Keybot the Quant Turns Bearish

The Keystone Speculator's proprietary trading robot, Keybot the Quant, flips back to the bear side yesterday at SPX 4024. The choppy stock market slop continues this year. The battle for market direction is between copper and the SPX.

Keybot the Quant

SPX S&P 500 2-Hour Chart; Negative Divergence Developing; Tweezer Top; Potential Island Reversal

Here is an update of the 2-hour chart. Remember, on Friday, the falling green wedge, positive divergence green lines and oversold stoch's forecast a move higher which occurs. Price took off higher once the greedy humans were afraid they were missing the boat on the long side.

Look at that juicy gap down at 3980-4000; it's big enough to drive a truck through it. That gap will be revisited in the future. So price rallies today helped by the full moon peaking for the month but a Tweezer Top forms.

The two candlesticks topping at 4080 display a matching or higher price high so the indicators can be assessed to see if they are set up with neggie d to call a top. The red lines show that the RSI, stochastics, histogram and money flow are all negatively diverged wanting to see a spankdown in price and thwack, it occurs in the afternoon.

Note the sneaky MACD, however, that remains long and strong (sloping higher; green line). There is upside fuel remaining in the MACD tank that wants price to make one more high before it will join the rest of the indicators in neggie d and call the top in the 2-hour time frame. Sometimes it is like herding kittens when looking for the turns.

The long and strong posture with the MACD wants price to come back up to 4070-4080 again and at that time it will likely go neggie d joining the other indicators and that will be the VST top.

Today was noise because Pope Powell speaks this week on Capitol Hill both on Tuesday and hump day. Tomorrow matters and then Powell will regurgitate that speech and comments on Wednesday. Global traders, as always, are waiting for Pope Powell to bring the tablets down from On High tomorrow and tell everyone how to trade. It is a sick crony capitalism system in its last throes but it is what it is. Markets are idling until Powell waves his staph and directs traders on what to do tomorrow.

Thus, price will likely come back up since the topside is not quite done yet. It is interesting where the Tweezer Top stopped the rally; right at the 4080 resistance and gap about 2 weeks ago (blue lines). This set-up puts a potential island reversal pattern on the table. If the SPX rallies and comes back up to 4080, and then bingo, in a heartbeat, price leaps to 4090, gapping back up through the gap, and then continuing higher, that would be an island reversal. There is a palm tree on the island. The other outcome is price simply rallying up through 4070, 4080 and on to 4090 simply filling the gap without fanfare.

The RSI did not reach overbot territory which you would like to see to call the top. And the MACD needs to go neggie d as discussed above. When price comes up to 4080, you can assess the indicators again and see if all the neggie d holds, and if the MACD joins the party, if so, the top is in on the 2-hour basis.

Powell typically speaks in front of the Senate Banking Committee at 10 AM EST with questions following. Usually, the Fed will release Powell's comments at 8:30 AM or 9:00 AM before he sits down at 10 AM. Thus, markets may react to the release of comments and then, from 10 AM EST on, anything can 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.

Note Added Tuesday Morning, 3/7/23, at 10:20 AM EST: Boom. Pope Powell lays an egg flapping hawkish wings expecting more rate hikes ahead. The 2-year leaps to 4.96% a year-to-date high. The 10-year yield is at 3.98% for a 2-10 spread dropping to -98 bips. Stocks tank and the SPX drops to 4013 right now testing the 200 EMA on the SPX 60-minute at 4024; failure. A short-term bear market is back but price will wrestle and decide to bounce or die from 4024. Right now, it is dying. Pope Powell is speaking. The 2-hour chart collapses as Powell lays an egg.

Note Added Tuesday Morning, 3/7/23, at 10:22 AM EST: SPX 4024. Bounce or die.

Note Added Tuesday Evening, 3/7/23, at 8:00 PM EST:  It died.

Note Added Friday Morning, 3/10/23, at 7:30 AM EST: The US stock market collapses. The SPX plummets -1.9% to 3918 losing the 12-mth MA at 3957-3960 and 10-mth MA at 3921. Back tests are likely needed going forward. More choppy slop is likely with the US Monthly Jobs Report dropping in an hour and inflation data next week. The 2-year yield received the negative divergence spankdown in quick order losing 20 bips in a flash an unbelievable move. The 2-year yield is at 4.82%. The 10-year is at 3.85%. The 2-10 spread is at -97 bips becoming less inverted after the -110 basis point drop. A new hook pattern forms and heads higher for the 2-10 spread ushering in the US recession going forward, unless the yield curve becomes more inverted and drops below -110 bips which is already rare multi-decade lows.

SPX S&P 500 60-Minute Chart with 200 EMA Cross

The previous SPX 2-hour chart showed the VST (very short term) bottom in place for stocks and voila, the possie d fuel shoots price higher on the hourly basis. The 200 EMA on the SPX 60-minute chart is a key ST market signal. You can see that the bearish price action in stocks started on 2/21/23.

Late last week, a bull orgy appears and price pokes up through the critical 200 EMA on the 60-minute at 4021. This is a big deal for day and scalp traders. Since this bull/bear line in the sand is important, a back kiss is needed so that will likely occur in the days ahead where a bounce or die decision will then be made from the 4021 support.

On the last flip to the bear side (2/16/23-2/21/23; red circle), you can see how price highly respects this key metric. Bulls win big above 4021. Bears win big below 4021. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Tuesday Morning, 3/7/23, at 10:15 AM EST: Boom. Pope Powell lays an egg flapping hawkish wings expecting more rate hikes ahead. The 2-year leaps to 4.96% a year-to-date high. The 10-year yield is at 3.98% for a 2-10 spread dropping to -98 bips. Stocks tank and the SPX drops to 4013 right now testing the 200 EMA on the SPX 60-minute at 4024; failure. A short-term bear market is back but nothing is cast in stone as yet. This is the back kiss that was needed and price will now make the bounce or die decision from 4024. Right now, it is dying. Pope Powell begins speaking.

Note Added Tuesday Morning, 3/7/23, at 10:22 AM EST: SPX 4024. Bounce or die.

Note Added Tuesday Afternoon, 3/7/23, at 12:32 PM EST: SPX 4023. Bounce or die.

Note Added Tuesday Evening, 3/7/23, at 8:00 PM EST:  It died. The VST bear is back but now a back kiss would be expected to the underside of 4024.

YC2YR 2-10 Yield Curve Spread Daily Chart; Positive Divergence; Hook Pattern Higher Brings on US Recession; 2-10 Spread Drops to -100 Bips

The 2-10 yield spread has been of great interest over the last month as the previous posts here and here explain. When the blue hook pattern catches hold and sends the 2-10 spread back to the zero inversion line, that is what brings on the US recession.

The big news that the yield curve inverted occurs in April and it was no April Fool's Day joke. That was almost a year ago. The 2-10 spread is the go-to measure of the yield curve but the spread can be assessed across any durations from 3-month to 30-year yields. Last August, the first real hook pattern forms. Oh no, here comes the recession as the hook plays out and the spread heads higher to the zero line but alas, in September, the spread collapses lower as the yield curve further inverts (2-year yield climbing higher faster than the 10-year yield).

There are some other tries of sending the spread higher (less negative) but they all fail, too. December was the start of a big run higher to usher in the recession but alas, the spread collapses, again. A week of so ago, the 2-10 spread drops to -90 basis points (negative 90 bips). 

All this talk of dropping makes one think of Sports Team and their latest coolio rock and roll tune, The Drop. The monkey's in the ties will have to decide. Kiss the ring and watch the jackals sing.

Anyhoo, as long as the 2-10 spread lingers in the lower range, the recession continues partying with Godot (it will not arrive). So the spread heads higher up to -0.78, only to drop again down to the current -0.89 intraday printing -0.91. This action is the double bottom at the lower right of the chart. You may need a magnifying glass to see that spaghetti.

Thus, the 2-10 spread came down to -90 bips, bounced to -78 bips, and has now fallen back to -91 bips parking at -0.89 bips for the weekend (the chart is EOD numbers (end-of-day)). Note that all the chart indicators are in positive divergence (green lines) as the spread came down for the matching, and lower, low. The spread is loaded up with upside fuel and ready to launch higher.

The bad new is that as it launches higher from the possie d and oversold conditions, that will finally usher-in the US recession going forward. The spread never touched the middle band on the last rise so that -0.81 is firmly on the table as the first stop higher. Then the upper band and 50-day MA at -70 and -71 bips would be the next target higher. A move up through the prior bump at -78 bips and the -81 bips middle band would be a big deal portending far less negative numbers (higher) ahead.

So the daily basis above says the bottom is in for the 2-10 yield spread. Bring up the weekly chart. Wow. Also, all possie d. The bottom standard deviation band on the weekly is -0.96 so that has to be on the table perhaps hinting that in the coming days there may be choppiness as the Fed talking heads spew their dribble.

But make no mistake. The 2-10 spread has bottomed both on the weekly and daily basis. There may be some sideways chop for a week or two but the low numbers are in as per the daily chart.

The monthly chart is also showing possie d with the indicators except for the MACD line that remains weak and bleak. That means after the yield spread moves higher for a few weeks it will roll back over again and likely make one more move lower a couple months out, in late April or May, maybe down to current levels maybe not, and then it is all up after that on a long-term basis shedding the inverted status.

However, March has just started and 4 weeks have to play out for the monthly chart. Thus, the MACD may be possie d by the end of the month on the monthly chart and this would dictate that the long-term bottom for the 2-10 spread is occurring right now, in real-time. The MACD line on the monthly is already way down in the cellar and has no where to go but up (which will likely form possie d this month). This means the recession is coming and likely far closer than anyone realizes. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Tuesday Morning, 3/7/23, at 8:32 AM EST: The 2-year yield hovers around 4.86%-4.87% and the 10-year is at 3.94% for a 2-10 spread at 92-93 basis points. Let's take a look at the charts since a new week is underway. The daily and weekly charts are possie d as explained above so these spread levels should serve as a base. Pope Powell speaks shortly and of course he can change the picture immediately if he coughs and it sounds like he said something. The spread will/should move up due to the possie d and this is accomplished by the 10-yeary yield moving higher and the 2-year lower, or the 2-year anchored and the 10-year rising, or the 10-year anchored and the 2-year dropping, or both dropping but the 2-year falling faster, you get the idea. A multi-week uptrend in the spread is about to begin. The move higher in the spread going forward will usher-in the US recession.

Note Added Tuesday Morning, 3/7/23, at 10:01 AM EST: Boom. Pope Powell lays an egg flapping hawkish wings expecting more rate hikes ahead. The 2-year leaps to 4.96% a year-to-date high. The 10-year yield is at 3.98% for a 2-10 spread dropping to -98 bips now tagging the lower standard deviation band on the weekly chart. A little time may be needed for charts to adjust but no change in the analysis is expected (indicators will likely remain positively diverged).

Note Added Tuesday Morning, 3/7/23, at 11:07 AM EST: The 2-10 spread drops to -100 bips (-1 percentage point).

Note Added Tuesday Evening, 3/7/23, at 7:08 PM EST: The 2-year yield explodes higher above 5% to 5.03%. Wow! The 10-year nudges higher to 3.98%. The 2-10 spread drops like a rock to -105 basis points! A historic day. Pope Powell lays an egg shooting the 2-year yield to the moon. Give the chart a couple days to reset if necessary.

Note Added Wednesday Morning, 3/8/23, at 9:00 AM EST:  It is pandemonium. The 2-year yield catapults higher to 5.05% and 10-year yield at 3.96%. The 2-year yield popped to 5.08% and the 2-10 SPREAD DROPS BELOW -110 BASIS POINTS. WOW. This level of yield curve inversion not seen in decades! Look for a new hook pattern higher going forward which will usher-in a recession. This extreme level of negativity in the yield curve occurred in the 1929 crash, 1973 recessionary turmoil and in the late 70's when Fed Chairman Volcker stepped-in to quash inflation.

TLRY Tilray Weekly Chart; Positive Divergence

Keystone bot some pot today. What!!? Pot stocks, pot stocks, not pot. Oh, okay. The marijuana plays are crispy-fried, toasted, cooked; they must have smoked a fatty. TLRY crashes from the 30-60 area in the frenzy 2 years ago down to sub 3 bucks. Call it a -90% and more crash. There is a lot of consolidation occurring in the industry. The pot market got flooded with product and the people can't smoke it fast enough, although they are trying their best.

Who knows where the bottom is at? TLRY weekly chart above shows positive divergence across all indicators so she is fueled-up for a run higher on the weekly basis. Price starts to pop due to the positivity on the 2-hour chart. MJ is the same chart and there are plenty of other marijuana plays.

Price is below the moving averages requiring a mean reversion higher. The money flow is negative over the next week or two so there may more chop ahead for a couple weeks.

Once garbage starts dropping sometimes you do not know where it will end but the stocks are probably pretty-well washed-out now considering the possie d. Keystone bot TLRY and MJ as speculative longs and will probably hold them for a few weeks. If they fall out of bed over the next few days, the trades will have to be ditched. Smoke 'em if you got 'em. 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.

Keybot the Quant Turns Bullish

Keystone's proprietary trading robot, Keybot the Quant, whipsaws back to the long side at SPX 3978 late yesterday. Don't hold your breath since another flip will likely occur back to the downside at any time forward. The chop suey continues chopping-up bulls and bears alike.

Bulls need XLF above 35.69 to prove that the rally is real. Bears need SPX below 3962 to introduce market negativity. XLF is at 35.68.....a minute ago it tagged 35.70. This is the second test of the critical 35.69 resistance this morning and will tell you a lot. A rejection at XLF 35.69 likely means the rally will fall apart. XLF above 35.69 will ignite more stock market upside. The SPX is at 4017 at the highs of the day as the banks make their critical bounce or die decision.

Keybot the Quant

Note Added 10:33 AM EST: XLF is at 35.67....... now 35.68... another test of resistance in progress that dictates where the stock market is going. The banks matter.

Note Added 10:34 AM EST: Whoopsies daisies. XLF is at 35.64. The drama continues....

Note Added 11:16 AM EST: The bulls cheer. XLF pops to 35.71. 

Note Added 11:22 AM EST: The bears cheer. XLF is at 35.69. This game will likely continue for a while. The SPX is stalled at 4015-ish waiting to see what the banks decide.

Note Added 11:31 AM EST: The bulls cheer. XLF pops to 35.73 so a bullish orgy rally is expected. SPX is at the HOD at 4018 of course boosted by the  bank orgy but will the XLF 35.69 support hold today? Will it hold for more than 10 minutes? The banksters are puffing-out their chests and tipping their tophats to the adoring shareholders.

Note Added 12:42 PM EST: XLF 35.81. It's a bull orgy party. SPX 4025.

SPX S&P 500 Monthly Chart; Battle at 12-Mth MA at 3962 Testing the 1-Year Cyclical Bear Market

The saga with the SPX monthly chart continues. The 10-mth MA at 3928 and 12-mth MA at 3962 are critically-important numbers. The 12-mth MA at 3962 dictates whether the US stock market is in a cyclical bull market or cyclical bear. The cyclical bear market is ongoing for the last year but the battle between bulls and bears started in December.

Price poked above the 10-mth MA in November which told you a test of the uber important 12-mth MA was likely, and it occurs in December, but is met with a strong spankdown. The bulls pick themselves up, and dust themselves off, as they put away the New Year's Eve party favors for next year, and push stocks higher again. January is a big rally month with the 10-mth again taken out so a test of the 12-mth resistance is on tap, and occurs, and price pokes up through.

Bulls are walking around with chin's high and chest's puffed, proclaiming a new bull market. Not so fast. After spiking to 4200, the SPX collapses back through the 12-mth MA stating that the 1-year cyclical bear market remains king.

Note how price comes down to tap on the 10-mth MA over the last 2 months and then recovers (the lower shadows of the candlesticks come down to tease the 10-mth). The bulls prevail on the back kisses (support holds) with price now poking back above the 12-mth MA at 3962 so a cyclical bull market is back on the table. March is a long month and a lot will happen over the next 4 weeks.

The battle continues. The utilities failed portending serious bad stuff coming down the pike for the US stock market, to begin at anytime over the coming days and weeks so the expectation would be for the SPX to fail through both of the moving averages again going forward.

The SPX fell to the 10-mth at 3928 yesterday for that back test of support and recovered strongly above the 12-mth MA at 3962 but most of the folks buying are robots and day-trader's. The US Monthly Jobs Report is next Friday, late this month, so Heaven help us if we have to endure another week of choppy slop until a firm directional commitment occurs. The whole year is chop suey so far chopping up bulls and bears alike especially those playing leveraged ETF's.

Also, watch the 20-week MA support at 3957 and 50-week MA resistance at 4002.

Bulls will rally euphorically above 4002. Bulls win big above 3957-3962. Bears will reexert their negativity below 3957-3962. Armageddon for stocks begins if 3928 is lost. 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 2-Hour Chart; Oversold; Falling Wedge; Positive Divergence

Remember, trading is playing 5-dimensional chess constantly assessing the minute, hourly, daily, weekly and monthly timeframes. You can trade within any timeframe, or across a couple of them, or develop a macro-view on the economy and markets assessing all the timeframes together.

The utilities fail which preach doom and gloom ahead (see previous chart). This is interpreted as stocks beginning to drop any time forward and dropping for several weeks with an ugly outcome. If you bring up the SPX weekly chart, the RSI is moving lower, weak and bleak, crossing down into bear territory sub 50%, and the other indicators are weak and bleak wanting to see lower lows in price on the weekly basis.

If you bring up the SPX daily chart, the RSI remains weak and bleak, ditto the MACD line (bearishness ahead). The stochastics on the daily chart are oversold and want a bounce so this will conspire with the 2-hour chart above to create a VST bounce in stocks. The daily and weekly basis, however, want to see lower lows in price on their bases.

That brings us to the 2-hour chart. In this time frame, the chart is clearly trying to bottom. Stochastics are oversold wanting to see a bounce. The falling wedge pattern is bullish. The chart indicators are possie d. You see a bounce occurring now with stocks after the initial drop to 3928 today (watch this number going forward). The 1-hour chart is positively diverged and wanted to see the bounce as well so the hourly timeframe is bull-friendly.

Keystone wanted to catch the bottom today for a quickie trade but it may have already occurred. This mini-rally is not to be chased higher for all the reasons above but if price comes down again and the possie d is in place, a quickie long trade may be fun for a day or two (hourly basis). With the utilities dead, it takes a strong will to hold stocks over the weekend. A Black Monday would not be good if long.

Nonetheless, the lesson is that it is best to hang tight and wait for the 2-hour chart to come back up and form negative divergence. That will kick-in the downside and the daily and weekly charts will likely join the downside fun. So that top on the 2-hour chart above may not be until tomorrow or Monday after the mini-rally plays out (watch for the neggie d to form on the 2-hour chart).

20-day MA is 4065

200 EMA on the SPX 60-minute chart is 4024

50-week MA is 4001

50-day MA is 3982

12-month MA 3959

20-week MA 3956

SPX price is at 3944

200-day MA is 3940

10-month MA 3924

Price came down to 3928 this morning to test that critical 10-month at 3924 that all the old-timer's watch. The interplay between the moving average's support/resistance will tell you the path ahead. A loss of 3940 will set up the test of 3924. 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 10:46 AM EST: You can see the SPX teasing 3940 support over the last few minutes making a bounce or die decision.

Note Added 10:49 AM EST: SPX 3943. The dance along the 3840 tightrope continues. Whoopsies daisies. Back down to 3940 with wobbly legs. Now a jump back to 3943 the ebb and flow, the yin and yang, and the push between bulls and bears continues.

Note Added 10:56 AM EST: SPX 3947. Wheee! Whoopie! The bulls have their chests puffed out and with chins held high are buying stocks thinking a firm bottom is at hand. You know what will happen as explained above. It looks like now a quickie-long trade (scalp) will not work so it is best to sit tight and watch for the neggie d to form on the SPX 2-hour chart and then play the short side.

Note Added Friday Morning, 3/3/23, at 8:22 AM EST: The bulls push the SPX up 30 points, +0.8%, to 3981 back above the 12-mth MA at 3962. This is the battle. Bulls win big above 3962. Bears win big below 3962. With the failure of the utes, the bears would be expected to prevail going forward but the battle has to play out.

UTIL Utilities Weekly Chart; Utilities Fail Forecasting Ominous Road Ahead for US Stock Market

It's all over but the cryin'. Irene, goodnight, goodnight Irene as Leadbelly would sing to his honey. The utilities have failed in a big way. UTIL needed to rally above the 939 palindrome this week (blue circle) but has failed miserably. Next week, UTIL must be above 972 (purple circle). The 50-wk MA at 976 is also uber important and it has basically been in failure mode since September. The trap-door for stocks has now opened with the failure of the 15-week lookback weekly trend (flips from an uptrend to now a downtrend bad news for stocks).

THE FAILURE OF THE UTILITIES PORTENDS THAT VERY BAD THINGS ARE GOING TO HAPPEN TO THE STOCK MARKET GOING FORWARD. In decades past, the failure of stocks would follow utes from zero to 8 weeks out. Since the markets have been chop suey for a few weeks, the time frames appear compressed, so the failure in stocks would be expected sooner rather than later.

If you are long any stock, you must immediately decide if you are willing to keep it for 5 or 10 years. If not, you would be wise to dump it.

UTIL is testing the 200-wk MA long-term support at 893 so it would be a big deal if this failed guaranteeing stock market carnage ahead. For the weeks ahead from 3/6/23 into April, UTIL has to jump all the way back up to 975-ish and higher and remain there. That would be a sight and obviously not expected. Utes remain at that 50-wk MA flatline for about 8 weeks so the utilities will likely remain in complete failure for the next month or two. THIS IS EXTREMELY OMINOUS FOR THE STOCK MARKET.

Exciting times. Respect the utilities ominous warning. It's All Over Now, Baby Blue. 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.

Keybot the Quant Turns Bearish

Keystone's proprietary trading robot, Keybot the Quant, whipsaws back to the bear side at SPX 3955 yesterday. The choppy whipsaw slop continues. THE UTILITIES HAVE FAILED BIGTIME PORTENDING SERIOUSLY BAD THINGS FOR THE STOCK MARKET GOING FORWARD.

The current fight in real-time is banks versus volatility. Bulls need XLF 35.69 to right the ship and bears need VIX 21.63 to create stock market carnage. One of them will flinch.

Keybot the Quant