SPX S&P 500 Daily Chart Overbot Rising Wedge Negative Divergence Setting Up

As mentioned a few days ago, the SPX daily chart was in the process of topping but needed a few more days to set up. It is there now as the negative divergence shows although today has to play out as explained below. About a week ago, it was thought that the 2-hour chart would create a pullback and then prices would come back up to satisfy the daily chart; which essentially occurs but a stronger selloff was expected. Each times stock began to move lower on the 2-hour chart from negative divergence, the central bankers intervened to maintain buoyancy  in the stock market.

As this central banker drama plays out, the daily chart indicators line up with neggie d (red lines) so a smack down is on tap. However, watch that sneaky RSI on the verge of the overbot level (tiny purple circle). If the RSI pokes above the 70% level that will delay the market top by a day or three. If the RSI remains flat as is compared to the prior high about a week prior, then the bears will be all systems go for downside. Watch the MACD cross since a negative cross will confirm the beginning of a selloff in stocks. The dark red rising wedge is ominous.

Price tagged the upper standard deviation line so a move back to the middle band at 2022 and rising is in play. If the RSI pokes higher as mentioned then price will seek the upper band more substantively at 2074 before rolling over. Stocks are long overdue for a pull back and have been stick-saved over the last three weeks by a Draghi pump, then a Yellen pump, then positive seasonality around the Easter holiday, then another Yellen pump on Tuesday. The central bankers are sick; they have created a Frankenstein market. They realize this but they no longer know what to do except pretend that they know what they are doing.

S&P futures were down -4 but are now +1 about 90 minutes ahead of the opening bell. Watch the RSI to see if the top occurs today or if it will be delayed until Monday. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

SPX S&P 500 2-Hour Chart Yellen Rally

The drama on the 2-hour chart continues. The chart has wanted the SPX to roll over but the central bankers keep pumping equities higher. After each pump, the chart has to reset factoring the move into the price. The blue circle shows where ECB President Draghi goosed the stock market. The purple circles show the two pumps by Fed Chair Yellen. Note that price did not bounce due to positive divergence. This behavior verifies that the rally is due to central banker pumping.

The current price candlestick is completely above the upper standard deviation band displaying off-the-charts uber bullishness. This is a rare occurrence. A move back to the middle band, at a minimum, at 2042 and rising is on the table. Stochastics are oversold and maxed out at the ceiling so this will lead to the first pull back in this 2-hour time frame. Stocks will come back up after that, however, due to the strength in the RSI and MACD. It may take from 2 to 5 candlesticks to create the next top with negative divergence so say anytime from lunchtime today through the end of day tomorrow. The central bankers are powerful. The brown triangle shows price breaking out to the upside.

Put/calls remain low and have not yet been satisfied with a big selloff. the TICK machine tags +1300 today uber bullishness. NYMO remains elevated and has not yet come down. The SPXA50R is at multi-year highs. The bulls are partying like its 1999 but if the bears stay patient they should get a turn at bat in the days ahead. As long as traders maintain confidence in central bankers, the band plays on. 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.

SUNE SunEdison Weekly Chart from Boom to Bust in 8 Months

The sun no long shines for solar power company SunEdison. Instead, SUNE is pummeled with dark clouds and rain. Television pundits and Wall Street analysts praised SUNE during 2014 and 2015 telling investors to buy with both hands. They do not mention the stock anymore and Ma and Pa Kettle are now eating franks and beans each evening since they lost all of their money.

SUNE crashes from 33 to 0.57, a -98.3% loss, an epic failure, and likely belly-up heading into bankruptcy. Note that if you were watching the chart you knew last summer that a major pull back was coming due to the rising wedge, oversold conditions and negative divergence (red lines). The rest is history. 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.

NYA NYSE Composite Weekly Chart 40 MA Cross

The SPX crossed above its critical 12-month MA at 2030 over the last few days which signals a cyclical (weeks and months) bull market ahead. The fight continues but the bulls have the firm upper hand. Another one of Keystone's key cyclical signals is the 40-week MA cross on the NYA now at 10158. The NYA pokes above ending at 10190 yesterday announcing the arrival of a cyclical bull market confirming the SPX 12-month MA cross signal. The jury remains out so you will have to watch this closely over the coming days and week or two.

The rally off the textbook Tweezer Bottom (purple circle) is huge from under 9K to 10.2K, +15%, in only seven weeks time. Price is testing both the 40-week MA and the upper trend line on the downward-sloping long-term channel. The indicators are long and strong pointing to matching and higher highs in price after any pull back occurs on the weekly basis. Note that the MACD line was not happy with the February bottom; it wanted to see another matching or lower low in price under 9K so that may have to be revisited in the future.

Watch the NYA 40-week MA at 10158 like a hawk; it will tell you a lot about market direction ahead. Each day that the NYA is above 10158 is another nail in the bear's coffin but if NYA drops under 10158, the bears will spring to life and take the stock market lower. 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 11:07 AM: The bulls are in control with NYA up to 10267.

Keybot the Quant Turns Bullish

Keystone's trading algorithm, Keybot the Quant, flips bullish this afternoon at SPX 2050. The NYA Index above 10156 creates market bulllishness. Bears need the NYA under 10156 or they got nothing. As always, remain cautious for a whipsaw move back to the short side especially in these erratic markets. More information is found at Keybot's site;

Keybot the Quant

SPX S&P 500 1-Minute Chart Fed Chair Yellen Creates Market Rally

The central bankers are the market. As soon as Fed Chair Yellen begins speaking at the Economic Club of New York, she comments on a weak economy and flaps her dovish wings. Stocks explode higher. The SPX leaps from 2035 to 2048 a 13-handle gain in a flash. Long live Chair Yellen! All Hail Yellen. Kneel and bow when in the presence of her power! The SPX is fighting at the 2044 level which is the starting year number that determines if stocks are positive or negative for this 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 5:09 PM: The SPX finishes the day up 18 points, +0.9%, to 2055 after Chair Yellen hitched up her skirt this afternoon and winked at the traders.

SPXA150R S&P 500 Percent of Stocks Above 50-Day MA and SPX Weekly Charts

The number of stocks above their 50-day MA are above 90 nearly at 92 an uber multi-year high. The dramatic rally has great momentum as traders are buying any stock with a heartbeat. The red circles show what happens when the bullishness becomes excessive. What do you think will happen?

The red lines show how stocks continued to rally from late 2014 through 2015 but the SPXA50R was decreasing. This divergence was a clear warning of trouble coming. Keystone also monitors the SPXA150R and SPXA200R. If the SPXA150R prints above 70%, markets are getting ahead of themselves. Every few years the SPXA150R may move above 90% when that occurs you definitely want to be all-in short as Keystone pointed out two years ago which led to the stock market collapse in September 2014.

The SPA50R chart above is a weekly chart so the expectation would be for markets to top out on this weekly basis very soon and pull back.

Watch the H&S pattern shown by the dark red lines on the SPX chart. Price is printing a right shoulder right now. The neckline is 1880 and the head is 2135 which is a 255 point difference. Thus, the downside target would be 1625 if the neckline at 1880 fails. 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 5:11 PM: The SPX finishes the day up 18 points, +0.9%, to 2055 a new closing high for this year. The analysis above does not change.

SPX S&P 500 5-Minute Chart Battle for the 12-Month MA at 2030

The SPX drops at the open to test the critical 12-month MA at 2030 that is a key tool in determining a cyclical bull market versus a cyclical bear market. Price bounces off the key level in the early going. The SPX is above 2030 signaling bullish markets for the weeks and months ahead, however, obviously, this fight is ongoing. Fed Chair Yellen speaks shortly and will impact markets.

Bulls win big above 2030. Bears win big under 2030. Since this is such a critical level, if 2030 fails, stocks may flush quickly lower. 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 10:08 AM EST: The SPX pops to 2034 after the Consumer Confidence data reports at 96.2. The battle for the 12-month MA continues. Both sides fully realize the seriousness of this level.

Note Added 12:28 PM: Yellen is flapping her dovish wings so stocks rally. SPX is up to 2041 now nine solid points above danger. The bulls cheer for Fed Chair Yellen, Queen of the Doves! The central bankers are the market. The SPX pops 7 points to 2044 as Yellen continues talking.

Note Added 5:15 PM: The bulls punch the bears in the face. Chair Yellen creates an upside orgy of  bullish joy after flapping her dovish wings. The SPX ends the session up 18 points, +0.9%, to 2055 now positive on the year and at a new closing high for this year. Another key cyclical market signal is the 40-week MA on the NYA at 10156 so watch this level closely the remainder of the week. Bulls will maintain market upside with NYA above 10156. Bears will stop the upside rally and begin selling in equities if the NYA loses the 10156 level.

CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts

The put/calls are dropping again indicating the ongoing complacency. And why wouldn't traders remain fearless? The ECB and Fed keep pumping stocks higher so everyday is a party. Investors dip their mug into the Fed punchbowl, become inebriated, and then start buying any stock with a heartbeat. The red circles show peaks in trader complacency; what typically happens? Yes, a market top since the optimism is way too euphoric and joyous.

There are two paths that are most likely; first, the purple path where markets begin selling off now and will continue lower until the put/calls print in the green circles, or, second, the brown line where stocks sneak out one to three days of sideways to sideways higher gains and then rolls over to the downside with stocks collapsing until fear and panic begins in the green circles when a rally will begin. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

SPX S&P 500 2-Hour Chart Sideways Symmetrical Triangle

The 2-hour chart has provided some interesting entertainment over the last couple weeks. The red arrows show expected negative divergence spank downs which occur but the bears cannot gain downside traction. This is due to the central bankers pumping stocks and the buoyancy associated with a three-day Easter holiday. The  blue circle shows ECB President Draghi pumping the stock market higher and the purple circle shows Fed Chair Yellen pumping stocks higher. Then the SPX stumbles through a tight sideways range on low holiday volume. 

By the looks of the brown sideways symmetrical triangle, however, tomorrow (Tuesday, 3/29/16) looks like a big decision day. The apex of the triangle can fit another four or five candlesticks (8 to 10 hours of trading time) but the triangle pattern is squeezing in so tight the breakout direction will likely become evident tomorrow. The vertical side of the triangle is 60 handles so there will be a big winner and a big loser. If price breaks above up and out of the triangle, say at the starting year number at 2044-2045, price will target 2105 (2045+60). If the bears win and price collapses out of the bottom of the triangle at say 2035, the downside target is 1975.

Money flow drifts lower and the MACD line is in a negative cross which favors a bearish outcome although nothing is certain in these erratic markets. Following along from the SPX daily chart posted a short time ago, the expectation would be for price to fall. If price rises, the upper band at 2058 is an immediate target. The put/call ratios are dropping so a couple days of further bullishness should only lead to stocks rolling over and selling off. Watch the triangle pattern on Tuesday to see which way she breaks. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

SPX S&P 500 Daily Chart

There are many story lines occurring on the daily chart. Keystone has previously described the blue W pattern a  few times and it turns out to be textbook. The height of the W is 110 points so the target is 2050 (1940+110) if price breaks up and out at 1940 which occurs. W's are very strong when they are under both the 50 and 200-day MA's, strong if under at least one of these critical moving averages and only somewhat strong if the top of the W pattern is intertwined with the 50 and 200-day MA's. If you play a W that is somewhat strong you may want to cash in the long play before the upside target whereas a W pattern like above you are relatively certain that price will print at the target, which it did.

As price moves higher it forms an ominous red rising wedge; the collapses from rising wedges can be quite dramatic. It has been tough for bears to gain downside traction with the goofy calendar since over the last couple weeks, the ECB and Fed meetings occur and Easter holiday which help keep stocks elevated.

The candlestick today show bulls and bears fighting it out and price ending the day exactly in the middle so it is a draw. The critical 12-month MA is at 2030 and all Hades would break loose if this fails. The 50-week MA is also at 2030. Bulls are fine above 2030. Bears rule the markets under 2030. Price is at 2037.

Price has not yet back kissed the 200-day MA at 2017 so this is on the table. The peak in price last Tuesday comes with negative divergence (red lines) which wants a spank down which occurs. The RSI and MACD line are dead flat as the higher high in price occurs so you do have to give the path forward to the bears, however, the momentum for 6 weeks may provide enough oomph to bring price up a bit more before rolling over. Keep an eye on the MACD cross to see if it occurs (black line under purple line).

The pink box verifies that the downside move in the S&P 500 was a strong downward trend in January into February but it ran out of gas when the ADX dropped under 25-ish in late February. That is when you knew the strong downtrend in price had ended. Note that after the wild upside orgy since 2/11/16, the ADX is unimpressed at 22 so the robust upside move in stocks is not a strong uptrend. Market bulls will rejoice if the ADX moves above 25 and stays above since it guarantees that stocks will continue higher to probably print new record highs. Market bears must keep the ADX under 25 and stocks will roll over and begin selling off.

The expectation is for stocks to sell off in this daily time frame. The CPC and CPCE put/calls are coming back down again indicating ongoing market complacency which occurs for market tops. Thus, stocks will either begin leaking lower tomorrow and visit 2011-2023 for starters, or, may remain elevated floating a bit higher for a day or three, but this will result in a roll over to the downside immediately thereafter. As long as the thin brown lines hold if price makes a matching high, the neggie d will spank markets lower.

Bears would be best off for price to simply fill that sliver of a gap on the upside at 2060-ish. This would button-up all upside gaps and open the door for extended long term market weakness. There are no other gaps to fill above. On the downside, there are a few juicy gaps at 1193-ish, 1898-ish and 1870-ish that will need filled at some point forward (little circles).

So the forecast is negative for the chart above and in the daily time frame for the days ahead say into the first week of April, however, the SPX weekly chart indicators remain long and strong. Thus, stocks are either topped out now or will so in the coming couple days, and then drop to 2011-2023, then likely a test of 2002 which will decide if the 2K level fails. If so, that gap fill at 1990-1997 will be filled.

After the quick downside move, stocks should recover say during the week of 4/11/16 due to the weekly chart and come back up again for matching perhaps higher highs. That may be when the gap fill at 2060 occurs. Once the weekly chart indicators roll over with neggie d probably in mid to late April, the expectation is that the stock market likely rolls over for very extended downside ahead. But it is best to take things, like life, one day at a time. So nimble shorts may be prudent for the days ahead but you do not want to out live your welcome perhaps flipping long early April then setting up short again as the weekly chart indicators form negative divergence. Of course the path ahead will be modified as necessary depending on how the charts progress.

Key price support and resistance levels are; 2079, 2071, 2067, 2061, 2046, 2038-2040, 2032, 2017-2023, 2011, 2002, 1997, 1993 and 1985-1988. 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 Support, Resistance (S/R), Moving Averages and Other Important Levels for Trading the Week of 3/28/16

SPX (S&P 500) support, resistance (S/R), moving averages and other important levels are provided for the trading week of 3/29/16. Levels shown in bold are strong resistance and support. Bold and underlined levels are very strong and important S/R. For 2016, the intraday high for the year is 2056.60 on 3/22/16 and the closing high for the year is 2051.60 on 3/21/16. The SPX begins the week at 2036 negative on the year by eight points.

For 2016, the intraday low for the year is 1810.10 on 2/11/16 and the closing low thus far for the year is 1829.08. The intraday low in 2015 was 1867.01 on 8/24/15 and intrayear closing low for 2015 is 1867.61 on 8/25/15.

For Monday, 3/28/16, with the SPX starting at 2036, the bulls need any smidge of green in the S&P futures and the SPX will accelerate higher to 2040 in a flash for a bounce or die decision. S&P futures are +3 about one-half hour before the opening bell. The bears need to push the S&P 500 under 2021-2023 to create a downside acceleration to 2011. A move through 2023-2035 is sideways action to begin the week.

The SPX keeps testing the critically important 12-month MA at 2030. If 2030 fails, price will likely collapse to 2022. Bulls are fine as long as they keep the S&P 500 above 2030. A failure of the 12-month MA at 2030 will create serious market negativity. The SPX is above the 12-month by six points signalling a cyclical bull market ahead but this battle will likely continue this week.

The bulls face strong overhead resistance at 2040, 2046 and 2061. Bears will try to violate the strong support level below at 2032 then the strong gauntlet of support at 2017-2023. If 2017 fails, 2011 is likely and then 2002.

Looking at the near-term picture the strongest S/R is 2079, 2071, 2067, 2061, 2046, 2038-2040, 2032, 2017-2023, 2011, 2002, 1997, 1993 and 1985-1988.

Note: If the list below displays any blank spaces, view it in a different browser.

2135 (5/20/15 All-Time Intraday High: 2134.72)

2133 (7/20/15 Intraday High 2132.82)

2131 (5/21/15 All-Time Closing High: 2130.82)

2130 (6/22/15 Intraday High 2129.87)

2129

2128 (7/20/15 Closing High: 2128.28)

2126 (4/27/15 Intraday High: 2125.92)

2124 (6/23/15 Closing High: 2124.20)

2123

2121 (4/24/15 Intraday High: 2120.92)

2120 (2/25/15 Intraday High: 2119.59)

2118 (4/24/15 Closing High: 2117.69)

2117 (3/2/15 Closing High: 2117.39)

2114

2110

2109

2104

2103

2102

2100

2099

2097

2094 (12/29/14 Intraday High: 2093.55)

2093

2091 (12/29/14 Closing High: 2090.57)

2089

2086

2084

2083

2081

2080

2079 (12/5/14 Intraday High: 2079.47)

2077

2076 (11/28/14 Intraday High: 2075.76)

2075 (12/5/14 Closing High: 2075.37)

2073 (11/26/14 Closing High: 2072.83)

2071 (11/21/14 Intraday High: 2071.46)

2069

2067

2065

2064

2063

2061

2057 (3/22/16 Intraday High for 2016: 2056.60)

2056.60 Previous Week’s High

2056 (11/18/14 Intraday High: 2056.08)

2053

2052 (3/21/16 Closing High for 2016: 2051.60)

2050

2046 (11/13/14 Intraday High: 2046.18)

2044 (12/31/15 Closing High: 2043.94)

2044

2043.94 Trading for 2016 Begins Here

2042

2040

2038

2036.04 Friday HOD

2035.94 Friday Close – Monday Starts Here

2034

2032.59 (20-month MA)

2032

2031.59 (50-week MA)

2030.35 (12-month MA; a Keystone Cyclical Signal) (the cliff)

2030

2023

2022.49 Friday LOD

2022.49 Previous Week’s Low

2022

2019 (9/19/14 Intraday High: 2019.26)

2017.33 (100-week MA)

2017.13 (10-month MA)

2017

2016.99 (200-day MA)

2011 (9/18/14 Closing High: 2011.36) (9/4/14 Intraday High: 2011.17)

2007.38 (20-day MA)

2007 (9/5/14 Closing High: 2007.71)

2005 (8/26/14 Intraday High: 2005.04)

2003 (8/29/14 Closing High: 2003.37)

2002

1998

1997

1996.90 (100-day MA)

1995

1993 (1/15/15 Closing Low: 1992.67)

1991.26 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)

1991 (7/24/14 Intraday Top: 1991.39)

1990.97 (150-day MA; the Slope is a Keystone Cyclical Signal)

1989.24 (20-week MA)

1988 (7/24/14 Closing High: 1987.98)

1987

1986 (7/3/14 Intraday Top: 1985.59)

1985 (7/3/14 Closing High: 1985.44)

1983

1982

1981 (2/2/15 Intraday Low: 1980.90)

1980

1979

1978

1977

1973

1970

1969

1968 (6/24/14 Intraday Top: 1968.17)

1965

1964

1963 (6/20/14 Closing High: 1962.87)

1961

1958

1956 (6/9/14 Intraday Top: 1955.55)

1951 (6/9/14 Closing High: 1951.27)

1949

1948

1943

1942

1941.24 (50-day MA)

1937

1936

1932.23 March Begins Here

1931

1928.61 (150-week MA)

1928

1924 (5/30/14 Intraday Top: 1924.03) (5/13/14 Closing High: 1923.57)

1920

1917

1914

1912

1910

1906

1902 (5/13/14 Intraday Top: 1902.17)

1901

1897 (5/13/14 Closing High: 1897.45) (4/4/14 Intraday Top: 1897.28)

1891 (4/2/14 Closing High: 1890.90)

1889

1886

1885

1884 (3/21/14 Intraday Top: 1883.97) (3/7/14 Intraday Top: 1883.57)

1882

1879

1878 (3/7/14 Closing High: 1878.04)

1877

1874

1873

1872

1870

1868 (8/25/15 Closing Low: 1867.61)

1867 (8/24/15 Intraday Low: 1867.01)

1865

1862

1859 (1/20/16 Closing Low: 1859.33)

1855

1851 (1/15/14 Intraday Top: 1850.84)

1849 (12/31/13 Intraday High Top for 2013: 1849.44)

1848 (1/15/14 Closing High: 1848.38) (12/31/13 Closing High for 2013: 1848.36)

1846

1845

1843

1841

1840

1839

1835

1831

1829 (2/11/16 Closing Low for 2016: 1829.08)

1828

1827

1824

1820

1816

1814 (11/29/13 Intraday Top: 1813.55)

1812 (12/9/13 Intraday Top: 1811.52) (1/20/16 Intraday Low: 1812.29)

1810 (2/11/16 Intraday Low for 2016: 1810.10)

1809.44 (200-week MA)

1809 (12/9/13 Closing Top: 1808.37)

1808

1807 (11/27/13 Closing Top: 1807.23)

1806

1803

1801

1800

1799 (11/18/13 Intraday Top: 1798.82)

1798 (11/15/13 Closing Top: 1798.18)

1796

1793

1791

1788

1785

Keystone's Inflation-Deflation Indicator Remains in DEFLATION; United States Extends the Deflationary Funk

Global commodities have fallen out of bed and the deflation that Keystone has talked about for the last two years remains troublesome. Keystone's Inflation-Deflation Indicator remains in DEFLATION at 1.77. The indicator prints a low in mid-December at 1.70 with the CRB Commodity Index at 170 and 10-year yield at 2.19%. Perhaps the deflationary funk is finally bottoming? Over the last week, there are many discussions that inflation is here or at the doorstep since the Core CPI (Consumer Price Index) is moving towards +2%. The CPI, however, remains far lower. There is a very interesting bifurcation occurring in the inflation-deflation battle.

Obviously, the raw materials and goods deflation remains rampant and deeply embedded in the global economy. Dr Copper has collapsed as well as iron ore, coal, gold, all commodities verifying a slow and sluggish global economy. However, there is a flatness to the services components that creates the illusion that inflation is winning out currently. Plain and simple, inflation is not in play. As Donald Trump would say, "Believe me." When inflation is in play, you will know it daily. People will be complaining loudly non-stop about rising prices. This is not occurring even though there are complaints concerning rising medical and tuition costs and perhaps around the meat department at the local supermarket (elevated meat prices).

There is a whiff of services inflation occurring. The bulk of this is due to rising medical insurance (Affordable Care Act; ACA; Obamacare) and prescription costs, increasing college tuition, rising accounting, attorney and professional service fees and home prices. House prices remain very elevated which creates ammunition for those touting the worries and concerns over inflation. Most Americans are addicted to prescription pills nowadays so they must shell out more money for these drugs and that is felt in their pocket book. Upper middle class and wealthy people, that make up the investment community and economics circles, notice these inflationary prices more directly impacting their individual circumstances which clouds their reasoning in a subjective inflation-deflation debate.

If your kids are grown and left the nest and you are healthy, the services inflation mentioned above has a negligible affect on your life. In addition, and most importantly, inflation cannot exist without wage inflation (watch the Friday Monthly Jobs Report to see if any wage inflation occurs) and wage inflation is on a milk carton (missing). When was the last time you had a raise? The United States remains in a deflationary funk since August 2014. Think back to the summer of 2008 if you want to relive the feeling of rising inflation. Rising prices were a common daily complaint at office water coolers, supermarkets and dentist offices in 2008; not now. When inflation occurs, you will feel it, "Believe me."

Former Fed Chairman Bernanke began pumping markets with QE 1 (quantitative easing) in March 2009 with the intent of creating inflation; the plan launched by the Bernanke-Yellen-Evans triumphant, is a failure to date. The Wall Street community and especially the Federal Reserve and other central bankers, however, continue to refuse to say the "D" word. America has been solidly mired in deflation for 19 months.

A look at Keystone's Inflation-Deflation Indicator is informative. Taking a broad view of Keystone's chart above, the last time the United States was in an inflationary environment was in 2008 during the commodities bubble. Once the 2008-2009 financial crisis and stock market crash hit, deflation reared its ugly head. The Fed has been goosing markets for the last 7 years and the closest they came to creating inflation was in early 2011. It is absolutely shameful and bordering on criminality how the central bankers have destroyed free markets and negated the price discovery process with their obscene Keynesian money printing. The global deflation is a worrisome development since it was a hallmark of The Great Depression when sick stagnant economic activity lingered for many years.

Despite the majority consensus touting inflation, the deflation cloud lingers. Europe remains mired in deflation and the question is whether that deflation will be exported to the US this year and the answer is yes. Deflation is also imported from Asia to the US. Lower commodity prices create the deflationary affects with the CRB plummeting to record lows. In early 2009, the Fed saved the stock market with QE1; the beginning of the Keynesian money-printing schemes. This central banker intervention continues globally along with low rate polices and the ongoing Fed ZIRP (zero interest rates) Forever policy. The Fed raised the key rate by a quarter-point up off the zero bound so the multi-year ZIRP policy morphs into TWIRP (25 basis point hikes).

The inflation versus deflation debate rages on between traders, investors, economists, analysts and market enthusiasts. Each side highlights anecdotal evidence to prove their case. Inflationists had touted higher food and energy prices but these effects proved transitory as deflation keeps biting chunks out of the economy. Inflationists will tout higher insurance and college tuition costs, as well as increasing home prices, while deflationists highlight long-term weakness in commodities (oil, copper, lead, zinc, iron ore, gold, silver, platinum, palladium and other commodities all trending lower), lack of wage growth and falling Treasury yields to bolster their case.

The flat to lower wages is very important. Inflation will not exist without rising wages; this is why you want to watch the wage component in the monthly jobs report the first Friday of each month.  The wage data for the Monthly Jobs Reports is arguably more important than the actual job number and unemployment rate. Wages are generally remaining flat so inflation isn ot occurring. Disinflationary and deflationary pressures are ongoing around the globe.

The US economy slipped back into Deflation in August 2014 according to The Keystone Speculator Inflation-Deflation Indicator. During spring and summer time 2014, the inflationists were on a roll. Oil prices were rocketing higher as well as energy costs and everyone took notice of the rising food prices at the super market choosing to eat spam instead of steak. The indicator was above 3.00 in the middle neutral zone where inflationists and deflationists fight it out but the indicator never moved anywhere near inflation at 3.60 and higher.

During July and August 2014, the indicator drops into disinflation playing around between 2.90 and 3.00 due to the falling 10-year Treasury yields down towards 2.30% and lower and the dropping CRB Commodity Index under 290 and lower. Keystone's indicator falls into deflation in August 2014 which always creates a huge gasp of shock and surprise from the 95% or more of investors and traders that universally agree that deflation will never exist and inflation should be arriving any minute (due to the obscene Fed money printing). The consensus was universally wrong as is typically the case.

Money managers parade across television and computer screens daily 100% guaranteeing that note and bond yields will move higher--and some have been comically promising that since late 2009. The consensus continues to have the Treasury yield direction wrong and stubbornly remains on the soap box for higher rates since, well, more time has passed and rates have to go up, don't they? That at least is the thinking but remember, there is no one alive now that traded through the Great Depression that can provide insight into this current epic and historic market period that perhaps only occurs at an 80-year-ish cycle period or multi-decades stock cycle period a la a Kondratiev Winter.

The Treasury yields typically move in the same direction as the equity markets since money usually moves from stocks into bonds and from bonds to stocks depending on risk-off, or risk-on, respectively. Higher yields (lower Treasury prices due to low demand) = higher stocks = a move towards inflation. Lower yields (higher Treasury prices due to high demand) = lower stocks = a move towards deflation.

In normal markets, copper and commodities will push and pull markets in the same direction but the central banker money overrules all market fundamentals. Price discovery is lost across all asset classes due to the 7 years of central banker intervention. No one truly knows what any asset is actually worth anymore. As long as global QE and the Fed's ZIRP (now TWIRP) Forever policy continues flooding the markets with cash, the stock market floats higher. The big upward move in commodities during spring 2014 is what created the inflation buzz. The CRB Commodity Index went from 275 at the start of the year to nearly 315 at the June 2014 peak so this move pushed Keystone's indicator above 3.00. Now the CRB collapses from near 315 to far under 200!!! The CRB is at 170!! An epic bear market failure.

The economy was in disinflation and deflation for much of 2013 but this did not have a negative effect on the stock market. The Fed's easy money funds dividend and buyback programs to pump stock prices higher nullifying regular expected negative market affects. In addition, the easy money is used to help fund M&A and tax inversion strategies. The free money is making the wealthy super wealthy since they own stocks at the expense of the middle class and poor that are knocking on doors unable to find a job.

The Fed has created an elite privileged society in America; the rich are richer and the poor poorer. President Obama is in full agreement with this direction since he appointed Fed Chair Yellen, Queen of the Doves, to the FOMC because she is a Keynesian that prints money to send the stock market higher. The president and republicans and democrats in Congress are all part of the elite class; the rich always protect their own.

The 10-year Treasury note price is used for the denominator of The Keystone Speculator Inflation-Deflation Indicator. The 10-year Treasury price is 97.53 with a yield at 1.90%. The 10-year yield was over 3.00% to begin 2014, 110 basis points higher. The CRB Commodity Index is 172.18. Taking a look at the numbers;

CRB/10-Year Price = 172.18/97.53 = 1.77

Over 4.40 = Hyperinflation
Between 3.60 and 4.40 = Inflation
Between 3.00 and 3.60 = Neutral; Inflationists and Deflationists Battle
Between 2.9 and 3.00 = Disinflation
Under 2.90 = Deflation

The last time that rampant inflation existed in the US was from 2006 into 2008 as the stock market peaked out (see chart). During the Fall 2008 market crash into early 2009, commodities collapsed and investors ran to the perceived safety of US Treasuries driving yields lower. The pundits pound the table currently that low oil and commodity prices lead to great things ahead but it did not work out that way in 2008-2009. Instead, lower commodity prices was a harbinger of deflation and a stock market crash.

Keystone's Inflation-Deflation Indicator collapsed into deflation in early 2009. Former Fed Chairman Ben Bernanke is labeled as a 'student of the Great Depression' and his main takeaway is that the Fed did not provide enough stimulus quickly enough to prevent the depressionary malaise that developed through the 1930's. Therefore, Bernanke fired the huge QE1 money bazooka in March 2009 to save the country (only 'in Bernanke's opinion'; Hayek rolls over in his grave from such a detrimental idea that may destroy America before it is over) from a deflationary spiral. As the chart shows, the quantitative easing programs did work sending the indicator up into the neutral zone headed towards inflation. Bernanke must have been proud with his chest puffed out as he signed autographs in 2011 for his decisions. However, the US budget crisis and other economic softness created more concern in 2011 which led to the August 2011 stock market waterfall crash. 

In May 2011, the indicator was above 3.60-3.70 signaling the existence of inflation but it was very brief. If you blinked you missed it. The indicator peaked out in 2011 and quickly retreated (inflation was very noticeable but it did not have staying power) as the stock market collapsed. The Fed has received a lot of heat over the last few years for remaining worried about disinflation and deflation but the chart clearly shows the Fed is correct to worry.

The only thing the Fed members have been correct about is concern over disinflation and deflation although the bozo's continue to incorrectly say 'deflationary forces are transitory'. Comically, Bernanke touted this line and now Yellen so the Fed has been saying deflation is transitory for the last five years. Pause for laughter. The FOMC is likely monitoring similar technical presentations such as this article which definitely shows the United States mired in deflation with inflation nowhere in play (barring the minor sideways move in services inflation) despite the Fed's obscene Keynesian spending for over 7 years. It is a disgrace.

Since the 2011 peak, the indicator has moved steadily lower from above 3.60 down to 1.77 (from neutral down through disinflation into deflation). The indicator signals deflation from August 2013 until January 2014 and from August 2014 to present. The United States is in a downward deflationary spiral for the last 19 months.

Chairman Bernanke announced QE1, QE2 and Operation Twist to stop the free-fall into a deflationary spiral from 2009-2012. In late 2012, the Fed threw the kitchen sink at the markets with the promise of QE3 Infinity, timed with the ECB's OMT Bond-Buying program, and also QE4 Infinity and Beyond (which replaced Operation Twist with outright purchases), when the stock markets were already somewhat elevated (the QE3 and QE4 pumps are now simply referred to as the QE3 Infinity program). This orgy of Fed quantitative easing, along with the BOJ bludgeoning the yen (sending dollar/yen currency pair and Japanese and US stocks higher), creates the bullish equity markets into the present day.  In addition, the PBOC (China), the BOE and ECB are all pumping the stock markets with easy money as well. Also of huge importance, is the Fed's easy money bank rolling stock buyback programs which only serve to make the wealthy super wealthy. Buybacks do nothing to help the average person that continues to hold the bag and carry water for the wealthy elite class.

The mid-December 1.70 reading three months ago is the lowest since 2009 and the line is falling off the chart; the deflation is uber serious sending a shiver down every Wall Street spine that a Great Depression redux definitely remains on the table (despite over 7 years of obscene Fed Keynesian money printing). Folks continue to tighten their spending to stretch family budgets. Purchases are delayed since store discounts are increasing and the item will be cheaper in a couple weeks (a hallmark sign of deflation). A cash society is growing in the US since common folks can avoid paying government taxes. This behavior drove Greece and Spain economies into the toilet since revenue flowing into government decreases. The government then cannot provide services or sustain programs and society breaks down.

The wealthy, made wealthier by the Fed with obscene stock market gains are spending their winnings on luxury goods, high-priced real estate (creating a house price bubble), art, vintage cars and collectibles (all are asset bubbles). The central bankers threw the kitchen sink at markets over the last three years but the US continues to slip-slide into deflation anyway. Deflation is a powerful force and perhaps it needs to extract its pound of flesh. Deflation was cheated and not permitted to play out in March 2009 when Bernanke stepped in with QE1.

An over leveraged economy like 2006-2008 needs to result in failures so the slate can be cleared as capitalism dictates. Markets were never allowed to clear. Free markets and capitalism are dead in America since the government now saves companies from failure; especially the corrupt banksters that are in bed with the politicians. At best, the United States is a pseudo-free market system. Society, especially the elite class, does not want to experience the negativity and pain associated with the cleansing side of capitalism (when stocks sell off). People only want to experience the happy side of capitalism (when stocks go up). So the Fed tries to paper over the problems using time to its advantage but as time goes on, the chart above says the Fed's grand experiment is failing or has already failed. If it did not work after 7 years, it most probably will not work.

The lackluster action in the Baltic Dry Index (BDI) and shippers indicate a global slowdown is ongoing. Ditto the drop in commodities and weak copper. It is interesting to watch the power of the central bankers as they pump equity markets higher but without the global economy kicking into gear it will be all for naught. The debt created will only end with a more drastic fall from grace than late 2008 early 2009 since a healthy market bottom was never allowed to occur in 2009 (free markets were destroyed as the bad side of capitalism was not allowed to take place to clear the markets properly in early 2009). America is now left with a pseudo-fee market and semi-capitalism system; it is absolutely shameful. Austrian economists solemnly hold their heads in their hands cursing the sick central banker behavior. The United States is not a free country; it is simply more free than most other countries.

The pundits and analysts that say Inflation and even hyperinflation are at the doorstep are premature. Inflation and even hyperinfation is definitely expected in the years ahead but it may be years away still yet. Keystone is thinking that inflation will occur in sync with the 18-year stock cycle of 1964 (bear), 1982 (bull), 2000 (bear), and 2018 (bull). So the thought is that inflation and hyperinflation are perhaps two to four years away. As low as Keystone's chart is now, in the 2020's, say four years from now, the chart will likely be up in the hyperinflation zone as the velocity of money creates accelerating inflation.

The expectation remains that Treasury yields should move sideways and even leak lower for the next year or three. The 18-year bear stock market cycle should raise its ugly head moving forward for the last couple years of its cycle (now through 2018). Judging from history, it would not be surprising to see the stock market down say 2 of the next 3 years to finish out the 18-year secular stock market cycle.

Deflation is nasty and will surely affect everyone's lives. Since prices drop precipitously in deflation, consumers do not spend money since next week the price will be even cheaper. This economic behavior leads to a stagnant and very sick economy with businesses closing doors due to the lack of demand. Companies are hanging on currently with skeleton work forces hoping for business to pick up. A downward deflationary spiral occurs since companies fire workers that are no longer needed due to falling product demand; now these people without jobs cannot buy products and the cycle repeats. Europe is on the verge of falling into a deflationary funk a la Japan's lost two decades.

Long-time readers of Keystone's missives fully anticipated and expected the current global deflation to occur despite the consensus saying that deflation would never occur.

The structural unemployment problem remains in the U.S. and the current stagnant wage growth (wage deflation) reinforces an ongoing deflationary and disinflationary theme. Technology, computers and the Internet are huge deflationary machines. Robots continue to replace human's on the job. The GOOGL driverless vehicle technology already has trucks operating on the road in California for several months and only one accident has occurred--and that was comically a human driver that hit the driverless vehicle. Just think of the impact to the trucking industry. Trucks could transport goods driverless allowing companies to drop-kick more workers across the parking lot. The pattern of 'more tech--less human's' will continue.

The structural unemployment problem will continue in the US for years and perhaps decades forward. The unemployed and underemployed create a burden on the economy over time. The wealthy on Wall Street, in bed with the Fed, made themselves wealthier taking advantage of the 2008-2009 crash while the middle class and poor (that do not own stocks) were thrown under the bus.

Companies are meeting EPS (earnings-per-share) by laying off workers and squeezing more production out of existing workers (as evidenced by flat to lower top line revenues for companies across all sectors for the last couple years!). These deflationary signals are ignored in the media. At some point, everyone will have to utter the 'D' word, deflation, and show respect to the 900-pound gorilla sitting on the living room sofa.

Watch Keystone's formula above, you can crunch the numbers to check on the indicator every few weeks. It was shocking to see equity markets print new record highs in recent months against a disinflationary and deflationary back drop. This behavior can only be chalked up to the amazing power of the central banker money-printing. These madmen operating levers behind the curtain are sick.

Inflation is not in sight despite the inflation-deflation indicator moving a touch above 3.00 in early 2014 due to rising food and beef costs. Corn and wheat prices have plummeted back to earth. Crops are producing yields at record highs this year so the food inflation will continue subsiding. The cheaper grain prices will bring down the cost of beef especially as herds increase after the culling due to drought a couple years ago.

Stagnant wages in America will prevent inflation from occurring. When wages rise, that will tell you inflation is coming fast and Treasury yields will then rise strongly. As long as wages remain flat or lower, inflation will not exist. Think back to the last period of rampant inflation in 2006-2008; you were likely enjoying happy raises at work, right? And probably not so much from 2009 to present? Correct? Food price increases tend to be seasonal and weather-related and work through the system over time. Fewer folks are complaining about high food prices anymore except for slightly elevated meat prices and eggs have increased due to the bird flu epidemic.

What does all the above wind-bag mumbo-jumbo above say in a nutshell? The current answer to the ongoing inflation-deflation debate is DEFLATION as much as everyone tries to ignore it. After seven years of obscene Fed and other central banker money-printing, the United States economy remains mired in deflation proving that Bernanke's grand Keynesian experiment, blessed and implemented by Fed Chair Greenspan and now controlled by Fed Chair Yellen, as well as dovish Fed members such as Evans, may be tragically failing. Prepare yourself and your family by raising as much personal cash as possible and paying off debt. Avoid taking on new debt. Cash is king in deflation. Remember this; "cash is king in deflation." History may repeat. The bums standing on a street corner holding a tin cup in the 1930's would ask a passerby, "hey buddy, can you spare a dime?"

With this devastating deflationary funk ongoing, ridiculously, Fed Chair Yellen raised the key benchmark rate for the first time in a decade on 12/16/15 off the zero bound ZIRP rate at 0.00%-0.25% to 0.25%-0.50%. The end game may be nigh for the Fed and other central banker money printers. If the Fed has to reverse course and return to ZIRP, due to a weak economy and ongoing deflation, all credibility in the Fed would be destroyed. The Fed boxed itself into a corner guaranteeing a rate hike in 2015 so they felt they had to announce the hike otherwise credibility would be immediately lost. What a sad, sick and twisted world the central bankers have created. The Fed's Keynesian games only work if investors maintain confidence in the Federal Reserve. If credibility is lost, all is lost and the 'Emperor is exposed as not wearing any clothes' (Hans Christian Andersen).

Many analysts argue against the overall ongoing global deflation hypothesis saying the view on services inflation versus goods inflation must be explored in more detail. Services are experiencing some inflationary effects while goods are in a severe deflationary downtrend. Although this is true as discussed int he initial paragraphs above, services will likely follow the trend lower in goods rather than goods immediately inflating higher.

On 8/28/15, seven months ago, notable economist Marty Feldstein proclaims that deflation is not a problem dismissing that it ever posed any real threat. Feldstein says a deflationary outcome is "certainly not true now." Feldstein reflects the majority consensus of market participants; no one wants to mention the "D" word since it is synonymous with The Great Depression. Perhaps Feldstein wants to take back his words.