SPX Monthly Chart with 12 MA Cross -- Secular Bear Market

The EOM provides another month-end print. The secular bulls needed an SPX 1281 print today to undo the secular bear market currently in place, but, despite the strong last day rally, it did not. Thus, markets remain in a Secular Bear Market.

A secular bull market was signaled when the bombs started dropping for the Iraq War in March 2003. The secular bear was locked in as of October 2007 as markets turned down due to the negative divergence. In march 2009, after the waterfall slide note how there was no positive divergence to bounce the index, the index was artificially bounced by QE1. Thus, there is more than likely unfinished business at that 2009 low. The markets were then launched into a secular bull that started to falter in summer of 2010, but Chairman Bernanke stepped in to save the day with QE2 which popped the markets into the trend change this year.

At the spring 2011 top this year, the MACD histogram, stochastics and money flow were all negatively diverged spanking price down but note how the RSI and MACD line wanted a little more price buoyancy--which we are now receiving. The secular bear market has been in place for four prints now, August thru November. Watch the 12-month MA at 1281 like a hawk moving forward. Price is now only 34 points away. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your finanical advisor before making any investment decision.

Keystone's Midday Market Action 11-30-11

Retail, utilites and lower volatility are strongly supporting and lifting the broad markets. Thus, other sectors must be referenced to gauge further market strength. Keystone's algo is currently highlighting four new sectors to watch; semiconductors, financials, copper and commodities. If the SOX, semi's, now at 365.84, moves above 370, four points higher, the markets will accelerate upwards.

If XLF, financials, now at 12.48, moves above 12.75, the markets will accelerate upwards. JJC, copper, has joined the bull camp now.   JJC is now at 45.66, firmly above the 45.25 level that serves as a bullish-bearish line, so this is adding bullish thrust for the broad markets. Watch JJC closely the remainder of the day.  Lastly, CRB, commodities, now at 313, watch the 322 level which would signal more broad market bullishness.  Copper is the key today driving markets higher. Thus, the four sectors now supporting the bullish strength are utes, retail, lower volatility and copper.

Note Added 11/30/11 at 2:35 PM:  Wild day today.  JJC (copper) remains elevated so all systems are go for bulls.  Semiconductors, the SOX, jumped into the bull camp for a little while but then moved back out.  SOX is now printing 370.07.  If SOX moves above 370.50 broad markets will run a lot higher into the close.  Financials are running.  XLF now printing 12.67, if the 12.75 level is achieved, only 8 more pennies, the broad markets will take another big leg upwards into the close. Thus, the bulls are driving the bus now, comfortably motoring along with no worries, watch JJC, SOX and XLF to determine broad market direction going forward.

Note Added 11/30/11 at 3:02 PM:  XLF inching higher now printing 12.72. A couple more pennies and this will open up the flood gates for the broad markets to move higher.

Note Added 11/30/11 at 3:16 PM:  There she is, XLF at 12.74, close enough. As long as this 12.74 holds, or higher, then the broad markets should run higher now into the close. High drama.

Note Added 11/30/11 at 3:19 PM:  SOX popped up to 370.50 as well but got spanked back, keep an eye on that. The markets may experience a wild orgy into the close if XLF and SOX cooperate.

Note Added 11/30/11 at 3:22 PM:  Look at them go. XLF now 12.77.  SOX now over 370.50. Markets are deciding now. One orgy, coming up? Next few minutes will tell the tale.

Note Added 11/30/11 at 3:24 PM:  TRIN is 0.25, obscenely low, uber bullish.  NYAD spiked over +2500 today, now printing +2300, uber bullish. Both of these, however, are contrarian, and would forecast a snapback market pull back move to recover. SOX 370.21 now and XLF 12.73 so the end-of-day orgy is in jeopardy. Markets are very bullish, however. SOX is above 370.50 and XLF at 12.74 again, orgy is back on.

Note Added 11/30/11 at 3:41 PM:  XLF at HOD at 12.78.  Wow, now 12.81.  Holy smokes.  SOX blew up thru 370.50 now printing 371.47. The orgy is in full swing now. Big melt-up into the close.

Note Added 11/30/11 at 3:46 PM:  Dow Industrials are now over 12K, where's my 12K hat?  It's around here somewhere. Whoops, maybe there's time to find that hat.

Note Added 11/30/11 at 4:09 PM:  The wild upside melt-up into the close was due to the bullish financials and semi's. Everything went the bull's way today. The Dow closed at 12046, up 490 points, or 4.2%. 12K hats all around. That was one for the record books. Interestingly, the SPX closed at SPX 1247, this was the level that Keystone's algo had shorted from back on 11/15/11. The SPX gained 52 points today, or 4.3%. The Nasdaq was up 105 points, or 4.2%. RUT small caps were up 41 points, or 5.9%.

Keystone's Morning Wake Up 11-30-11

EOM today and tomorrow ushers in the cold December winds. Futures were down large overnight, about 1% for the S&P, on the bank downgrade news and continued Eurozone dithering. That changed about an hour ago with the futures up almost a percent now, acoounting for a 2% move in the overnight session overall.  China is easing reserve requirements for the first time in three years so the futures jumped large.

Platinum is coming very close to the critical 1500 level and this bears watching. Italy 10-year yields remain well above 7% and Germany 10-year's are 2.3%. John Paulson apologizes for this year's performance, probably more an attempt at lessening redemption requests more than anything. The EU Summit next Friday, 12/9/11, is gaining momo, the markets want firm action taken so this date will serve as a crescendo. BAC is on the verge of losing the 5 handle; in the afterhours action last night after the bank downgrade it danced a bit under.

Ecomomic data includes Productivity and Costs, Chicago PMI, Pending Home Sales, Oil Inventories and Beige Book.  Potential market pivot points at 10 AM and 2 PM but the strong futures should simply keep the day happy.

Sticking to the things that can be measured, the retail sector, RTH, and volatilty, VIX, continue to determine broad market direction. If the market bulls gain upside steam today, watch semiconductors, copper, commodities and financials for further signs of strength.  As long as RTH stays above 108.40, now at 109.97 to start the session, the markets will remain buoyant. As long as VIX stays below 32.85, now at 30.64 to start the session, the markets will remain buoyant. If either the RTH or VIX violates their respective levels, then the markets will weaken and the selling will increase. If both lose the levels shown, the bears will be pushing strongly to the downside.

Watch SPX overhead resistance at 1204 and 1210.  The Nasdaq futures are up 0.59% and the S&P futures are up 0.57% at this writing, a couple hours before the open,  so the upside market move would have limited juice.  The Nasdaq will need to lead the parade if the bulls want to run strongly but now both indexes are lining out for the same gains percentage-wise. Keep watching this relationship as the pre-market plays out.

European Bond Yields 11-30-11

Italy yields remain elevated.
Italy 2-year yield is 7.17%
Italy 5-year is 7.67%
Italy 10-year yield is 7.30%
Germany 10-year yield 2.30%
U.K. 10-year yield is 2.18%
U.S. 10-year yield is 1.99%

Germany yields are now firmly higher than the U.K. Italy 10-year remains well over 7%. ECB will be in there buying Italy debt today.

Note Added 11/30/11 at 11:31 AM EST:  Italy 10-year yield is 7.08%. Spain 10-year is 6.25%. Note the 20 basis point drop in yield for the Italy 10-year in concert with the coordinated central bank move today.

FCX Freeport McMoran Weekly Chart H&S

No surprise that the moves in FCX mirror the copper moves since that is their specialty. FCX is dealing with headaches at their mines currently adding to weakness in price. Same H&S pattern on FCX as copper. Head at 60 and neckline at 45 targeted 30 which was achieved. Watch price as it tests the 200 week MA resistance ceiling now at 37.3-ish. The 20 week is under the 50 week MA is very bearish.

The red circles show the lower lows in October and price was not even as low as mid-2010 price. Thus, price exploring lower levels is likely. Projection is sideways to sideways lower for the weeks and months ahead.This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

COPPER Daily Chart

Copper daily chart shows the H&S pattern playing out with a 4.6 head and 3.8 neckline. That targeted the 3.0 level which was achieved. Now price works sideways getting squeezed in by a sideways triangle. Price will breakout from this 3.3-3.5 zone. Watch price in relation to the 20 week MA in relation to the 50 week MA. If the 20 MA moves under the 50 MA that is very bearish. Watch the RSI 50% level as well. The low money flow reading currently prefers to see lower prices moving forward. Projection is sideways to sideways down moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

COPPER:GOLD Ratio Weekly Chart

Copper:gold ratio chart is a reflection of industrial metals versus precious metals. Since industrial metals are so important to any recovery, the chart moves up in good economic times (green bars), but as worries enter the economy and people prefer owning some gold to reduce their fear, the chart moves downwards (red bars). The ratio bottomed in early 2009 to lead the way up for the broad markets.

The April 2010 top marked the end of QE1.  The February 2011 top was the end of QE2. Currently, price drifts lower testing the channel's lower rail as the globe remains in a funk. Note that the 2009-2010 happiness was due to stimulus. The current ratio price is below when QE2 was announced in August 2010. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

GDXJ Junior Gold Miners Weekly Chart H&S

This year we watched the top occur for GDXJ in April in real-time, receiving the negative divergence smack down as the red lines show. The blue lines clearly show a textbook--at least so far--H&S pattern in play. The head at 42 and neckline at 32 targets 22. Note how the 32 neckline failed, and then price came up for the back kiss, and failed again ushering in the continued weakness and likely target to 22.

The teal lines over the last month show a positive divergence bounce although the purple lines want to see lower lows for price. A gap fill is needed at 29 but the gold and mining charts are so full of gaps they look like swiss cheese, so they are not pertinent to the analysis. The green arrow shows the announcement of QE2 and how it rocket-launched the GDXJ. When Chairman Bernanke says his quantitative easing had no effect on asset inflation this chart clearly shows that statement to be in error. QE2 sent the commodities into bubble territory, that popped. If further quantitative easing is announced, GDXJ may be an attractive play with a repeat of the green arrow occurring.

Current projection, however, is not so rosie. Target remains at 22 for the weeks and months ahead. The 20 week MA under the 50 week MA is very bearish. At lower prices, the juniors will be much more attractive for takeovers which in turn will bounce the index strongly again. GDXJ will be an attractive long from the 22-24 area. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

GDX Gold Miners Weekly Chart H&S

GDX gold miners chart shows that the sideways 52-64 range has been in place for about a year and one-half. An H&S pattern has formed now with a head at 66 and neck line at 52. This targets 38 should the neck line fail. The 20 week MA managed to move above the 50 MA providing the gold miner bulls hope for further upside. Watch this 20/50 MA cross like a hawk. The last three months of action exhibits a sideways pattern similar to the gold charts. Note the failure of money flow now occurring moving under the lower trend line which hints that price should move lower. The RSI 50% level is important, if it stays below the gold miner bears are favored; gold miner bulls receive a feather in their caps if the RSI moves above 50%.

A further back kiss of the 50 week MA at 58-ish remains in play, even a test of the 20 MA at 59-ish. The projection, however, is for price to move sideways to sideways lower for the months ahead, eventually rupturing the neckline at 52, ushering in the path downwards towards 38. Price in relation to the 50 MA in relation to the 20 MA is very important moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Keystone's Midday Market Action 11-29-11

RTH is elevated, VIX moving lower, market bulls appear fine despite the flat to lower markets. The upside is limited since the Nasdaq is not leading the S&P higher.  Consumer Confidence is a market pivot point at 10 AM.

Note Added 11/29/11 at 9:55 AM:  Markets moving up now as the RTH and VIX dictates. SPX:VIX moving towards 38. SPX now above 1197.  Yesterday's HOD was 1197.35. There it is, 1197.44 print. Bulls should be good to go now, watch to see if price stays above 1197.35. Rejected at first try, it will come up again for another try, keep watching.

Note Added 11/29/11 at 10:02 AM:  There you go, SPX came back up and over 1197 and jumped up over 1199.  This 1196-1199 resistance cluster may put up a little fight but now that the 1197+ is busted, a move to 1204 would be anticipated.  The S&P percentage up continues to outpace the Nasdaq so this is why price is stumblilng currently. If the Nasdaq can move into the lead the indexes will not look back. For now, price plays in the 1196-1199 zone. 

Note Added 11/29/11 at 10:18 AM:  SPX now printing 1203.  Resistance at 1204 and 1210 is now in play.

Note Added 11/29/11 at 3:03 PM:  RTH is elevated now with a 110 handle and VIX moves ever lower now with a 30 handle. As long as this is the case, the market bulls are in control. The Nasdaq never led the upside today so the rally did not have a lot of gusto.

GOLD Daily Chart Sideways Symmetrical Triangle

The gold daily chart is building a triangle out sideways with price staying within the boundaries. A move will occur out of this triangle and the move should equal the length of the veritical side, say 350 points. Thus, a move favoring bulls out the top at 1770 would taget 2120, interestingly, the 2200-2400 area is the inflation-adjusted high from years ago. A move out the bottom at 1680 favoring gold bears would target 1330. The importance of the coming break out move cannot be overstated.

The low stochastics and money flow gives the bears a slight advantage since these indicators are acting like a weight hanging on price trying to get it to fail the lower rail. That 1725-ish center line identifies the 20 week MA level which the weekly chart is fighting at currently. Bulls can become happier if they see the RSI regain the 50% level. Projection is for price to fail out the bottom of the triangle and head sideways to sideways down moving forward. In addition, watch for any potential fake out move which occurs from these triangle patterns so which ever way price breaks out, pay attention when the back kiss occurs. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

SPX S/R 11-29-11

SPX support and resistance. Strong resistance cluster at 1196-1199 but this can be taken out if SPX moves up over 1197. Resistance at 1204 and 1210 are key.  Support provided below at 1193 (starting price today) and 1188.

·         1238

·         1235 (12/15/10; also HOD 12/7/10 large volume)

·         1233 (LOD 12/16/10)

·         1229

·         1227 (HOD 11/9/10)

·         1225

·         1224 (12/7/10 large volume)

·         1220 (HOD 4/26/10)

·         1219

·         1217 (4/23/10)

·         1215

·         1210

·         1209 (HOD 4/29/10)

·         1207 (4/29/10 Top)

·         1206

·         1204

·         1201

·         1199

·         1198

·         1196

·         1195

·         1193 (9/15/08 post-LEH bk)

·         1191

·         1189

·         1188

·         1183

·         1181

·         1179

·         1178

·         1175

·         1173

Keystone's Morning Wake Up 11-29-11

The retail sector, RTH, supplied the rally fuel yesterday. Many pundits are cheerleading the robust retail sales both on Black Friday, and on Cyber Monday, driving retail stocks higher, and thus the broader markets higher.  Maybe the crowds were a mall thing since the Friday shopping crowd at the local Walmart in good ole Pennsylvania was not as large as a typical Saturday.  The crowds showed up Friday for special deals, time will tell if the consumer has the stamina to go the distance.  Lots of cash exchanged hands on Black Friday but if the mark-ups deteriorate to grocery store levels the amount of cash taken in pales in comparison to the profit generated. In other words, if you are selling a lot but giving it away, this does not help the bottom line earnings numbers or the stock prices in the long run. For now, Keystone will not become a Scrooge. Pass the Kool-aid and those rose-colored glasses.

The lower volatilty, relatively, since numbers in the 30's are elevated overall, also encoraged the market bulls.  The VIX begins today at 32.13 and if it stays under 32.85, the bulls rule. RTH begins today at 108.74 and if it stays above 108.40, the bulls rule. Keystone's SPX:VIX Ratio at 37, above the critical 35 level, means the bulls are having a party with no worries.  Bears got nothing unless they can move the ratio under the 35 level.

For the SPX, if market bulls can push above 1197, this will open the door to much higher prices in short order.  SPX 1196-1199 is a sturdy resistance zone but if price moves above 1197, the zone should give way.  The next resistance above is 1204, then 1210.

Thus, to start things off, watch RTH 108.40, VIX 32.85 and SPX 1197+.

Note Added 11/29/11 at 9 AM:  Note the S&P futures are up 0.37% and the Nasdaq futures are up less at 0.14%, thus, the upside market move after the open should be muted.  The market bulls need SPX over that 1197 threshhold which would then open up the door for more broad market upside.

GOLD Weekly Chart Sideways Symmetrical Triangle Price Testing 20 MA

The rising blue wedge, overbot conditions and negative divergence shown by the red lines sealed gold's fate three months ago. Price dropped dramatically but the 20 week MA and neon green lower trend line craddled price and bounced it back up again. Now a pink sideways triangle is in place with price having to make a decision on a direction at any time. This week, price has tested the underside of the 20 week MA in the 1710-1730 area. This back kiss is critical. Price failure here opens the door to much lower numbers moving forward. If the gold bulls want to regain control it has to be here and now.

If the RSI drops under 50%, the stochastics already have, the gold bears will be winning and the back kiss of the 20 MA results in failure. The projection is lower prices moving forward for the months ahead. The 1580-1600 area is particularly interesting where sturdy horizontal support exists forming a confluence with the upward moving 50 week MA. The 65 week MA, shown on a previous chart a few posts back, serves as a magnet for price and it is now printing 1513.

In the days ahead, watch the 20 week MA test, the RSI 50% level, the pink lower trend line, the neon green lower trend line and if the money flow drops under the orange support line; these tools will tell the tale on gold as December plays out. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

European Bond Yields 11-29-11

Latest prints show:
Italy 2-year yield is 7.36%
Italy 10-year yield is 7.37%
U.K. 10-year yield is 2.26%
German 10-year yield is 2.23%
U.S. 10-year yield is 2.01%

The Italy yield curve inversion across the 2-10 spread is now flat, but it makes no difference, Italy is likely in a recession already. The U.K. and Germany are trading at the same yield level. Germany yield moved higher to match the U.K. levels last week.

An interesting development yesterday was that for weeks now, European money would seek safety in Germany, exaclty like U.S. money will move into treasuries as investors seek safety when stocks sell off. As global markets moved up yesterday, with yields moving up as would be expected, in the U.S., the 10-year yield actually dropped from about 2.07% down into the mid 1.95%-ish area, before recovering this morning back to about 2%.  This means that money is seeking safety in the U.S. in lieu of Germany now, so the game is changing.  This behavior suggests that more and more investors are losing complete confidence in Europe.

More evidence of this shift will be apparent as European yields continue to climb, especially Germany, while the U.S. yields are flat or even lower. This behavior also highlights the importance of the timeline moving forward.  The Eurozone debt crisis train is speeding down the track but the political leaders are in the club car drinking booze, smokin' big cigars and making little progress in solving the situation. The higher the yields, the faster the train, and a curve is in the tracks just up ahead. That curve may be the EU Summit on 12/9/11, traders and markets will be expecting big things from this meeting.

Note Added 11/29/11 at 5:26 AM EST: Italy 2-year is 7.36%. Italy 5-year is 7.62%. Italy 10-year is 7.28%. Germany 2.32%.

Note Added 11/29/11 at 5:33 AM EST: Italy 2-year is 7.04%. Italy 5-year is 7.62%. Italy 10-year is 7.24%.

Note Added 11/29/11 at 6:00 AM EST:  Let's look at the entire curve. Italy 2-year is 7.16%. 5's are 7.73%. 10's are 7.35%. 30's are 7.29%. The inversion exists from the 5's to the 30's, the 2's have dropped back currently. Same idea, Italy and Europe more than likely in recession.

HD Home Depot Negative Divergence Overbot Rising Wedge Gap

Those buying HD now will regret it as 2012 rolls in. Note the blue negative divergence that ushered in a spank down, the red negative divergence that created a smack down, and now, the purple negative divergence that will create the next smack down. Note the green gap a smidge above the current price; this gap can very well be filled this week to satisfy that loose end on the upside and clear the way for the trip south.

The thin black lines show the rising wedge posture for price over the last couple years, bearish. Stochastics are overbot more agreeable to price falling not rising. The lower trend line in teal represents where all hope is lost if/when price tumbles. The 20 week MA under the 50 MA is very bearish.

Projection is for price to top right now, this week, at 37.50-38.50, and then a spank down should occur. As price moves up, watch the 37.80 level since, if you factor in Keystone's 80-20 Rule, should move up further to the 38.20 level. Thus, a short can be considered anywhere between here and 37.80, if 37.80 is broken to the upside, then 38.10-38.30 would provide the next opportunity to enter short. The drop should be significant with the intial move down targeting the 34-35 area. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

NFLX Netflix Daily Chart Positive Divergence Setting Up Oversold Falling Wedge Potential Island Reversals Gaps

The green lines show that positive divergence is in place now for the RSI, MACD and stochastics, with oversold conditions and a falling wedge for price, a perfect group of signals for a bounce up and recovery. But, not so fast. The money flow indicator is not happy with the low price level as yet; there is always one of them in the crowd, folks. The red circles show that money flow is actually printing lower lows, thus, price is going to have to come back down again to test 63 or lower. The weekly chart hints at the same action. The low from a day ago was 63-ish; the lows and S/R from February 2010 is in the 60-63 zone as well.

Note the dark blue circle that may be a potential island reversal forming where price now gaps up from 70 to 75-ish in a heartbeat. Also note the larger light blue potential island reversal that would take price from 90 to 110 in a heartbeat. But, as the red circles forecast, do not get too excited about all that bullishness just yet. First thing is first.

Price needs to come back down to test the low at 62.90. If the 62.80 level is held, then the worst is over and the sustainable upside party can begin. When this price low occurs, watch the money flow indicator and you will see that the money flow will then be positively diverged signaling the all clear for a bullish bounce and recovery. The other outcome is for price to collapse lower, to explore levels from early 2010. This scenario would take price as low as 58, so the target for a long entry would then be from the 58-60 area.

Projection is for price to fall to set up a long play from 62.80, or from the 58-60 range. This matching or lower low in price at 58-63 should place a base for NFLX and even serve as a head for a potential inverted head and shoulders that will form as the weeks and months move along. NFLX has almost bottomed, one final move to 63, or, 58-63 is all that is needed. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your financial advisor before making any investment decision.

Keystone's Midday Market Action 11-28-11

Let's take a look at the tools. If following along, you see the market bulls in full control.  The utilities sector, UTIL, remains elevated. The retail sector, RTH, jumped above the 108.50 level at the open and is now printing 109.32, market bullish. The SPX:VIX jumped above 35, now printing 37.45, market bullish. Lower relative volatility is shown by the VIX dropping under 32, now at 31.92. This is market bullish but only by a sliver, pennies. The SPX blew up thru the 1181-1188 resistance cluster like it was not even there, bullish. Now it becomes the 1181-1188 support cluster.

The bulls came to play today; the markets were beat down and the shorter term indicators such as NYMO and CPC wanted to see this bounce.  Keystone's algorithm flipped back to the bull side, for now. Watch for a whipsaw move today or tomorrow.

For the remainder of the day, markets should remain elevated. Continue to monitor RTH 108.50 and VIX 32 for broad market direction moving forward from here.   RTH is now printing 109.17 which provides market bullishness and buoyancy. VIX is at 31.93 under the 32 level which provides market bullishness and buoyancy. Watch VIX closely since it is on the bull-bear line and a move above 32 will start to place a sad frown on this happy bull day. If VIX stays under 32 all day, the wine will flow like water.

Note Added 11/28/11 at 11:03 AM:  The VIX moved above 32 at 10:50 AM; market bears are pushing back trying to spoil the day. VIX now printing 32.28. SPX:VIX remains above 37, well above 35 and market bullish. RTH printing 108.93 still above 108.50. If volatility remains elevated above 32, watch RTH 108.50 to gauge any further bearishness.

Note Added 11/28/11 at 12:16 PM:  Status quo, UTIL, RTH and SPX:VIX are providing market bullishness. VIX is providing bearishness but not succeeding in pushing the indexes back down.  If VIX stays above 32 (bearish) and RTH drops under 108.50, the bullish fun today will quickly end as markets reverse and sell off.  Conversely, if VIX drops back under 32 today, the market rally will extend upwards on bullish euphoria into the close.  Thus, RTH 108.50 and VIX 32 tells you everything you need to know for the remainder of the day.

Note Added 11/28/11 at 5:06 PM:  RTH moved under 108.50 during the afternoon which ushered in market weakness but then price danced above and below before closing the day above 108.50 favoring market bulls.  Similarly, the volatilty, VIX, spent the bulk of the day above that 32-ish area but then late in the session stumbled lower to tip its hand that it actually favors the market bulls. For now, the bulls are in control of the indexes.

Keybot the Quant Turns Bullish

Keystone's algorithm, Keybot the Quant, flipped back to the bull side at 9:52 AM EST at SPX 1194. This closes out the short trade from SPX 1247 on 11/15/11 for a 4% gain.  Utes, retail and lower volatility are supporting the bullish move.  Stay on guard for a whipsaw today or tomorrow, for now, the bulls are enjoying the upside.

More information on Keybot's site:

http://www.keybotthequant.blogspot.com

Keystone's Morning Wake Up 11-28-11; IMF Rally and Cyber Monday

The markets are set to bounce with an IMF rally. News last evening said the IMF is in talks with Italy over providing financing and thus, a move towards a Euro solution, but the IMF released a statement that the news is not true.  Regardless, the futures are in rally mode anyways. Italy is not even convinced since 10-year yields remain above 7%. The NYAD, NYMO, CPC and TRIN charts discussed last week provide upside market fuel as well, especially the low -98 NYMO print right now and the CPC 1.32 print, both indicating that a market bounce is desired.

The indexes sold off into Friday's close but the utilities sector remained buoyant which favors the bullish move today.  Watch the SPX:VIX ratio at the open, now at 33.61.  If the ratio moves above 35, that verifies the market bulls in full control of the markets. If the ratio does not move above 35, the rally has no legs. Another indicator to gauge the bullish strength at the open is volatility, VIX, now at 34.47.  If the VIX drops under 32, this provides the rally move street cred. If the VIX stays above 32, then the market bulls got nothing today. Retail is also key. Watch RTH, now at 106.42. If two points are gained to move the RTH above 108.50, then the market rally move has legs. If the RTH 108.50 ceiling holds, and price is unable to move above there, then the market bulls got nothing.

Cyber Monday requires a shout-out since it is the highest sales day ever recorded for Internet sales and today should not disappoint.  The loss of productivity at companies today, as employees worry more about Amazon specials and shipping and handling costs instead of the 1 PM conference room meeting, probably rivals the loss of productivity due to the March Madness basketball polls during the spring time. Bosses will pace hallways today creating a presence to deter the office shoppers, much like the local patrol car driving thru the neighborhood to deter crime, but their actions will have little affect when it comes to purchasing a bike for Bill or a doll for Little Nell.  Besides, the bosses return to their corner offices to perform their own cyber shopping anyway. Thus, if you are waiting on an important business call today, do not hold your breath.

Watch UTIL 424.35, SPX:VIX 35, VIX 32 and RTH 108.50 to gauge the bullish strength today and determine overall market direction. A market pivot point occurs at 10 AM due to the New Home Sales data release so the early action may change course one-half hour after the open.

SPX 10-Minute Chart

The chart shows the price action over the last three days with price set for a large pop at the opening bell to start the week. The black lines show the positive divergence that creates the upside bounce. The green lines show the key support and resistance levels moving forward; 1188, 1183, 1181, 1178, 1173, 1166, 1163, 1155. SPX 1173 is key resistance overhead which opens the door for a further upward thrust which appears to be on tap.  Thus, 1173 giving way leads to testing 1178, then 1181. A strong resistance cluster exists at 1181-1188 so that is a tough ceiling for price to more up thru.

The markets sold off into Friday's close but the utilities sector remained bullish.  The bounce today will also further help to bring the NYAD, NYMO, CPC and TRIN charts back in line as discussed late last week. The markets will remain violent since the VIX remains elevated so a bounce in the indexes is nothing to get excited about.  Oddly, the futures started their upward rise last night on the news that the IMF is in financing discussions with Italy to help solve the Euro woes, but, the IMF rebuked the rumor and said it is not true. Nevertheless, the futures head up even higher.

European Bond Yields 11-28-11

The new trading week begins on the rumor that the IMF is in financing talks with Italy. U.S. futures bounced on the news last night and have ticked stronger despite the IMF denying the rumor.  The Italy 10-year yield is at 7.08%, remaining above the critical 7% level.  Germany 10-year is 2.31%.  Portugal 10-year yield is 13.23%. U.S. 10-year is 2.05%.  The French-German spread is narrowing. Note that Germany 10-year yields have risen about 40 basis points in the last week.

Keystone's Key Events and Market Movers Week of 11-28-11

© 2011 The Keystone Speculator™. All Rights Reserved. No part of this document may be copied although links to this site are encouraged.

Keystone presents the following underlying market currents, sometimes subtle, sometimes turbulent, that move global markets in real time.  The key dates and times below typically correspond to market pivot points.

Summary for the New Trading Week Ahead:

Europe is a mess and markets wince on any news bite.  Watch the Italy, Spain and France 10-year yields to gauge the creeping contagion. Spain moving over 7% will be trouble. Italy staying over 7% is trouble. European yield curve inversions are trouble.

Continue to watch the asset relationship; euro higher=dollar lower=commodities higher=gold higher=U.S. equities higher=treasuries price lower yields higher, or, the visa versa, euro down=dollar up=commodities down=gold down=U.S. equities down=treasuries price higher yields lower, which is the recent action. 

For the new trading week, earnings releases are minimal since most major companies have reported.  Retail numbers are important this week nonetheless.  December will usher in the pre-announcement confessional season for Q4 numbers. Tech and biotech sectors are higher thus far for Q4, which would be expected due to seasonality. This shows just how strong that October rally was since price remains above where the rally started the first week of October, despite the selloff over the last few days.

The economic data schedule shows the very important Consumer Confidence number hitting at 10 AM Tuesday. This time is a likely candidate for a market pivot point.   The Beige Book at 2 PM Wednesday is another potential market pivot point.  The back half of the week will focus on the employment picture, unless Europe news is occurring, and Jobless Claims on Thursday morning leads into the Friday morning Jobs circus.  Construction Spending and ISM at 10 AM Thursday is another market pivot point.  Construction spending is an excellent gauge for employment. Watch the energy market closely, XLE, as the ISM number hits.  If markets are buoyant Monday morning, energy would require a good look as a viable quickie long play, selling on the ISM news later in the week.  So the focus for the new week, as November ends and the cold December winds blow, is the economic data points highlighted above and watching the European 10-year yields.

Keystone’s Eclipse Indicator targeted the early November area as a potential large market selloff area, and the indicator did not disappoint, the SPX has dropped over 9% from the early November high. The eclipse indicator next focuses on mid-December thru mid-January for a potential large market selloff area.  A Bradley turn window remains open now so watch for a market trend change at any time, especially Monday and before Wednesday.  It was interesting to see the weak week last week, leading into the new moon that occurred on Friday. 

The BOJ is keeping, or trying to keep, the dollar/yen above 76.5.  Dollar/yen buoyancy should relate to dollar buoyancy, which ushers in lower commodities and equities prices like 10/31/11 and 11/1/11.  Continue to watch for the dollar to rise as the weeks move along. A rise in the dollar will place further pressure on oil, gold, silver and other commodities. Oil and the equities markets are moving together. Gold lost about 3% last week. Continue to watch the asset relationships listed above with the euro leading the parade—and the euro takes its direction off of the European bond market—watch those 10-year yields.

Key Dates and Times for the Week Ahead:

·         Monday, 11/28/11: Markets remain at the mercy of Europe news moving forward.  Watch Italy, Spain and France 10-year yields to gauge contagion creep.  Keystone’s Eclipse Indicator window, where the markets are susceptible to a large selloff, starts to close now with the target area already resulting in a 9% and more large market selloff.  A Bradley turn window remains open now thru 11/30/11 so watch for a market turn now. New Home Sales 10 AM. Dallas Fed Mfg Survey 10:30 AM. 3-month and 6-Month Bill Auctions 11:30 AM.  Earnings: THO.

·         Tuesday, 11/29/11: S&P Case-Shiller 9 AM. Consumer Confidence 10 AM. House Price Index 10 AM. 4-Week Bill Auctions 11:30 AM. Earnings: TIF, TOPS.

·         Wednesday, 11/30/11:  Mortgage Purchase Applications 7 AM. Challenger Job Report 7:30 AM. ADP Emplloyment Report 8:15 AM. Productivity and Costs 8:30 AM. Chicago PMI 9:45 AM. Pending Home Sales 10 AM. Oil Inventories 10:30 AM. Beige Book 2 PM. Farm Prices 3 PM. Earnings: ARO, AEO, CWTR, EXPR, FNSR, GES, KKD, LZB, SIGM.

·         Thursday, 12/1/11: Chain Store Sales and Motor Vehicle Sales data. Jobless Claims 8:30 AM.  ISM Manufacturing Index 10 AM-watch energy sector. Construction Spending 10 AM. Natty Inventories 10:30 AM. Fed Balance Sheet and Money Supply 4:30 PM. Earnings: BKS, HRB, KR, TLB, ULTA, ZUMZ.

·         Friday, 12/2/11: Monster Employment Index. Jobs Report 8:30 AM.  Plosser speaks 10 AM.  Earnings: BIG.

Key Dates and Times for the Month Ahead:

·         Thursday, 12/8/11: ECB Meeting and rate decision.

·         Friday, 12/9/11: Europe Summit, Merkel, Sarkozy and Monti; markets expect good news.

·         Tuesday, 12/13/11: FOMC Meeting and rate decision.

·         Mid-December thru Mid-January: Keystone’s Eclipse Indicator identifies this area for a potential large market sell off.

·         Wednesday, 12/21/11: Bradley turn window opens for a major turn.

·         Friday, 12/23/11: Congress debt vote.

Major Market Movers for the Weeks, Months and Years Ahead:

·         Earnings

·         Corporate Bankruptcies

·         Options Expiration (OpEx)

·         Quantitative Easing (QE3)

·         FOMC (Federal Open Market Committee) Rate Decisions and Policy

·         Rating Agency Downgrades

·         U.S. Presidential Election

·         Congress In or Out of Session

·         Europe Debt Crisis

·         ECB (European Central Bank) Rate Decisions and Policy

·         Ongoing Wars

·         Continuing Geopolitical Events

·         Occupy Wall Street Global Protests

·         State and Muni Crisis; Union Busting

·         College/Student Debt Bubble

·         China Property Bubble and China Contagion

·         PBOC (Peoples Bank of China) Rate Decisions and Policy

·         China New Premier Selection

·         Emerging Market Rate Decisions and Policy/Trade Wars

·         BOJ (Bank of Japan) Rate Decisions and Policy

·         Government Secured Enterprises (GSE’s) Impact

·         Oil Economic Impact

·         Mother Nature/Crop Reports/Energy Wars/Water Wars

·         World Population

·         Keystone’s Eclipse Selloff Areas

·         Bradley Turn Dates

·         Solar Flares, Sunspots, New and Full Moons

Details for the Major Market Movers:

·         Earnings:  Earnings season is far along now and light this week, retail most prevalent.  Numbers are in line with lower estimates and the weak predictions two months ago were overstated.  Thus, neither the bulls or bears are winning the earnings battle but a slight edge goes to the bulls. Companies are operating lean and mean currently, but a global recession reduces demand for products and services. Pre-announcement confessional season occurs in December.

·         Corporate Bankruptcies: Keystone looks for a high number of company bankruptcies in 2012 and 2013. The politicians cannot make a difference; they will only create deeper harm.  In a nutshell, there is no demand for products and services.  The deleveraging must continue and it will result in many companies going belly-up over the next couple years. Market negative over the intermediate and longer term.

·         Options Expiration (OpEx): Third Friday each month. Next is 12/16/11. Typically an up market move occurs from Tuesday thru Wednesday of OpEx week if you get your timing correct so consider this for 12/13/11 and 12/14/11. Markets typically move opposite on the following Monday morning from the direction they closed on OpEx Friday.

·         Quantitative Easing (QE3):  Quantitative easing two (QE2) ended 6/30/11.  Tentative projection for QE3 announcement is December-February. Fed said that more quantitative easing is on the table on 10/20/11 and 10/21/11 which spiked the markets skyward. The Fed announced Operation Twist.  M2 money supply is increasing. Deflation must raise its ugly face before Bernanke is forced to announce QE3. Keystone’s Inflation Deflation Indicator is moving from Neutral to Disinflation to Deflation, then back again, over the last few weeks, currently a smidge above disinflation. Use the CRB as a general guide, under 300 is disinflationary and under 290 deeper into deflation and under 270 will probably prompt Bernanke to announce QE3.  When Deflation appears in the weeks ahead, perhaps the first global quantitative easing program for planet Earth will commence.  It would have to be staggered since all countries cannot ease at the same time for any program to be effective.  Quantitative easing will bounce markets but it is only a matter of time before the rally peters out, just as QE1 did in April 2010 after 13 months and QE2 did in April 2011 after 8 months.  QE3 future rally will last 3 to 5 months?

·         FOMC (Federal Open Market Committee) Rate Decisions and Policy:  12/13/11. Fed announced that the Zero Interest Rate Policy (ZIRP) will remain in place until mid-2013. Operation Twist is ongoing.  QE3 announcement is anticipated for the December-February time frame. Deflation needs to occur first.

·         Rating Agency Downgrades: S&P announced a downgrade of U.S. debt from AAA to AA+ which accelerated the market selloff in August 2011.  Downgrade talk is a market negative and if any additional downgrade occurs for the U.S. from any of the three rating agencies, the equities markets will sell off large. The super committee failed at producing $1.2 trillion in cuts, so a U.S. downgrade has potential since the rating agencies actually wanted to see 3 to 4 trillion in cuts. Continue to watch for European downgrades.  Portugal and Hungary two recent downgrades and France was warned as well.  A France downgrade would send global markets spiraling downwards.

·         U.S. Presidential Election: Markets will ebb and flow as the politicians fight it out, one side is just as bad as the other; demopublicans and republocrats. The market affects are more of a 2012 story. Keystone will comment on the Presidential cycle with charts as time moves along so stay tuned. Perhaps a perfect storm exists for the rise of the independent candidate next year?

·         Congress In or Out of Session:  Market bullish when not in session, market bearish when in session. Further he said-she said baby bickering on the budget hurts the markets. Automatic budget cuts should occur in the future since the super committee could not agree. If Congress tries to walk back any cuts, this should result in a downgrade of debt and hurt equities markets.  Entitlement programs and tax reform must be modified to handle the debt problem but neither political party has the spine to do what is right.

·         Europe Debt Crisis:  The Europe news flow is the main driver of the markets now.  The five little piggies (PIIGS) are Portugal, Ireland, Italy, Greece and Spain. Merkel and Sarkozy, Merkozy, promised a solution by 11/3/11, which came and went.  New governments now forming for Greece and Italy.  Details on the Greece bailout plan must be provided still yet and Greece must vote on the plan after the new government is formed.  Italy, Spain and now France are the major worries. Watch the 10-year yields closely to gauge contagion. Rating agencies have downgraded Italy, Spain, Portugal and Hungary’s debt.  Italy is the third largest debtor nation in the World, only trailing the U.S. and Japan.  Italy’s debts are now piling up quickly posing a major risk to the global economy. Italy faces more than $300 billion in refinancing in 2012. Greece paper probably worth 30 cents (the Merkozy plan targets a 50% haircut) on the dollar, Ireland 50 cents, Portugal 85 cents but no one knows for sure. The Spain and U.K. high unemployment for young people is a major concern, leading to riots.  Italy and Spain are too big to fail, too big to bail. Rich Uncle China needs to save the day but they appear hesitant. France downgrade is a major worry now since that could start a cascading event.   Watch the asset relationship; weaker euro=stronger dollar=weaker commodities=weaker U.S. equities, and visa versa.

·         ECB European Central Bank) Rate Decisions and Policy:  ECB announces next rate decision 12/8/11, further cuts are coming, 1/12/12.  Past decisions are 25 bip cut on 11/3/11 as Keystone projected (Draghi’s first meeting reversing Trichet’s previous actions); no hike 10/6/11; no hike 8/4/11; 25 bip hike 7/7/11; no hike 6/9/11; no hike 5/5/11; 25 bip hike on 4/7/11 that began Trichet’s mistake this year, just like July 2008 when he raised at the peak in the commodities market, exactly the wrong time.  The euro buoyancy in 2011 was caused by Trichet’s hawkish talk, now that will reverse with Draghi, thus, the trend should be euro down=dollar up=equities down.

·         Ongoing Wars: Libya, Iraq and Afghanistan. Oil flow is returning to normal in Libya.  Wars and M.E. problems will always provide a bid underneath oil, gold and silver.  As tensions ease, the premium in price works itself out, as tensions escalate, premiums increase.

·         Continuing Geopolitical Events: Iran, Egypt, Syria, Saudi Arabia, Bahrain, Yemen, N. Korea:  Dollar bullish and equity bearish.  Tensions provide a premium to oil, gold and silver prices with news flow immediately impacting prices. The Iran nuclear issue escalates each day.  Iran and Israel test missiles, each flexing their muscles.  Bahrain is a worry since unrest will impact oil supply.  Yemen is important since it is a southern Saudi border. Al-Awlaki’s death should add to stabilization in the area in the long term. Yemen protestors are killed with live ammunition on 10/15/11. Syria is receiving pressure from countries in the area since over 3,000 citizens have been killed in the riots thus far.  Iran, Syria and Yemen are the major current concerns. News flow impacts commodities in real time.  Any bad news=higher oil, gold and silver prices, or, visa versa.

·         Occupy Wall Street Global Protests: The protests began in New York on 9/17/11 and have had no impact on markets.  New York police evicted protestors from Zucotti Park two weeks ago so the movement appears in disarray for now.  Protestor numbers are dwindling as the winter winds blow.

·         State and Muni Crisis; Union Busting:  Muni’s should experience pain first.  Muni’s rely on State funds.  The new State fiscal budgets are underway.  State funding of local municipality projects will be impacted.  Muni and State layoffs increasing. Colleges relied on State funds and tuition increases are already hitting cash-strapped students. Lingering unemployment lessens government tax inflows. U.S. will probably see an increase in the cash society since folks will find ways to avoid higher taxes, hurting government coffers rather than helping.  Interestingly, Kenneth Langone, cofounder of HD, commented on 11/3/11 that the trucking industry cannot find drivers to fill jobs since, despite the current high unemployment; many are producing more income using government assistance in combination with working ‘under-the-table’ just as Keystone has been writing about the last few months. Multiple U.S. cities now experiencing budget fights and protests.  Harrisburg, Pennsylvania, went bankrupt recently.  Now add Jefferson County, Alabama, home of Birmingham to the bankruptcy list.  Governments are trying to reduce the burden of high union costs. On 11/8/11, Ohio voted in favor of the unions (teachers, firefighters, police, etc…) and against the Republicans trying to reduce costs. This decision places a feather in the union caps all across America. Judge Mary France just ruled that Harrisburg is not allowed to seek bankruptcy protection, more than likely setting the table for taxpayers to pick up the tab once again in communities all across America as government over spending collapses a shaky system. Watch to see if California financial decisions spook the country; California is basically the same as Greece already. State and Muni problems are a 2012 story. MUB daily and weekly charts were in negative divergence marking September as a significant price top for muni’s. Meredith Whitney should be vindicated moving forward.

·         College/Student Debt Bubble: Students graduate with large debt and no job. Law students accumulate nearly 100K in loans and many remain jobless. Universities build lavish facilities that are unnecessary for education. One poll cited 80% of college graduates moving back home to live with parents.  Student loan defaults have doubled since 2005. Two-thirds of students have $24K or more debt.  No effect near term but in the months forward the loan defaults will develop into a big problem. Young folks have no productive outlet for their youthful energy so riots, even Black Friday holiday shopping mayhem, increase as frustration grows. Now that State funding is being lost to colleges, tuition hikes are occurring, students now have to pay even more for an education that no longer leads to a well-paying job. The high college debt coupled with no jobs is a double whammy for the young folks. On 11/4/11 in Keystone’s home city of Pittsburgh, Pennsylvania, Vice President Biden touted the Obama Administration’s plan to reduce the maximum annual payment on federal student loans from 15% to 10% of discretionary income.

·         China Property Bubble and China Contagion:  As of 11/18/11, China property prices in 70 cities dropped for the first time this year—the bubble is popping.  This is extremely negative on global markets causing contagion in Asia and elsewhere. Chinese factories are now going bankrupt. There are signs of growth slowing, bad real estate loans and fraudulent accounting by companies.  Copper was used as collateral for some construction loans and serves as a proxy for China.  A drop in copper price may provide the catalyst for the China real estate collapse. 65 million homes are unoccupied in China, a glut of capacity of epic proportions. Europe is China’s major customer so the Euro woes will only accelerate China’s problems.  China has built uninhabited cities, such as Ordos, to fuel their explosive growth during this century. China growth rates are trailing off, there are only so many empty cities that you can build.  China officials admit that 8% growth is needed to simply maintain ‘social cohesion’ so watch this number closely as the months play out. Keystone agrees with Jim Chanos’ view on China. Watch the copper price to gauge China moving forward. China has to decide if they want to play a larger role in the world and help prop up the global mess. China may be supporting Greece behind the scenes to help buy Europe some time. China bubble pops=global markets down.

·         PBOC (Peoples Bank of China) Rate Decisions and Policy:  We are now one year along from the first rate hike in China in October 2010. First hike 25 bps 10/19/10; second hike 25 bps Christmas 12/25/10; third hike 25 bps China New Years on 2/8/11; fourth hike 25 bps 4/5/11; fifth hike 25 bips 7/7/11.  China said in 2010 that it will project about five hikes into June 2011.  Hikes have occurred October, December, February, April and now July, so China should hold steady for the weeks and months ahead. Currency decisions will probably be delayed until the new premier is selected in the back half of 2012.

·         China New Premier Selection:  The new 5-year leader is chosen in 2012 (at the same time as the U.S. president) so major currency decisions will be avoided until then.  Will it be a smooth transition?

·         Emerging Market Rate Decisions and Policy/Trade Wars:  India, Brazil, Taiwan, South Korea most important. Same effects as China rate hikes; commodities will sell off.  China, India and Brazil are most important to global markets. Watch India closely moving forward since they were last to raise rates in conflict with their Asian peers. Each emerging country lowering rates here forward will escalate trade wars. Brazil is lowering rates.  Chairman Bernanke’s hot easy QE2 money pumped up emerging markets and commodities from August 2010 thru May 2011 creating new asset bubbles. India is now experiencing civil unrest as citizens demonstrate against corruption at all levels of government.  India directly supports one-third of the global gold market.  Watch India as a proxy for gold price. China consumes 40% or more of the world’s copper production. Watch China as a proxy for copper price.

·         BOJ (Bank of Japan) Rate Decisions and Policy:  BOJ initiated a new round of currency intervention 10/31/11 as Keystone projected.  The intervention bounced the dollar/yen (weaker yen) from 76 to 79 with price around 77.7 now.  Effects from the Japan tsunami and nuclear disaster are subsiding.  Japan lowered growth projections moving forward. Japan is defending the 76.5 dollar/yen level.  In March 2011, the BOJ and G7 performed a coordinated intervention to weaken the yen, moving dollar/yen from 76 to over 85 in less than three weeks.  In August 2011, BOJ acted alone which bounced the dollar/yen from 76 to over 80 in three days, but price retreated quickly.  BOJ participated with other central banks on 8/15/11 to support Europe. Dollar/yen up=dollar up=euro down=commodities down=equities down.

·         Government-Secured Enterprises (GSE’s) Impact: 10/1/11 was a deadline to extend the GSE limit of $730K, which came and went, so the limits have reverted back down to $625.5K, with a possible review to raise the limit again in the weeks ahead.  This action hurts folks dancing on the fine line in that price range.  The GSE’s back 9 of every 10 mortgages. In general, for all folks, down payments of 25% to 30% are now required.  In essence, the demand will be reduced, thus, the market will tighten and house prices will continue lower moving forward. Keystone’s proprietary algorithm shows that housing has already fallen back into a double dip as of mid-May 2011. This is deflationary behavior giving Chairman Bernanke many sleepless nights. Keystone considers real estate to be a key investment over the next year or two but prices have much lower to fall first. Low rates do not help the housing recovery since folks do not have jobs. If they do have a job, they may not have a good credit score.  If they do have a good credit score, then they cannot come up with the 25% and higher down payments.  Perhaps the washout in housing will occur in 2012 and 2013, which should provide the ideal time to buy property, a generational-type low.

·         Oil Economic Impact:   Oil effects gasoline price which in turn affects retail sales. OPEC, the SPR (Strategic Oil reserve) and hurricane season effect oil price. SPR oil release is no longer an issue as oil price has fallen due to lower global demand. Hurricane season is over until June 20112.  Brent Oil and WTIC (West Texas) oil prices are important. With global demand for goods and services slowing, the intermediate and longer term view leans towards lower oil prices. Oil price moves with the equities markets; up oil=up markets and visa versa, oil down=equities down.

·         Mother Nature/Crop Reports/Commodity Wars/Energy Wars/Water Wars: Droughts (in Texas and the Southern States), storms, floods (in the Midwest and Thailand), earthquakes, tsunami’s (Japan), volcanic ash (northern Europe), hurricane’s (Gulf) and the like. Mother Nature had a huge impact on food inflation over the last year. Food and oil are the most affected. As the crop reports improve, the premium to price comes back out. The global need for fresh water supplies, and the potential “water wars” in the future, will affect markets in the long term. Farm prices are released 11/30/11.

·         World Population:  World population crossed 7 billion on 10/31/11. The obvious affect on the markets is the need for food to feed these 7 billion mouths. Ag commodities show promise in a long term time frame.

·         Eclipse Selloff Target Areas: Allow plus or minus a week or two on each side of the following dates as potential areas of major market selloffs; 5/15/11 (large sell off occurred May-June); 7/15/11 (large sell off occurred 7/8 thru 7/18 then the crash the week of 8/1/11); 11/3/11 (SPX dropped from 1278 to 1158, 9.4%, from 11/8/11 to 11/25/11); 1/3/12 (watch mid December thru mid January). Note how the May, July and November targets were all spot on.  This technique targets the next potential large market selloff area to occur from mid-December thru mid-January which also coincides with a major Bradley turn area.

·         Bradley Turn Dates: 11/22/11-11/23/11 so the Bradley turn window is 11/15/11 thru 11/30/11, NOW; 12/28/11 (major turn area; window is from 12/21/11 thru 1/4/12); 1/11/12. Typically allow a +/- 7 day window with actual turns usually occurring in closer to the actual date, say +/- 3 day window. Markets more than likely change their trends, if headed up, they reverse down, or if they have been moving down in the previous days, they reverse up.  Every now and then, however, the markets will melt up or down in an acceleration move of the current trend. Dates are courtesy of Donald Bradley, Peter Eliades and Arch Crawford; reference their web sites for additional information.

·         Solar Flares, Sunspots, Full and New Moons: Definitely not something to trade off of but you must be aware of their influence. An M9.3-class solar flare at sunspot 1261 occurred on 8/4/11—at the same time the stock market waterfall crash commenced. Projections are for the flares to increase in the years ahead. Solar flare activity tends to coincide with market selling events.  There are studies on full moon and new moon effects that will tout both sides of the coin. In Keystone’s non-scientific studies, full moons tend to be in line with buying and new moons tend to be in line with selling, but only about a 60% to 65% correlation; a slight advantage over a coin flip. Full moon on 10/11/11 resulted in a buoyant week for the markets. New moon was 10/26/11 and 10/25/11 was a large down day although two large up days occurred directly after.  Full moon on 11/10/11 resulted in large up move 11/10/11 and 11/11/11 although 11/9/11 was a large down day. The new moon 11/25/11 shows selling before and into 11/25/11.  The next full moon is 12/10/11. The next new moon is 12/24/11.