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Wednesday, October 10, 2012
SPX 60-Minute Chart with Price Versus 200 EMA Signals Bearish Markets Ahead
One of Keystone's key market Turn Signals (reference the Turn Signal page on this site) turned bearish today which is a major development that is very bear friendly and unfriendly to any long positions. When the SPX falls thru the 200 EMA on the 60-minute chart the market has big problems. The last time this occurred was after the early summer selloff. Draghi had to step in and promise a huge bazooka to save the markets on 7/26/12 since certain failure was ahead. Will a white knight on a white horse step in to save the day now (such as Spain finally formally requesting a bailout)? Perhaps the Lone Ranger will appear on Silver, his trusty steed, to save the day, but, considering that he also wears a mask, he is simply another trader that will be fleecing your pockets as the markets continue rolling over.
Note the teases that occurred in August and September which provides the chart some serious street cred. S&P just downgraded Spain; perhaps Moody's will follow along and also downgrade that floating ship wreck before tomorrow's open. The rupture at the 200 EMA is a big deal. Look for a back test to occur in the hours or days ahead. The 200 EMA is at 1440.43. The markets are in serious trouble right now and this is interesting since most traders are treating the bearish action with a laissez-faire attitude. Pay attention to this chart in the days ahead. If price stays under the 200 EMA over the next few days, the broad indexes will be printing far lower numbers moving 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.
KS, Does this mean you going to look to temporarily get out of AMD and wait for the market to sell off? Will Util have to move above 481.36 to cause Keybot to turn back to the bull side before Friday? Thank you kindly for all of your amazing knowledge and enlightenment ol' wisest one.
The 200 ema to me signals a bottom sell off to this at the 1432. Don't be fooled by this chart into thinking a collapse is near. The opposite seems true. The sell off is almost complete. Maybe at test below the 1430 too scare everyone but then a rise. It seems right KS, technically, but if anything all will hold till elections. That you have not figured in. Elections.
You are predicting a white knight appears to save the day, perhaps that is correct, maybe Spain will announce the request for the bailout tomorrow and that would do the trick and save the day, like Draghi saving the day in late July. If price moves back above the 200 EMA that will definitely show that the bulls are making a comeback and strongly pushing higher. So watch 1440-1441. It will be interesting.
Also of interest is if you expand the chart out to check the action in the May selloff, the price bottom occurred at the start of June, at 1270, the 200 EMA was about 1335, so the bottom was identified with the price 65 handles lower than the EMA. Simply taking the 1440 number now, and this would represent best case scenario for bulls, would be 1440-65 = 1375. Interestingly, using this voodoo-style measuring stick, the projection for price would be 1375 or lower, say 1320-1380, using the previous May fractal for this chart.
Remember that there are trades operating on both the long side and short side across different time frames. Sticking with Keybot, the algorithm that controls 65% of the overall portfolio, is short via SDS right now and yes, UTIL probably needs to move above 481.36 to turn this around to the bull side again. If VIX moves above 16.90, or JJC under 46.35, or RTH under 44.50, any of these, this seals the bulls fate and the bears will gain strong downside momo, and that will keep Keybot strongly bearish. So that is Keybot and it is designed to move thru the year with less risk while still providing an attractive return. It has returned 9% thus far this year.
Then for the 35% of the portfolio that is the short term trading, all the trades talked about on the K.S. site here each day, both long and short positions are constantly held. So the answer is that the three longs, the Positions and Picks page always shows what the current positions are, AMD, CEP and DNDN, will all remain in place and simmer. It would be nice to see a strong flush downwards for markets with an upward spike in volatility and Keystone will likely clear the slate for the short term short positions. Retail Sales is Monday so perhaps that will cause the roll over in that sector, finally, which will aid the retail shorts. So, the beat goes on.
Keybot carries a lot of clout since it controls a big chunk of change so the mood of the markets now is negative and bearish (use Keybot's status as a general indication of the markets in real-time, that is why it is constantly displayed in the left margin). Net-net, the entire portfolio is 95% short right now. This would change immediately if Keybot was to flip long.
Good analysis, and I say that as someone who got burned by Draghi's miracle "save". Most tops are tortuous affairs--look at 2008, what a roll-coaster--and this is no exception. CPC is above 1, NYMO is at the point where it tends to reverse, SPX:VIX is also in the zone, ditto the VIX--all these point to a bounce. The weakness signals are rising but that just tells us the final top is getting closer IMO. Technically, we might triple top around 1470, but KS's 80/20 rule suggest SPX 1480 will lead to 1520. In a real blow-off top, we'd surpass the 2007 high around 1575, just to eradicate the bears before we go over the waterfall. That's what happened in 2008....
TRIN at 1.5 is steady-eddy selling so it actually indicates that the selling was no panic, it was consistent and typically leads to additional selling. If TRIN would have spiked to 3, or 4, or higher, somehting big like that, then that would show panic occurred and a snap back market rally move would be needed.
NYMO is interesting, the previous -40 low that created the market bounce shows the NYMO recovering to the middle BB on the daily chart, now it is back down and may want to tag the lower BB again down under -60. The indicators for NYMO are positively diverged but price has only barely made a lower low as compared to the -40. This needs a day or two more to work out. At this juncture, a move down to -60 thru -80 may actually identify the market bottom in the days ahead, but, all that can be done is taking things one hour, or minute, at a time.
None of the media pundits believe the downside is real, everyone is now trained to expect higher and higher numbers. If Spain does not announce its bailour request as today plays out, weakness may reenter the markets. If Moody's provides a downgrade to Spain today, the markets would gap down. It is craziness.
This comment has been removed by the author.
ReplyDeleteKS, Does this mean you going to look to temporarily get out of AMD and wait for the market to sell off? Will Util have to move above 481.36 to cause Keybot to turn back to the bull side before Friday? Thank you kindly for all of your amazing knowledge and enlightenment ol' wisest one.
ReplyDeleteThe 200 ema to me signals a bottom sell off to this at the 1432. Don't be fooled by this chart into thinking a collapse is near. The opposite seems true. The sell off is almost complete. Maybe at test below the 1430 too scare everyone but then a rise. It seems right KS, technically, but if anything all will hold till elections. That you have not figured in. Elections.
ReplyDeleteYou are predicting a white knight appears to save the day, perhaps that is correct, maybe Spain will announce the request for the bailout tomorrow and that would do the trick and save the day, like Draghi saving the day in late July. If price moves back above the 200 EMA that will definitely show that the bulls are making a comeback and strongly pushing higher. So watch 1440-1441. It will be interesting.
DeleteAlso of interest is if you expand the chart out to check the action in the May selloff, the price bottom occurred at the start of June, at 1270, the 200 EMA was about 1335, so the bottom was identified with the price 65 handles lower than the EMA. Simply taking the 1440 number now, and this would represent best case scenario for bulls, would be 1440-65 = 1375. Interestingly, using this voodoo-style measuring stick, the projection for price would be 1375 or lower, say 1320-1380, using the previous May fractal for this chart.
DeleteRemember that there are trades operating on both the long side and short side across different time frames. Sticking with Keybot, the algorithm that controls 65% of the overall portfolio, is short via SDS right now and yes, UTIL probably needs to move above 481.36 to turn this around to the bull side again. If VIX moves above 16.90, or JJC under 46.35, or RTH under 44.50, any of these, this seals the bulls fate and the bears will gain strong downside momo, and that will keep Keybot strongly bearish. So that is Keybot and it is designed to move thru the year with less risk while still providing an attractive return. It has returned 9% thus far this year.
ReplyDeleteThen for the 35% of the portfolio that is the short term trading, all the trades talked about on the K.S. site here each day, both long and short positions are constantly held. So the answer is that the three longs, the Positions and Picks page always shows what the current positions are, AMD, CEP and DNDN, will all remain in place and simmer. It would be nice to see a strong flush downwards for markets with an upward spike in volatility and Keystone will likely clear the slate for the short term short positions. Retail Sales is Monday so perhaps that will cause the roll over in that sector, finally, which will aid the retail shorts. So, the beat goes on.
Keybot carries a lot of clout since it controls a big chunk of change so the mood of the markets now is negative and bearish (use Keybot's status as a general indication of the markets in real-time, that is why it is constantly displayed in the left margin). Net-net, the entire portfolio is 95% short right now. This would change immediately if Keybot was to flip long.
KS, TRIN is 1.53 today, is that also telling us the bear is done...?
ReplyDeleteGood analysis, and I say that as someone who got burned by Draghi's miracle "save". Most tops are tortuous affairs--look at 2008, what a roll-coaster--and this is no exception. CPC is above 1, NYMO is at the point where it tends to reverse, SPX:VIX is also in the zone, ditto the VIX--all these point to a bounce. The weakness signals are rising but that just tells us the final top is getting closer IMO. Technically, we might triple top around 1470, but KS's 80/20 rule suggest SPX 1480 will lead to 1520. In a real blow-off top, we'd surpass the 2007 high around 1575, just to eradicate the bears before we go over the waterfall. That's what happened in 2008....
ReplyDeleteTRIN at 1.5 is steady-eddy selling so it actually indicates that the selling was no panic, it was consistent and typically leads to additional selling. If TRIN would have spiked to 3, or 4, or higher, somehting big like that, then that would show panic occurred and a snap back market rally move would be needed.
ReplyDeleteNYMO is interesting, the previous -40 low that created the market bounce shows the NYMO recovering to the middle BB on the daily chart, now it is back down and may want to tag the lower BB again down under -60. The indicators for NYMO are positively diverged but price has only barely made a lower low as compared to the -40. This needs a day or two more to work out. At this juncture, a move down to -60 thru -80 may actually identify the market bottom in the days ahead, but, all that can be done is taking things one hour, or minute, at a time.
None of the media pundits believe the downside is real, everyone is now trained to expect higher and higher numbers. If Spain does not announce its bailour request as today plays out, weakness may reenter the markets. If Moody's provides a downgrade to Spain today, the markets would gap down. It is craziness.