Tuesday, September 26, 2023

YC2YR 2-10 Spread (Yield Curve) Daily Chart; US Yield Curve Dis-Inverting for 3 Months; -40 Bips Line in Sand Will Bring on Recession

The 2-10 spread, the yield curve, is dis-inverting again. While no one was looking, the US yield curve dis-inverts for the last 3 months.

Keystone says it is not so much the inversion that brings on recession as it is the hook pattern. Once the blue hook forms and the yield curve dis-inverts, that will bring on the recession and as it approaches and runs above the inversion line to completely dis-invert (the 10-year yield moves back above the 2-year yield), the recession will be guaranteed.

Note the many hook teases over the last year. Many thought the US would be in recession this year (including Keystone that still thinks that) as the yield curve started to dis-invert during December then thwack, the 2-10 spread was smacked lower again as conflicting inflation data and central banker intervention sends yields to and fro.

Another hook pattern started to form during the banking crisis this year in March and it looked like the recession was coming on fast with the steep ascent of the yield curve then thwack, the dis-inversion was halted at the red resistance line at -40 bips. Write this number on your forehead because it is a critical number going forward.

As the new blue hook attempts to dis-invert the yield curve again now, watch to see if the -40 bips level gives way to more dis-inversion and ultimately complete dis-inversion. A move above -40 bips will signal that the recession is at hand and a complete dis-inversion back above zero will confirm that the recession is fully in play. At that time, we find out if it is a soft or hard landing. Many of you will have plenty of time to watch the drama at home because you will be sh*t-canned at work.

The current dis-inversion behavior is obeying that upward-sloping purple channel. Typically, the first stab at -40 bips, should it occur, would result in a spank down. There is likely support now at the -60 to -65 bip range.

Current real-time yields this Tuesday Morning, 9/26/23, are; 2-year 5.12%, 5-year 4.58%, 10-year 4.50%, 30-year 4.62%. Thus 4.50% - 5.12% = -0.62% = negative 62 basis points (bips). Note that the 5-30 spread is a positive 4 bips and the 10-30 spread is positive 12 bips both are not inverted.

The initial yield curve inversion in April 2022 was fleeting amounting to only dipping a big toe in the water. The inversion hits again and deepens starting July 2022. Typically, a recession appears 6 months to 24 months after a yield curve inversion with an average of 18 months. The US is at 18 months now from the initial inversion and 15 months from when the July 2022 inversion started. The recession is in your neighborhood, peeking in windows, looking around for your house.

The yield curve is dis-inverting over the last few days as yields float higher so, by definition, the 10-year yield (longer duration) is moving up faster than the 2-year. The 10-year yield is sticky around 4.50% currently. Everybody and his brother on Wall Street calls for higher rates ahead.

In prior charts, Keystone lays out the scenario that if the stock market tanks, which the SPX weekly chart says it will going forward, the money leaving stocks will flow into notes and bonds sending yields lower. Under this scenario of lower yields, and continued dis-inversion, the 2-year yield would drop faster than the 10-year yield. No one expects this outcome. 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 Daily Chart; H&S (Head and Shoulders) Stock Chart Pattern

The US stock market that is the S&P 500, SPX, displays an ominous H&S (head and shoulders) chart pattern. A previous post highlighted a similar set-up with the SOX (chips). It is textbook so far.

The left and right shoulders have nice touches at the 4340 neckline creating a clean pattern. With the head at 46 hundo and the neck at 4340, the difference is 260 points. Thus, taking 260 away from 4340 sets a downside target at 4080 if the 4340 neckline fails.

That downside target at 4080 would get attention especially when Wall Street is singing in unison that the year will end with the SPX in the 4600 to 5000 range or higher. If the H&S plays out, the analysts will only be off by a thousand points.

When the neckline fails, a back kiss is expected since it is such an important line in the sand. Price comes up yesterday for the back test sitting at the neckline at 4337-4340. The SPX must make a bounce or die decision now either shunning the H&S and instead bouncing and beginning a big rally higher again, or, dying from here and collapsing placing the low 4080 target firmly on the table. Interestingly, S&P futures are deteriorating overnight now down about -25 points about 5 hours before the opening bell in the United States for the regular session (potentially dying).

The thin purple lines show important price support levels on the way down. That orange circle is a big gap that will need filled at some point forward and of course when you mention gaps you must say that it is big enough to drive a truck through it.

The 4050-4170 congestion range from April and May serves as a big landing area if the H&S failure starts kicking the collapse in price into high gear. There is lots of fun ahead. The SPX weekly chart indicators are weak and bleak wanting lower lows in price going forward on the weekly basis so this metric says there is a high likelihood that the H&S will play out.

If price bounces, watch the gap above (orange circle), that is big enough to drive a truck through, because a brief 'bounce' rally may occur from the neckline and fill that gap, up to 4400, only then to roll over, fall through the neckline again and die going forward. You simply have to watch how the charts develop and they will provide the answer ahead of time.

The ole Wall Street adage, "Sell Rosh Hashanah and Buy Yom Kippur," was right on target this year. If you sold on 9/15/23 and covered yesterday during the rally, you are a happy camper. It is likely only coincidence that it worked out successfully. The saying, if memory serves, came from the many Jewish traders that would step away from the stock market during this important religious period, and then return on Yom Kippur with cash in their pockets ready to buy stocks. Nowadays, kids are trading stocks in their underwear in Mom's basement so Jewish traders taking a few days off does not have the same impact now.

Watch for the bounce or die decision today from the 4340 neckline. A bounce would hint that the gap above at 4375-4400 may need filled. If price dies from the neckline today, that is an ominous development. The H&S pattern will be flashing red signals and anyone long the market will be clenching their buttocks. Simply watch the charts and they will provide the answers going forward. 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.

Monday, September 25, 2023

SPX S&P 500 and BPSPX Bullish Percent Index Daily Charts

The BPSPX will reverse six percentage-points to the upside to confirm a stock market rally but the chart shows lower lows occurring down to 43. Typically, a level of 35-ish identifies a key and important bottom in the stock market. You can see the October low was an easy call for a substantive rally ahead.

Ditto the March low during the banking crisis when the Federal Reserve stepped-in in to save the day in the rigged crony capitalism system (do you understand that capitalism does not exist or are you a stupid twit?). Protecting the privileged elite and the upper middle class sycophants that service the wealthy is all that matters in America.

The bullishness in the stock market is rampant this year and traders are anxious to buy dips. The December lows and June lows in the BPSPX were bottoms in the stock market with the dip-buyers tripping over each other to buy equities.

Thus, a bottom is coming in stocks but it is not here yet (big green circles). The SPX daily chart indicators are starting to form positive divergence to mark a bottom in that time frame but it is not quite there yet. The bottom in the SPX on the daily basis should occur this week.

The ole Wall Street adage, "Sell Rosh Hashanah and buy Yom Kippur," is in play and traders sold the markets over the last week. Yom Kippur is today so perhaps the bulls will want to dip their long toes in the water to see if the coast is clear. S&P futures, however, are becoming soggy. The full moon is Friday which may create buoyancy in stocks. The EOM is Saturday.

The bad news is that the chart indicators on the SPX weekly chart are weak and bleak wanting to see lower lows in price moving forward on the weekly basis. It means more pain is ahead for all of you long the stock market. In the near-term, however, stocks will likely bounce as possie d sets up in the daily time frame but after a few-day rally, stock prices will roll over and die again to honor the weakness on the weekly basis going forward. In technical trading, you are playing multi-dimensional chess and the dimensions are the time frames (minutes, hours, days, weeks, months, quarters, years).

If you go long the stock market, you need to watch the BPSPX to see if it prints a six percentage-point reversal to the upside to confirm you are correct. If stocks rally but the BPSPX does not reverse by 6 points, the trade will reverse and stocks will fall again since the BPSPX would not have blessed the rally.

On trading, you can use the possie d in the daily time frame to time the bottom in the SPX this week and play it with a quickie long but do not marry the position since the SPX weekly chart remains weak and bleak. On the weekly basis going forward, the short side is a better place to be so the assumption is that the BPSPX will likely move down to 35 or lower before she wants to reverse with a strong rally (as compared to the coming rally on the daily basis that will not last too long probably only for a few days). 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.

Sunday, September 24, 2023

The Keystone Speculator's Inflation-Deflation Indicator

by K E Stone (Keystone)

The Biden inflation is a hot topic these days. Sleepy Joe's war on America's energy complex for the sake of the stupid glorified golf carts (EV's) is a sad commentary on the country. Jackasses wedded to the misguided climate change political narrative destroy the backbone of America. Stopping inflation is child's play. Reopen the oil fields that Biden shut down and voila, inflation will disappear. Fuel (oil, gasoline, natural gas, coal, etc..) makes the world go round.

Americans are too corrupt and greedy nowadays to do what is right for the nation. Instead, they pledge allegiance to their political tribes placing that narrative and agenda ahead of what is best for the country.

The Biden inflation is a moon-shot. The indicator goes from deflation to inflation in one-year's time. The peaks in inflation are May and June of 2022. You probably realize that this year you are not that vocal about inflation and higher prices than you were during the summer of 2022. However, inflation is in the daily zeitgeist again as prices and yields rise.

Oil is at and above 90 bucks a barrel creating the latest push higher in inflation. Inflationists and deflationists battle each day spewing talking points and cherry-picking data to try and bolster their narratives. You can clearly see in the chart above why analysts are having a hard time at assessing inflation. There are many fits and starts and reversals in direction over the last couple years.

The Keystone Speculator's Inflation-Deflation Indicator is in NEUTRAL territory on the verge of breaking above 3.1 to signal inflation ahead (like summer 2022).

The Keystone Speculator's Inflation-Deflation Indicator sits at 2.99, call it 3.00 over the last few days, at Neutral teasing a foray back into inflation land. The United States has not seen disinflation since 2021.

President Biden and Congress pass massive COVID-19 spending bills in 2021 throwing money out to Americans like a fireman tossing candy to children during a parade. Trump was also greasing the skids in 2020.

At the same time, in 2020 and 2021, the Federal Reserve turned up the money-printing dial from from heinous to disgraceful. The money-printing was so obscene it would make Caligula blush. The Fed turns the money-printing dial to 11 a la Spinal TapChairman Powell and Treasury Secretary Yellen toss money to Americans from a helicopter piloted by former Fed Chairman Bernanke.

Worse, creating the trifecta of the inflationary backdrop, is Biden's stupid misguided climate change agenda hacking the vital oil, gas and coal industries to death while promoting windmills, solar cells and glorified golf carts (EV's) that do not work in natural disasters and cause more ecological waste (mining and battery disposal) than regular gas-powered cars.

The factors above are the inflation fuel and the pent-up demand for goods and services after the lows of the pandemic lights the fuse. Higher oil, gasoline and fuel drives up the costs of all goods and services.

The chart above generally 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 destroyed price discovery, and the disruptions of supply lines due to the pandemic, the goods and services inflations have been on separate paths.

The thinking was that services inflation would roll over and come down to join the lower goods inflation, however, what may occur is goods inflation floating higher to join services inflation. The trend is higher for this year mimicking the move in the US stock market.

The oil, coal and natural gas industries are the energy backbone of the United States. It takes a high degree of stupidity, and corruption, to purposely crash these industries, adding to the already out of control inflation due to the Congressional spending spree (fiscal stimulus) and the Fed's money-printing (monetary stimulus). The so-called green energies are not ready for primetime so Biden sells America down the rabbit hole of despair. At the same time, Russia's dirtbag dictator Putin continues the Ukraine War further exacerbating worldwide inflation.

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 97.56 with a yield at 4.41%.

Commodities are in the numerator (top number). The CRB Commodity Index is at 285.99.

The Keystone Speculator Inflation-Deflation Indicator

CRB/10-Year Price = 285.99/97.56 = 2.99, call it 3.00 over last few days

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

Granted, the calculation above is focused 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 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 provides way too much stimulus creating a lazy workforce that would rather sit home than work. The staffing shortages are a headache for employers that want to get back to normal but cannot since there are not enough workers to fill positions. 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 inflationThe 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.

Interestingly, as economic activity slows in the US, and some companies begin layoffs  in 2022, the wages are starting to stagnate again, helping create the current top in inflation since June 2022.

The inflation over the last year is mainly due to energy, food and rent/utility costs. People notice higher gasoline and food prices more than other price changes. The inflation indicator falls into the neutral range as the path forward becomes a guessing game.

Oil will have a big impact on the path forward. Everybody and his bro call for oil above $100 per barrel but that typically means it will not get there. Wages are moderating which will keep inflation at bay. Inflation will eventually run far higher in the years forward and bring on hyperinflation but is now the time?

Just think, in a few years, the chart above will be way up there in the hyperinflation zone. That is when the Dow will be over 50K, the SPX will be 10K or more, a gallon of gasoline will be $10 and more, a loaf of bread will be $10. The stock market will be hugely higher, however, the US dollar will be toilet paper. That will be a whole new set of challenges when the velocity of money (money on reserve at the banks that suddenly floods into circulation) kicks in.

Inflation in 2022 matched 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. Here we are over one year later and it is holding.

Watch the indicator closely over the next month to see if it starts calling for inflation again. It would not be surprising to see it roll over as oil and commodities retreat and the economy softens. It would be a big deal falling into disinflation again since that would then open the door to deflation. If we start on the path lower to disinflation and deflation, that would likely occur with the US stock market selling off in force a la 2008/2009 and 2022.

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. 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 with higher stock prices (at the expense of the rest of society).

The chart has to make a decision on what direction to move out of the neutral territory. A move higher with more inflation and higher prices means the wealthy class keeps spending money, mainly on services, to keep the economy afloat, or, a move to disinflation occurs if the economy begins falling apart and layoffs rise. 

US Unemployment Claims Weekly Chart; Half-Year Sideways Malaise Continues Delaying Arrival of US Recession

The US Jobless Claims from the BLS are a key metric for assessing the onset of a US recession, or at least they used to be. The weekly data can be scattered and jumpy so the 4-week moving average (MA) is important in smoothing out the noise.

US Unemployment Claims have trended higher for the last year (red channel) despite the news media reporting the whole time that all is groovy. However, the subtle rise in claims does not usher-in a recession as would be expected.

Instead, this summer, during the AI orgy, as the stock market catapulted higher, businesses decided it is better to keep the employees on the payroll since the economy is still chugging along fine thanks to the spending by the upper middle class and wealthy elite that raped America's crony capitalism system for all its worth over the last decade and more.

You can see claims peak in the summer as the good news about the economy becomes rampant with rising stock prices. The green channel shows how claims are now in a descending trend for the last 3 months. This is likely one of the main reasons you hear the analysts on television proclaim that there will be no recession and only a soft landing exists in our future.

But not so fast. The purple channel, yes, the chart is starting to look like a bowl of spaghetti, is also now in play highlighting the overall sideways behavior in claims for the last half-year.

After over a decade of Federal Reserve money printing and more recently, the COVID-19 pandemic super stimulus parade, the wealthy class and companies remain flush with cash so they can afford to keep employees around even if they spend half the day surfing the internet, talking on the phone, updating the filing system or cleaning-up the copy machine room.

Charging time to overhead is the kiss of death. You always want the company to make money off of you being there. If you are doing busy work these days and billing time to overhead tasks, plan that you will lose your job and be laid off, sh*t-canned, in the weeks and months ahead. Companies will only keep your unproductive arse around for so long; after a while, or if business does not pick up as expected, they will drop-kick your butt into the dumpster at the far end of the parking lot.

Claims fell to two hundo thousand on Thursday, 9/21/23, the last data point on the chart, and the 4-wk MA is at 217K. It will be a big deal on Thursday, 9/28/23, if claims come in sub 200K. It will show that this recession indicator is completely busted and useless these days due to the many years of obscene Fed money printing (monetary stimulus) and Congress's unabashed fiscal stimulus spending.

The interesting aspect of companies keeping workers on the books even if they are unproductive (for fear of laying them off and then not being able to hire them back if business improves) is that when the recession hits, and it will hit, the spike in claims will be a spectacular event.

Not spectacular from the standpoint of people losing their livelihoods, but rather the magnitude. Using claims as a recession indicator will regain its value when companies realize that the US is sliding into troubled times. The increase in claims will not be subtle like over the last year. Considering that people are holding on to workers, when they see the light that the good times are not coming, the claims will likely catapult higher like a rocket. There will be no ambiguity, claims will likely shoot to 300K in a heartbeat leaving the entire chart in the dust.

Until then, times are groovy and everyone is walking along in Itchycoo Park. It's all too beautiful. Let's see. Something else is of interest from the perspective of Management 101; holiday layoffs. Businesses never want to sh*t-can employees around the holidays. The company receives bad publicity and their reputation may be damaged when they throw little Timmy, that is confined to a wheelchair, out into the street days before Christmas.

The holiday season is Thanksgiving around the third week of November, Christmas on 12/25/23, and New Years. You can lump Halloween in there since that kicks off the move into the holiday season. Thus, if you are an employer, you have to now decide if you want to keep that unproductive employee on the payroll into the new year.

Typically, if you get laid off the second week of November or later, the company is going to be called every name in the book. How can they be that uncaring to kick people out into the street before the holiday? To avoid the bad reputation risk and handle the situation smoothly, companies will lay off workers the first week of November or sooner. The last week of October would be a good time to can folks since they could not complain as much that it was near the holidays.

Companies realize that if they keep the dead weight around hoping for business to pick-up, and they are keeping those workers into mid-November, they will have to fork over all that holiday pay into the new year. If business is shaky, you do not want to commit to all that outlay of expenses for many weeks hoping the economy improves. It may be time to cut bait.

What does all this windbag talk mean? What it means is that if you see an increase in claims, it is coming over the next 5 weeks. If the claims remain benign into the November Rain, Slash's crying guitar is unforgettable, the soft landing people will have something to hang their hats on and it may become a reality.

If you have been doing busy work at your job, and think that is fun getting paid for basically standing or sitting around all day, you must understand that you will probably be canned over the next 5 weeks. You would be smart to diligently look for a new job now and jump ship before it hits the fan. Companies are not going to let your deadbeat arse come into work each day to lay around into the new year.

Using Unemployment Claims as a recession indicator may be a bust due to the sick direction of America's crony capitalism system especially in recent years. The next couple months, especially the next 5 weeks, are going to tell a lot about the labor picture.

One more thing to chew on is chips. No, not potato chips, semiconductors. The US has been in a housing recession all year long and a manufacturing recession for many months as well and this has not brought on a recession. That is because of the new kid in town; chips. A chip is in almost every product these days.

Semiconductors and Doctor Copper are key indicators in this modern-day rather than the old school housing and autos (copper was always key because the two biggest uses are housing and autos and this only increases due to the electric vehicle follies). Semiconductor stock charts are heading lower for the last couple weeks and NVDA is not as joyful as it was in the summer. Watch the chips and tech sector.

A lot of you tech workers and programmers that think your job will last forever and the company cannot get by without you (because the boss told you this) are in for a rude life awakening. Many of you are *ssholes and deserve what is coming at you. 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.

Saturday, September 23, 2023

The Keystone Speculator's Housing Market Indicator Chart Signals US Housing Recession in 9th Month Starting the 10th Month

Happy Autumn. Keystone is never invited to the Fall harvesting picnics and Halloween parties because he always brings the wet blanket. The US housing market is in a recession for 9 months, it started at Christmastime, and days away from starting the 10th month.

Conditions worsen for every month thus far as verified by the red and green moving average lines diverging now 82 units apart. The rate of change month-on-month has slowed for the last set of data last Tuesday but the bottom line is that the housing recession worsens.

However, it is different this time. The huge amount of Fed and Congressional liquidity jammed into the market during the COVID-19 pandemic creates the inflation problem and sends house prices to the moon. The low mortgage rates for 14 years, because the Fed made it that way enriching their wealthy friends and powerful masters, has created low inventories in existing homes for sale. People want to stay put since their mortgage rate is small compared to today's rates now pushing 5%, 6% and 7%.

In addition, wealthy cash buyers are propping up the housing market over the last year enriched by the Fed printing money and the Congress spending money like drunken sailors. These wealthy buyers are purchasing homes and having homes built for cash. The home builders enjoyed a big rally in their stocks because of the wealthy buyers walking into the office, slapping $500K in cash on the table, and telling the builders they want a McMansion with granite counter tops.

The dirty truth, and there is always dirty corrupted truth behind everything you hear in today's corrupt world, is that these wealthy buyers are a Motley Crew (Crue). Let's take the Harley's out for a ride, boys. 

Anyhoo, back to the dirty truth. The majority of wealthy buyers supporting the housing market are the CCP (communist China leaders), Arabs (decreasing oil supplies to send prices higher and make more money), although I guess Arabs is no longer an accepted word but Keystone does not pay attention to such dribble, and US gangs and Mexican cartels (making money off drug/fentanyl trafficking). Don't you want these corrupt and criminal folks as your neighbors? We need Oliver's Army.

One in five homes are purchased by corporations (that also account for the cash buyers) a disturbing trend. People are moving to states such as Texas and Florida also creating enthusiasm in the new home market but this activity should fade over time. The wealthy house-buying does not last forever and it is beginning to show in the data. Builders are now offering incentives. Commercial real estate remains a growing problem; watch the activity at strip malls.

In July, Keystone told you the homebuilder stocks were topping-out due to negative divergence, and they did. TOL recovered for a double-top but that was an even easier top call due to the glaring neggie d. KBH, DHI, LEN, TOL and the XHB ETF all peaked in July as forecasted.

The US housing recession is now finishing its 9th month, starting the 10th month, with the indicator lines diverging from each other (worsening). Here is a link to the prior housing market article.

Four days ago, US Housing Starts are down to 1.283 million not seen since July 2020 over 2 years ago! The business media did not say a word. Analysts are picking their noses. Folks, Housing Starts are at 2-year lows! In addition, the Housing Starts data has been revised lower for every month this year except February which was revised higher by only a hair. Housing Starts revisions are down for the last 6 consecutive months so even the low 1.283 million will likely be revised lower in October. 

Loan rejections are at a 5-year high. Put that in your pipe and smoke it. Sounds like the corporations will buy even more homes (the military-industrial-corporation complex). Most Americans are rubbing two nickels together to try and make ends meet.

It is different this time because the ongoing housing and manufacturing recessions should have already sank the US economy into recession. There is a new game in town and that is semiconductors. Actually, chips have led the stock market for a couple decades and the importance of chips, and now AI, dominates the path forward for stocks and the economy (i.e. when the recession will hit).

Semiconductors have broken down over the last 2 weeks sending the US stock market south. Banks, retail stocks and other important sectors follow the chips down the rabbit hole. Now that the new kid on the block, the chips, a chip off the ole block, has given up the ghost, the sickness in housing and manufacturing should kick-in more negativity heralding the arrival of the US economic recession that has been spending time this year hanging out with Godot. 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.

Thursday, September 21, 2023

NYA NYSE Composite Weekly Chart with 40 MA Cross; Cyclical Bear Market Begins Unless Bulls Can Reverse the Negativity

Keystone's two most important long-term stock market indicators are the SPX 12-month MA cross and the NYA 40-week MA cross.

Today is a big deal because a failure occurs with the NYA 40-week MA cross throwing the US stock market into a cyclical bear market pattern going forward. The NYA 40-wk MA is at 15622 so write this number on your forehead so you do not forget it. The NYA collapses into a cyclical bear market today closing at 15601.

The bulls can easily reverse this extremely negative development for the stock market but time will tell if they can. The battle may continue for a few days or week or two before a clear winner emerges. All the Wall Street anal-ysts have revised their SPX forecasts higher so they are firmly in the camp that the NYA will bounce from here and never touch the 40-wk MA again. Do you think they are correct?

Watch NYA 15622 like a hawk since it tells you who wins going forward. If the negative cross remains verifying a new cyclical bear market, the next step is to watch the SPX 12-month MA cross. If that fails, the cyclical bear market is guaranteed and stocks will be facing a bloodbath.

The SPX 12-mth MA is at 4181 with the SPX at 4330. If the bears can send the S&P 500 only 149 points lower, there will be Hell to pay in the US stock market and an October crash will be in play. The fun starts with the NYA 15622 bull/bear line in the sand so keep an eye on it. 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 9/23/23, Saturday: The NYA battles at the bull/bear line in the sand at 15622, that dictates a cyclical bear market ahead, as expected. It is Rock'em Sock'em Robots and the bears win the Friday battle with the NYA finishing the week at 15570. Expect more drama next week.

USD US Dollar Index Daily Chart; Golden Cross; Overbot; Rising Wedge; Negative Divergence

The US dollar is topped-out on the daily basis just like the dollar/yen currency pair previously posted. Of course, the BOJ decision is pending and may delay the pullback. Right now, on the daily basis, the dollar should drop, yen should pop, and dollar/yen pair drop.

The red rising wedge is bearish. Stochastics are overbot agreeable to a pullback. Price prints the higher high and all of the chart indicators are neggie d (red lines) out of upside fuel and wanting to see a spankdown occur. The dollar will drop but the only thing that can alter this picture is the BOJ or Fed talk.

The gold circle shows a Golden Cross. The skies part. Angels appear. Sinners sing Hallelujah. A golden cross is a glorious event that is supposed to bring tidings of great joy and prosperity. The Death Cross is the evil twin that is supposed to usher in doom and gloom.

Every time the golden or death crosses occur, Keystone has to explain the pattern since everyone gets it wrong. Are you ready for some Golden Crosses 101? The golden cross occurs when the 50-day MA crosses above the 200-day MA and conversely, the death cross occurs when the 50-day MA stabs down through the 200-day MA.

When a cross occurs, the media goes into a tizzy treating the crosses like gospel professing guaranteed happiness ahead for stocks if a golden cross occurs or sad selling if a death cross appears. Not so fast. It is more nuanced than that. The way the patterns actually work is that a move opposite will occur when the cross occurs and the outcome will only be as advertised if the cross remains in effect. Huh? Do you understand? Uh-huh.

For the golden cross for the greenback above, price would now be expected to drop and pull back down. It takes a long time for the 50-day MA to curl higher and then poke up through the 200 so price needs a rest and it typically pulls back down when the cross occurs. This pullback lasts a few days or week or two and then price will recover again. The trick is to keep an eye on the cross. If price then recovers and starts trending higher again and the golden cross remains in effect, that forecasts happy times ahead for stocks (you receive the golden cross blessing).

However, when price pulls back when the golden cross occurs and say the drop is very severe and the golden cross rolls over into a death cross negating itself, obviously that would not forecast a rosy path forward. This is why you cannot make the blanket statement now that all is rosy going forward for the US dollar because a golden cross occurred. You have to watch the pullback expected now due to the golden cross, and the chart technicals discussed above forecast a pullback, and make sure the golden cross remains in effect, if you are a dollar bull.

Keystone is not playing long or short in the currencies right now. Central banker decisions are creating drama this week. 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 9/23/23, Saturday: USD 105.58.

SOX Semiconductors Daily Chart; Head and Shoulders (H&S); Potential Island Reversal; Gaps; Lower Band Violation; Aroon Negative Cross

Semiconductors are taking the pipe. Semiconductors are the key stock market indicator along with Dr Copper. Housing and autos used to matter, also trannies, but they take a back seat to chips nowadays. The US housing recession continues for 9 months (only wealthy cash buyers are active), manufacturing remains in a recession, and the Dow Jones Transportation Index (TRAN; DJT) is in a 2-month downfall. No one cares. It is Strange Days and even the word 'trannies' means something different now.

Nonetheless, semi's are at the top of the heap now. For decades, the chips lead the upside in the US stock market and technology sector. Almost every product made nowadays has a chip in it. The AI hype only serves to fuel the semiconductor fever. Independent Taiwan is a major focus since they produce a lot of the advanced chips and technology and the sick communists, Dictator Xi and the CCP on mainland China, want to take control of the island nation like they did to Hong Kong.

So that is some of the backdrop of the semiconductor arena as the SOX daily chart prints a potential H&S (head and shoulders) top. There are a couple left shoulders but the H&S pattern clearly jumps out at you. A couple of nice necklines fit the pricing data one at 3486 and the other at 3400. The head is at 3870.

Thus, 3870-3486=384, take it away from 3486, for a downside target of 3102 (blue line) if the 3486 fails. The 3486 failed and interestingly, that is where the 100-day MA crossed as well so that failure is a big negative for chips going forward.

Taking 3870-3400=470, take it away from 3400, for a downside target of 2930 (purple line) if the 3400 level fails. Price is deciding now if it wants to give up the 3400 support and neckline (bounce or die decision).

Price prints a lower low, slightly, and that allows an assessment of the chart indicators and you can see that the histogram, MACD line, stochastics and ROC are positively diverged, wanting a bounce in the daily time frame, but the RSI remains weak and bleak wanting further lows before it bounces. The MACD and ROC also have momo in the very near term to the downside. S&P futures are weak this morning so watch the chips since a lower price may pull more chart indicators to the negative side delaying the relief rally in this daily time frame by a couple days.

SOX is close to bouncing in the daily time frame but not quite. Perhaps a drop today and tomorrow will set the stage for a relief rally but the weekly chart is sick wanting more price lows on the weekly basis. Thus, when the chips start to rally on the daily basis, perhaps by the end of tomorrow, or starting early next week, the multi-day rally after that will fizzle and lead to lower lows for SOX for the weeks forward.

The orange circles highlight gaps big enough to drive the proverbial truck through. They will need filled at some point. With the big gaps higher in May during the AI orgy, the SOX is on an island above 3400. There is the potential for an island reversal pattern where, within only a couple days, price may plummet like a rock down to the blue line. That would get everyone's attention.

Price has violated the lower band at 3408 so a move higher (recovery rally) to the middle band, also the 20-day MA, at 3566, is on the table. The 20 is rolling over lower so price may come up to meet it at the confluence of the 100-day MA at 3508, so perhaps a relief rally to 3520-ish where the SOX will then roll over and completely die on the weekly basis.

The pink box for the ADX shows how the rally higher was a strong trend during June but petered out in July. The SOX is dropping for a couple months but the ADX is only at 17 not yet identifying the downside as a strong trend lower. Once the ADX moves above 27-ish, which it likely will considering the weak weekly chart, that will signal that the trend lower is a strong trend lower.

The Aroon performs the negative red cross so the bears are in charge in chip world. 100% of the bears believe that chips will continue lower forever. Over one-half of the chip bulls still believe that semiconductor stocks will continue higher going forward. These are the dolts that will buy the dip over the next couple-few days.

You can adopt the same analysis as you review the charts for SMH and XSD. Of course, stocks such as INTC, AMD, NVDA, MRVL, GOOGL, MSFT and AAPL will impact the chip arena. Keystone does not hold any positions long or short the chips right now and probably will not play the coming bounce in the daily time frame since it will require nimbleness due to the weak weekly chart (do not marry the position if you play the pending rally on the daily basis). The play may be to wait for the bounce, let the rally play out in the daily time frame to bring price back up for neckline back kisses and perhaps the recovery to 3520, and at that time, say early October, as the daily chart and 2-hour chart go neggie d, shorts against the chip sector would be in order. 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 9/21/23, Thursday Morning, at 9:54 AM EST: SOX pukes to 3355 levels not seen since May. The 3400 neckline fails. ARM loses an arm.

Note Added 9/23/23, Saturday: SOX 3365. As the ole saying goes, 'the chips are down'. SOX loses -3.2% this week with a low at 3337. SOX loses its shirt, and socks, dropping from 3875 to 3337, a -14% crash, in only 7 weeks. If chips are sinking faster than Keystone's jokes on open stage night, and virtually every product nowadays has a chip in it, what does that mean? Semiconductors led the US stock market to ruin in early 2022 beginning the multi-month collapse.

Wednesday, September 20, 2023

USDJPY US Dollar/Japanese Yen Currency Pair Daily Chart; Overbot; Rising Wedge; Negative Divergence

The dollar/yen currency pair is topping-out right now in real-time on the daily basis. You can see price moving ever higher but the chart indicators are all in negative divergence (red lines) wanting to see a smackdown.

The 20-day MA is a logical downside target to start at 146.95. The 20-week MA support is at 142.76. There is solid price support at 146.38-146.52. The neggie d is nasty so a move lower to test the blue line at 146.50-ish is likely on the table.

The weekly chart is also setting up with neggie d so the dollar/yen is topped out on the daily basis now and the weekly basis may follow suit if not, the USDJPY pair may muddle along for a few days then begin dropping to begin a multi-week move lower.

Of course the man of the hour, Chairman Powell, steps on stage this afternoon after bringing the tablets down from On High, and this drama will dictate any tweaks to the path forward. 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 6:46 PM EST: Federal Reserve Chairman Powell does not hike this time but the Fed may hike once more at one of the last two meetings this year. Dollar/yen catapults higher to 148.10, then drops to 147.75 then rocket launches to 148.35 a couple hours ago. Dollar/yen is now at 148.28. Give the chart a day or two to absorb the Fed news and it should set up the same and begin a spankdown on the daily basis. The Fed joy likely has extended the top on the weekly basis to a couple weeks or so out. Let it top-out on the daily chart above and then as it begins dropping take a closer look at the weekly chart to confirm what is happening in that time frame.

Note Added 9/21/23, Thursday Morning, at 6:43 AM EST: The central banker decisions around the world continue impacting currency markets. Dollar/yen 147.90. USD 105.43.

Note Added 9/23/23, Saturday: USD/JPY 148.37. USD 105.58. XJY (yen) 67.44.