CPC Put/Call Ratio and SPX Daily Chart; Rampant Complacency and Euphoria Continues; Negative Divergence

Here is an update on the stock market topping drama the last week or two. The CPC dropped sub 0.70 verifying the excessive bullishness so a top is at hand. The SPX daily chart, however, was not yet topped out with negative divergence (read the prior post). The other chart indicators were neggie d and expected to spank price lower but the SPX should come back up for a matching or higher high again due to the MACD line that remained long and strong. Voila. That price action occurs.

The SPX drops for 3 or so days, then recovers in 3 days with price running higher using up the remaining MACD fuel in the gas tank. But there is more drama. Price stopped just short of the matching high (thin red line) so neggie d is not occurring. It would be better for bears to tag the 5969 high from 9 days ago instead of stopping short at 5943 (to properly lock-in the neggie d). The SPX was almost there, about 25 points shy. Is that close enough for government work? You will have to wait for the price action early next week.

Obviously, if stocks collapse from here the Thursday price high would be good enough to call it a matching high to 8 or 9 days ago and the top is in. Chances are, price may float higher for a day or two more to tag the 5960-5970-ish area to print the matching high and confirm the negative divergence and call the top. Note how all the chart indicators are sloping seriously downwards; it is not a gentle difference lower than the peaks from 8 and 9 days ago. This tells you that if price moves higher, it is unlikely that any of the indicators will be able to make a new high compared to 8 and 9 days ago, thus, the top is likely now or any day forward, say early or middle next week. This would start the stock market selloff and payback to rectify the excessive bullishness, complacency, euphoria and belief that stocks will never go down ever as shown by the CPC.

Note on the CPC chart that price bounced without panic and fear playing the lead part therefore it is phony baloney. You do not want to nibble on or start accumulating longs until you see the CPC spike to the heavens above that 1.15 and 1.20 area. Keystone told yinz that during March as you tried to call a bottom and got your head handed to you on a platter. The panic and fear occurred in early April when traders lost their shirts and swore they would never buy or own a stock again; that is when you step in and take that sucka's shares.

The SPX bounce 5 days ago occurs exactly at the confluence of the 200-day MA and 20-day MA and price S/R from late March and early March. How cool is that?

The Aroon is comical because more bears are bullish on stocks than bulls. Pause for laughter. About 70% of the bulls believe stocks will continue higher in the daily time frame. It is not 100% like 8 days ago but remains elevated. There are a couple of bulls that may be starting to get worried. But not the bears. None of the bears expect stocks to drop in other words, 100% of the bears expect stocks to keep moving higher forever. That is hilarious. It is another sign of a significant top a la 2/19/25.

The ADX pink box shows that the drop in stocks from late February to early April was a strong trend lower but that strong downward trend petered out in late April as the bulls took over. With stocks rallying to beat the band ever since, Hey Bartender, come on baby, have a drink with me, note that the ADX is flatter than a newlywed's souffle. If the stock market wanted to continue rallying higher in a strong trend, the ADX should be above 30 now heading higher; it is not. The move higher in stocks is NOT a strong trend higher.

What does all this windbag technical analysis mean? The top could have been called if price would have only cooperated and ran 25 ticks higher, but it did not, so Monday and Tuesday need to play out to see if they can ring the price bell that would then lock in the neggie d and call the top. She may be topped-out right now with the rise back up and peak on Thursday good enough for gov't work and adequate to call the top in the daily time frame. The big slump in the indicators over the last 8 days (thin red lines) hint that the top is in for the stock market now or will be early next week.

Keybot the Quant, Keystone's trading robot, flipped short yesterday. It will be interesting to see if the quant remains short early next week or if the bulls try to stage a comeback to keep the stock market turd afloat. The start of the week is important and obviously, King Donnie's words will manipulate stocks in one direction or the other. He and his cronies need to line their pockets just like the Biden's. Donnie is threatening commie China again proclaiming that from now on there will be No More Mr Nice Guy. 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.

BPSPX S&P 500 Bullish Percent Index

The important metrics for the BPSPX are the 30% and 70% levels and the 6 percentage-point reversals.

As the stock market was pounded into early April, the BPSPX fell so low it was a guaranteed buy signal on the come. Voila. The BPSPX shoots higher confirming that the trend has changed and the bulls are back in business. Stocks rally higher and test the key 70% level in early May punching up through. The bulls are unstoppable walking around with their chests puffed out.

The BPSPX tops-out at 76.40 on 5/19/25 so taking away 6 is the 70.40 level. If 70.40 fails, and then the 70 level fails, that would be a double-whammy sell signal for the stock market. It occurs with price down to 69.60.

Typically, the BPSPX and stocks would be falling like rocks but King Donnie keeps interjecting to keep markets happy and reward his crony friends, just like Sleepy Joe Biden. Grift is the key element of America's failed crony capitalism system.

Thus, the bulls need more orange head happy talk to send the BPSPX back above 70 and maintain buoyancy in the stock market. The bears want the BPSPX to continue lower which will guarantee that stocks head lower. Obviously, if Donnie threatens more countries with tariffs and bloviations that will kick-in the downside.

Note the tight standard deviation band. Wow. That tells you a huge price move is about to happen but it does not predict direction. It is like squeezing a tube of toothpaste. You know it will jump wildly out and somewhere but you do not know where. Maybe a Black Monday, or Black Tuesday, or maybe a Black Friday is in Vogue this season. Friday I'm In Love. 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

The Keystone Speculator's proprietary trading robot, Keybot the Quant, flips into the bear camp today at SPX 5859 at munchtime. Copper is the key currently and as the red metal goes, so goes the market.

Keybot the Quant

NFLX Netflix Daily and Weekly Charts; Rising Wedges; Overbot; Negative Divergence; Price Extended; Upper Band Violations; Excessive Euphoria and Complacency

Did you hear about the new hit Netflix show? It is called The Swan Song where NFLX jumps off a cliff into the unforgiving ocean below. Netflix should be called Netflex for flexing its muscles. Netflix is the bull's favorite flavor these days. Forget those old and tired NVDA and PLTR long plays, they will fade away like the penny loafer, it is time to pump a new favorite son called Netflix.

The television talking heads, analysts, strategists, Uber driver and shoeshine boy are in total 100% agreement that NFLX stock will go up forever. Rabid pundits purposely animate themselves to increase viewership by wildly waving arms telling folks to buy, buy, buy!! All of those pundits do not tell you that they are selling, selling, selling, hoping for you to be the sucka holding the bag, and so far it is working.

The daily and weekly charts above clearly show that NFLX is topping-out. It is time to sing Goodnight, Adios, Au revoir and Auf wiedersehen to NFLX. Lawrence Welk. We hardly knew ye, Neflix. How can that be when NFLX just printed a new all-time record high? The wine is flowing like water. Everyone (corrupt Wall Street) says NFLX is a guaranteed winner.

On the daily chart, the rising wedge pattern is bearish. The Friday print is a doji candlestick that typically signals a change in direction. Price has violated the upper standard deviation band so a move to the middle band at 1120 and lower band at 1026, and sharply rising, are on the table. Price is overextended and a mean reversion lower would be expected.

The red lines show universal negative divergence across all chart indicators as price makes the new all-time high. There is no gas, not even fumes, left in the tank to take it higher in the daily time frame. Momentum is on NFLX's side that may create buoyancy for a few days but it would be for naught. The RSI and stochastics are overbot agreeable to a pullback in the daily time frame.

The ADX on the daily squeezes up into a strong trend higher for price (pink box) but as price catapults higher, the ADX is flat or rolling over again likely to drop out of the strong trend higher box. Note that the strong trend higher (peaks) have decreased since Thanksgiving. The Aroon makes you laugh out loud. The red circles show that 100% of the bulls expect NFLX to go up forever, and 100% of the bears expect NFLX to go up forever. Pause for laughter. There are zero bears. The boat is fully loaded on one side with everyone drunk as skunks drinking Netflix wine. You know how that ends.

On the NFLX weekly chart, pretty much the same dealio. The rising wedge is bearish. Price has violated the upper band so the middle band at 981 and lower band at 780 are on the table. Price is extended above its moving average ribbon needing a mean reversion lower. Just like the daily chart, the red lines show all indicators in neggie d and the RSI and stochastics are overbot agreeable to a pullback.

If you are bullish NFLX, that means most of you idiots reading this, your hope relies on the MACD line on the weekly chart. It is threatening to breakout a touch higher and if it does, it will extend the top by a week or two so keep an eye on it. That would give you a few more days to exit the long side. If she comes in with a bad attitude tomorrow morning, however, the MACD will likely drop lower and the stock is toast probably beginning its multi-week pullback right away.

The ADX on the weekly shows that price is in a strong trend higher for the last 17 months since the start of 2024. Note, however, the ADX peaked with the stock market on 2/19/25 and is far lower as price catapults skyward (neggie d). Also, the ADX is near dropping out of the pink box that will verify the end of the strong trend higher in price on the weekly basis.

The Aroon on the weekly is a repeat of the daily scenario. Every single bull and bear on NFLX believes the stock will go up forever. It is funny. This is why the smart money has their talking heads on television to pump and dump Netflix. If you are Joe Retail, Jane Winedrinker, Carlos Bagholder or Savita Sixpack, and you bot NFLX stock over the last month, you will be losing money in short order going forward. You are the bagholding sucka's.  The stupid human tricks continue as Todd sings Alright Guy.

Keystone does not hold NFLX long or short but obviously the path forward is to short it. Every single metric discussed above for both charts is bearish. Be careful with the momentum since price may try to linger flat for a few days or week or so before the multi-week down move begins. If you remain long NFLX, you are going to be fed Into the Buzzsaw; that was a good book. 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 Monday Morning, 5/19/25, at 6:45 AM EST: JPM downgrades NFLX. They must have read Keystone's technical analysis. NFLX loses a couple percent in the pre-market sitting at 1166. The all-time record high is 1196.50 and all-time closing high at 1191.53. NFLX started the year at 891.

Note Added Tuesday Morning, 5/20/25, at 5:19 AM EST: JPM CEO Jamie Dimon, that the Wall Street crowd worships, repeats the word 'complacency' over and over yesterday. He gets it. Individual stocks, and the stock market, are setting up with another top like 2/19/25.

CPC Put/Call Ratio and SPX Daily Charts Signal Top At Hand Due to Rampant Complacency and Developing Neggie D

Traders and investors return to rampant complacency, uber bullishness, euphoria and fearlessness buying any stock with a heartbeat and pumping it to glory. Every day is one big party with King Donnie signing meaningless pieces of paper promising the world a la Neville Chamberlain (WWIII) and Herbert Hoover (Great Depression II). The stock market is a ticking time bomb due to the low put/call ratio verifying the rampant complacency. The VIX has also relaxed to a 17-handle.

Okay, so now that you know a stock market top is at hand any time in the hours and days ahead, what do you do? You try and time the top to take full advantage. The housekeeping includes ditching the longs and bringing on shorts. In past decades, the top would occur typically within 1 to 3 days of the low put/call ratio but over the last couple decades, as the human greed has run off the charts, the top can occur any time within hours to a couple weeks (10 trading days), sometimes a tad more. The February top was tricky in that context as the low put/calls were triggering as equities topped out, but the neggie d called the exact top so no problemmo.

You need universal negative divergence across all chart indicators to call the top, in the chart above, that is the daily time frame. Price makes matching or higher highs so the indicators can be assessed. The histogram, stochastics and money flow are all neggie d wanting to see a spankdown. The stochastics and RSI are also overbot (RSI at 68 close enough to 70) agreeable to a pull back. The MACD line and RSI, however, remain long and strong wanting to see higher highs in price still yet in the dialy time frame.

Thus, stocks may need a jog move (down-up) to get the RSI into negative divergence and then the MACD line will need a jog to do the same. Both may occur together which would be 2 or 3 days or they may occur with the MACD always bringing up the rear, which is typical, that would be 4 to 6 days. If you bring up the 2-hour chart, oh, she is topped-out now with neggie d.

Thus, mathematicians say thus a lot that is why we are not invited to the fun parties, A Million Miles Away, thus, the SPX should be weak today pulling back also with the help of the neggie d indicators above. But, after a couple days, the SPX will come back up to satisfy the long and strong RSI and MACD. You can get a feel for this, right? Just watch the charts and you can call the top in the coming days. Right now is a top, but the daily chart says not quite. Instead, let some sogginess enter stocks for a couple days, then a move back up, and that may be THE top.

Position yourself accordingly. A lot of talking heads are opining about a toppy market that makes you think the upside may squeak out another hundo or more SPX points before she dies. It would be prudent to begin trimming longs and bringing on a couple short positions today before the weekend in case Black Monday makes an appearance. Then, through next week, increase the shorts that will be a nice set-up as equities top-out and die.

Keystone called the February top (red circle) and then told you to wait for the panic and fear before you nibble and buy long and cover the shorts, and that was early April (green circle), and now here we are holding the ticking time bomb again so you know what to do and what to watch. 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.

Happy Armed Forces Day tomorrow to all you vets and families of lost loved ones in the foreign wars. That is a lot of brave men and women. Cher was great at keeping the troops happy and letting them know what they are fighting for. If I Could Turn Back Time. The officers got in trouble for the show but they knew how to lift moral and keep the men motivated.

Note Added 9:55 AM EST: Stocks are open for trading for the Friday session. Let's take a look. On the SPX 2-hour, she is cooked with universal neggie d. If you are a day trader and nimble trader, it is time to short. The SPX daily chart looks the same as explained above although the RSI is flattening. A bigtime top is at hand. Stocks will drop today and perhaps Monday, then recover to current highs again, and at that time the MACD on the daily will be neggie d, joining all the other indicators, say in the middle or end of next week, and you can call the top and then watch equities die. Simply use the 2-hour and daily charts to time the pending top. Build short positions going forward. Everyone is far too bulled-up, euphoric and complacent thinking the stock market goes up forever no matter what; these dummies need to be taught a lesson again since they did not learn the first time.

Note Added 4:20 PM EST: The bulls win the day with the 2-hour chart not yet rolling over. Go figure. Monday it will. This is a weekend that you should have some shorts on especially with the move higher today.

Note Added 4:53 PM EST: Moody's downgrades US debt from AAA to AA1. This is bad news. The US is the world's reserve currency and no longer AAA-rated by any major agency (Fitch and Standard and Poor's already downgraded US debt in 2023 and 2011, respectively). King Donnie will throw a hissy fit. The expectation is for a weak start for stocks on Monday considering the news but the weekend will have to play out. Everyone will be watching Sunday evening futures. The House is unable to move the Trump tax and spending bill out of committee which is supposed to be the easy part. Pause for laughter. Speaker Johnson's job is on the line. He reminds you of Hermey. Remember Hermey? He was the elf that wanted to be a dentist in the Rudolph the Red-Nosed Reindeer Christmas television special. Trying to get politicians to agree is like pulling teeth. Mike probably wishes he was at the dentist instead of dealing with all the prima donna politicians.

Note Added Tuesday Morning, 5/20/25, at 5:11 AM EST: SPX 5963.60. Stocks remain buoyant as the retail crowd is trained to buy any dip forever. CNBC commentator Jim Cramer keeps telling people to buy stocks. That is stupid considering the verifiable and rampant euphoria and complacency in the stock market and the SPX daily chart topping-out with neggie d. Jamie Dimon at JPM said the word 'complacency' word over and over yesterday. He gets it. The SPX daily chart remains the same with the RSI a hair higher and the MACD still higher. These have to negatively diverge to call the top and it should occur any time in the days ahead.

PLTR Palantir 2-Hour, Daily and Weekly Charts; Negative Divergence Forecasts a Top and Start of Multi-Week Decline; We Hardly Knew Ye

The US stock market is a crap fest these days since it is difficult to find stocks to play long or short. Most are in a sick sideways funk or have already rallied off the bottom. The prior long recommendations are all higher and ride the relief rally. Keystone made a killing on DDD and others. The only long that Keystone is still holding is BOXL; all the others were cashed-out taking profits. Those tickers have all now bounced off the bottom due to possie d so you have to think about chasing them now.

Thus, there is not a lot to play right now and the list becomes smaller. At the index level, it is likely most prudent to wait for the stock market to set up short going forward so simply watch the charts. On the micro basis, utilities will likely roll over going forward, that may be a bad omen for the broad stock market, and some tickers are already getting spanked-down off the highs. So you can look for short opportunities in utes maybe the SDP ETF but it is thinly traded.

ANDE may be due for a bounce after getting beaten down. It is slim pickings to find stocks to play long or short, and Slim just left town. Keystone bot some SBIT today the inverse of bitcoin. What!? That is blasphemy! Bitcoin charts are setting up with neggie d and BITI and SBIT are setting up with possie d since they are the inverse. Keystone will see if bitcoin drops to take a ride higher with the inverse ETF. For now, BITI and SBIT have bit the dust, but are set up on the possie d launch pad, so they are worth taking a chance on the long side (but bitcoin is red hot right now).

After looking at numerous tickers, a lot of them are going Nowhere Man. Another potential play is Palantir the favorite AI flavor. PLTR can handle data in support of artificial intelligence making it a tech darling that everyone wants to dance with. Well, the bell tolls, and Palantir, it tolls for thee.

All three time frames, hourly, daily and weekly, are set up with negative divergence so she is cooked. Stick a fork in it. Crispy-fried. We hardly knew ye. Palantir is about to have a religious experience going forward. A neggie spankdown will begin any time forward and open the door to a multi-week pullback. What!!? No way. What's this guy smoking? It's Palantir. It will go up forever. If you are a little twit, maybe a Wall Street analyst, spouting such nonsense, you may as well take your shirt off now, because you will lose it going forward. The Palantir cooking was fantastic and tasty but now it goes Rancid. Ruby Soho. Keystone discovered that it's hard to wear a baseball cap with a mohawk. Ruby, Ruby, Ruby Soho. Destination unknown.

Gus at the granite shop a couple miles away has already started engraving the gray tombstone with Palantir's name. It is fun knowing that a stock is about to collapse when no one else does. The only thing that can save it would be a positive news announcement and it will need to happen fast. Keystone is not in PLTR long or short right now but plans to start going short tomorrow and going forward. If you are long Palantir, are you sure you want to go up against Keystone? Come on, Sonny, step up to the plate, do you want to play? Do you feel lucky, punk? Do you, punk?

A final note is that the monthly chart still shows a long and strong MACD line, thus, after the smack down occurs for PLTR, and it is beaten for a few weeks, it will recover and likely come all the way back up again one more time for a significant long-term top, likely in the July, August, September time frame, that will then lead to another top and a multi-month decline in PLTR. The charts will lead the way. Right now, they say sell, Mortimer, sell, and in a few weeks the weekly chart will set up with positive divergence telling you to buy for the way back up but again, you will have to use the charts for the timing to see how it plays out. 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 Friday Morning, 5/16/25, at 10:05 AM EST: PLTR is at 128.76. Keystone is short from 130+ so not much movement yet. Let's take a look. The Palantir daily chart is in neggie d across all indicators; it's a top. Ditto the 2-hour chart. Ditto weekly. The only thing holding this piece of sh*t up, is the hype. Blow on it and you should knock it over. CEO Karp needs to announce good news pronto if he wants to save it. Keystone is shorting bitcoin, a dangerous and speculative move considering the current hype, so let's see how that is going. The trade is flat, like price, so far. The bitcoin daily chart is in neggie d. Weekly chart in neggie d. Sogginess would be expected in bitcoin going forward perhaps in concert with US equities sliding lower.

NYA NYSE Composite Weekly Chart with 40-Week MA Cross; Ongoing Cyclical Bear Market Faces Critical Back Test

Today is stock market drama day as Pope Powell brings the tablets down from On High telling traders how to trade. The two key metrics that separate cyclical bull and bear markets are the NYA 40-wk MA cross and SPX 12-mth MA cross. Both are negative verifying the ongoing cyclical bear market.

However, there is a critical back test occurring for the NYA currently. The 40-wk MA is at 19380-19383 and price is at 19182 coming up for the back kiss. Remember, the right-hand candlestick is this week so it is in progress. If Powell is dovish, stocks may go to the moon and that candlestick would turn white and pop higher into cyclical bull territory.

You can see that price came up last week and bumped its head on the critical 40-wk MA resistance line in the sand, and this week, so far, it receives a slap-down. The next few days are extremely important and tell you the path forward for the stock market for the weeks and months ahead.

If the NYA remains below 19380-19383, and the SPX remains below its 12-mth MA at 5733-5740, the stock market is toast going forward especially after a successful back kiss by the bears. The real stock market downside path will begin as the cyclical bear market begins to bite hard.

If the NYA pops above 19380-19383, perhaps on Powell happy dovish talk, the bulls will become emboldened. The next goal for bulls will be the SPX at 5733-5740 and if that is taken out to the upside, wow, stocks will rally higher returning into a cyclical bull market.

If the NYA pops above 19380-19383, but the SPX is unable to achieve 5733, stocks will likely roll over again and if the NYA loses the 40-wk MA that will chart a path of doom and gloom ahead like the first scenario. Choose your Poison. Every Rose Has Its Thorn. 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 Friday, I'm In Love, 5/9/25, at 7:27 AM EST: The NYA jumps above the critical 19383 line in the sand with the bulls puffing their chests out signaling the all-clear only to be running for their lives into the closing bell as NYA collapses back below 19383. Do you think the NYA 40-wk MA cross is important? The battle will continue for a few days or week or two since this is such a critical juncture (deciding if the current cyclical bear market since March remains in effect). The third scenario was in play for a while but the stock market falls back into the dire first scenario at the end of the session. As per the Keybot the Quant robot, that currently remains long, bulls need NYA above 19383 and VIX below 21.80 to send stocks to the moon. Bears need to keep these two metrics negative while at the same time weaken the chips and retail stocks. NYA 19383 and VIX 21.80 tell you if the bulls will be Saying Goodbye, or not, as Ondara sings. 

Note Added 5/13/25, at 6:09 PM EST: The bulls win after King Donnie lowers the tariffs on China but they remain elevated. Go figure. The indexes catapult to the stratosphere with a bull orgy in full gear. Both the NYA and SPX (popping over 5900) return to cyclical bull market patterns.

The Keystone Speculator's Inflation-Deflation Indicator; US REMAINS MIRED IN NEUTRAL STATUS QUO, NOT INFLATIONARY, AND NOT DISINFLATIONARY, FOR 3 YEARS

Keystone's inflation-deflation indicator remains in NEUTRAL territory, not inflationary, and not disinflationary. Inflation is choppy sideways for 3 years with the Federal Reserve not making any progress lower to their 2% goal (do not confuse Keystone's non-dimensional indicator above with the actual inflation percentages).

Inflation is neutral according to Keystone's indicator and moving sideways but to correlate it to the Federal Reserve, from the Fed's perspective, inflation is moving sideways above the Fed's 2% target.

The chart above mainly reflects goods inflation rather than services inflation. For decades this did not matter since both moved in unison. In recent years, however, due to obscene central banker money printing that has made the wealthy rich beyond their wildest dreams, and the disruptions of supply lines due to the pandemic, the goods and services inflations have not been in sync.

The expectation would be for services inflation to roll over and come down to join goods inflation and after many months, the data is starting to hint at this outcome. The last four readings of services inflation show three of the months in a downtrend. After all, even when you have dough, how many trips to Europe, and how many $100K Mercedes convertibles, and how many $25K refrigerators do you need?

The oil, coal and natural gas industries are the energy backbone of the United States. President Biden's war on America's energy complex in favor of the glorified gold cart (EV) economy, along with the out of control Congressional spending (fiscal stimulus), and the Fed's money-printing (monetary stimulus), and the Ukraine War, and the ongoing supply disruptions from the pandemic aftermath, create the runaway inflation in 2022.

The 10-year Treasury note 'price' is used for the denominator (bottom number) of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 103.09 with a yield at 4.24% on 4/26/25.

Commodities are in the numerator (top number). The CRB Commodity Index is at 298.46.

CRB/10-Year Price = 298.46/103.09 = 2.895

Above 4.20 = Hyperinflation

Between 3.1 and 4.2 = Inflation

Between 2.5 and 3.1 = Neutral; Inflationists and Deflationists Battle

Between 2.1 and 2.5 = Disinflation

Below 2.1 = Deflation

Interestingly, the indicator is at 2.90 signaling neither inflation or disinflation. The Fed is targeting a 2% inflation rate (not to be confused with the indicator number) and since the indicator above is moving choppy sideways for the last 2 years, inflation can be assumed to be moving sideways above the Fed's 2% inflation target. Keystone's indicator is in a neutral sideways posture but this is viewed as too high inflation from the Fed's perspective, and the public's when they go to the grocery store.

Granted, the calculation above is focused more on goods inflation rather than services inflation. For many decades, you could track commodities, with the CRB, or GTX, and the goods inflation and deflation dictated the overall economy's direction. As the US politicians screwed America over the last five decades, sending jobs overseas and destroying the middle class so stock prices could move higher on the foreign slave labor, the goods production went to foreign nations while the US focused more on services as the major part of the economy.

The debate between inflationists and deflationists over the last few years has been the discussion of goods versus services inflation. The pundits looking for inflation said goods would inflate and catch-up to the rising services sector while the talking heads preaching deflation said the services inflation would drop to join the goods disinflation and deflation as the economy slumps. All bets were off and both sides ended up being correct as the COVID-19 pandemic hit knocking the world on its arse.

The deflationists were correct in 2019 and 2020. Services inflation drops to become more compatible with the goods deflation. Of course, the China Virus pandemic wiped out the airlines, hotels, travel, restaurants and hospitality and leisure industries. Services are knee-capped falling to the ground joining the goods deflation. Men turned into bush people letting their hair grow wildly outward as they avoided the barber for fear of catching covid.

Then the central banker cavalry arrives March 2020 promising to print money forever. Greenspan, Bernanke and Yellen (former Fed chairs) were already in the basement of the Eccles Building running the printing presses like mad. Helicopter Ben loaded-up his chopper with freshly printed Benjamin's dropping the money from the sky into the investment banker's hands on Wall Street.

President Biden, along with Congress, provided way too much stimulus during the pandemic creating a lazy workforce that would rather sit home than work. The staffing shortages were a headache for employers that wanted to get back to normal during 2022 to 2024. Wages rise sending inflation higher. These behaviors, and the obscene amounts of Congressional (fiscal) and Federal Reserve (monetary) stimulus, send inflation to the moon.

When the Fed and Congress tag-teamed in March and April 2020 with trillions in stimulus, billions went into the US stock market pumping it to record highs. A few hundred thousand workers left the workforce either retiring or caring for loved ones after the pandemic, creating a massive labor shortage as the pent-up demand hit in 2021 and 2022.

Rising wages create inflation. The lack of inflation and ongoing persistent deflation for many years was due to the stagnant wage growth. Inflation cannot exist without wage inflation which had not occurred for many years until 2021 and 2022. In 2025, wages are moderating which will keep inflation at bay.

The inflation in recent years is mainly due to energy, food, insurance, and rent/utility costs. People notice higher gasoline and food prices more than other price changes. The wealthy class, made super rich by the Fed's money-printing over the last couple decades, continue to spend money which staves-off an overall recession in America, for now. There are signs that the wealthy are beginning to cut back on their spending.

Inflation in 2022 ran higher to try and match the 2011 highs. Back then, traders were convinced that rates would continue higher but instead the peak was in. Time will tell if the inflation peak in May/June 2022 will hold; so far it has 3 years later and the poke higher to begin 2025 petered out with the indicator falling back into neutral territory.

The answer to the inflation-deflation debate is both sides are right and both are wrong since the indicator sits at neutral. The path to disinflation is more likely if the economy sours. People would lose jobs and the stock market would drop but only until the Fed steps in with easy money by lowering rates and then equities will rally. The people propping up the economy right now are the upper middle class and wealthy because the Fed's easy money made them rich beyond their wildest expectations driving stock prices to the moon (at the expense of the rest of society).

Since services inflation is moderating flat to down, the goods inflation will take on more responsibility for the path forward of overall inflation. The CRB Index ran higher after Trump's election ushering in more inflation and then topped-out in February and fell back down providing recent data showing a slight moderation to inflation. If the Trump Trade and Tariff War was not occurring, the case could be made for a continued sideways move with inflation but would that really be so bad? No.

However, there is a big orange head sitting on the living room sofa. If King Donnie creates crazy inflation due to his tariff games, goods inflation may run strongly higher sending inflation strongly higher. 

There is good news and bad news for Federal Reserve Chairman Powell. The bad news is that the Fed is making zero progress for 3 years at lowering inflation to their 2% goal. Oh no, well, what is the good news? The good news is that inflation is not trending higher either for the last 3 years. Inflation is choppy sideways for over 3 years with the boil now coming off the services inflation numbers (even the rich are running out of money they want to spend). Inflation is stuck in a sideways pattern above the Fed's target.

The Keystone Speculator's Unemployment Rate Indicator -- US LABOR RECESSION STARTED 9/8/23 NOW 19 MONTHS ALONG AND COUNTING

THE UNITED STATES LABOR RECESSION STARTED ON 9/8/23 AND IS 19 MONTHS ALONG AND COUNTING; OVER 1-1/2 YEARS!!

The country also remains in a housing recession and manufacturing recession in addition to the labor recession but an overall US recession continues vacationing with Godot (it is nowhere in sight). The Godot Recession (the recession that never arrives) occurs because consumer spending by the wealthy Americans, that benefited from the 15 years of Fed money-printing, remains robust and the AI hype and excitement also delayed the overall US recession. This link takes you to the prior labor recession article.

How can this be? For many decades, if America is in a labor, housing and manufacturing recessions, than it is guaranteed to be in an overall US economic recession. Not anymore, buckaroo. Semiconductors are the new sheriff in town and that sector has gone great guns higher. Further, the AI hype sends stocks to the moon. The easy money provided by the Fed and Congress during the COVID-19 pandemic creates inflation and jobs galore. People cannot spend the free money fast enough, like pigs feeding at the trough next to the barn out back. Employers begged for workers during 2022-2024 but not so much anymore.

Companies and businesses now admit that they know who they plan on sh*t-canning (layoffs) but are holding off a bit longer to see how the Donnie Trump Trade and Tariff War unfolds, or unravels. There are tens of thousands of stupid employees right now across America that do not know their job hangs in the balance and depends on King Donnie.

Trump buckled and backpedaled on his tariff threats to prevent the stock market from falling further and more importantly, foreigners were losing confidence in the all-mighty US dollar and treasuries. The orange head proclaimed a 90-day period for tariff talks, that consist mainly of Donnie talking to himself, that places a deadline drop-dead date at 7/8/25 (another 76 days or 11 weeks). If you do not have much to do at work, and are charging hours to overhead on your timesheet, you are toast and better start praying that the economy improves pronto, otherwise, your arse is grass. You will be first to be called into the office on a Monday morning and told to pack your stuff up and get the Hell out.

The stage is set for the Friday, 5/2/25, US Monthly Jobs Report. Federal Reserve presidents and members are already wiping beads of sweats from their greasy foreheads. The unemployment rate is for all the marbles.

In the last Fed meeting, Chairman Powell could not have been clearer if you focused on his words. The Fed will not act to lower interest rates unless the US unemployment rate moves above 4.4%. Keystone says the quiet part out loud. Powell's focus on the unemployment rate is obvious and yet journalists did not zero-in on this fact. The Federal Reserve is more concerned about the unemployment rate jumping higher, and are likely concerned about when rather than if it will occur. They are less concerned about inflation that is hyped in the daily news. The services inflation is soggy again, 3 out of the last 4 months. Of course the unknown wild card is King Donnie Trump and his tariff drama that may create a COVID-19 pandemic inflation redux.

The Fed is likely less concerned about inflation on the margins and more concerned about growth and jobs thinking that the 4.4% and higher rate is the trigger-point. With all this in mind, perhaps we can make projections on what may occur on 5/2/25.

The current unemployment rate is 4.2%. It hit 4.3% that matched highs not seen since December 2021. The rate has come down twice to back kiss the red line only to shoot higher again adding credibility to the scenario where the unemployment rate should continue higher. A move to or above 4.3% would be important since it is taking out those highs from 2021.

If the unemployment rate pops to 4.4% or higher, a big jump from the current 4.2%, bells, horns and whistles begin sounding at the Eccles Building. The Fed will be open to rate cuts going forward to help the economy so King Donnie will be happy for the bad news. The Fed does not want to see 4.4% or higher because consumers will worry bigtime about their jobs, the economy, and their future, and immediately put a halt to spending bringing on a US recession. The economy is not the stock market, however. The bad news of a 4.4% unemployment rate means rate cuts and more easy money to goose the US stock market higher and make the rich richer. Stocks will probably rally nicely going forward on news that the Fed's printing presses will begin providing easy money again. Isn't the crony capitalism system a sick piece of filth? Capitalism does not exist.

If the unemployment rate rises to 4.3% from the current 4.2%, the worry and angst would be similar to the previous paragraph but slightly less so. Rate cuts will be more likely going forward but everyone will want to see more data that means the 6/6/25 Jobs Report becomes key. The stock market will likely remain choppy flat with an upside buoyancy.

If the unemployment rate remains flat at 4.2%, status quo, it would give everyone a reason to think status quo, and go back to focusing on King Donnie and his latest trade and tariff antics. Stocks will move according to the Whitehouse soundbites.

If the unemployment rate drops to 4.1% from the current 4.2%, that means the economy is hanging in there better than thought. The funny thing is that everybody and his bro are buying everything off the shelves for fear that the tariffs will raise prices. Inventory stockers, clerks, and other employees are needed to push the products out the door right now and for another couple weeks, but then what when the shelves are empty and everyone's pantry is stocked with canned goods, water and toilet paper? Those workers will not be needed. The case for lowering rates will take on less importance but King Donnie will probably throw another hissy fit about rates. Stocks will likely be soggy since the rate cuts are not coming soon.

If the unemployment rate drops to 4.0%, the labor recession will end. Of course, another month or two of data would be needed to confirm, but 5/2/25 would mark the beginning of a US labor recovery.

Choose your poison. She was Poison in the Well, and I drank it. Technically, the rate breaks out higher and performed two back tests already hinting that she wants to run higher (4.3%, 4.4% and higher). 

With the US Monthly Jobs Report only four trading days away, the consensus is for 130K jobs and a steady unemployment rate of 4.2%. The prior month was 228K jobs and a 4.2% rate.

Watch the unemployment rate; it is what matters to the Fed and should be what matters to you. The stage is set. The jobs circus is back in town this week. If you listen real close, you can hear the calliope music. The crony capitalism system has become a caricature of itself.

Note Added 5/7/25, at 9:06 AM EST: The 4.2% unemployment rate scenario played out on Friday, 5/2/25, with a jobs number beat at 177K. Everyone and his bro were throwing confetti celebrating the 177K jobs. Why? That headline number is unreliable. The rate matters since Chairman Powell is following the rate. Stocks rallied on the release but surprisingly, the 2-year yield jumped about a dozen basis points. The behavior reflects the optimism on the 177K jobs number, go figure, so stocks are bot and notes and bonds are sold off, some of that money flowing into equities. The group think dictates the market action but people should be concerned that the unemployment rate is 4.2%, sticky, and likely going to continue higher (recession on the come). The same set-up is at play for the 6/6/25 jobs report. A 4.0% rate and lower (unlikely) will signal the all-clear and end of the labor recession. A rate of 4.1% or 4.2% signal ongoing labor angst. A rate popping to 4.3% and higher means the wheels are falling off the economy and the Fed will be more open to talking about rate cuts (sending stocks higher on easy money) instead of worrying about inflation brought on by the self-inflicted Trump Trade and Tariff War baby games.

The Keystone Speculator's Housing Market Indicator; UNITED STATES HOUSING RECESSION IS ONGOING FOR 28 MONTHS AND COUNTING

The US is in a housing recession for 28 months (2 years and 4 months). The Keystone Speculator's Housing Market Indicator signaled the US housing recession starting 12/20/22 with no end in sight yet. Some homeowners turn into home moaners. People do not want to leave their current home, that has a low mortgage rate, for a new home with a bigger monthly payment. The lower availability of homes on the market hurts the first-time homebuyers.

The housing recession does not end until the red line moves above the green line. Here is the previous housing recession chart as this series continues until a housing recovery begins and rumor has it that the recovery is partying with Godot two towns over.

How could the United States not be in an overall recession when there is an ongoing housing recession for over 2 years, a labor recession for 1-1/2 years, and a 2-year manufacturing recession/slump? In past decades, that trio of pain would guarantee an overall US economic recession and yet it remains missing and nowhere in sight.

The Godot Recession has not yet arrived despite the weakness in housing, manufacturing and labor. The Federal Reserve provided monetary stimulus and the Congress provided fiscal stimulus during the COVID-19 pandemic that created the 3-year housing recovery. The sales agreements were being signed faster than divorce papers. It was one big party. The banksters were partying giving away houses like candy. Now they are in the county jail, with everyone in the cell block, dancing and singing to Jailhouse Rock.

The party ends on 12/20/22 as the housing recession begins. Time will tell if Godot arrives bringing the overall US recession. King Donnie is doing his best to become the modern-day Herbert Hoover (Great Depression redux) destroying the economy and markets and bringing on that US recession. If consumer spending continues slipping away, you will say hello to the Godot Recession and the ongoing housing, labor and manufacturing recessions will say they told you so.