Wednesday, July 30, 2014

SPX 60-Minute Chart 200 EMA Cross Downward-Sloping Channel Falling Wedge Oversold Positive Divergence Developing

We watched the neggie d form a couple weeks ago (red lines), with the rising wedge and overbot stochastics all forecasting a spank down, which occured. Price is now dropping into the falling green wedge with oversold stochastics and possie d for the histogram and money flow. The RSI is a toss-up printing a matching low as price dropped but that would be deemed positive divergence. The RSI did not reach oversold territory so that is on the table still yet.

Keystone's two key ST market signals are the 8/34 MA cross on the 30-minute (see previous chart) and the 200 EMA cross on the 60-minute. The SPX failed the 200 EMA at 1966.14 this morning ushering in bearish markets for the hours and days ahead, however, the bulls fight back and now are maintaining price above the 200 EMA signaling bullish markets for the hours and days ahead. Market bulls must send price strongly higher immediately or they are in for some significant pain ahead for days and weeks under 1966.14. Price is perched exactly at the 1966.14. Bounce or die.

Bulls are okay and equities will recover going forward as long as SPX price stays above 1966.14. Market mayhem will begin in earnest if the SPX drops under 1966.14. The indicators hint that even though a recovery bounce should occur, lower lows in price are desired afterwards so the stochastics and MACD line can set up with positive divergence. The Fed statment is only one-half hour away so it is folly to make too much of a guess on direction. Whatever the Fed says is going to send markets wildly one way or the other. Watch the 200 EMA cross at 1966.14 since it tells you who wins, and who loses, 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.

Note Added 1:30 PM: SPX 1964.68 falling under the 200 EMA on the 60-minute at 1966.14. VIX 13.83. RTH 59.76 safely above 59.62. TRIN drops to 0.73 which is very bull friendly. Fed statement is on tap in 30 minutes. The insider's are likely receiving the information ahead of time right now. Utilities are collapsing today and will require more attention going forward. Type 'UTIL' in the search box and study previous charts since the weekly closing price for UTIL 15 weeks ago, and the 50-week MA, will become extremely important going forward; utes are an excellent forecasting tool.

Note Added 1:35 PM: SPX 1966.37 above the 200 EMA on the 60-minute at 1966.14. Easy come easy go as the big fight at the 200 EMA continues. Have to wait until after the Fed statement to see where she wants to go. One side is going to be very happy and the other very sad depending on how price pivots from SPX 1966.14.

Note Added 1:42 PM: SPX 1966.01.

Note Added 1:44 PM:  SPX 1967.03. TRIN is 0.73 strongly favoring bulls today so the Arms Index is a big help for the bulls allowing them to keep equities elevated. VIX 13.68. RTH 59.80. The 10-year yield is 2.56%. Dollar/yen 102.92 up one handle over the last day a huge currency move. Stronger dollar thwacks commodities. GTX down -0.6%. Higher yield on 10-year buoys financials, tech and consumer discretionary while hurting utilities, consumer staples and homebuilders. UTIL -1.8%. XHB puking -0.8%.

Note Added 1:56 PM: SPX 1966.60 at the 1966.14 pivot point. Bounce or die. Who will win? The Fed decides who wins.

SPX 30-Minute Chart 8/34 MA Cross

The bears create the negative 8/34 MA cross on the SPX 30-minute chart by only twenty cents at the end of yesterday's session signaling bearish markets for the hours ahead, however, the GDP is a blowout 4.0% and futures are catching a strong bid, so the bulls want to turn the negative cross into a positive 8/34 cross and seize back control. Price pierced the lower standard deviation band at 1972 so a move back to the middle band at 1978 at a minimum would be expected going forward.

The indicators are weak and bleak (red lines) wanting to see lower lows in price after any bounce in price occurs. The stochastics are oversold which will help create the price bounce higher at the opening bell. Key S/R is shown by the brown lines at 1986, 1985, 1980, 1976, 1973, 1968, 1963, 1961 and 1960. Depending on how the price action settles out today a sideways path through 1968-1986 may develop. The FOMC announcement is 2 PM which will impact markets. Watch the 8/34 cross today. Bears are fine if the negative cross remains. If the SPX stays below the 1985-1986 resistance today, the bears could maintain control. If the SPX starts moving above 1985 the bulls are likely going to run to new all-time highs.

Keybot the Quant algo is bearish currently and VIX 12.69 is a major bull-bear line in the sand. As markets rally to begin the day, if VIX stays above 12.69 the bears are fine and markets will weaken and sell off. If the VIX drops under 12.69, the bulls have upside fuel available and markets will continue higher. If both the VIX moves below 12.69, and the SPX moves above 1985, Keybot will likely flip to the long side. Today should be a wild day. 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 12:52 PM:  It is a wild day. Big up move at the opening bell but you saw the VIX above 12.69 and heading higher off the initial lows so you knew that equities would weaken and sell off which they did. VIX is now above the 200-day MA at 13.57 which is extremely bearish. Carnage will result if the VIX stays above 13.57. Reference previous VIX chart to study volatility. The key market bull-bear lines in the sand that are influencing broad market direction are VIX 12.69 and RTH 59.62. Bears need RTH under 59.62 but the bulls are maintaining the retail stocks above with RTH at 59.73. Equities will sell off in force if RTH loses 59.62. The market bulls can recover if the VIX drops under 12.69. If the bulls can simply keep RTH above 59.62 this will stop the downside selling and prevent the bears from making significant headway lower. The 8 MA remains under the 34 MA on the SPX 30-minute signaling bearish markets for the hours ahead, however, the 8 MA is 1968 and price is creeping higher towards 1968 which would curl the 8 MA higher. The Fed statement is 2 PM one hour away so markets are idling waiting for the reading of the tablets brought down from on high. Watch VIX 13.57 and VIX 12.69 and RTH 59.62 to gauge market direction forward.

Tuesday, July 29, 2014


The RUT 150-day MA slope highlighted here over the last three weeks finally rolled over today. This is a major market event. The 150-day MA has sloped higher for over two years correctly prognosticating the cyclical bull market rally, until today. Yesterday's 150-day MA is 1154.09; today's is 1154.05. The slope of the 150-day moving average now falls by four pennies turning negative for the first time in years. As the astronauts said decades ago, "Houston, we have a problem." The bears pop champagne corks since the long awaited major market multi-year pull back and potential negative finish to the secular bear market 2000-2018 has likely begun.

The green box shows the slope of the 150-day MA moving higher as it has for month after month after month continually verifying the cyclical bull market rally, until today. The only way bulls can stop the failure is to jam markets higher immediately beginning tomorrow. The remainder of trading this week could not be any more important. If bulls plan on maintaining the cyclical bull rally, they must send markets strongly higher from now into the weekend. If the 150-day MA prints negatively tomorrow (Wednesday), then Thursday, and also Friday, the small caps are lost and the broad indexes will follow the small caps lower; markets will break down. This is an important day in market history for you are witnessing the exact inception of a cyclical bear market for the RUT index. We will know over the coming days if it sticks and is official moving forward. Keystone uses the 150-day MA slope on the SPX as the 100% confirmation that a cyclical bear market is occurring and worsening and the RUT 150-day MA slope rolling over paves the way forward for the SPX to follow in the future. 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 Sunday, 8/3/14, 3:03 PM: The RUT 150-day MA rolling over and turning negative and remaining negative for four consecutive days into the weekend is a significant market event. The Dow 150-day MA is 16484.08 for Thursday of last week and 16484.16 for Friday only 8 pennies of a positive slope (cyclical bull market) remaining. The market negativity will greatly increase if the Dow rolls over and joins the RUT in declaring a cyclical bear market for the weeks, months and potentially one or two years ahead. Watch the Dow 150-day MA slope for a vital clue on the market direction ahead.

Monday, July 28, 2014

VIX Volatility Daily Chart 200 MA Cross

Volatility jumps higher today above 13 but is languishing on each side of this psychological 13 number. As a rule of thumb for the VIX using it as a tool, market carnage is guaranteed with the VIX above its 200-day MA now at 13.60. The market bulls can make a come back and recover if they can keep the VIX under the 200-day MA. Note that eight days ago price ran above the 200-day MA but it was a one-day event. Keystone described the market selling then as a volatility event. No meat and potatoes sectors had rolled over so once fickle volatility dropped markets would recover and that is what happened. Since late last week, however, for this recent three-day market sell off, volatility moves higher but this time with a semiconductor sector that has broken down and a weakening retail sector. Note that the VIX ran higher today to test the 200-day MA printing a HOD at 13.64 but it could not stay above and was spanked lower.

Keybot the Quant remains short with RTH 59.62 and VIX 12.70 the key bull-bear lines in the sand that control market direction currently. Both are bearish, but only by pennies, hence the broad indexes stagger sideways unwilling to commit either way. These two parameters will point the way ahead. RTH is printing at 59.59 only three pennies on the bear side causing market negativity. VIX is 12.99 bearish by 29 cents (remember volatility moves inversely to equities).

The VIX 12.70 line is identified by Keystone's algorithm, Keybot the Quant. So use the 12.70 level and 200-day MA at 13.60 as the two key indicators on this chart. Markets will remain weak and drift lower with the VIX above 12.70 and bears win big above 13.60. Equities will recover and move higher if VIX drops under 12.70. The red lines above encompass the 200-day MA over the last few months, all of this year, so use the 13.6-14.5 range as a key resistance area for VIX. Market trouble occurs above VIX 13.60 and serious trouble, with the SPX dropping into free fall when VIX moves above 14.5. The VIX is printing at 12.95 as this message is typed. The RTH is 59.58. The SPX is down barely three points to 1975.75. 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 1:26 PM: The RTH moves higher to 59.65 above 59.62 so equities will recover today and move higher. VIX is 12.82. A big rally will occur if VIX drops under 12.70. Bears will resume selling pressure if RTH drops under 59.62.

Note Added 1:31 PM: RTH 59.64. VIX 12.80. SPX 1977.56. TRIN is at 1.20 representing a preference for steady-eddy selling today so if the Arms Index had its way it wants to see RTH, the retail sector, weaken again.

Note Added 1:55 PM:  The market price action displays more drama than a Shakespearean play; comedy and tragedy all at the same time. The VIX drops under the 12.68 bull-bear line in the sand (use this number instead of 12.70--Keybot is constantly calculating numbers in real-time) creating a further move higher in the stock market. The bulls recover today meeting the RTH 59.62 and VIX 12.68 goals. Keep watching these levels since the movement above or below these two key levels for these two parameters will tell you which way the market is going.

Note Added 1:58 PM: RTH 59.68. VIX 12.67. SPX 1980.49. TRIN 1.27. The beat goes on. Keystone took profits on the JJG trade exiting the long position. JJG likely has some more near-term juice (days) but is tricky since the weekly chart remains weak. No use turning down a profit and moving on especially after catching the exact bottom.

Note Added 2:06 PM: The VIX back kissed the 12.68 critical level and failed now at 12.61 so the bulls may plan to run further today.

Note Added 10:36 PM: The VIX ends at 12.56 in the bull camp sticking a thumb in the bear's eye. The bears, however, declare victory by pushing RTH back under 59.62 which created the broad market weakness into the closing bell during the last one-half hour of trading. So Tuesday is very simple. Watch VIX 12.69 and RTH 59.62 to determine market direction. Bears will rejoice as equity markets crumble if the VIX moves above 12.69 and above 13. Bulls will toast victory ahead if they push RTH above 59.62. If VIX stays under 12.69, and RTH remains under 59.62, then markets stagger sideways like the town drunk unable to make a decision. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead, however, the 8 MA is running upwards, and the 34 MA is dropping downwards, so a potential positive 8/34 MA cross may occur placing the bulls back in charge. The 8 MA on the 30-minute is 1978 so the bears must send SPX price under 1978 and lower immediately after the opening bell to stop the 8/34 positive cross from occurring. If the SPX begins the day hanging around 1979-1983, say for the first hour of trading, markets are going to head higher and RTH will likely turn bullish. If the bears push the SPX lower from the get-go, under 1978 and down towards 1967, the long-awaited sustainable market selling event may be at hand with the VIX moving above 12.69. As explained and highlighted in the above chart, the VIX 200-day MA is key. Bears need VIX above the 200-day MA at 13.60 to growl strongly and guarantee sustainable market carnage. If the VIX stays under 13.60, the bears got buptkiss. Dollar/yen is buoyant at 101.88 moving higher so the weaker yen creates lift in the NIKK tonight and will help the bulls tomorrow. Market bears want to see the dollar/yen lower to 101.80, 101.70 and lower. Market bulls want to see the dollar/yen higher above 102. Use the 101.88 as a reference to see who wins overnight.

Note Added 11:04 PM: Scroll back to the RUT chart or type 'RUT' into the search box at the right to bring the chart up and study the 150-day MA slope cyclical indicator that is explained. For any stock or index, the slope of the 150-day MA tells you if the stock is in a cyclical bull, or cyclical bear, pattern. The RUT has enjoyed an upward-sloping 150-day moving average for many long months but in recent days the slope is flattening and may roll over. If the RUT 150-day MA slope rolls over to a negative slope you are witnessing the exact inception of a cyclical bear market that may last months or a year or two. The last four days result in the following 150-day MA prints for RUT; 1153.67, 1153.92, 1154.00 and 1154.09. The differences are 25 cents, 8 cents and 9 cents. Wow! This is intense and very important; one of the most important things you will witness. The 150-day MA slope is only 8 or 9 pennies from slipping negative for the Russell 2000 Small Cap Index. Obviously, by definition, if price continues printing under 1154.09, this will drag the 150-day MA lower to make for happy market bears. If you see the RUT starting to run higher tomorrow and this week, above 1154.09 the fix is in and the bears will get slapped in the face again as markets run to the all-time highs. It is a huge deal if the RUT 150-day MA slope turns negative; it cannot be understated. It would mean that all the bullish prognostications on the market are wrong. Watch it like a hawk.

Note Added 10:04 PM on 7/29/14: VIX regains 12.69 and higher creating market negativity. VIX is 13.28 and the 200-day MA is 13.58. Bears need thirty cents more to move VIX above 13.28 which will unleash market carnage. Bulls can stage a recovery if they prevent VIX 13.58. Note that the RUT 150-day MA is 1154.05. Bingo. Bears pop champagne corks after being kicked in the teeth for months, and years on end. The RUSSELL 2000 SMALL CAP INDEX 150-DAY MA ROLLED OVER TODAY PRINTING A NEGATIVE SLOPE FOR THE FIRST TIME IN OVER TWO YEARS. The CYCLICAL BULL MARKET NOW TURNS INTO A CYCLICAL BEAR MARKET. The expectation is that the small caps will roll over much more going forward and the Nasdaq and broad indexes will follow along lower each index then rolling over with its 150-day MA turning negative in the days, weeks and months ahead. The bulls must reverse this major negative market signal immediately and the only way they can is to drive markets sharply higher starting tomorrow. Bulls need a big rally to save the day and turn the RUT 150-day MA slope positive again.

Friday, July 25, 2014

Keybot the Quant Turns Bearish

Keystone's trading algorithm, Keybot the Quant flips back to the bear side at SPX 1975 today. The collapse in semiconductors is a big deal. SOX 624 will be important at Monday's opening bell. Volatility and retail are also important for next week. As always, stay alert for a whipsaw on Monday but the bulls will need happy news and positivity in chips to regain the upside mojo. More information is found on Keybot's site;

Keybot the Quant

Keystone's Midday Market Action 7/25/14

The market drama continues. Semiconductors suffer a serious breakdown today. The news on chips has been weak over the last couple weeks. SOX collapses to a 619 handle. Keybot the Quant remains long but is in position to go short in part due to the weak semi's. Keybot is only hanging on to the long side by a thread and the algo will likely flip to the short side if the SPX drops under 1979 and holds this lower level for about five minutes time. The SPX is currently 1981.

If the SOX recovers today from 620 up to 622 and higher, equities will recover. Keybot the Quant identifies the SOX 624 level as a bull-bear line in the sand. SOX collapsed under 624 at the opening bell and this is what creates the majority of market directional weakness today. If the SOX drops further through 619, 618, etc..., the stock market will be falling like a stone. The VIX is 12.12 helping the bulls. Keybot identifies VIX 12.95 as the bull-bear line in the sand. Thus, the markets will fall apart if the VIX moves above 12.95. If the bulls can send the SOX steadily higher into the closing bell and keep the VIX tame at 12.12, equities will stabilize and float higher into the weekend. Any weakness in SOX or increase in VIX will send equities lower.

Interestingly, as this missive is typed, the SPX recovers to 1983 but the SOX remains flat across 619.49. VIX is 12.07 so the slight drop creates market lift. TRIN is 0.75 firmly bullish so it will help the broad indexes recover. Dollar/yen 101.82 dropping from the 101.90 plus highs only an hour or two ago so a stronger yen creates market weakness. The 10-year yield is 2.48% after teasing a hair above 2.50% earlier.

Keystone bot JJG opening a new long position. This long trade requires a nimble touch since a positive divergence bounce is expected from the daily chart but then weakness should return via the weekly chart. So perhaps a launch and gain of a few percent will be good enough to exit the trade quickly and move on. Reference previous chart on JJG a few posts back.

Note Added 10:36 AM: SOX 619.68. VIX 12.04. TRIN 0.76. SPX 1982.43The 8 MA stabs down through the 34 MA on the SPX 30-minute chart at the opening bell today signaling bearish markets for the hours ahead.

Note Added 5:51 PM: SOX 616.65 so semiconductors knock stocks lower. VIX rises to 12.69 but the bears need another 26 cents or so to create mayhem. TRIN came up to 1.03 a single hair on the bear side as the day worked out. Retail stocks are weak and will play a key role next week. The main market directional drivers currently are semi's, volatility and retail stocks. Listen for any news in chip land or retail land over the weekend. Dollar/yen 101.82 remaining steady during the session so equities remained steady. Keybot the Quant flips to the bear side today at SPX 1975 at the lows of the day. The new moon occurs tomorrow and stocks are typically weak moving through the new moon. The Russian sanctions play a key role in markets now. When the threat for the deeper Level Three sectoral sanctions is on the table stocks drop when the fear of sectoral sanctions subside, stocks move higher. Germany is getting whacked on sanction concerns. Late in the day the rumor mill says stronger sanctions are coming early or mid next week.

Thursday, July 24, 2014

SPX 30-Minute Chart 8/34 MA Cross Overbot Rising Wedge Negative Divergence

The 30-minute receives an initial smack down due to the negative divergence. The chart would be content with this mornings price high, a new record all-time high at 1991.39, as a near term top. The previous 2-hour chart hints at a recovery move to play around at the highs again after an initial selloff occurs. The 8 MA remains above the 34 MA signaling bullish markets for the hours ahead. The bears need to push the SPX under the 8 MA at 1989 to start curling the 8 MA downwards to create a negative 8/34 cross. The bears got nothing until they receive the 8/34 negative cross.

Projection is sideways to sideways lower moving forward with current price levels serving as a near term top. Watch the MACD line cross to see if the bulls may try to thrust higher; the RSI also did not become overbot, but overall, the chart is consistent with price topping out and rolling over. Key support below is 1986, 1985, 1984, 1982, 1980, 1976, 1973, 1968, 1963, 1961, 1960 and 1956. Note the TRIN today down at an uber low at 0.74 creatign bullish lift today. Ditto dollar/yen at 101.82. Banzai! The weaker yen sends stocks higher. Interestingly, the VIX is up today, so is the SPX, so one of them is wrong. VIX is at 11.78 languishing under 12 continuing to create lift in the stock market. Bears need VIX 12.95 to create sustainable market selling. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 7/25/14: The 8 MA stabs down through the 34 MA on the SPX 30-minute chart at the opening bell today signaling bearish markets for the hours ahead.

BPSPX S&P 500 Bullish Percent Index Remains on Market Buy Signal

The BPSPX remains on a market buy signal. You recall the drama in May when the buy signal triggered and the bulls have never looked back ever since. When the BPSPX reverses six percentage points a directional change is verified and when the 70% is crossed the double whammy buy or sell signal occurs. The 35 level is also important but the over 5-year bull market rally has left that lower level in the dust. In the years forward we will be talking about the BPSPX when it is down between 10 and 60; all things revert back to the mean eventually. In February the reversal occurs from 62 to 68 so the bulls had mojo and then once the 70 level was taken out the market buy signal verified the upside rally.

In March, equities peaked and the BPSPX reversed to the bear side from 77 to 71, then losing the 70 level, the bears were in clover. Then the bulls slap the bears in the face in early May recovering from 65 through the 70 and 71 levels receiving the buy signal again. The top print is 84.60, call it 85 to keep things simple, so a six percentage-point reversal is 79 for the bears to receive the initial market sell signal. Then under 70 the market downside will be locked firmly in place. However, the bulls are keeping price above 79 not allowing the bears to have a day in the sun, for now. The BPSPX will drop under 79; it is only a matter of when. For today, the bulls continue to ride the market buy signal. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added on 7/25/14: BPSPX ends the week at 82.60. Thus, the bears still have their work cut out for them. Bears need 79 and lower to receive a market sell signal. Otherwise, they got buptkiss and the bull party will continue.

SPX 2-Hour Chart Overbot Rising Wedge Negative Divergence

The theme the last couple days is waiting for the SPX to peak out in the near term. The bulls keep finding a way to add oomph. The key driver from late Tuesday through yesterday is the West backing down from announcing the strong sectoral (Level Three) sanctions against Russia. Once Europe and the US showed that they were weak-kneed and not willing to take the economic hit from sanctions, along with Russia, global stock markets rally higher. This accounts for the upside action from the 1982 intraday low seven candlesticks ago (Tuesday).

The bulls needed to punch up through 1989.50 to create an upside acceleration and the bulls keep pushing printing new all-time highs as this missive is typed now above 1991. The 2-hour chart above shows overbot conditions; the stochastics are cooked. The RSI is not overbot, however, so the sneaky bulls may plan some additional upside. The indicators are universally negatively diverged over the last few weeks but the very near term (the last couple days) RSI and MACD line want to squeeze out another price high after the initial spank down occurs. Price would be expected to drop down into the upward-sloping purple channel moving forward. The blue dots show the price extensions above the moving averages when the mean reversions typically occur.

The expectation continues for price to top out at any time today or at the latest early tomorrow. Since the RSI and MACD is trying to squeeze out more juice, one to three more candlesticks (two to six hours) may be required for price to top out so the bulls may be able to keep markets buoyant moving into the closing bell today. 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.

Wednesday, July 23, 2014

RUT Russell 2000 Small Caps Daily Chart Cyclical Market Signal

Keystone has mentioned the slope of the 150-day MA on RUT a couple of times over the last month. The slope of the 150-day MA for any index or stock is very important since it tells you if the price action is in a cyclical bull, or cyclical bear market. Keystone uses the 150-day MA slope on the SPX as a key broad market indicator but since small caps typically lead, the flattening and potential roll over of the RUT 150-day right now is very important.

If, actually when, the slope of the 150-day MA turns negative the RUT will fall into a cyclical bear market. The RUT last flattened in late 2012 where the markets were going to roll over but the Congress saved the day to begin the new year in 2013. The last significant cyclical bear for the RUT with a  negative 150-day slope was mid 2011 through early 2012 and of course this encompasses the August 2011 waterfall crash. In fact, the slope turned negative as the crash occurred. By the time a few days went by and the slope was clearly moving down, the RUT had already dropped from 870 to 640, -26%.

Sticking to the here and now, the RUT remains in the cyclical bull since early 2012 over two years time. Using YHOO Finance's interactive chart for ^RUT, with a 150-day MA, the last several days of 150-day MA end-of-day prints are; 1152.23, 1152.38, 1152.47, 1152.80, 1153.09 and 1153.41 yesterday. Looking at the differences and rate of change between each; 15 cents, 9 cents, 33 cents, 29 cents and 32 cents. The market bears were within nine thin pennies of turning the 150-day MA slope negative and officially beginning a cyclical bear market in small caps.

But alas, the bulls slap the bears in the face again, backed by the Fed's easy money, and the RUT recovers. Check the 150-day MA each day forward to see if that spread tightens and if the slope turns negative. When that day occurs the market bears can pop champagne corks since their long wait for extended and significant market downside is finally at hand. Until then, however, the bulls continue to rule the roost with an over two-year cyclical bull market in small caps continuing. Obviously, if the RUT prints below 1153 going forward this will help create the roll over in the 150-day MA and a cyclical bear market ahead. The market bulls must keep RUT price above 1154 and heading higher to keep the cyclical bull market party alive with an upward-sloping 150-day.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.

Tuesday, July 22, 2014

SPX Weekly Chart Rising Wedge Overbot Negative Divergence

As usual, as has been the case for well over one year's time, the bear's are slapped in the teeth again and hit over the head with a 2x4. The market bulls crush the VIX under 12 and create an upside orgy rally today that would make Caligula blush. We have been monitoring the weekly chart for the last month and as you recall we were waiting for a 1 to 3 weeks more and another matching or higher price high, due to the MACD line remaining long and strong in the very near term, and today, voila, it appears. Market bears are happy to see this chart although the money flow may further delay the bears day in the sun by a couple more weeks.

The new price high occurs today and the indicators are lined up with negative divergence across the board both on a multi-month time frame and in the near term. The little red circles may potentially delay the market top for a week or two but the top appears at hand. When Friday prints, check this chart because the MACD line and money flow very short term move (little red circles) will likely be flat or sloping down (neggie d) sealing the fate of the SPX. Regardless, she is very very close now and this is a potential multi-year market top.

The neon green circles show the touches for the 20-week MA occurring at least once every 4 to 6 months at the most so it is time for price to revert to the mean. Price has not touched the 50-week MA since November of 2012, 20 months ago! This is long overdue for a back kiss and price always overshoots to the downside just like the upside. Remember, the collapses from rising wedge patterns can be quite dramatic; sharp and quick where the markets are down -5% before anyone even notices and that is only the beginning. Exercise extreme caution moving forward.

Cash is a nice place to be and do not let people tell you that it is stupid letting money sit in cash. Be patient and let things play out for a few weeks or months forward. Despite the non-stop woodshed beatings the bears receive, they manage a smile on their black and blue swollen face. The bear's bloody eyes display a calm resolute look since they know the chart above will lead them to victory very soon. Projection is for sideways to sideways lower for the weeks and months to come with a multi-year market top potentially printing right now. Index shorts can be continually scaled into here 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.

CAT Caterpillar Weekly Chart Rising Wedge Overbot Negative Divergence

CAT has finally run its course. Notable short-seller Jimmy Chanos of Kynikos Associates will be happy since he is short CAT and has been professing its ills for many months. He will now finally be able to breathe easy. Caterpillar can be shorted here forward. The green sideways symmetrical triangle was highlighted as it developed and played out with an upside break out as many of you long time readers remember from last year. The vertical side of the triangle is about 25 handles so from the breakout at 85, add 25, and voila, 110 target is achieved. That bull rally was basically straight up.

While the triangle pattern target is snagged, the red lines show a rising wedge in place with overbot indicators and negative divergence across the board (red lines). This is an attractive stock to short going forward. Purple lines provide support. Economists and traders say the global economy is running on all cylinders but that is in conflict with CAT rolling over for the weeks and months ahead. All construction, bridges, buildings, roads and houses begin with a hole in the ground made by a yellow excavator or dozer. Watch rubber and tire makers to see if their sales drop since there will be less need for big industrial tires for the CAT equipment. Projection is sideways to sideways lower prices into the end of the year. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 7/24/14: CAT reports disappointing earnings this morning. The stock plummets -3.4% printing an intraday low at 104.09 at that 104-105 first level of support.

JJG Grains ETN Daily Chart Downward-Sloping Channel Falling Wedge Oversold Positive Divergence

The drop in corn and wheat prices has been spectacular. JJG is a grain ETN that shows the carnage. The move lower shows inflation fears subsiding and turning into disinflationary fears. Corn is in many products and a requirement for raising beef, pork and chicken so the food inflation at the supermarket will relax moving forward. The blue downward-sloping channel is in play. JJG is beaten like a rented mule but note that the green lines show universal positive divergence across all indicators, oversold conditions, and a falling wedge pattern (bullish). If you are a nimble trader, this would be a nice long trade to jump into for a quick pop. The weekly chart remains weak so you have to take the money and run once it launches. A move up to the bottom rail of the channel and horizontal support at 40-ish is an upside target. Keystone does not hold a position in JJG currently.

The inflation-deflation debate will rage on but the chart shows that the food inflation is deflating. JJG will bounce but then stagger sideways even making new lows moving forward say through 35-43 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. Consult your financial advisor before making any investment decision.

HYG High-Yield Weekly Chart Rising Wedge Overbot Negative Divergence

High-yield instruments have rolled over from lofty levels. This is one of the bubble areas Keystone has been highlighting in recent months. SJB (very thinly traded) is an ETF that moves inverse to high-yield (SJB moves up if HYG falls) and Keystone remains long. Collapses out of rising wedges can be quite dramatic. The fall from the top is harsh but still nothing that a rising wedge pattern is capable of. The purple circles show that price has not back tested the 20-week MA, now at 93.63, for close to one year, until now. Price always reverts. The 50-week MA, now at 91.17, has not been tested in one year as well. A collapse from a rising wedge could easily tag the 50-week MA and prices typically overshoot to the downside just as they overshoot to the upside.

That said, the 20-week MA is a logical place for a relief bounce. The MACD and stochastics are weak and bleak. The RSI and money flow, however, can help with a short-term relief bounce. Overall, the expectation is that the top is in for high-yield. Even if price ventures up for an M top, or double top pattern, price is not expected to make new highs again. HYG has jumped from 40 to 95, +122%, due to the Fed's easy money starting with QE1 in March 2009; over +25% per year but the Fed says there are no bubbles in this area. HYG may recover in the near term but lower prices are expected going forward 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. Consult your financial advisor before making any investment decision.

SPX 30-Minute Chart 8/34 MA Cross Tight Bands Squeeze Out Upside Rally Rising Wedge Overbot Negative Divergence

Here is an update of yesterday's chart. The bulls broke up through the sideways channel at 1976 resistance so 1980 R was attacked which also gave way. This opened the door to test the all-time highs at 1985-1986 and bingo, a new all-time intraday high is printed at 1986.24. The tight bands squeeze out an upside move. The 8 MA crosses above the 34 MA yesterday afternoon signalling bullishness for the hours ahead which occurs today.

The red rising wedge is developing, the stochastics are overbot, the red lines show negative divergence in the multi-day frame as well as VST over the last couple hours except for a smidge of juice with the MACD line. So markets would be expected to top out in 1 to 4 candlesticks so in an hour or two. Thus, perhaps a sell off may appear into the closing bell. AAPL earnings are released after the closing bell and will greatly impact the broad markets.

Key S/R is 1986, 1985, 1980, 1976, 1973, 1968, 1963, 1961, 1960, 1956, 1951 and 1949. Keybot the Quant algo turns bullish today but remember that Keybot is operating as a lower risk lower reward type model and not designed to catch exact tops or exact bottoms. A spike in volatility or weakness in retail, financials or copper will immediately turn the markets negative again. For now the bulls are happy with a happy upside orgy day but the projection is for the SPX to top out perhaps this afternoon. 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 3:50 PM:  The SPX remains elevated today dropping down to 1981 a short time ago receiving some of the neggie d spank down action. The topping out behavior remains in play. The SPX 2-hour chart may try to squeeze out 1 or 3 more candlesticks so the top may be on tap tomorrow. There is 10 minutes remaining to see if the SPX can print a new all-time closing high. The SPX will print a new all-tiem record intraday high at 1986.24. Trannies are at all-time highs again and will be looking for the Dow Industrials to confirm. VIX is 11.92 not moving lower to provide more bull fuel, but not moving higher so the bears do not receive help. Market bulls will need a lower VIX tomorrow to take equities higherTRIN 1.00 dead flat neutral refusing to pick a side today not wanting anything to do with bulls or bears.

Note Added 4:02 PM: The SPX does not print a new all-time closing high.

Keybot the Quant Turns Bullish

The ebb and flow continues with Keystone's trading algorithm, Keybot the Quant, flipping to the long side at SPX 1982. Do not hold your breath since it would not be surprising for a whipsaw move to occur back to the bear camp. Volatility is the key market driver since late last week due to the geopolitics so the wild moves in VIX, up and down, sends the broad indexes in the opposite direction, down and up. Watch VIX 12.96 as the bull-bear danger line. VIX is at 11.95 comfortably in the bull camp creating the market upside today. More information is at Keybot's site;

Keybot the Quant

Monday, July 21, 2014

SPX 30-Minute Chart 8/34 MA Cross Sideways Channel Standard Deviation Bands Squeezing in Tight

The struggle for market control continues with the bulls and bears fighting over the 8/34 MA cross on the 30-minute. The red and green circles show the recent bear and bull crosses, respectively. Last Thursday's big loss created a negative 8/34 cross favoring bears but the Friday recovery created the positive cross and happy bulls but today's weakness creates a negative 8/34 cross ushering in market selling for the hours ahead.

The fight continues, however, since the 8 MA and 34 MA are only pennies from each other and the bulls are trying to create the positive 8/34 cross. The SPX is staggering sideways through the 1968, 1973 and 1976 S/R levels (see prior message for support and resistance levels). Price pokes up through 1973 R so the 1976 R is now in play. The 20-day MA is 1968.69 which forms a confluence with horizontal support and provides this level with serious street cred. Thus, price stumbles through the sideways 1968-1976 channel deciding which side it wants to break out from. Bulls win above 1976 and will send price higher to the 1980 R. Bears win big under 1968 which will quickly drop price to the 1960-1961 level for a critical bounce or die decision.

The indicators show a sideways chart pattern. Use the 50% and zero levels to gauge which side is winning. The RSI is a touch in favor of bulls above 50%. The stochastics, however, favor bears under 50%.The histogram and MACD line hug the flat zero line. The standard deviation bands (green lines) show another tight squeeze so a commitment on a strong directional move is likely on tap this afternoon or first thing in the morning. The green arrows show prior squeezes which result in 20-point moves one way of the other. Tight bands tell you a sharp strong move will occur but does not tell you what direction. Watch the 8/34 cross since it constantly identifies the winner 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.

Note Added 1:53 PM:  SPX 1975. The 8 MA on the 30-minute is 1970.87 and 34 MA 1971.58 so the bulls are pushing to create a positive cross with the 8 MA moving higher and the 34 MA sloping lower. Bears must create market weakness right away or they will fold like a cheap suit into the closing bell. The VIX is 12.64 dropping sending stocks higher. TRIN 1.05 a hair on the bear side of one. Bears must hold that 1976 R.

Note Added 3:39 PM: The bulls keep pushing higher with SPX at 1975 knocking on that 1976 R door. VIX 12.67. TRIN is down to 0.84 favoring the bulls and helping create market lift. The pending very sharp move described above is perhaps on tap for tomorrow's opening bell. The price action is sideways directionless like a drunk staggering along Times Square on a Saturday night. The ADX for the 30-minute chart is down at 12 showing no trend up, or down, in price whatsoever. Copper trades higher today moving JJC higher which helps the stock market bulls. Volatility is the key market direction driver currently; VIX 12.95 is the bull-bear line in the sand. At VIX 12.67 the bulls receive upside juice. Bears need the VIX above 12.95 then the bears need to turn a sector such as retail, financials or copper bearish to establish sustainable market selling. Right now, the bears are weak and need to push volatility higher to show they got game. The bears will receive a small feather for their caps if they can keep a lid on the markets by holding the SPX 1976 resistance.

Note Added 3:53 PM: SPX 1974. VIX 12.70. TRIN 0.91.

Note Added 3:56 PM:  Dollar.yen 101.39 so the slight increase in this currency pair from 101.30 this morning (weaker yen) helped create the market lift off the bottom today.

Note Added 4:01 PM: The bears are happy they held SPX 1976 resistance but the bulls are very happy they keep VIX under 12.95 since this will allow them to win tomorrow.

Note Added 4:07 PM: Netflix misses by a penny with 1.15 EPS and beats by a tiny hair on top line revenue with $1.34 billion versus $1.33 billion estimated. Traders push NFLX +2% higher on the knee-jerk reaction blessing the in-line results. As time goes on, NFLX keeps leaking lower, +1.5%.... +1.2% .... +0.8%..... hurry-up, buy a movie to help them out.

Note Added 4:14 PM: Chipotle is a hot tamale reporting 3.50 EPS trouncing the 3.06 estimate. Top line revenue is $1.05 billion versus the $990 million estimate. Sales are increasing with increasing traffic and increasing ticket prices. The popular restaurant is running on all cylinders. CMG gains +8%. Burrito’s are big business.

SPX Support, Resistance (S/R), Moving Averages and Other Important Levels for Trading the Week of 7/21/14

SPX support, resistance (S/R), moving averages and other important levels are provided for trading the week of 7/21/14. Levels shown in bold are strong resistance and support. Bold and underlined levels are very strong and important key S/R levels. The SPX closing and intraday all-time highs occurred on 7/3/14 two and one-half weeks ago at 1985-1986.

Equities remain elevated near all-time highs but the bears fight back today. Thursday was the big market down day, followed by the big recovery day on Friday, and now more weakness today. The VIX above 13 creates market negativity. If VIX drops under 13, equities will recover. Bears win if VIX stays above 13 and moves higher going forward.

The SPX starts the week at 1978 and fell like a stone at the opening bell. The bulls need only two points today, to touch the 1980 handle and this resistance will immediately give way with price running to test the all-time highs at 1985-1986 in very quick order. The bears need to push under the very strong 1960-1961 support level to accelerate the downside which will be substantial if this strong support fails. Even more interesting is that an air pocket exists between 1949 and 1928 so the 1949-1951 support level would be the last chance for the bulls to hold back the selling. A move today through 1962-1981 is sideways action to begin the week which is occurring.

The SPX is printing 1970 as one-half of Monday's trade is over. Note that today is a fight for the critical 20-day MA at 1968.44. Bounce or die. Bulls must hold this 1968-1969 level or failure will occur. Bears need the SPX under the 20-day MA as soon as possible. The bears need to move the SPX under the 200 EMA on the 60-minute chart at 1957.44 to lock in sustainable multi-day and perhaps multi-week and longer downside for the stock market.

As this missive was typed, the VIX drops under 13 and is now down at 12.88 so stocks recover. SPX is 1972.31 now down only 6 points on the day. The 1973 offers up strong overhead resistance. If this should give way, price will seek the strong 1976 R next. The SPX bounces off the 20-day MA today so the bulls are content with the price action.

1986 (7/3/14 All-Time Intraday High: 1985.59) (7/3/14 Intraday High for 2014: 1985.59)
1985 (7/3/14 All-Time Closing High: 1985.44) (7/3/14 Closing High for 2014: 1985.44)
1983.94 Previous Week’s High
1979.91 Friday HOD
1978.22 Friday Close – Monday Starts Here
Currently Printing 1970.16 in Monday Trading
1968.44 (20-day MA)
1968 (6/24/14 Intraday Top: 1968.17)
1963 (6/20/14 Closing High: 1962.87)
1960.82 Friday LOD
1960.23 July Begins Here
1957.44 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)
1956 (6/9/14 Intraday Top: 1955.55)
1955.59 Previous Week’s Low
1951 (6/9/14 Closing High: 1951.27)
1938.42 (50-day MA)
1924 (5/30/14 Intraday Top: 1924.03) (5/13/14 Closing High: 1923.57)
1907.33 (20-week MA)
1902 (5/13/14 Intraday Top: 1902.17)
1901.89 (100-day MA)
1897 (5/13/14 Closing High: 1897.45) (4/4/14 Intraday Top: 1897.28)
1891 (4/2/14 Closing High: 1890.90)
1884 (3/21/14 Intraday Top: 1883.97) (3/7/14 Intraday Top: 1883.57)
1878 (3/7/14 Closing High: 1878.04)
1873.90 (150-day MA; the Slope is a Keystone Cyclical Signal)
1866.29 (10-month MA; a major market warning signal)
1851 (1/15/14 Intraday Top: 1850.84)
1849 (12/31/13 Intraday High Top for 2013: 1849.44)
1848.36 Trading for 2014 Begins Here
1848 (1/15/14 Closing High: 1848.38) (12/31/13 Closing High for 2013: 1848.36)
1845.37 (200-day MA; not tested for 19 months extremely odd behavior)
1831.45 (12-month MA; a Keystone Cyclical Signal) (the cliff)
1824.35 (50-week MA)

Friday, July 18, 2014

Keystone's Midday Market Action 7/18/14; Israel Invades Gaza; Ukraine Airplane Crash Aftermath; Consumer Sentiment

Retail stocks are the key today since Keybot the Quant algorithm identifies RTH 59.46 as the key metric affecting market direction. Whichever way the RTH pivots from 59.46, so do the markets, and the RTH runs higher now at 59.52 providing a nod to the market bulls sending equities higher. The TRIN is down to 0.71 which will guarantee bull victory today if it stays under one. Now that the bulls take back RTH 59.46 into their camp, VIX 13.06 is the next target, which gives way to the downside (bullish) as this missive is typed. VIX is now at 13.00. Watch the VIX closely since the drop under 13.06 will create a lot more bull fuel and a stronger relief rally.

The SPX bounces immediately so the 200 EMA cross on the 60-minute will not turn negative, at least in the early going, so the bulls sit back and light a stoagie (refernce the previous chart). Markets should pivot at 10 AM with Consumer Sentiment and Leading Indicators so wait for this to pass before seeing how markets settle in for the day. RTH above 59.46, and VIX under 13.06, with the low 0.7 TRIN, says the bulls easily win today. Can they keep it up?

Note Added 9:50 AM: RTH 59.56 (above the 59.46 bull-bear line causing market bullishness). VIX 13.18 (above the 13.06 bull-bear line causing market bearishness). These two parameters are the rudder steering the market directional ship today. Monitor them closely so see which way the broad market will move. TRIN 0.77.

Note Added 9:54 AM: RTH 59.55. VIX 13.30. Sentiment hits in one minute.

Note Added 9:56 AM: Consumer Sentiment is 81.3 the weakest since spring time. Dollar/yen 101.37. RTH 59.56. VIX 13.34. TRIN 0.79.

Note Added 10:00 AM: Leading indicators are up +0.3% missing the +0.5% estimate. RTH 59.58 so the bulls latch on to the retail stocks to keep equities buoyant into the weekend. VIX is 13.32 so the bears latch on to volatility to maintain downward pressure in equities. One of these two characters will flinch and tell you the market direction answer. If they remain status quo, then equities simply stagger sideways into Happy Hour.

Note Added 2:34 PM: The VIX collapses under 13.06 and bears fold like a cheap suit. Keybot the Quant algo remains short but will likely flip long if the SPX moves above 1982.63. The SPX is currently printing 1978 and rising at the highs of the day. VIX is at 12.15. TRIN 1.04 interestingly moving above one today in the bear camp but the low volatility is powerful and forces equities to move higher.

Note Added 2:39 PM: The 8 MA just moved above the 34 MA on the SPX 30-minute chart which which gives the nod to the bulls for the hours ahead. The cross is only occurring by pennies thus far so if the bears want to prevent the 8/34 cross or at least make it very short-lived, the bears must push the SPX lower immediately. If the bulls keep pushing higher they may push higher into and through early next week. There is lots of time remaining in today's trading. The next one-half hour or so will tell a lot. If bears plan on pushing back they have to do it now. VIX 12.22. TRIN 1.03.

Note Added 3:39 PM:  The drama continues. SPX 1978. VIX 12.21. TRIN 1.12Bulls still have time to push higher. The TRIN is maintaining a ceiling on the SPX. Keystone bot QID, a 2x inverse ETF that goes up if tech (Nadaq) goes down, opening a new long position. QID has attractive positive divergence on weekly and daily charts. It may need more time to base but it will simply be added to moving forward. 

SPX 60-Minute Chart 200 EMA Cross

Now you can see why Keystone always references the 200 EMA cross on the 60-minute often. The SPX remains above the 200 EMA at 1955.72 signaling bullish markets for the hours and days ahead. Note the intraday low at 1955.59 with price bouncing directly off this critical bull-bear signal line verifying its importance. The bulls continue to enjoy a big party above the 200 EMA and even when it is pierced to the downside the bulls have quickly recovered. Perhaps this time it will be different but the bears have no hope until they create a price drop under the 200 EMA which will trigger substantial market selling.

The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead. Thus, either the chart above turns bearish agreeing with the 30-minute chart forecast signaling ongoing bear victory and market selling, or, the 8 MA will cross above the 34 MA on the 30-minute chart agreeing with the 60-minute chart above signaling that the bulls win moving forward.

The red lines show weak and bleak indicators wanting to see lower lows in price after a bounce occurs. The stochastics are oversold which will help create a bounce.The bears need the negative 200 EMA cross or they got nothing. If so, equities are going to start noticeably deteriorating. 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 10:05 AM: Equities start off with the bounce and the SPX is at 1965 and higher ruining any bear hopes for market mayhem, for now. Bears need the negative 200 EMA cross, the 1955-1956 level to fail, or they got nothing.