game today so the market bulls cannot win. Isn't that an interesting twist? (The opposite of last year's set-up where both teams were NFC and the bears could not win.)
Other past comical occurrences with the Super Bowl Indicator include the New York Giants (NFC) win against the New England Pats (AFC) in the 2008 Superbowl. Do you remember what happened in 2008? Yes, an epic market crash, so always take this indicator with a healthy grain of salt. Other interesting years include Denver's (AFC) wins in 1998 and 1999 that predicted bear markets, but instead heralded continued bullish markets topping out the secular bull pattern and the 2000 St Louis Ram's (NFC) win against the Tennessee Titans (AFC) that predicted a bull market but instead ushered in the dotcom crash.
If the bulls receive the nod, the average market gain is 10% to 11% for the year. If the bears receive the nod, the markets lose an average of 4% to 5%. Interestingly, the Monday following the Super Bowl is typically a down market day about two-thirds of the time, probably because of thin markets due to traders staying home nursing hangovers.
For this year, 2014, to keep it very simple and bottom line the Super Bowl Indicator (ignoring the case that actually two AFC teams are playing), if the Denver Bronco's (AFC) win, the market bears will enjoy a down year for equities. If the Seattle Seahawks (NFC) win, the market bulls will run the broad indexes higher in 2014. Good luck to both teams today. Most importantly, the black and gold Pittsburgh Steeler dynasty remains in place with six Super Bowl wins, more Super Bowl wins than any other NFL team. When Keystone was asked which team would win today, he confidently replied, "the team with the most points."
Note Added 5:30 AM on 2/3/14: The Seattle Seahawks embarrass the Denver Bronco's crushing them 43-8 with Seattle claiming its first Super Bowl win. Congratulations. Seattle is an NFC team so the Super Bowl Indicator says the bulls will send the stock market about +10% higher by the end of the year. Interestingly, as discussed above, Seattle is not an original NFC team so there is no NFC team this year and the bears will send markets about -5% lower no matter who won. Thus, each side can claim victory with the indicator. This year's set up is the exact mirror image of 2013 where the AFC won pointing to a down market but both teams were original NFC so the bulls receive the nod no matter what, and of course last year's market was up. Thus, for 2014, does the indicator follow the pure-play rule that the NFC now points to a higher stock market for 2014, or, like last year, the indicator follows its intended roots, and since no original NFC team was in the game, then the bears automatically receive the nod for 2014? In other words, pull out the game coin and flip it. In 11 months we will know the answer.
The daily chronology of global markets and world economics is provided by Keystone the Scribe. The mosaic of global economic events blend together to provide the ongoing market zeitgeist. Keystone the Scribe's site is easily accessed from the link in the right margin at any time or the link below;
Keystone the Scribe
On the humorous and fun side, today is Groundhog Day in the States. Here in Keystone's neck of the woods, in southwestern Pennsylvania, Punxsutawney Phil, the world-famous weather-prognosticating groundhog, sees his shadow as day breaks, forecasting six more weeks of winter.
Market buy signals occur when the BPSPX reverses six percentage-points to the upside and when price moves above 70%. Conversely, market sell signals occur when price reverses six-percentage points and when the 70% level is lost. On Friday, the BPSPX lost the 70 level issuing a firm market sell signal based on both parameters. As long as price stays under 70, markets will continue selling off.
The 70 level was teased during the June bottom but quickly recovered back above to negate the sell signal. Watch the 70 level closely since the bulls will either launch an immediate up move from here to establish a recovery rally, or, markets will continue selling off moving forward. The 70 level tells you the answer. For now, the bears have the six percentage-point reversal sell signal and the sub 70 sell signal so they are cruising lower. Bulls need to push the BPSPX immediately above 70% or they got nothing and are in store for a sustainable and extended downside market move. 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.
