Saturday, August 24, 2019
The NYA keeps bouncing to and fro across the critical 40-week MA at 12533 one of Keystone's most important cyclical (weeks and months perhaps a year or two) stock market signals. On Friday, the NYA collapses through the 40 ushering in a cyclical bear market. As always you have to give it a week or two to see if the bears have the beans to maintain the negative move.
The NYA fell into a cyclical bear market during the Q4 2018 stock market crash (red circle on the left). Equities bottomed on Christmas Eve but on January 3, 2019, as Keystone described in real-time, stocks took a turn for the worse and the internal data clearly showed a crash ahead. Equities were in the process of collapsing until the central bankers panicked stepping in to save the day. The global central bankers including the Fed, BOJ, ECB, PBOC and others colluded and coordinated messages and monetary policy to save the stock market and once again protect the wealthy class. Stocks catapult higher as the central bankers promise to print money forever.
The NYA regains the 40-week MA in early February (green circle) as it was quite obvious that the central bankers will never let the stock market fail. The NYA teased a failure during the May malaise but this price action only served as a bear-trap. Equities run higher to all-time record highs in July, and then fall on their sword. As mentioned above, this 3-week battle at the NYA 40-week MA determines who wins and loses going forward.
Each day the NYA remains below the 40-week MA is another nail in the bull coffin. Anyone long the market or individual stocks will be losing money if the NYA remains below the 40. Bears will be humiliated and have to run away with their tail between their legs again if the NYA regains the 40; the bulls will be running stocks towards the highs again.
The table is set. The bears are in control for the weeks nd months ahead unless the bulls can reverse the NYA 40-week negative cross.
Keystone's most important cyclical market signal is the SPX 12-month MA cross. The SPX 12-month MA is at 2807. The S&P 500 dropped to 2822 this month and was down to 2835 on Friday. The SPX sits at 2847 only 40 points above the 2807 Armageddon bull-bear line in the sand. If the SPX loses the 12-month MA at 2807, it is over for the stock market. 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 5-Minute Chart; Stocks Tank on China's and President Trump's Trade War Rhetoric; Federal Reserve Chairman Powell Speaks from Jackson Hole, Wyoming
It is interesting to watch the ongoing collapse of crony capitalism that will play out in the months and years ahead. The markets have become a complete joke after March 2009 when former Federal Reserve Chairman Bernanke implemented QE1 to save the stock market and protect America's privileged class that own large equity portfolios.
The wealthy politicians, CEO's, corporate executives, billionaires and millionaires have raped America for all its worth over the last five decades. Capitalism is dying. The United States is best described as a faux free market crony capitalism financial system. The wealthy control the legislation and direction of the nation and always ensure that their wallets receive big chunks of cash.
The democrats and republicans are two sides of the same coin. Keystone often describes them as demopublcans and republocrats. They only care about their reelection. President Trump promised to help the little people but instead gave a tax break to the wealthy class. The reason for this is to build a war chest of money for his reelection. The individuals in the privileged class that each received about $25K for the tax cut immediately donated one-third to one-half of it to Trump's reelection campaign. This is the way the crony capitalism game is played. President's Obama, Bush and all the rest did the same thing.
As John Dalberg-Acton proclaimed, "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
Trump continues to publically denigrate Chairman Powell for several months and the attacks are becoming more abrasive and ignorant. The reason is simple. If the economy turns south, Trump needs someone to blame. None of this is rocket science. Trump is the one who hired Powell and the president says he only hires the best people. The president is a walking contradiction which is creating increased market angst.
The chart above tells the market story for Friday. China imposed more tariffs pre-market which sinks the US futures. The Trump tariff and trade war escalation creates the gap-down open for the benchmark S&P 500 (the stock market). Comically, Powell is the one who rides to the rescue saving the day with more dovish talk. Then, Trump hastily tweets his anger at China and at Powell even spelling the chairman's name wrong. Comically, King Trump orders all companies to no longer do business with China. His decree is bazaar especially since products from Trump's own companies are made in China. Stocks collapse. It is the Trump trade war escalation that sinks the markets on Friday.
The central banks are another sick reason for the ongoing demise of capitalism; they created the income inequality problem. Their obscene Keynesian money-printing monetary policies, for over one decade, have inflated all asset prices around the world including stocks, bonds, real estate, vineyards, art, collectibles, antique cars, etc.... No one knows what any asset is truly worth anymore and humorously, the world remains awash in liquidity. Easy money encourages stupid investment. The Federal Reserve, and other global central bankers, have destroyed all price discovery.
Officials at the Federal Reserve and other central banks perform the bidding of the large Wall Street investment banks since they are rewarded with lucrative token speaking engagements once they resign from public life; a quid pro quo for their dovish loyalty to the privileged class. This is Crony Capitalism 101.
One-half of Americans do not own a single share of stock. The wealthy class are rewarded with riches far beyond their wildest dreams (due to the central banker Keynesian money printing schemes) while common folks suffer through one-decade plus of structural unemployment and high debt. Interestingly, the number of people holding three jobs is at an all-time record high. It takes two or three jobs for people to make the same income they did before the 2008-2009 financial crisis; dubbed the Great Recession.
Protectionism increases around the world as central bankers race to the bottom (competitively debase their currencies to gain an economic advantage but in the end only serve to slit each other's throats). Protectionism extended the Great Depression through the 1930's.
Capitalism is failing in the US for two main reasons; humans are corrupt and no transparency. That is all there is to it. The privileged class operate by a different set of rules than the common people. They are privy to all the insider information on legislation and companies and make money in securities effortlessly. Wouldn't you like to know how the game ends before it begins? You too could make a lot of money in a corrupt rigged system if you were one of the chosen ones.
Most people do not know that Congress is actually allowed to trade on insider information. That is why a lowly representative will go to Washington, DC, wanting to do good for his constituency, but in a very short time becomes corrupted as money is shoved into his pockets and leggy women whisper sweet nothing's in his ears while playing with his necktie. Why do you think nearly all of the representatives and senators inside the corrupt beltway are millionaires?
Typically, all governments and financial systems fail within 200 to 250 years or sooner due to human corruption and lack of transparency so America is overdue for a change/revolution of some sort. The 2020's may look a lot like, and rhyme with, the 1960's. Once the recession begins, it will likely quickly morph into a class war.
The divide between the rich and poor is at a five decade high and basically a one-century high. Payback will be a b*tch. The huddled masses are going to want to blame someone for their decade of misery which will have no end in sight once the recession begins and the wealthy privileged class will have bullseye's printed on their backs. The class war will likely become very ugly with violent individuals targeting CEO's, politicians and anyone that has the appearance that they are wealthy. There is a sad future over the horizon created by greedy humans. The wealthy will likely seek out gated communities for their own protection as the class war intensifies.
JPM CEO Jamie Dimon is now touting a line that companies should care more about people than profits. That is hilartious. Dimon is smart enough to see what is coming down the pike as well and he is getting out in front of it all. When the ugliness begins, and protesters begin showing up at McMansions, Dimon will be telling everyone that he feels their pain and has been on their side from the start; of course trying to save his and his crony buddies' skin. These people are so predictable. Dimon filled his pockets with money over the last 10 years and likely now worries that they all got a little too greedy. That is the thing about greed; even when you start to realize you are greedy, you cannot help yourself and you continue being greedy.
Starting a couple years ago, China placed limits on what any rich citizen could flaunt in public. They obviously see class war problems on the horizon and know that someone walking around in expensive jewelry and furs, driving a $100K Mercedez-Benz, will not be viewed nicely by a person scrounging for some bread to eat. It is all fascinating 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.
Keybot the Quant algorithm flips to the bear side yesterday before lunchtime at SPX 2873. Retail stocks and the NYA Index are the two key parameters that will impact stock market direction on Monday. More information is at Keybot's site;
Keybot the Quant
Keybot the Quant
Friday, August 23, 2019
SPX (S&P 500) Daily Chart; Sideways Channel; Federal Reserve Chairman Powell Speaks from Jackson Hole, Wyoming, USA
Look at that plate of spaghetti; I see a couple tomatoes in there. You can see the choppy whipsaw markets between the blue channel that is ongoing for the month of August. The EOM is next Friday. The lower bound of the blue sideways channel is 2822-ish; call it 2820. The upper rail of the blue channel is at 2945. Thus, obviously, bulls win hugely if the 2945 is taken out to the upside. Conversely, bears will celebrate if 2820 gives way to the downside. Between 2820 and 2945 is continued choppy noise.
The red lines show the stock market topping due to negative divergence, overbot conditions and upper band violations. The July top came with the ominous rising wedge pattern Keystone described at the time. The collapses form rising wedges can be quite dramatic and bloop, it was from 3000+ to 2820-ish in a heartbeat.
Note that the MACD line was weak and bleak when stocks took the positive divergence bounce (green lines) off the early June bottom. The MACD line likely wants price to come back down to 2720-2740 in the future.
The SPX tested the lows this month at 2820-ish and the green lines show possie d and oversold conditions bouncing price higher. The stochastics and money flow remain long and strong wanting more highs in price although the RSI sits dead-on the bull-bear dividing line at 50%.
Markets are waiting for Federal Reserve Chairman Powell to bring the tablets down from on high in Wyoming this morning. Powell will tell the traders how to trade in this sick world of global central banking in 2019. Thus, the stock market is a crap-shoot right now. If Powell coos dovishly (promising lots of rate cuts), stocks will catapult to glory, the VIX will collapse below 15, and the bulls will be singing happy songs into the weekend.
If Powell does not speak dovishly (adapting a wait-and-see approach and unwilling to proclaim a large number of rate cuts ahead), or perhaps tries to be too cute, creating confusion and angst, stocks will sell off. Charts will have to price in the Powell doctrine today and early next week. Note how the selling volumes far outweigh the buying volumes. There is distribution taking place with the smart money handing shares off to the dumb money.
The yellow arrows show the tight band squeeze that shot price southward. Tight bands indicate a huge move on tap but do not predict direction. The rising wedge, neggie d, overbot conditions and upper band violation indicated that down was the direction.
The lower band was taken out harshly in the downdraft so price needed to at least recover to the middle band, which is also the 20-day MA, at 2923, and price did accomplish this goal with the SPX sitting directly on this moving average and making a bounce or die decision. The upper band at 3030 is in play and may become real if Powell puts on his dove suit and flies above the adoring crowd today dropping money (talking dovishly).
Price is using that 100-day MA at 2910 as support the last three days so keep an eye on that important moving average; bulls win above while bears win below. S&P futures are up +10 with the VIX at 16.56 about 90 minutes before the opening bell for the US Friday trading session. Emperor Powell will make his decrees at 10 AM EST. 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 8:05 AM EST: China announces plans to levy tariffs against the United States. The US-China trade war festers; the wound is becoming infected. S&P futures drop -14 with the VIX spiking to 18.01. The bears cheer. F, GM and TSLA are punched in the face (auto makers). USD 98.33. Gold 1511. 10-year yield 1.60%. The VIX 200-day MA at 17 dictates a bull versus bear market.
Note Added Saturday Morning, 8/24/19: The bears slap the stock market lower yesterday after the US and China go at each other's throats over the trade war. Autos, retail and chips are beaten severely. The VIX explodes higher to 21.07 and settles at 19.87 so stocks collapse. The SPX finishes down 76 points, -2.6%, to 2847. LOD 2834.97. The 150-day MA resistance is at 2862. The 200-day MA support is at 2803. Note that both the closing and intraday lows have not ventured down to test the 2820-2822 blue channel bottom trend support line as yet. Price is in the neighborhood and will likely want to tap on this critical 2820-ish trend line to say hello and of course, make a bounce or die decision. The sideways, erratic, unstable, choppy whipsaw stock market action continues. Chairman Powell flapped his dovish wings and stocks rallied but President Trump and China are firing insults and more tariffs at each other sinking equities. Trump continues to denigrate Powell publically, even now calling for his resignation. Trump is the one who hired Powell and says he only hires the best people. During Powell's speech he said he, and the Fed, answer to Congress and the American people. King Donny does not like that; he requires everyone to kneel and kiss his shoes each day. Powell's comment likely got under Trump's thin skin causing him to lash out erratically yesterday. The Trump drama, instability and most of all, uncertainty, sends the stock market into a tizzy. Trump says President Xi is his friend yesterday but at the same time asks who is the worst enemy of America; Xi or Powell. No one knows what Trump will say or do next most of all he does not even know. Companies cannot chart a logical course forward on policies that change hourly.
The knock-down, drag-out, fight between bulls and bears continues all week long and Federal Reserve Chairman Powell enters the ring this morning to decide who wins. Powell will bring the tablets down from on high and tell global traders how to trade at 10 AM EST. Emperor Powell is in Jackson Hole, Wyoming, USA, with other crony central bankers colluding and communicating the next step in coordinated money-printing around the world. The wealthy elite class always protects itself above the common huddled masses.
The week began with that gap-down move in the VIX as the global central bankers place their jack boots on the throat of volatility. On Monday, the bulls push the VIX below the 200-day MA at 16.98-17.07 so equities are happy. The VIX moves inversely to the stock market (SPX) about 90% or more of the time. The bears battle back on Tuesday morning but the bulls slap them in the face again. The bears fight back again but then the gap-down move occurs on Wednesday morning the jack-booted central bankers crush volatility to pump stocks higher.
The bears were not giving up and jam the VIX higher on Thursday morning (yesterday) feeling proud that they are in control again. That did not last long as the bulls push the VIX below 17 again. The VIX is trading right now, three hours before the opening bell for the US trading session, at the short-term bullish, albeit ominous, 16.66 with S&P futures +6.
Of course the main event today is the Powell doctrine that will be laid out in the coming hours. The stock market wants to hear never-ending dovishness. It wants the global central bankers to keep printing money like madmen which inflates asset prices. This will give the privileged class time to exit lots of investments and let the huddled masses idiots hold the proverbial bag. This is the way the game is played.
Keep watching the VIX 200-day MA at 17; it tells you the stock market direction ahead. Bears win above 17 while bulls will keep choppy markets flat to buoyant between 15 and 17. Bulls will be celebrating record highs ahead if the VIX drops below 15. The beat goes on. Powell is at the free buffet right now wiping a jelly stain off his necktie. 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 at 8:09 AM EST: The VIX spikes above 18 now at 17.61-ish (bouncing around) above the 17 bull-bear demarcation line. The bears are dancing a jig of joy. China announces new tariffs against the United States so the US-China trade war deepens.
Note Added Saturday Morning, 8/24/19: The bears came to play on Friday aided by the deterioration of the US-China trade war. The VIX pops above 21 and settles for the week at 19.86. The SPX collapses 76 points, -2.6%, to 2847, in the Friday trade. LOD 2835.
Thursday, August 22, 2019
The bull-bear battle at the VIX 200-day MA at 17.01 continues with the bulls exalting themselves into the lead yesterday after volatility collapses below the 200. VIX drops so stocks pop. The VIX is currently trading at 16.22 jumping nearly +3% in the early going on Thursday morning 2-1/2 hours before the opening bell for the regular US trading session.
So the bulls have their chests puffed-out with the VIX on their side (below 17) but the bears are trying to spoil the fun. Stock market bulls win over the coming hours and days as long as the VIX remains below the 200. Bears will win in this time frame if the VIX moves above 17.
Keybot the Quant is on the long side these days, dealing with the choppy markets, and tracking VIX 14.99 as the key bull-bear line in the sand; call it 15 to keep it simple. Thus, according to the volatility parameter in the Keybot model, bears are in control in the daily and few-week time frame ahead if the VIX remains above the bull-bear line at 15. The stock market will eventually roll back over to the downside if the VIX remains above 15 and if this happens, the VIX will likely venture higher to test the 200-day again.
If VIX loses the 15 level, the SPX will be happily launching itself towards 3K again. Between 15 and 17, stocks will likely whipsaw and chop sideways. Stocks will fall apart if the VIX moves above 17.
When a critical moving average is broken, a back-kiss is typically in order. Hence, the VIX floats higher as this message is typed. The VIX may make a bounce or die decision in the 16.50-17.00 area. Back tests occur because price wants to make doubly sure that it is heading in the correct direction. If the VIX move lower is a fake-out bull trap, the VIX will quickly move back above 17 slapping the bulls in the face. If the stock market bulls are correct and the S&P 500 is on its way to record highs above 3K again, the VIX will collapse below 15 and the consumption of Fed wine will continue. 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 7:24 AM EST: VIX 16.03. S&P futures -1. Volatility sneaks a little bit higher maintaining a 16-handle after yesterday's close with a 15 handle so futures slip a tiny bit lower.
Note Added Friday Morning, 8/23/19, at 6:37 AM EST: The battle at the 200 continues. The VIX came up for a back kiss yesterday and ran to 17.68 to make for happy bears but then volatility fell on its sword and collapsed back below the 200. The SPX gains 8 points, +1%, to 2924 and the VIX finished at 16.68. Of course the market makers bounced it two pennies at the close so as not to print the infamous 666. So the back test was successful for the stock market bulls with the VIX remaining below 17. In the early going East Coast time, three hours before the opening bell for the regular US Friday session, the VIX is at, wait for it..... wait a bit longer for it ..... 16.66. S&P futures +6. All eyes are on Emperor Powell who speaks at 10 AM EST from Jackson Hole, Wyoming, USA.
Tuesday, August 20, 2019
Keystone highlighted the BPSPX in late July as the stock market topped-out. The BPSPX peaked at 76 so subtracting 6 percentage-points is 70. The 70% level is also a key bullish-bearish level for the BPSPX. Thus, the failure at 70-ish creates a market sell signal and the loss of the 70 level creates a double-whammy sell signal and whoosh, down she goes.
The near-term bottom a couple days ago is 46.20. The bulls need a six percentage-point reversal to create a market buy signal so that level is 52.20. The bears are fine as long as the BPSPX remains below 52. Bulls win above 52.
If the stock market sells off again and the BPSPX drops further, the 30-40 zone is critical since that will indicate that the stock market will need to recover and move higher. For now, the bulls are trying to boost the BPSPX and the next couple days are critical to see if the rally has legs, or not. During the big Monday up day, the trading volume was pathetic hinting at a lack of conviction. Of course, markets remain subject to President Trump's tweets, China's trade comments and central banker decisions and statements. 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 Thursday Morning, 8/22/19, at 7:24 AM EST: The stock market bulls pump the BPSPX to 50.60 call it 51 now only a point or so from victory at 52 when a market buy signal will occur. S&P futures, however, are fractionally negative two hours before the opening bell for the regular Thursday trading session so the bears are trying to curl the BPSPX lower.
Note Added Saturday Morning, 8/24/19: The stock market falls apart on Friday after escalation of the US-China trade war. The BPSPX drops to 49.80 so the sell signals remain in place.
Monday, August 19, 2019
The VIX 200-day MA is at the 17.04-17.07 level and decides whether the stock market is in a short-term bull or bear market. Do you think the 200-day moving average is important? Look at the charts.
The VIX makes a bee-line for this critical demarcation level after the opening bell for the regular session at 9:30 AM EST (the VIX actually begins trading at 3 AM EST). The VIX bounces on this first test of the 200 support so stocks retreat after the gap-up opening.
The VIX then rolls over again. At this point, the bears are feeling good that the 200-day MA support held. Bears win above the 200-day while bulls win below the 200-day. The VIX tests the critical 17.04-17.07 level again, bounces along, then whoosh (green circle). At 12:45 PM EST, the central banker's jack boots step on the throat of volatility driving stocks higher.
They jammed vol lower at the start of the fourth trading segment. Each day is split into six 65-minute segments beginning at the following times; 9:30 AM EST, 10:35 AM, 11:40 AM, 12:45 PM, 1:50 PM and 2:55 PM. Vol was jammed lower exactly at the start of the fourth segment; the trading robots step-in buying big blocks and the SPX pops.The trading volume today, however, was pathetic (little conviction for the upside).
The bulls are in clover as long as the VIX remains below the 200-day MA. You have to give it a day or two to see if price is fully committed, or not. Note how at the end of the day the SPX fell out if its joyous upside channel. The VIX, however, remains subdued and inside its downward-sloping channel, so stocks would be expected to remain buoyant. S&P futures are down -5 on Monday evening East Coast time.
VIX 17.04-17.07 tells the market directional story ahead; keep watching volatility. Other than that, its just another day in the rigged and corrupt markets. 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 on Tuesday Morning, 8/20/19, at 4:08 AM EST: The VIX is trading for about one hour and sits at 16.79 down slightly. The bulls dance with glee. S&P futures are up +4. Bears have zero hope unless the VIX climbs back above the 17.04-17.07 level.
Note Added on Tuesday Morning, 8/20/19, at 8:32 AM EST: VIX 16.74. S&P futures +3.
TNX 10-Year Treasury Note Yield Weekly Chart; 10-Year Yield at 3-Year Low Not Seen Since President Trump's Election; Positive Divergence Developing; Yields Oversold; Lower Band Violation; Yields Extended on Downside
There is lots of drama around the Treasury yields and the inversion of the 2-10 yield spread (yield curve) last week. Interestingly, the pundits proclaim no worries since although the inversion signal says a recession is coming, it may be many months even a year or two away. The Federal Reserve and other global central bankers have destroyed all price discovery in markets over the last decade. No one truly knows what any asset is actually worth anymore due to all the easy money and currency printing. The world remains awash in liquidity.
Folks pick up the cash laying around everywhere (low interest rates) and buy stocks, bonds, real estate, art, collectibles, vineyards, you name it, and stupid stuff, or expand their companies when the demand is not there. Money is free and the 'livin' is easy' as Ella would sing. The debt is not a problem as long as rates remain low. Of course when rates climb in the months and years ahead, people and companies will be drowning in the debt at the same time the assets, they foolishly invested in, are worth far less than the original price. Such is the path ahead for the Western world as crony capitalism crumbles.
The move lower in the 10-year yield is remarkable. The neggie d spankdown late last year was forecasted and explained by Keystone at the time and bloop, yields collapse as investors flock to the perceived safety of notes and bonds. Lower yields are a global phenomenon. The corrupt talking heads tell you all is fine and always point to anecdotal economic data to bolster their positive outlooks but the global pilgrimage to notes and bonds tell a different story.
A global slowdown is in progress and with the inversion of the yield curve, a recession is inevitable, it is only a matter of time (when). Analysts are touting past historical data on the yield curve inversions and recessions and say a recession remains far off, but these are not your grandfather's markets. These are Fed, ECB, BOJ and other central banker controlled markets for over one-decade running.
Perhaps the constant crushing of the short end yields by the Fed delayed the yield curve inversion by many months or even a year or two. By that calculation, wow, the recession could be now. No one wants to hear such comments when they are busy grabbing the central banker's easy money and buying stocks and bonds with both fists.
All that discussion above aside, yield is due for a dead-cat bounce and receives it this morning up 6 to 8 bips currently at to 1.62%. USD 98.19. S&P futures +28. VIX is at the 17.71 palindrome. President Trump was elected November 2016 and took office January 2017. Traders sold out of notes and bonds sending yields higher and that money went into the stock market. The pundits proclaim that inflation is here to stay but Keystone highlighted the negative divergence and topping behavior and yields receive the neggie d spankdown in early 2017. Yield fell into the falling wedge pattern, which is a bullish chart pattern during 2017 and bounced due to the positive divergence and oversold yield conditions in late 2017.
The pink arrows show the standard deviation lines squeezing in tight so you knew a big move was coming but direction was unknown. It was up. Again, in late 2018, as the stock market and yields were topping-out, the inflationists proclaim that inflation is here to stay. Wrong again. Keystone highlighted the ominous rising wedge pattern, negative divergence, overbot yields, upper band violation and max 100 positive Aroon at the time and called the top in yields, which occurred. Yields collapse along with the stock market as money left equities and went into notes and bonds driving the yields lower. Note how the collapses from rising wedge patterns can be quite dramatic; it sure was.
Yields tumble lower since Q4 2018, hesitate at the 200-week MA, trying to bounce, but then gave up the ghost losing the 200. The US-China trade war creates instability and negativity. People feel better about owning notes and bonds in troubled times. The yield curve inversion (2-10 spread) creates the downward flush in yield and what a sight it is.
As mentioned, a dead-cat bounce is expected and occurring now due to the positive divergence on the stochastics, MACD histogram and CCI. The oversold yield levels also create a bounce as well as the lower band violations and price is extended far below its moving averages so a mean reversion higher is needed. The red negative Aroon line is at the max 100 and has nowhere to go but down which means yield should bounce. However, note the weak and bleak RSI and MACD line. These two parameters want to see the yield lows tested again.
So an up-down move would be expected to get the RSI to turn possie d and another up-down jog would likely be needed to position the MACD line with positive divergence and thus creating the firm bottom in yield. So an up, down, up, down jog move is about a month or so of time for the bottom to be placed.
The ADX line shows that the upward move in yields was a strong trend in late 2016 but petered out in early 2017. The down move in yields during 2017 was never a strong trend. So yields recover in 2018 and the trend higher in yield, that excited the inflationists, was a very strong trend but that petered out as summer began. The huge down move is clearly a very strong trend as shown by the ADX catapulting higher to 50; that is a huge number. It hints that yields will likely want to stay lower for longer.
Summing up all of the above mumbo-jumbo and making sense of the spaghetti in the chart, the bounce in yield is expected but yield should roll back over to test the lows again over the next month. A more firm bottom for yield, on a weekly basis, appears to be coming in the late-September or October time frame. The chart can be monitored for any developments and changes. Treasury note and bond bears, inflationists, that expect lower prices and higher yields, will not be correct until the RSI and MACD line turn possie d; that will be the bottom.
The middle band is in play at 2.18% but it is falling sharply and will likely start to curl in that congestion zone at 1.75% to 2.10% which is an upside target. Yield has fallen so far you would think a test of the low in summer 2016 should be tested. This epic test may occur as the MACD line forms positive divergence announcing the bottom. Time will tell. Keystone has no positions either way here but a TBT long or TLT short may be on the table later next month or in October. 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.
Stocks are rallying after President Trump touts happy talk with the US-China trade negotiations. S&P futures are up +25 with the VIX down to 17.85 about 3-1/2 hours before the opening bell for the regular US Monday trading session. As the stock market rallies, simply watch the 200-day MA at 17.07. If the VIX drops below 17.07, the rally is real and has further legs higher for a few days. If the VIX remains above 17.07, the rally will quickly fade and stocks will roll back over to the downside.
The Keybot the Quant algorithm is on the long side and tracking VIX 14.85 as the bull-bear line in the sand. If stocks rally and the VIX drops below 17.07, the bulls will be happy and enthusiastic. If the VIX then drops below 14.85, more new highs are on the way for equities and the SPX will be headed above 3K again. If markets are rallying for several days but are unable to push the VIX below 14.85, then the stock market will roll over again to the downside and then you can watch the 200 again. Easy-peasy. 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 8:00 AM EST: S&P +32. VIX 17.51. The stock market bulls are singing, "Happy Days Are Here Again." However, as mentioned above, the bulls will need another 44 cents lower in VIX to prove that they actually have the beans to sustain the up move. Bulls got nothing unless the VIX goes sub 17.07. Semiconductors are bigtime important this week and greatly impacting stock market direction. NVDA is up +3% in the pre-market adding to the +7.3% gain on Friday. SMH pops +2.5%. XSD and SOX would be expected to pop. The chips are creating market buoyancy. Watch them closely.
Note Added 8:31 PM EST: After the dust cleared today, the S&P 500 pops 35 big points, +1.3%, to 2924 and the VIX drops to 16.88 below the critical 200-day MA at the 17.04-17.07 level. Keep watching it for a couple days to see if it holds, or not. The bulls are partying but the trading volume was pathetic.