SPX S&P 500 and INDU Dow Industrials Daily Chart with 150-Day MA Slope Failures; Keystone's 150-Day MA Slope Cyclical Market Indicator

The Dow Jones Industrials and SP 500 major stock market indexes are indicating the start of a cyclical bear market pattern. Keystone's 150-Day MA Slope Cyclical Market Indicator identifies the start of a cyclical bear market for an index or stock when the 150-day MA flattens and rolls over to a negative slope. The Dow is there and the SPX is just beginning. The Nasdaq Composite, Nazzy 100 and Russell 2000 indexes maintain an upward-sloping 150-day MA.

Either the Dow and S&P 500 serve as canaries in the coal mine as to what will occur with the COMPQ, NDX and RUT, or, the negative slopes for the SPX and INDU will not continue and the big rally in prices will continue and nullify the negative slopes above. For now, you must respect the above development and realize that the SPX and INDU, or DJI, are falling into a cyclical (weeks and months) bear market going forward. Watch the slope of the 150-day MA's closely each day forward.

You can write down the numbers beginning today and record them at the end of each day forward. The 150 for the Dow is 24861.24 and for the SPX is 2741.01. Thus, each day forward, for the cyclical bear to begin growling strongly and lock itself into place going forward, you need to see these numbers slowly decrease each day forward. For example, you would expect the 150-day for the SPX to drop to 2740.99 tomorrow, then 2740.97 on Tuesday, 9/4, and so on. If the 150-day MA's lose the negative slope and begin trending higher again, the bulls are in control and will continue sending stocks higher. Otherwise, the stock market is in trouble going forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Monday 9/3/18, Labor Day holiday: The SPX 150-day MA is 2741.33 up from the prior day's 2741.01 so the bull's are pushing it higher to avoid the slope failure. This battle will continue for the days ahead but for now the bulls are succeeding in stopping the roll over in the 150. Tuesday trading will provide another data point for the 150. For the Dow, the 150-day MA is at 24858.07 below the prior day's 24861.24 so the Dirty Thirty continues to slip into a cyclical bear market pattern.

VIX Volatility and SPX S&P 500 Daily Charts; Correlation Breakdown

The VIX and SPX inverse correlation is breaking down just like in January before the stock market top. The VIX moves opposite the stock market (SPX) 80 to 90% of the time. It gets your attention when the VIX and SPX are moving in the same direction.

The VIX printed its epic all-time low on 11/24/17 at 8.56 (green circle) the lowest VIX print in history which is uber bullish for the stock market. Note how volatilty traidled lower in 2017 and the stock market trended higher as would be expected.

In January, however, the VIX began runninghigher signaling trouble for the stock market moving above its 200-day MA but instead stocks were in a parabolic move higher. Traders were tripping over each other buying stocks with both fists. The euphoria was off the charts as pundits told Aunt Nellie to invest all her retirement money in the stock market. Reality hit on 1/26/18. The VIX jumped higher and the VIX/SPX inverse correlation returned with a vengeance with stocks crashing.

The VIX spiking to 50 was a great buy signal since there was blood flowing in the streets. Doom and gloom was rampant. Traders were jumping out of windows no longer able to watch computer screens showing massive losses; fortunately they jumped out of ground floor windows.

The buy signal due to the wicked high VIX at 50 worked out great since it identified the early February bottom in the stock market and you can see how the VIX once again trended lower, dropping below the 200-day MA in early May, so you knew the bulls were in control of the stock market and sure enough, equities trended higher from February into early August as the VIX trended lower during that period.

The purple circle shows the recent low in the VIX at 10.17. The VIX/SPX correlation was in play with the VIX popping above the 200-day MA signaling trouble for stocks but it was very short; stocks dropped but if you blinked you missed it. Then, notice the recent behavior. The VIXis trending higher ever since the 10.17 lower as the stock market is continuing to trend higher the same behavior that occurred in January ahead of the stock market top. It would be wise to stay alert and cautious. Real trouble would not begin until the VIX moves above the 200-day MA at 14.64 so watch that closely.

In late January, note how the SPX price was extended above the moving average ribbon; the S&P 500 was above the 20-day MA above the 50-day MA above the 100 above the 150 above the 200. You knew that price needed a mean reversion lower which occurred. Currently, same dealio. Price is extended above the 20 above the 50 above the 100 above the 150 above the 200 so a mean reversion is in play once again.

Note the flattening of the 150-day MA on the SPX chart. That is one of Keystone's cyclical market signals. That flattening 150-day MA is trouble for the stock market. Watch it closely. 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.

VIX Volatility Daily Chart

Here is the VIX chart that you can use directly for determining stock market direction over the coming days. US markets are closed on Monday for the Labor Day holiday so after tomorrow, Friday, 8/31/18, the EOM, US stocks will not trade again until Tuesday, 9/4/18, the first trading day of September. The monthly charts receive new data points cast in stone at 4 PM EST tomorrow (Friday). It may be best to wait for Tuesday and Wednesday of next week, when the monthly charts are showing the September candlestick, to post all the monthly charts.

For the VIX daily chart above, the Keybot the Quant algorithm is tracking 13.40 as the key bull-bear level. And, as always, the 200-day MA, now at 14.64, is a key short-term stock market signal. Note how the VIX kept bumping its head up against the 20-day MA for a few days and then finally poked up through, and today fought at the 50-day MA at 13.29 in the afternoon and finally overcame this resistance which now becomes support.

Thus, if the VIX falls below 13.40, the bulls win and the stock market will resume the upside rally. If the VIX drops below Keybot's 13.40, however, watch that 50-day since price may simply want to go down to quickly back kiss the 13.29 and then move higher and regain the 13.40.

If the VIX remains between 13.40 and 14.64, the stock market will move sideways with a downward bias. If the VIX moves above 14.64, the stock market will take a large leg lower and that complacency shown from the low put/call ratios will kick into gear and send stocks sharply lower. These correlations will hold for the next few days ahead. The VIX begins trading at 3 AM EST so you can get a read on stock market direction several hours before the stock market opens for the regular session. 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 Monday 9/3/18, Labor Day holiday: The VIX battled at the 13.40 level in Friday trading threatening to break out higher but the bulls win with the VIX dropping to 12.86 at the closing bell. The above drama continues going forward.

SPX S&P 500 2-Hour Chart; Overbot; Negative Divergence Developing; Two-Leg Bull Flag

There is a lot going on in markets technically, politically and seasonality-wise. Since the low CPC and CPCE put/call ratios identify uber complacency and fearlessness in the stock market currently and a top at hand, it is useful to take a gander at the 2-hour chart to see when this top may occur in the hours and days ahead.

Political-wise, the US-Canada trade deal creates market joy like the US-Mexico deal the other day. Of course the central banks create joy with the ongoing Powell Rally from last Friday (purple circle). Powell hinted that the December rate hike may not be a done-deal and the dovishness creates market upside (the September hike on 9/26/18 is a done deal). so it is a question of what is priced-in. The Powell joy is likely priced-in now and the Canada deal may even be priced-in and result in a sell-the-news event.

Seasonality-wise, stocks are typically bullish the two days in front of a three-day weekend. US markets are closed on Monday for the Labor Day holiday so this provides the wind at the bull's backs for tomorrow and Friday. However, when a month is strongly higher, like August, it typically sell off the last couple days which is tomorrow and Friday. New money typically provides buoyancy in stocks when a month begins which is Tuesday of next week, 9/4, when US traders will return to work. Considering the recent strength, the bears likely have a bit more of an edge to finish this week due to the already big upside rally and then the bulls may come to play again on Tuesday.

Those factors aside, the chart shows a two-leg bull flag pattern playing out (blue). Using easy numbers, the rally begins at 2810 to 2870 for the first leg, which is 60 handles, then the textbook consolidation where price moves sideways to sideways lower creating the flag, then leg two begins at 2855 so the upside target is 2915 which is hit today satisfying the pattern. You could say that leg one is 2805 to 2873, 68 handles, so 2855+68=2823 which leaves a few more points of upside available (perhaps for Tuesday or Wednesday).

The RSI and stochastics are overbot and want to see price pull back. The red lines indicate negative divergence that wants price to pull back. The MACD line is long and strong that wants another higher high in price. So, in the 2-hour time frame, price should drop but then come back up again for the higher high to satisfy the MACD. At that time the near-term top may occur if the MACD line goes neggie d with the next price high. If price drops then comes back up that would likely take 2 or 3 candlesticks for the MACD to turn neggie d so that would be 4 to 6 hours which would be tomorrow for the potential top (in this 2-hour time frame).

The SPX daily chart has a long and strong RSI, although it is overbot, so it likely wants to come back up for another high after a pull back in the daily time frame. That higher high may occur in conjunction with traders returning to work on Tuesday and Wednesday. Remember, the complacent put/calls want a top to be placed at any time any day ahead. If the daily wants to come back up after a one or two day pullback that higher high in the SPX may coincide with some buoyancy due to the month of September beginning on Tuesday and Wednesday.

So if you toss all of the above mumbo-jumbo into the air and sprinkle some magic dust on it all, stocks may top out tomorrow (as soon as the MACD line above goes neggie d) and the SPX finish the week soggy since it already had a big up month. Friday, during the last couple hours, may see lift in stocks as the joyous long holiday weekend, marking the end of summer, approaches. If the daily was fully neggie d, the downside would have legs as soon as the 2-hour tops out, but the RSI likely forecasts a jog move, down for a day or two, perhaps part of tomorrow and Friday, then up again, probably Tuesday maybe into Wednesday, and that may be the near-term top where the CPC and CPCE put/calls can finally flex their muscles and create substantive downside havoc.

The new moon peaks on Sunday 9/9 so stocks may be weak from 9/7 through 9/10. Another interesting aspect of all these moving parts is Keystone's Eclipse Indicator that identifies the 8/13 through 9/10 period as having potential as a significant market top. Thus, there may be serious weakness ahead for the stock market from say, 9/6 into the week of 9/10 (which would satisfy the uber low put/calls that want a strong pull back).

The Monthly Jobs Report is on 9/7 adding more drama as if there is not enough already. Keeping it simple, just watch the MACD line above, price may trade down to begin the Thursday morning trading, but will likely recover and come back up to the highs (because of the long and strong MACD line), at that time, maybe going into lunchtime tomorrow, if the MACD line turns negge d (sloping down) with the next price high, the near-term top is in. Taking a guess, the top may occur between noon and 2 PM tomorrow. The SPX daily chart can then be monitored to see how the downside will progress. Everybody and his brother is bullish now as evidenced by the low put/calls and the subdued VIX. There are no bears remaining, the last one left town tonight on the subway. 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 Monday 9/3/18, Labor Day holiday: The SPX tops out at 2 PM Thursday as mentioned above although it did not quite reach the highs from Wednesday. The stock market trends lower through Friday but, as explained, the SPX daily chart wants to see another high in this near-term.

CPC and CPCE Put/Call Ratios Daily Chart; Near-Term Top At Hand

Here is an update of the previous CPC and CPCE put/call charts from last week. The low numbers last week indicate complacency in the stock market and a pull back is expected of 40 to 80 SPX handles and perhaps much more. The question is where it would top out in the days forward. The SPX peaked a day later at 2874-ish and then pulled back a couple days to a low at 2855 and then zoomed higher. That 15 or 20 SPX handle pullback was nothing. If you blinked you missed it.

The central bankers, always the positive wild card in the stock market, came out firing both barrels. The Fed pumped stocks higher on Friday from Chairman Powell's dovish speech at Jackson Hole. Powell's dovishness is verified by the Fed Funds futures only indicating a 60% chance of a December rate hike. The September hike, on 9/26/18, is considered a done-deal. Typically, you want to see the rate hike chance over 80%, the higher the better, for it to be cast in stone. The December hike is up in the air verifying the Powell dovishness. Hence, stocks rocket higher. Central banker easy money rules the stock market since March 2009. It has gone on so long that no one pays attention to it anymore.

Then, the PBOC, China's central bank, announces counter-cyclical measures to control the yuan. This is a fancy phrase that simply means the PBOC will intervene if the yuan becomes too weak (the dollar/yuan moving towards 7), and if the yuan becomes too strong (the dollar/yuan pair moving towards 6.2-6.3). The idea is to create stability and the news creates more stock market upside. Asia stock indexes rally on the PBOC intervention. The double-whammy central banker games create global stock market joy since Friday. The central bankers are the market.

The stock market rally continues through today and the upside euphoria is verified by new lower-lows in both the CPC and CPCE put/calls. Traders are buying stocks at the ask with both fists. Bulls are throwing confetti, dancing and singing with lamp shades on their heads as the drink Fed and PBOC wine buying stocks with reckless abandon.

The bullish pundits are out in force parading across the business television screens telling investors to, "Buy, buy, buy!" Such is complacency and lack of fear in markets exactly when a pull back occurs. Barring more central banker largess, the 40 to 80 SPX handles of downside are on the table and once again it is a matter of from what level. The near-term top can occur at anytime, any day forward. The SPX prints a new all-time closing high today at 2896.74 and a new all-time high at 2898.25. A drop down to the 2800 to 2830 is a realistic downside target for the days ahead as soon as the top prints at any time, probably this week.

The up move in equities has momentum. The MACD line on the SPX 2-hour chart continues sloping higher but the RSI and stoch's are both overbot and negatively diverging. Stocks may top out and begin the downside tomorrow afternoon; it depends on how the charts set-up. The news bites on trade and the central banker intervention are in the mix as well. 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.

Keystone's Recession Indicator; Philadelphia Fed Mfg Index Prints 4 Consecutive Down Numbers and/or 3-Month MA Crosses Below Zero

The recent manufacturing data is soggy and today was no different with the Dallas and Chicago Fed data. The numbers remain strong but are running out of gas. For the Philly Fed, four consecutive downward-trending numbers and/or the 3-month or 4-month moving average falling below zero are useful in determining when a recession arrives.

The Philly Fed last week is at 11.9 which is the blue line in the chart the lowest number since 2016 but remains above zero. One rule of thumb Keystone uses on recession forecasting is that if four decreasing numbers occur in a row, a recession is likely on the come. The last four readings are 34.4, 19.9, 25.7 and 11.9 so this is not occurring as yet. Watch the number on 9/20/18 to see if it is below 11.9 and then the key will be if another lower low occurs or even a negative number in October.

Another rule of thumb for the recession watch is using the 3-month MA, or the 4-month MA, for the Philly Fed data. This is shown by the maroon line that prints a lower lower than in recent months. When the moving average turns negative a recession is likely beginning to smack you in the face. The chart is for the last 18 months from March 2017 through August 2018.

Note the trend in the Philly Fed since the peak at 34.4 in May; lower lows and lower highs. When the Philly Fed falls apart it is usually a very fast and sharp drop (which is not occurring as yet). Everyone is busy celebrating the stock market euphoria and most young folks (under 30 years old) have not experienced a recession before. All of the lives of young people will change forever when the recession hits. Many will lose their jobs and have no idea what will hit them. Old dudes, like Keystone, have lived through several recession periods over the decades.

When the 3 or 4-month MA's turn negative, the recession has begun or will within a few short months. The maroon line is at 19.2 heading lower. Typically, a recession occurs every four to seven years but the Federal Reserve and other global central bankers have destroyed the expected business and economic cycles with their obscene Keynesian spending since March 2009. That is when former Fed Chairman Bernanke, the "Father of Easy Money," began QE1 to protect the wealthy privileged class in America saving the stock market. Anything goes in markets nowadays and the bitter end to a decade of central banker largess, that creates the nonstop record highs year after year, may end more abruptly than anyone realizes.

There was a bad recession in the early 1980's, then a milder recession in the early 1990's. The 1990's were aided by the huge technology boom and the advent and common use of the personal computer. This pushed off the recession until the dotcom bubble burst in March 2000. In the early 2000's, former Fed Chairman Greenspan pumped the stock market higher to reward his wealthy friends by lowering rates and keeping rates at low levels. This created the housing boom which went bust in 2007-2008 and created the 2008-2009 financial crisis. Fed Chairs Bernanke, Yellen and now Powell keep the stock market party going off the 2009 bottom to the present day.

The stock market peaked in 1980 dropping into the recession during 1980-1983. The stock market peaked in the summer of 1990 as the recession began and was in progress. The Philly Fed 3-mth MA went negative months before. Stocks peaked in March 2000 with the recession during 2001-2002. The 3-mth MA crossed negative at the start of 2001. October 2007 was the peak in the stock market ahead of the Great Recession during 2008-2009. The Philly Fed 3-mth MA crossed negative in mid to late 2008.

In 2011-2012, the 3-mth MA went negative but Bernake saved the day when he announced 'QE Infinity' again saving the wealthy class that own large stock portfolios. In late 2015, the Philly Fed 3-mth MA again slips negative. The stock market peaked in May 2015; you long time followers of Keystone remember him calling the exact top in the stock market back then. However, as always, the Fed and other global central bankers stepped in to save the day in early 2016 (the Tweezer Bottom on the candlestick charts) and stocks rally to the present day.

The stock market typically peaks ahead of when the Philly Fed 3-mth MA slips negative which occurs coincidentally or a couple-few months ahead of when recession begins. The Philly Fed number is approaching zero quickly and the 3-mth MA is under 20 printing new lows and heading down. Remember, when the Philly Fed collapses, it typically occurs very sharp and quick. The recession is likely approaching far faster than anyone realizes.

Go back and look at the SPX monthly chart previously posted that is in universal negative divergence forecasting a top in the stock market currently. The caveat is the MACD line that remains neggie d but you have to watch that closely since if the MACD prints a higher high than January this will extend the stock market top a couple-three months. Currently, however, it is very likely the stock market is topping right now (a multi-month and multi-year major top) between here and the end of year.

The stock market top would gel with weaker numbers ahead for the Philly Fed and take the 3-mth MA negative as we end the year and in early 2019 so the recession may be on the come in Q4 or Q1 2019, or at the latest Q2 2019. Now many analysts will say this is preposterous, and maybe they will be proven correct, but if you are called into the boss's office during the holidays or as the new year begins and he drop-kicks you across the parking lot as the recession is underway and stocks and the economy are heading south rapidly, you will only have yourself to blame for not being prepared. The vast majority of Wall Street analysts say a recession will not occur until late 2019 at the very earliest and most say a recession is a 2020 event at the earliest.

Watch the Philly Fed closely here on out; see if four downward numbers will print consecutively and monitor if the 3-month MA turns negative. Keystone can update the above chart as time progresses if the hundreds of thousands of monthly users of the KE Stone blogs provide support, otherwise, you will be on your own (but Keystone will be happy to tell you what you missed out on after the fact). 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: Keystone found an article that is well written by Jill Mislinski at Advisor Perspectives that is useful for further study concerning the Philadelphia Fed Mfg Index. The link is Advisor Perspectives Philly Fed Manufacturing Index.

Keystone's Housing Sector Indicator is Flashing Extreme Caution

Keystone's proprietary trading algorithm, Keybot the Quant, that has been operating for 10 years and in development for 10 year before that, incorporates a housing sector parameter into the model. In February 2012, the red line crossed above the green line in the chart and Keystone called the official start of the housing recovery that continues to the present. At the time, doom and gloom was rampant in the stock market and the universal consensus was that a dust bowl will continue and become worse for America.

Stocks had peaked-out in October 2007 and the crash occurred in late 2008 as Lehman Brothers went belly-up. The stock market continued falling apart into March 2009 when Federal Reserve Chairman Bernanke, and the other officials at the Fed and Treasury, stepped in to save the stock market to protect America's wealthy privileged class.

The rich were screaming bloody murder as their huge stock portfolio's were collapsing so Bernanke, Paulson and others that protect the privileged class intervened to pump stocks higher. This action is indisputable proof at how capitalism does not exist in America. The United States is best described as a 'pseudo free market crony capitalism financial system'. The banks and other companies such as GM and AIG were saved to protect the wealthy class and here we are a decade later with the wealthy richer than ever while the common people suffer through years of unemployment and underemployment.

The divide between rich and poor in America is now the widest in 50 years but the wealthy do not care since they raped the system for all its worth and they got theirs courtesy of the Keynesian stimulus provided by the central bankers. The central bankers perform the bidding of the wealthy since they receive lucrative fees from token speaking engagements after they leave public office. Bernanke was handed $250K for showing up for a few hours at a Wall Street investment banking conference a couple months after he left office. This is America's crony capitalism system on full display.

All that shameful activity aside, the housing market signaled great things ahead in February 2012 and that coincides when Fed Chairman Bernanke declared that he would provide "QE Infinity" for the stock market. Look at the huge rally in stocks ever since. It was a turning point for the country in that 2012 time frame since that is truly when the middle class, poor and disadvantaged were spit on by the wealthy that control the nation's economy and markets.

Fast forward to 2017. Cracks were forming in the housing sector last year and in June 2017 Keystone's housing indicator threatened to signal downside trouble ahead ending the 5+ years of bullish joy. However, the housing market recovered. Then, in November 2017, same thing. The housing market was wobbling threatening to roll over but the housing and stock market bulls put off the day of reckoning once again.

Here we are in August 2018 and Keystone's proprietary indicator is once again threatening bad things ahead for the housing market. The last two months are very sick and the indicator is very close to creating a negative cross (red line may cross down through the green line). At that time, Keystone will call the end to the housing market rally that began in February 2012.

Note the happiness in stocks that occur with a strong housing market and you can surely expect the opposite outcome when Keystone's indicator signals the end of the housing sector rally at any time in the weeks ahead. The negative cross may occur any month forward. We are moving towards the Fall and winter months in the States and housing activity would be expected to seasonally slow which would aid the bearish outcome. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

YC2YR US 2-10 Yield Spread Weekly Chart; 2-10 Spread Narrows to an 18-Handle!!; US Yield Curve Flattens

This afternoon, 8/23/18, with the 2-year yield near 2.61% and the 10-year yield under 2.82%, the 2-10 yield spread narrows to 20.75 basis points. This is the flattest the yield curve has been since 2007 about 11 years ago but no one cares since they are too busy buying stocks. Perhaps a 2-10 spread in the teens will get everyone's attention? 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 8:10 PM EST Thursday Evening, 8/23/18 (9:10 AM Friday Tokyo; 2:10 AM Friday Central Europe; 1:10 AM Friday London): The US 2-10 spread narrows to 19.98 basis points; a 19-handle!! The 2-10 spread is now in the teens! The 2-year yield is up to 2.62% and the 10-year at 2.82%.

Note Added Saturday, 8/25/18: The US 2-10 spread narrows to 18.80 basis points during the Friday session; an 18-handle!! 

Keybot the Quant Turns Bullish

Keystone's algorithm, Keybot the Quant, flips to the bull side at SPX 2868. The bulls are boosting semiconductors to lift the stock market. As always, stay alert for a whipsaw. More information is found at Keybot's site.

Keybot the Quant

SPX S&P 500 Monthly Chart; Overbot; Rising Wedge; Negative Divergence; Long-Term Stock Market Top At Hand

The SPX prints an all-time record high at 2873.23 so the negative divergence on the monthly chart is official. The long-term multi-month and multi-year top in the stock market is at hand. It has been a long road since the former Federal Reserve Chairman Bernanke saved the stock market in March 2009 to protect America's wealthy class.

Other global central bankers followed the US lead over the last 10 years with Keynesian easy money accomodation that continues into the present. The wealthy, that own large equity portfolios, rape the financial system for all its worth as stocks catapult higher. The central bankers perform the bidding of the wealthy since they are rewarded with lucrative speaking fees once they leave public office. This is the US crony capitalism system on full display.

Stocks would be expected to top out here a la the March 2000, October 2007 and May 2015 tops and head lower for many months even years. The prices currently printing in the stock market may not be seen again for many years. If you are a young person contemplating investing in stocks, stay away. Do not listen to all the horsesh*t from television pundits about investing for the long-term. You would be better off to sit tight and perhaps invest in the stock market a couple years down the road when prices are likely far lower.

The only thing that can save the stock market is central banker intervention or some type of cheerleading or action from the Whitehouse. Watch the MACD line (purple circle) on the SPX monthly chart like a hawk; it tells you the path ahead. As long as the MACD line remains negatively diverged (sloping down), the stock market is toast going forward on the monthly basis. If, however, the MACD line moves higher and prints above that thin red line in the right-hand margin, THE stock market top will be delayed by a couple months or so and instead of now it will occur in the September-November time frame. You are watching history in the  making. 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; Overbot; Negative Divergence

The S&P 500 prints a record high at 2873.33 today but not a record closing high. Price retreats after the euphoric high due to the negative divergence in play. Stochastics are overbot agreeable to a pullback. The SPX may seek the middle band at 2844 and rising as an initial downside target.

Bombshell political news occurs after the bell where President Trump's former attorney Michael Cohen agrees to a plea bargain and admits to violating campaign laws at the direction of a candidate (Trump). S&P futures will provided insight into how the market views this earth-shattering news. 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 5-Minute Chart; SPX Prints All-Time Record High

US stocks finish the day higher with new record highs in indexes but prices retreat off the highs. The SPX gains 13 points, +0.5%, to 2862.97 which is not a record closing high but the intraday high at 2873.23 is a new all-time high. The record closing high remains at 2872.87 from 1/26/18. 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.

RUT Russell 2000 Small Caps Daily Chart; RUT Prints All-Time Record High

The Russell 2000 small caps print a new all-time record high at 1709.47 overtaking the prior record high at 1708.56 from 7/10/18. The bulls are running. All eyes are focused on the SPX to see if it can squeeze out a new record high 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.

Note Added 10:11 AM EST: The RUT prints a new all-time high at 1712.59. 

Note Added 10:15 AM EST: The RUT prints a new all-time high at 1712.64. 

Note Added 10:20 AM EST: The RUT prints a new all-time high at 1713.56. 

Note Added 10:24 AM EST: The RUT prints a new all-time high at 1713.81. Bullish traders are tripping over each other buying small caps with both fists at the ask.

Note Added 10:36 AM EST: The RUT prints a new all-time high at 1714.86. Bulls are throwing confetti, singing songs and drinking wine provided by the Fed and Whitehouse. They cheer and sing that the joyous highs will never end. The small caps are melting-upwards. Aunt Nellie hands her life savings over to her money manager and tells him to buy the small caps as fast as possible.

Note Added 5:35 PM EST: The RUT prints a new all-time high today at 1722.29 and new all-time closing high at 1718.05. 

INDU Dow Jones Industrials and TRAN Dow Jones Transports Daily Charts; Dow Theory Upside Trend Confirmation; Trannies Print New All-Time Record High

The Dow Jones Industrials and Dow Jones Transports are confirming each other with higher highs and higher lows from a Dow Theory perspective. This behavior signals that the upside trend in the daily time frame should continue (after any pull back may occur).

The trannies are a whisker away from a new all-time record high. The record is at 11423.92 from 1/16/18. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 9:40 AM EST: TRAN prints a new all-time record high at 11440.86 as the trading day begins taking out the record from seven months ago. The Dow Industrials will now need to print a new all-time record high to confirm the ongoing upside in the stock market from a Dow Theory perspective. The Dow all-time high is 26614.85 from 1/26/18 and today's HOD thus far is 25850.39. Thus, the Dow needs to gain about 765 points to confirm the record high in the trannies and forecast more record highs for the broad stock indexes ahead.

Note Added 10:31 AM EST: TRAN prints a new all-time record high at 11475.40. TRAN is currently printing 11434.

Note Added 5:37 PM EST: TRAN prints a new all-time record high today at 11475.40 and new all-time closing high at 11436.36. The Dow Jones Industrials has its work cut out for it needing to rally well over 700 points to print a new record high and confirm more upside for the stock market from a Dow Theory perspective.

SPX S&P 500 and CPC and CPCE Put/Call Ratios Daily Charts; Near-Term Market Top Approaching

The CPC and CPCE put/call ratios provide insight into complacency versus fear. You want to buy the fear and sell the complacency. What would you do based on the charts above?

Clearly, both the CPC and CPCE put/calls are venturing into the complacency realm. Traders are euphoric. For the last week or two, pundits parade across business television screens proclaiming SPX targets of 3K, 3.1K and higher. In general, global central bankers remain accomodative providing easy money that continually pumps equities higher since March 2009. As Alfred E Neuman says, "What, me worry?"

In addition, the Whitehouse is into the stock market pumping game lately professing imminent trade deals each time the stock market dips. At the same time, yesterday, President Trump says the Federal Reserve is hiking rates too fast and should instead remain accomodative longer so the wealthy can continue to rape America with big stock gains. Thus, traders buy calls with reckless abandon believing that stocks can grow to the sky and the upside trend in the market for the last 10 years will never stop.

The red circles highlight the complacency in the stock market when traders are at euphoric levels tripping over each other to buy equities at the ask. The green circles indicate rampant fear and panic during a stock market selloff and when you want to buy equities as the blood flows in the streets.

The stock market top can occur coincidentally (right now) with the low put/calls or in the days ahead, sometimes several days ahead. Thus, the SPX may have enough juice and momentum to print that all-time record high at 2873 only about 15 points away before the complacency sends stocks south.

How far will stocks pull back? Looking at the S&P 500 chart, let's assess the prior selloffs. They are 202 handles in March, then 80 in April, 82 in June and about 45 and 42 handles for the recent modest selloffs. So the drop in the SPX, from wherever the top occurs in the near-term, can be from 40 to 200 handles, with an average of about 90 points. Thus, with Keystone sticking his index finger in the air, the pull back will likely be about 40 to 90 SPX handles from the top that should occur any time over the coming days.
This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

SPX S&P 500 Monthly Chart; Negative Divergence in Play Identifying a Major Multi-Month and Multi-Year Stock Market Top; President Trump Bashes Federal Reserve Setting Up Chairman Powell as the Future Fall-Guy and Scapegoat

On Monday, 8/20/18, in the afternoon, at 3:40 PM with the SPX at 2860, stocks begin sliding sharply lower towards the closing bell. The S&P 500 drops to 2856 so the Whitehouse steps in with dovish comments. In a Reuters interview, President Trump says he is “not thrilled” with Powell raising rates. Trump proclaims, “I should be given some help by the Fed.” USD 95.82. The dollar falls to session lows after Trump’s comments. The central bankers, and now the Whitehouse, are the markets.

It is rich that President Trump brags daily about the stock market record highs, the +4% GDP growth and millions of jobs created but then opines that he needs help from the Fed. Which is it, mister president? Is the economy healthy or is is sick? Trump says he plans to continue criticizing the Federal Reserve if they continue raising rates. Stocks stop the late-day slide dead in their tracks with the SPX reversing course higher to 2857 as the closing bell rings.

Trump is likely setting up the Federal Reserve to take the fall if the stock market trends lower over the next couple years. This is the key reason behind the Trump comments. No doubt the Whitehouse has chart technicians providing market commentary to the president's advisors and henchmen Mnuchin, Ross and Kudlow on a daily basis.

The SPX monthly chart displays negative divergence across all its key indicators (RSI, MACD, histogram, stochastics, money flow) as price comes up to match the 1/26/18 all-time record high at 2872.87 (price needs to touch the 2873-ish to officially confirm the negative divergence with the chart indicators but let's say it is close enough for government work).

It is very likely that the stock market is printing a major long-term top over the coming weeks a la October 2007 and May 2015. If so, after the SPX drops -10%, -20% and even more, Trump will proclaim that he created the strongest economic and market boom in America’s history but the Fed ruined it by hiking rates. Powell will be used as a scapegoat. This is the way the game is played on the corrupt and filthy streets of Washington, DC, and Wall Street.

US stocks finish the day in rally mode. The S&P 500 finishes up 7 points, +0.2%, at 2857. The SPX is within 1% of the all-time record high at 2872.87. The upper standard deviation band was violated a few months ago so the middle band at 2575, and rising, is firmly on the table as an initial downside target on the monthly basis. As the background color of the chart shows, the sun is setting on the stock market.

The monthly charts will print the final price for the month of August on Friday, 8/31/18, and a new candlestick will begin for the month of September on Tuesday, 9//4/18 (after Labor Day). Keystone can post the monthly charts for the major indexes and key individual stocks at that time and explain the situation if there is interest shown by the hundreds of thousands of monthly global users of the KE Stone blog sites. Otherwise, you can figure it out on your own. 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.

YC2YR US 2-10 Yield Spread Weekly Chart; 2-10 Spread Narrows to a 22-Handle!!; US Yield Curve Flattens

This afternoon, 8/20/18, with the 2-year yield near 2.60% and the 10-year yield under 2.83%, the 2-10 yield spread narrows to 22.8 basis points. This is the flattest the yield curve has been since 2007 about 11 years ago but no one cares since they are too busy buying stocks. 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.

TNX US Treasury 10-Year Yield Weekly Chart; Textbook Two-Leg Bull Flag Pattern; Sideways Symmetrical Triangle; Tight Bands

The 10-year yield will receive extra attention this week after bond king Jeff Gundlach warns about the excessive shorts in Treasuries at record levels. This may create a massive short squeeze that will burn those shorts.

The chart is showing yield. Higher bond prices lead to lower yields and lower bond prices lead to higher yields. The record amount of shorts in the 10-year note is expecting lower bond prices and higher yields. The Wall Street pundits have been calling for higher yields and higher inflation since late 2009 and have been wrong for nine years. But they are positive that this time yields will sky rocket higher. Gundlach warns that the opposite may happen where the 10-year note prices rise sending the yield lower and as the shorts panic, yield will be driven strongly lower.

The green lines show the textbook two-leg bull flag pattern since 2016. Yield runs from 1.40% to 2.50%, keeping the math simple that is a 1.1% gain, or 1,100 basis points. During most of 2017, the move up in yield consolidates with textbook behavior a sideways to sideways lower bias forming the flag (lower lows and lower highs in yield). Then the second leg of the bull flag begins from 2.00%-ish so you know that this will target 3.10% if the note selling continues. And it does and yield runs to 3.10% satisfying the bull flag pattern.

The blue sideways triangle is in play and yield is slipping below the lower trend line as this is typed at 2.85%. The vertical side of the triangle is about 32 basis points. Thus, a breakdown from 2.85% would target 2.53%. That would get everyone's attention as Gundlach warns.

A breakout in yield above the uppoer trend line at 2.98%-ish would target 3.30% with the inflationists and proponents of higher yields finally claiming victory after many years of predicting higher yields.

The red lines show the neggie d spankdwon in yield that Keystone previously highlighted and predicted which occurred. Note the tight pink standard deviation lines. Holy Moses. The move in yield is going to be bigtime. Tight bands do not predict direction but do predict that a huge move is on tap.

If yield continues lower from 2.85% and loses the lower band at 2.79%, the 2.53% target is likely. Bond and note bears (that want lower Treasury prices and higher yields) need yield to return inside the triangle at 2.85% to 2.98% and then to breakout higher to target the 3.30%.

The bond bulls (higher Treasury prices and lower yields) have to be given the advantage since yield is on the verge of breaking down from the triangle right now at 2.85%. 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 at 5:36 PM EST: The 10-year yield drops to 2.82%.

AAPL Apple Weekly Chart; Parabolic Price Move; Upper Band Violation; Overbot; Price Extended

Apple is the favorite flavor of traders these days. It is boosted with a trifecta of joy. First, the earnings beat provided an influx of money into the stock especially as the other FAANG stocks languish. FB and NFLX have fallen into bear markets (down more than -20% off their tops). Second, the hype around the $1 trillion market valuation provided another boost. Young techies especially caught up in the Apple hype run to their broker's placing full paychecks into AAPL stock believing that it will grow to the sky.

Third, the 13F quarterly filings reveal that Warren Buffett's Berkshire Hathaway is buying Apple stock with reckless abandon. Buffett once said he does not own Apple or tech stocks since he does not understand them. Well, now he must fully understand all there is to know about the tech sector. There are a huge number of Wall Street money managers that blindly follow Buffett's every move and jump in to the same positions without performing any due diligence. If it is good enough for the Oracle of Omaha it is good enough for them. CNBC commentator Jim Cramer is another Apple cheerleader telling his listeners and viewers to buy Apple with both hands. Thus, the price is in a parabolic up move currently.

This recent hype around Apple stock is further boosted by last week's interesting action and rally in defensive stocks. The utilities, consumer staples and REIT's print big gains. Many moons ago, before the non-stop global central banker intervention in markets over the last decade, stocks and the economy would typically follow business and economic cycles. When a downturn in the stock market was anticipated, traders would rotate into the safer plays, that typically pay attractive dividends, and hold out there until the coast is clear and a new economic and business cycle would develop and begin.

At that time, traders would rotate into cyclical and growth stocks. These are not your grandfather's markets. All asset classes are boosted into bubble territories due to the never-ending central banker intervention designed to make the wealthy richer (since they own large stock portfolios). Those seeking safety in defensive stocks are wasting their time and only covering themselves with a fig leaf because these stocks are at elevated levels like all other stocks. The central banker intervention has destroyed the expected business cycles.

The reason this is key, is that the boost in the defensive plays last week coincides with more Apple joy. Since pundits such as Buffett and Cramer are telling folks to back up the truck for AAPL stock and buy with reckless abandon, many traders now perceive Apple as a safe-haven play (that will be protected in any stock or economic downturn) and this helps boost the stock into its recent parabolic move higher.

The AAPL gains are obviously news-driven events; earnings, $1 trillion valuation goal, Buffett buying and safe-haven perception. Saying that Apple is an emotional stock is an understatement.

The weekly chart had displayed a doji candlestick but the Buffett hype prevented any trend change lower and instead shot the stock further skyward. Price continues to violate the upper standard deviation bands so a move to the middle band at 187, and rising, is firmly on the table. Price is extended above its moving averages also requiring a mean reversion lower. The bulls have succeeded in creating more juice on the weekly chart since the MACD line squeezed out a higher high as well as the histogram. The RSI, stochastics and money flow remain negatively diverged. There is near-term strength due to the momentum. The weekly chart was set up for a top in about a week or two time frame as previously explained but now that can stretch for another week or two due to the momo.

AAPL has become the darling of the FAANG stocks. Keystone has commented on the AAPL monthly chart and the long and strong MACD line and nothing has changed in this respect. The broad market will likely roll over first in the long-term perspective (months and years) and Apple will likely be one of the last to roll over and die on the long-term basis. Apple will likely make a top on the weekly chart say over the next one to three weeks and pull back perhaps to the middle band which is also the 20-week MA, but then rally again due to the long and strong MACD line on the monthly chart. This places the long-term multi-month and multi-year top for Apple in the late-September-October-November time frame, let's just call it by the end of the year. By the end of the year, the broader market will likely already be rolling over as the SPX monthly chart is in full negative divergence across all its indicators. 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; Rising Wedges; Negative Divergence; Distribution

There is lots going on in the SPX daily spaghetti chart. The red and orange rising wedges are bearish patterns. Price collapsed out of the orange wedge with a gap-down (blue circle) move. The hammer candlestick marks the bottom three days ago, on Wednesday, when the Whitehouse stepped in to save the day announcing that the US and China would restart trade talks and then stocks were purposely goosed more on word that Presdient Trump and communist dictator President Xi would meet in November at a summit to resolve the ongoing trade wars.

The central bankers have been the market for the last decade constantly manipulating equities higher to reward the wealthy privileged class in America. Now, with folks like Kudlow and Mnuchin in the Whitehouse, that sit and monitor the US stock market daily, the Whitehouse is the market.

The SPX rallies and fills the gap which is something the bears needed to happen anyway. The red lines show the negative divergence in play that spanked price lower out of the orange rising wedge. Price came down to the lower trend line for the multi-month red rising wedge and that is where the Whitehouse stepped in to save the day.

The brown circles show distribution days occurring for the last four months where the smart money is handing off shares to the dumb money. Joe Sixpack is getting all excited about the daily stock market hype on television and rush in to stocks afraid that they will miss the next big rally. Over the last two weeks, the strategists, analysts, traders and pundits are in universal agreement that the SPX will print another all-time record high and there may be a stock market melt-up on tap for the end of the year. Many are proclaiming 3K and 3.1K targets and higher.

All the indicators were in universal agreement with negative divergence that created the drop out of the orange wedge and there was no reason for price to recover so quickly (except for the Whitehouse intervention). Price should have at least touched the lower standard deviation band at 2799 and rising.

As price recovers, watch the horizontal red price line that identifies the high from seven trading days ago. If price matches this high or moves above, check the thin red lines shown for the indicators in the right margin. As long as they remain under the thin red lines, the neggie d would remain in play and price will collapse again. The effects from the prior negative divergence remain in play and price may simply roll over from current levels, especially with the gap-fill accomplished, if the joy from the Whitehouse trade war hype is priced-in.

The purple box for the ADX shows that the drop in the S&P 500 from the 1/26/18 record high was a very strong trend lower. The central bankers always save the day and place their jack boots on the throat of volatility which creates the April low and recovery. Note, however, the ADX remains subdued for four months and is now down to an 11-handle. Despite the rally from April to present, the move up in the stock market is NOT a strong trend higher. Isn't that interesting. For such a robust rally in equities, the ADX should be at least above 20-25 and actually in the 30's. This is likely due to the distribution taking place as the smart money sneaks out the back door.

The RSI and money flow are trying to generate near-term strength which creates a rise in the S&P futures to begin the week up +6 about 2-1/2 hours before Monday's opening bell. The upper standard deviation band is at 2866 so if the Whitehouse keeps up the trade-talk hype, price will likely migrate there. If so, watch the thin red lines for the indicators as explained above. Otherwise, and even if price runs higher, another retreat lower is likely with downside target at the middle band, the 20-day MA, at 2833 and rising, and the lower band at 2799 and rising. Stocks will be in trouble if the lower red trend line of the red rising wedge gives way at 2833-2840. 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.

AAPL Apple Weekly Chart; Overbot; Upper Band Violation; Negative Divergence

Apple popped on earnings which are always a crap-shoot for any company. The charts are pricing in the move and showing that not much has changed as compared to before the earnings release, except of course the price jumping above two hundo.

The weekly chart tags the upper band so a move to the middle band, at 184 and rising, is on the table as well as the lower band at 160. A doji candlestick prints for last week hinting at a trend change. The RSI and stochastics are overbot agreeable to a pullback. The chart indicators remain in negative divergence although there is a sliver of near-term strength in the MACD line that may try to create buoyancy in price for a few more days. The expectation remains for lower prices for mighty Apple.

The daily AAPL chart shows price bumping along with a 207-209 ceiling. The chart indicators are all negatively diverged except for the MACD line still sloping a touch higher. This hints that Apple will likely top out in the daily frame, say, mid-week. Price has penetrated its upper standard deviation band so a move to 197 is on the table as well as down to 182.

On the AAPL monthly chart, price has also violated the upper band so a move down to 161 and perhaps the lower band at 120 are on the table for the monthly time frame (a few months in the future). The monthly chart indicators remain negatively diverged except for the MACD line and a touch of near-term strength for the RSI.

Combining the charts, Apple should top out this week on the daily chart and sink for a few days. The weekly chart will likely roll over in a week or two with a few weeks of downside on tap. At that point, say in mid to late September, Apple should bounce as per the monthly chart (MACD long and strong) and rally to the highs once again, however, the MACD on the monthly will likely negatively diverge at that time, say in October, which will mark THE top for the tech giant.

Nothing much has changed as compared to before the earnings. The charts are pricing in the euphoric joy on the earnings release mainly driven by young tech professionals caught up in the hype buying Apple stock with their paychecks afraid they are missing out on big gains ahead. The smart money is very happy passing shares off on the future bagholders.

Keystone still does not have a position in AAPL. The thought was to look for an attractive entry but that did not appear and then earnings came up fast where it is best to simply sit back and watch instead. If you are a very nimble trader, you can play the top in the daily chart say this week, that will last a few days say into next week. The AAPL 2-hour chart displays tight standard deviation bands so a big move is likely coming in that time frame the presumption would be down.

Since Apple is such an emotional stock, it is likely better to let the weekly chart top out, say in a week or two, and perhaps play the retreat to 184-ish. Also, since the stock has momentum on its side, it may be most prudent, on a longer term basis, to simply wait for THE top in Apple which is likely on tap in the September-October-November time frame. The highs seen in this period will likely not be seen again for many months and likely for a couple years or more. Going into late this month and early September, it is reasonable to expect Apple in the 185-195 area. 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.