Happy Halloween. The Federal Reserve rate decision and Chairman Powell presser is now in the rearview mirror. As usual, stocks float higher into and through the Fed meeting. The central bankers are the market. Another dovish rate cut occurs so stocks rally higher. It's not rocket science.
The S&P 500, the SPX, the stock market, prints a new all-time record high at 3050.10 and new all-time closing high at 3046.77 on Wednesday, 10/30/19. Bullish traders are dancing jigs of joy as the SPX gaps higher this week printing the record-setting numbers.
Earlier this week, the 2-hour chart showed the sogginess that was on tap, which occurred. The daily chart shows the near-term attempt at positivity by the RSI and MACD which creates the recovery in SPX price into and through the Fed, along with the expected bullishness for a Fed meeting. Now what?
The 3025-ish level is key (blue trend line that was resistance now support) and represented a triple-top. The first top is in July, then September and the third top was 4 days ago. Of course, the ole Wall Street adage comes to mind; 'there is no such thing as a triple-top'. This statement is saying that as price comes up for the third top, it will blow up through because triple tops do not exist (the triple top is blown out as you see above by the new record highs). Keystone does not subscribe to this statement. In truth, triple-tops occur about one-half the time and the other half of the time price continues higher, so, flip a coin. The initial move in the chart above is higher but several days will need to pass for it to prove that up is the path ahead.
The Wall Street majority are celebrating the Fed meeting with upside joy expecting lots more into the end of year. Halloween may deliver a downside trick, however, instead of an upside treat. Remember, the CPC and CPCE daily put/call ratios are uber low signaling off the charts complacency. This behavior occurs at a stock market top in the daily time frame.
The red rising wedge is an ominous bearish pattern. The failures from rising wedges can be quite nasty and fast. The red lines show the universal negative divergence in play over the last 6 months. Price keeps moving higher, to record highs, on fumes rather than real fuel. The tiny green lines for RSI, MACD and money flow are trying to create short-term momentum in price. This activity will typically create 2 to 4 days of sideways to sideways higher price action, however, the 6-month neggie d hangs over the stock market's head like the Sword of Damocles. Ditto the put/calls. One false move and the stock market's head may be lopped off. The stochastics are overbot agreeable to a pullback now.
The purple boxes on the ADX show that the trend higher in late April and in late July were both strong trends but they petered out when the mood for stocks soured. Note how the ADX does not come up again as the S&P 500 prints record highs. The trend higher in SPX price and one-month rally is NOT considered to be a strong trend higher by the ADX.
The Aroon green line is pegged at 100.0, the maximum, with nowhere to go but down which is bearish. The Aroon red line is under 30% which means price is overbot, just like the green line, and bearish going forward. Price has not yet tagged the upper standard deviation band (pink) but keep an eye on the middle band support, the 20-day MA, at 2981, and rising.
The stock market can roll over at any time due to the rampant complacency and topping action as explained above. The expectation would be for a 40 to 150 point drop in the SPX. The geopolitical and US government news flows, and King Donny tweets, and central banker pontifications, will continue sending markets to and fro. 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 5:15 AM EST: News Flash. China doubts that a long-term trade deal is possible with President Trump. Wow. That is big news. As a hillbilly would say, "Those are fightin' words." President's Trump and Xi were planning to sign a phase one trade agreement in Chile at the APEC conference but that is cancelled because of the ongoing violence and social unrest (which also sends copper prices higher). It appears that the US-China trade negotiations are going downhill. Soybean Donny better get on the ball and close out the ag contracts with the communists. Trump has been bragging about the ag deal for the last six months as US farmer's go bankrupt. The US-China meeting is cancelled and now the communists stuff Trump. S&P futures are down -9. VIX 13.05. Wall Street awaits a response from the Tweeter-in-Chief.
Note Added 5:36 AM EST: S&P futures -10. VIX 13.10.
Note Added 5:47 AM EST: S&P futures -13. VIX 13.29. Copper slips away to the downside.
Note Added Saturday Morning, 11/2/19: The SPX retreats on Halloween Thursday tapping on the 3025-ish level but then recovering. The stock market catapults higher, gapping-up, on Friday after the US Monthly Jobs Report to a new all-time record high at 3066.95 and new all-time closing high at 3066.91. Any bearish hold-outs threw in the towel creating short-covering rocket fuel. Humorously, considering the euphoric price action, before the SPX falls from 40 to 150 points, or more, it is going to rally 40 points or more. This is typical behavior after the low put/call ratios print. Remember, a top will print any minute any day any time forward. The CPC plummets to 0.74 and the CPCE collapses to 0.53 on Friday. You wanted to sell into Friday's close and put on a short or two. Traders and investors are complacent, fearless and euphoric over the new stock market highs singing songs while guzzling down Fed wine, ECB champagne and BOJ sake and smoking PBOC crack. The central bankers are the market. China says it has reached a 'consensus in principle' on the trade deal whatever that means; it is simply more commie games. Something epic may occur in the stock market on Monday or early next week.
The NYHL shows that the number of new highs in the stock market yesterday now match the new highs that were occurring during the July stock market top. When the new highs are excessive, stocks will sell off and when the new lows are excessive, stocks will rally. What do you think will happen?
The early May top was a one-day event. The July top took its good ole time. The September top was forecasted by a couple weeks of new high peaks. We nearly have a couple weeks of new high peaks now. 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.
Alphabet releases earnings last evening but traders are yearning for more. GOOGL trades down -1.3% to 1272 in the pre-market. The stock initially fell below 1250 on the earnings release. Alphabet is spending money like drunken sailors. GOOGL popped +2% in the Monday trade to a record high at 1299.24 a whisker from 1.3K. GOOGL pierces the upper standard deviation band so the middle band at 1194, and rising, is on the table. The chart is on the weekly basis so the last candlestick on the right currently only reflects the Monday trade. The candlestick will continue to contort depending on how the week goes.
The 1272 price is at the level where GOOGL gapped-up to yesterday so it is now deciding if it wants to head lower to 1266-ish.The red lines show universal negative divergence across all chart indicators. The stoch's and money flow are coming off overbot levels agreeable to softness ahead. The green lines show near-term momentum mainly due to the gap-up Monday joy. This may create a jog move for a couple weeks, down one week, up the next, so the top may be a couple weeks out.
The ADX purple box shows that the uptrend was strong in late 2017 and early 2018 but that is when it petered out and price has been choppy sideways ever since. Alphabet and Apple have enjoyed gains in recent weeks, with parabolic moves in price, as traders playing high-flying hot stocks moved money from the other FAANG's; Facebook, Amazon and Netflix. The ADX down at 13 indicates that this big move higher in price is NOT a strong trend higher.
The parabolic jump in price creates the positive Aroon cross but comically, the green line pegs one hundo, the maximum. The Aroon red line is down at 16 so it has nowhere to go but up while the green line definitely has nowhere to go but down both indications are negative for price.
Look at the selling volumes over the last three months. See how price spiked and sucked in Joe Retail during one week, then it was followed by multiple sell weeks. That is the smart money distributing shares to Johnny and Jane Bagholder.
On the GOOGL monthly chart, Alphabet price tags the upper standard deviation band so the middle band at 1146 is on the table for the months ahead. The chart indicators are all in neggie d over the last year or two signaling a long-term top at hand on the monthly basis. The recent parabolic move in price, however, creates near-term momentum, so, like AAPL, GOOGL may peak out and roll over after the broad market has already started falling. All this is expected before year-end or by January. Of course, a new QE program from the Fed or other global central banker shananigans can always save the day and extend the market joy. The central bankers have created a decade-plus rally already the longest in stock market history.
If you are in GOOGL, cash out and move on. There is nothing to invest in there. Google, er Alphabet, has run its course. You could leave a lot of that dough sit in cash for a while. AAPL is the Superbowl of earnings this week and will either create stock market euphoric joy, or immense sorrow. GOOGL is currently trading down 19, -1.5%, to 1270 slipping into that blue gap shown in the chart above so price may want to touch 1266-ish to figure out what is going 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.
The S&P 500 prints a new all-time high at 3044.08 at 10:30 AM EST and a new all-time closing high at 3039.42 on 10/28/19. Happy days are truly here again. Traders expect another Fed rate cut on Wednesday afternoon and the stock market party is already underway. Praise and Glory to the Federal Reserve and other global central bankers!
Price gapped- up from 3022 to 3032 an immediate 10-point pop out of the gate and then up to 3039 in the first few minutes at record highs. The SPX blew away the old record from late July in the 3020's. The S&P 500 jumped to the record high but then oscillated sideways for the entire day through 3038-3042. Obviously, bulls win big above 3042 while bears win big below 3038. Price begins the Tuesday trade at 3039.
The CPC put/call ratio is at a low 0.79 number, sub 0.80, and the CPCE put/call collapses to 0.51. This is a near-term stock market top. The wild card is the Fed on hump day. Thus, traders may be willing to wait another day and one-half for Pope Powell to bring the tablets down from on high and tell traders how to trade. With fearlessness and complacency gone wild, the top can occur any day forward. Two floor traders were drunk as skunks this morning, before lunchtime, buying stocks with reckless abandon as they consumed tall glasses of Fed wine.
It is a good time to watch the SPX 2-hour chart to see when this near-term top will occur. Interestingly, this chart shows all chart indicators (RSI, MACD, histo, stochastics, money flow) in negative divergence. The RSI and stochastics are overbot agreeable to a pullback in this 2-hour time frame. The SPX has also violated its upper standard deviation band so the middle band at 3015, and rising, is on the table. All the chart indicators are calling for a spankdown which jives with the low put/call numbers.
The SPX 2-hour chart is ready to head lower now so the top may be in despite the expectation that equities should be buoyant in front of the Fed decision. Stocks typically move higher 80% of the time in front of a FOMC meeting but this may be one of the 20% times. The Consumer Confidence data at 10 AM EST tomorrow is very important and will move the stock market. The low put/calls signaling trader complacency and the SPX 2-hour chart both indicate that the top is in for stocks which may occur at anytime 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 Tuesday Morning, 10/29/19, at 4:38 AM EST: To clarify, the SPX 2-hour chart wants downside now, however, the daily chart indicators receive more juice after the big Monday rally. This hints that the SPX daily chart may need a couple-three days or so to top out. Thus, the stock market will likely be soggy for the hours ahead, say today, but then likely rally again into the Fed decision and Powell presser on Wednesday afternoon, perhaps Thursday, and then the stock market tops out late this week or Monday. Of course, with the complacency at fever's pitch, the roll over could happen at anytime any minute ahead. The Fed rate decision and Chairman Powell press conference is a key market pivot point. Considering the uber complacency, the SPX is expected to top out this week and then drop from 40 to 150 points. The question is if Powell can goose equities a little bit more before they roll over, or, if they roll over right away and especially if he becomes more hawkish. GOOGL lays an egg on yearnings last evening. The AAPL yearnings are another key market pivot point this week. Is Tim Cook cookin' the books?
The SPX prints a new all-time record high above 3041 a few minutes after the opening bell on Monday, October 28, 2019. The S&P 500 takes a breather for a few minutes and bingo, the SPX launches to another new record high above 3042. The bulls are singing songs, dancing jigs of joy and praising the never-ending power of the Federal Reserve and other central bankers. Bulls also praise President Trump's stock market cheerleading.
Happy days are truly here again; it feels like the 1920's. The highest all-time record price in stock market (the S&P 500; SPX) history prints minutes ago at 3042.30 at 9:48 AM EST on 10/28/19. The day is young. The 10-year yield is up to 1.85%. 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 7:29 PM EST: The SPX prints a new all-time record high at 3044.08 at 10:30 AM EST this morning, 10/28/19, and also a new all-time closing high at 3039.42. Traders are singing, "Happy Days Are Here Again!"
Remember last week, Keystone pointed out the low CPC put/call but the CPCE was not yet drifting lower; now it is. The expectation was for a lull in the upside price action but then a recovery until both the CPC and CPCE signaled complacency. Both of the put/calls have now slumped to multi-month lows. Traders are singing songs and yelling, "Whoopie, wheeee." Bullish traders are drinking Fed booze and BOJ sake anticipating a robust and wild party on hump day this week (FOMC Decision) as the rates are slashed again (BOJ is on tap Thursday). Long Live the Central Bankers! Hip, Hip, Hooray!
Traders celebrate the modern day money God's that can print cash out of thin air. Powell was in the basement of the Eccles Building this weekend running a printing press himself. Stocks typically rally into the Fed decisions about 80% of the time so the expectation would be for buoyancy in equities into hump day. Considering the ongoing turmoil, will this seasonality hold this week?
On Wednesday, will the Fed push back at the never-ending dovish perception of traders and investors who always expect infinite money-printing? Fed funds futures indicate a 91% chance for a rate cut on Wednesday. When the percentage goes above 80%, a rate move is guaranteed since the FOMC will not want to disappoint the market. There is only a 26% chance for another cut in December. As usual, Chairman Powell's words and comments will be important with traders gauging whether he is flapping dovish or hawkish wings.
The new moon peaked on Saturday night so no wonder the special forces raid and take-down of the Arab terrorist al-Baghdadi played out. The US has superior night vision technology so the covert raids take place at the darkest time of the month; the new moon. Stocks are typically weak moving through the new moon but S&P futures are up +9 and the VIX at 13.00 about an hour in front of the opening bell for the regular Monday trading session.
The SPX is set to take out its all-time high at 3027.98 and all-time closing high at 3025.86 from 7/26/19. This price action should only serve to send the put/calls even lower.
Traders are drunk as skunks throwing darts at the financial pages to pick stocks. Everyone laughs that stocks will always go up and if not, the Federal Reserve will always step in to save the day. Even Timmy Trader has joined the bullish bandwagon guzzling down ECB champagne and telling all his clients to go long with reckless abandon.
This week should prove interesting. The put/calls are at low levels consistent where a near-term stock market top will occur. Interestingly, the put buying that has occurred in recent days comes with traders not willing to sell any stocks (usually extreme put buying goes hand and hand with the stock market falling). This reinforces the majority belief by traders and investors that stocks will continue higher going forward into the end of year and beyond. Investors had expected a little pull back a week or two ago so they bot some protection but now they are not even buying protection. They say why bother since stocks always go higher? Investors now expect stocks to go up in the near-term and over the long-term, actually over any term. Traders are fearless and complacent.
What do you think will happen? Heavy-hitter's such as GOOGL and AAPL report yearnings this week; will Tim Cook lay an egg? Apple likely dictates whether the overall stock market goes higher or lower in the days and weeks ahead. Alphabet (Google) reports tonight. 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 8:47 AM EST: President Trump brags that the stock markets will print more record highs today and there is nothing but rainbows and blue skies ahead. The 10-year yield is up to 1.84%.
Note Added 8:52 AM EST: Futures pop when President Trump says the Phase 1 US-China trade deal wil be bigger than expected. Trump loves to pump the stock market higher. The S&P futures are up +12 with the VIX at 12.88, a 12-handle, so the new record highs are on tap at the opening bell. King Trump decrees! Oil flat. Copper and silver up a hair with gold down a hair. The 10-year yield is at 1.84% up 16 bips this month down 123 bips on the year. European stocks are higher.
Note Added 8:57 AM EST: S&P futures +13. VIX 12.84.
Note Added 9:35 AM EST: The S&P 500 prints a new all-time record high above 3039 and heading higher. Traders are tripping over each other to buy stocks. Bears are running for their lives creating a short-covering rally. The SPX goes parabolic now above 3041 up 19 points, +0.6%.
Note Added 9:39 AM EST: The S&P 500 prints 3041.81 finally taking a pause to catch its breath. The NDX prints a new all-time record high at 8089.71. Oddly, the VIX is higher at 12.80. You would expect the VIX to be dropping like a rock considering the new record stock market highs. The VIX should be sub 12.65 on its way to an 11-handle. Instead, the VIX floats higher towards 13. Stocks and volatility are both higher so one of them is wrong.
Note Added 7:32 PM EST: The SPX prints a new all-time record high at 3044.08 at 10:30 AM EST this morning, 10/28/19, and also a new all-time closing high at 3039.42. Traders are singing, "Happy Days Are Here Again!" The CPC is down to 0.79 and the CPCE collapses to 0.51 signaling complacency, fearlessness and a firm belief that stocks will never sell off. Traders are sniffing Fed glue, main-lining BOJ heroine and smoking ECB crack celebrating new record highs in stocks that they believe will continue forever without interruption. GOOGL lays an egg with earnings. Alphabet is spending money like drunken sailors. GOOGL trades lower in the afterhours.
In Europe there are five banks on every corner. The financial system has needed to consolidate banks for the last few decades but the status quo continues resulting in a potentially dire outcome. Many folks are employed by the banks and consolidation would lead to layoffs. Politico's worry that people without jobs become angry, sometimes violent, and they do. The Euro Stoxx Banking Index is at levels not seen since 1987. Global market participants continue to assess the potential damage of the negative rate environment year after year; these are uncharted waters.
The most worrisome aspect of the situation is the ominous red descending triangle taking one decade to form. Typically, if a descending triangle breaks down, it moves a distance lower equal to its vertical side. With the index at 93-ish, a 150-point collapse is not even possible.
Suffice it to say that if the red base line fails, the European banks and economy are toast and of course this will impact the rest of the world. Price has bounced off this multi-decade line in the sand before. Will the banks bounce again or will the descending triangle crush the European banking system sending them into Hades? 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 pointed out the bottoming in yields a couple months ago based on the positive divergence (blue lines), oversold conditions, lower band violation and mean reversion higher required. As September began, the yield is below the 20 MA below the 50 MA below the 100 below the 200; this does not last long. The 10-year yield is at 1.73% right now.
Remember, when traders want Treasuries they are buying like madmen driving prices higher and yields lower. Conversely, when times are good and traders want to take more risk in stocks, money flows out of notes and bonds so Treasury prices fall driving yields higher.
Yield did not have to come back down to the lows but it came down near there earlier this month. Yield tapped on the lower band so the middle band was on tap and occurs. Interestingly, if you can relax your eyes and make sense of the spaghetti, you see the top band and the 100-day MA providing a gauntlet of resistance at 1.84%-1.85%. This also acts a a magnet so price may want to venture to this level and make a bounce or die decision, perhaps timed with the Fed rate decision next Wednesday.
The ADX shows that the trend lower in yields was strong as the year began. That is because traders and investors were panicking after the Q4 crash and seeking perceived safety. That trend lower in yields early in the year was not a strong trend lower until mid-summer and then again when the bottom fell out in August and early September. The ADX is down to 16 indicating that the move lower in yields is no longer a strong trend (a sign that yields are stabilizing and bottoming). Watch for a potential positive cross on the Aroon going forward.
The chart tells a bigger picture. As the Federal Reserve continues cooing and Dove Powell flies above the masses dropping money from the sky, Treasury yields are no longer going down. Powell is up all night tossin' and turnin', as Bobby Lewis would sing, worried that the Fed's obscene one-decade Keynesian financial experiment is failing. When confidence is lost in the central banks, all is lost.
Considering the universal dovishness from central bankers around the world, yields should be trending lower; they are not. Something is starting to go very wrong in central banker land and they do not have a lot of ammunition to fight the battle ahead. Such is the fate of crony capitalism.
The 10-year yield weekly chart is agreeable to higher yields going forward. The monthly chart shows the ongoing sideways path of the 10-year yield through 1.50%-3.00% since 2010 (one decade since quantitative easing began; QE 1). Isn't it interesting that the 3-decade-plus bond rally is nearing its end. With a recession and likely big drop in stocks on the come over the next couple years, yields will want to move lower as investors seek safety but in fact yields may simply bump sideways and then begin moving higher.
Yield has violated the lower band on the monthly chart so a move to 2.52%, and dropping, is on the table in the monthly time frame. It is conceivable that the 10-year will bounce around between 1.40% and 2.50% for the next couple years as the multi-year disinflationary and deflationary period runs its course.
Keystone has touted and shown how the US remains mired in disinflation and deflation for many years. It was always met with scoffs but not anymore. Keystone also said that there will come a time in the future when all the inflationists throw in the towel and give up, finally accepting disinflation and deflation as their destiny. When this occurs, that is when the yields will bottom and begin to rise and usher in the very long period of inflation ahead. This will then lead to an explosion into hyperinflation (think velocity of money) creating a whole new set of nightmare problems down the road in a couple-three years or so.
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 Saturday Morning, 10/26/19: The 10-year finishes the week 4 basis points higher to 1.80%.
AAPL has gone parabolic. Ever since the Federal Reserve and other central bankers started the money-printing party in 2009, a decade ago, stocks have enjoyed huge gains. In fact all asset classes continue higher into bubble territories including stocks, bonds, art, real estate, collectibles, antique cars, vineyards, etc... The central bankers are sick pups performing the bidding of the wealthy elite class that own large stock portfolios.
Everyone and his bro are touting how great a company Apple is and ran by a genius such as Tim Cook. Analysts say the services division will make boat loads of money. Strategists proclaim that China sales are robust. They say Apple Watch is flying off the shelves and other tall tales. MS is out with a note this morning touting Apple TV. All these cheerleaders are pumping and dumping. Joe Sucka cannot buy AAPL and other FAANG stocks fast enough. The sharp-dressed man (makes you think of ZZ Top; take it away boys) on television says you can't go wrong if you buy Apple.
In truth, that is all crap. The simple explanation is rotation within FAANG. The selling in FB, AMZN and NFLX sends money into AAPL and GOOGL. The KISS Principle; Keep It Simple Stupid. As the recession descends upon us, many of you will lose your jobs and regret buying that five hundo dollar Apple Watch trinket as you worry about paying rent and buying food. With the ongoing distrust and trade war between China and the US continuing, it is foolish to think Apple sales will hold up in the communist kingdom.
Nonetheless, money runs from King Bezos, Zuck, who is getting grilled on Capitol Hil today, and Netflix, into Sapple driving price parabolic. The daily and weekly charts show the vertical move in AAPL stock; it is a phenomenal move. Investors are buying Cook's cooking.
Keystone has called each top in Apple due to the neggie d, oversold conditions, rising wedge patterns, upper band violations and required mean reversions. Apple was expected to come back up for another high due to the long and strong MACD on the monthly chart (first week of October 2018 a year ago) so price does print the higher record high. The monthly chart is now in negative divergence across all indicators over the last year. Now there is no reason for Apple to move higher on a long-term basis. There is momentum in the short-term, however, so Apple will likely need 2 or 3 months to top out and roll over. Price rotates within the FAANG stocks with Apple the big victor printing a new all-time high at 242.20.
The maroon lines show the negative divergence remaining in place over the last year and it is substantive. At the same time, however, the green lines show the near-term momentum trade, the parabolic price hike, on the daily and weekly charts. Thus, over the long multi-month time period, the stock is toast, however, in this near-term month-to-month basis, AAPL may be able to bump sideways at these levels for a bit longer, say the remainder of October, November, perhaps some of December. As the overall stock market rolls over for a multi-year lag period, Apple stock will simply be one of the last to roll over.
The purple boxes for the ADX show when the trends higher were strong trends. The prior rally into the Q4 2018 top was a strong trend higher; that disappeared in March of this year and the ADX at 24 says the ongoing parabolic rally is NOT a strong trend higher.
The upper band was violated so the middle band at 192 is on the table going forward as well as the lower band at 145. Price is elevated above the moving averages and desperately needs a mean reversion lower. Keystone does not hold a position in AAPL right now but would not be long. The expectation would be for Apple stock to be at 80-120 a year or two from now. 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 Saturday Morning, 10/26/19: AAPL catapults to a record high up +4.3% to 247 on the week. Tim Cook plans a toga party this weekend to celebrate. Apple price is parabolic going straight vertical from 200 to 247, +24%, in only 10 weeks time.
The sideways symmetrical triangle shown on the AMZN monthly chart is worth exploring more on the weekly chart. Keystone often talks about how a fake-out move will typically occur for sideways triangles as they progress (orange circle). Price will then retreat back into the triangle and usually break in the opposite direction. In the above chart the expectation would be for a failure out of the triangle. Note that the upper blue trend line does not touch the prices in 2018 although it is very near. Thus, the thick blue line identifies the vertical side of the triangle and this is about, eye-balling it, let's call it 330 points.
Since price is in the apex of the triangle at 1750, an upside break-out will target 2080 the 2018 highs. A break-down would target 1420. The red lines show the neggie d spankdown that started the Q4 2018 crash. Price feels some buoyancy as the year began but languishes sideways ever since. The chart indicators are not tipping their hands as they stumble sideways. The ADX confirmed the strong trend higher in AMZN on the weekly basis but this petered out late last year. The ADX down to 13 signaling that there is no strong trend occurring in Amazon. It is a stock staggering sideways wondering what to do on the weekly basis.
The bottom band was violated so the middle band, and 20-week MA, at 1833, is on the table. For an upside break-out to be convincing, price will need to poke up through 1833. The brown circles show distribution taking place in Amazon stock the smart money handing off shares to the dumb money. Each brown circle shows Johnny Bagholder buying Amazon stock after the guy on television said it is a screaming buy. Pump and dump.
Watch the Aroon for a potential negative cross; this will tell you it is lights-out time. The move from the triangle is uber important and will occur over the next few weeks. Keystone does not hold a position in AMZN right now and would not hold the stock long. King Bezos watched the Amazon Prime jesters bring him bags of gold each day; now he will watch the bags of gold disappear year-after-year ahead. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added Saturday Morning, 10/26/19: AMZN eeks out a +0.2% gain during the week to 1761 continuing to sit on the 50-week MA support/resistance at 1755. It's bounce or die time. King Bezos laid an egg last Thursday evening when Amazon released earnings. Investors were yearning for more. AMZN crashed as much as -9% in late trading but recovered on Friday as dip-buyers are constantly tripping over each other to go long.
Business schools will be using Amazon as a case study for decades to come. The multi-year rally is spectacular and jaw-dropping. King Bezos sits atop a gold throne ruling over his loyal Amazon Prime groupies. As the Federal Reserve began goosing the stock market in March 2009 and 2010, to protect the wealthy class in America, AMZN was down at a hundo and change. Amazon took out the 2K level last year right before the Q4 2018 crash.
Investors and traders are so used to the non-stop move in the chart from the lower-left to the upper-right that they expect the party to go on forever. Nothing lasts forever. Keystone identified the stock market top last year as well as the tops in the heavy-hitter's such as Amazon. The red lines show the negative divergence that occurred as AMZN printed new all-time record highs. Down she goes.
As usual, the central banks step in to save the day and that occurred right out of the gate this year when the Fed panicked on 1/3/19. The stock market was toast so the global central bankers colluded and coordinated to save the day. The Fed, BOJ, ECB, PBOC and a host of other banks began making dovish announcements every few days forward creating the rally in stocks this year.
This summer, AMZN tries to make another run higher but it was not in the cards. The red lines show the drastic neggie d on that price match. Down she goes. The upper standard deviation band was violated so the middle band, also the 20-month MA, at 1740, and rising, is on the table and price comes down to kiss this level, as would be expected. The lower band at 1442 is on the table. The pink arrows show the bands squeezing in tight. Whoa, boy. There is going to be a huge move in Amazon over the coming weeks and months, however, the tight bands do not predict direction.
The purple box shows that the ADX has identified the long rally higher in price as a strong trend higher. However, the ADX is dropping like a stone as price languishes sideways the last couple years. The 30-31 level is key, ditto 26-27. Let's just say if the ADX goes sub 30, the strong trend higher on the long-term monthly basis is officially over. The Aroon green line was pegged at one hundo with nowhere to go but down while the red line remains at zero with nowhere to go but up (both indications are bearish).
The brown circles show distribution taking place. The smart money is handing off Amazon shares to the dumb money. Note how the distribution has increased from the Q4 2018 crash to present. Amazon is constantly hyped on the television, radio and internet so Joe and Jane Sucka, the bag-holdin' chumps, buy AMZN because the financial pundit in the custom-tailored Armani suit said Amazon is a sure thing. Timmy Trader is still bragging at the office water cooler that AMZN will rally higher back to the price he entered at above 2K.
AMZN is sitting at the critical 20-month MA support at 1740-ish and must make an important bounce or die decision. If the 20 is lost, the 50-mth MA at 1211 will be on the table for the months ahead. It appears that Scamazon's best days are behind it.
Interestingly, AAPL is printing new all-time record highs. The money flowing out of Amazon is obviously floating into Apple continuing to chase the hottest high-flying stocks. Analysts tout Apple's sales numbers and the growing services division as homerun's going forward and the reason the price is printing new highs. The Apple Watch is touted as a success. This is all garbage. Apple stock is printing new highs because the money that left AMZN. FB and NFLX is flooding into AAPL (rotation within the FAANG stocks; Facebook, Apple, Amazon, Netflix and Google (Alphabet)). GOOGL is also benefiting from the malaise in AMZN, FB and NFLX. It's not rocket science.
Young people must get ready for the pending recession. Many of you will lose your jobs. Those of you sporting an Apple Watch will regret it instead wishing you had the five hundo bucks to spend on food and rent as you toss the wrist gadget into the kitchen junk drawer. Amazon Prime users will diminish. In a recession, you will start pinching pennies. Monthly services and fees will be axed as family budgets are tightened.
Just think, in a few years, AMZN can easily be a 3 hundo to 1K stock. 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 Saturday Morning, 10/26/19: AMZN eeks out a +0.2% gain during the week to 1761 continuing to sit on the 50-week MA support/resistance at 1755. It's bounce or die time. King Bezos laid an egg last Thursday evening when Amazon released earnings. Investors were yearning for more. AMZN crashed as much as -9% in late trading but recovered on Friday as dip-buyers are constantly tripping over each other to go long.
The stock market is a circus these days. The never-ending dovishness by central bankers, as well as the now-constant happy talk over a US-China trade deal, maintain an elevated stock market. A trade deal is expected by mid-November so both President Xi and President Trump can gain political capital. The proof will be in the pudding. King Donny has said that he wants a big deal and one that addresses IP theft and is fully enforceable if violated. A weak half-measure deal will not satisfy markets.
The CPCE put/call ratio behavior is unprecedented going from a panic mood to euphoria and then back to panic now nearly back to fearlessness again all this in only 3 weeks!! As the geopolitical news bites hit the tape, the stock market is thrown to and fro but mostly up, as seen by the rally in the S&P 500 off the 10/8/19 low. The high put/calls called the bottoms in the SPX on 10/2/19 and 10/7-8/19.
The low put/calls mid-month identify that a top was on the come but it turns out to be milktoast with only tiny pullbacks from the recent peaks. The CPCE then jumps to nearly 1.0 signaling panic and fear. This typically occurs with stocks falling sharply since this breeds the fear and panic in human minds. The fear and panic, however, occurs with the stock market rallying to within a heartbeat of all-time record highs. This is very odd behavior.
The elevated put/call ratio and elevated stock market tell you that investors are not willing to sell their stocks. Traders are holding on to longs expecting the upside party to continue. No doubt this is a continued belief in the power of central bankers. The BOJ promises more easy money in an announcement this week. The PBOC is stimulating the communist economy out the wazoo. The Fed remains dovish and the business news channels are playing ECB President Draghi's "whatever it takes" statement from 2012 over and over again
Draghi's last meeting is Thursday morning and Christine Lagarde, who headed the IMF, will now take over as president of the European Central Bank. Her first meeting and presser may be 12/12/19. Will she flap dovish wings? Traders and investors say yes and celebrate the power of the central bankers by buying stocks.
It is interesting times. The bread and circus days. The tail end of a Kondratieff Cycle. The CPCE and CPC daily charts help to identify complacency versus fear in the near-term. The willingness for investors to hold on to stocks no matter what indicates an underlying and deep-seated long-term bullish sentiment exactly what would be expected at major stock market tops. Traders are concerned over the near-term, hence, they buy put protection, but none are selling their stock holdings. Just think, when markets roll over lower, what are these folks going to then do all at once? That exit door is looking mighty tiny.
By buying put protection, any market weakness is viewed by investors as a short-term event. Traders expect stocks to continue higher over the longer-term due to the Federal Reserve and other central bank's never-ending money-printing. Also, investors are sniffing out a US-China trade deal because Donny needs a win for his re-election campaign. It is all viewed as blue skies and rainbows ahead. All this is occurring with a backdrop of monthly charts that are rolling over many peaking out with rising wedges and negative divergence across all chart indicators. It is going to be epic when she gives way anytime forward.
A major stock pullback would likely occur if the US-China trade deal is viewed as a cobbled-together piece of excrement. Traders will be disappointed if Donny does not deliver on his braggadocio. Over 2 years ago, the orange-headed leader said, "Trade deals are easy." We will find out in a few days and weeks if this is true; after 2 years it already appears untrue. Xi is dictator for life while Donny may be a footnote in history in one year's time.
At the same time the trade deal drama continues, confidence may be lost in the central bankers; this is when the true end game occurs in the stock market and equities will be in limbo for several years afterward. When hope, belief and faith is lost in the Fed and other global central bankers, all is lost. For now, traders and investors continue kneeling at the Fed altar each day.
Add on the Brexit drama, Hong Kong protests and populism rising around the world. The huddled masses everywhere are realizing the wealthy elite class has screwed everyone and now it is payback time. Socialism is on the rise since capitalism only existed as crony capitalism. Chile is in chaos causing the copper prices to run higher. Europe will likely be in recession in a few months; Germany, the economic engine across the pond, already is.
Housing Starts are rolling over in the States for the last three months. Manufacturing data is weak. The Fed and other central bankers have stopped a recession from occurring for a decade; can party host Powell keep the festivities going by spiking the market punch bowl with happy juice for another few years?
Back to the near-term, the CPCE drops yesterday to 0.64 a low reading but not yet at the complacency level. The expectation is for another top to form in this daily time frame over the next few days. The stock market is simply reacting to the news flow currently--good or bad. Happy US-China trade talk continues but the result of all this hype will likely not be known until the second week of November so say 3 or 4 weeks from now. So the trade stuff may be in a holding pattern. Will investors wait around for a month to find out what King Donny and Dictator Xi agree to?
The two-day FOMC meeting begins next Tuesday with the rate decision on Wednesday the day before Halloween. Will it be a trick or treat? Stocks are up 80% of the time the day or so in front of a Fed meeting so the bulls have the wind at their backs, say, on Monday afternoon, Tuesday, into the hump day decision. The nearness of the Fed meeting is likely contributing to buoyancy in equities--traders may be willing to wait a few days to see what Emperor Powell says when he brings the tablets down from on high and tells global investors how to trade next Wednesday. So if the bears want to growl, they need to get busy this week since by Monday and Tuesday stocks will likely want to start floating higher into the Fed party.
The FOMC meeting next week may be the pivotal turning point for a market top. That would give the CPCE 4 or 5 more trading days to set up the top with a low reading signaling complacency. 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 Saturday Morning, 10/26/19: The CPC is at 0.82, a low reading, and the CPCE drops to 0.56. Complacency is rampant. Traders are euphoric. The new moon peaks for the month tonight and stocks are typically bearish through the new moon. The Fed decision is on Wednesday and stocks are usually buoyant into the Fed meetings. The put/calls are setting up for a stock market top.
Cheech and Chong would say that pot stocks have gone up in smoke this year. The vape scandal does not help; it creates a negative vibe across the industry. Organizations against legalizing pot are touting it as a dangerous substance, as usual. The majority of Americans, however, realize marijuana is not harmful and actually has many medicinal benefits. Two-thirds of the US population are in favor of legalizing pot. There were horror stories that states such as Colorado would experience serious trouble with crime and car accidents if pot was legalized. You do not hear these ramblings anymore because crime has actually fallen, as well as car accidents, since pot became legal in the state.
These arguments for and against marijuana will continue but likely become irrelevant over the next years as pot is legalized. Obviously companies such as Tilray will benefit greatly over the long term.
This year, however, is a blood bath with TLRY price peaking at 3 hundo and dropping to 20 a -93% crash. Traders loved the IPO as it rocket launched out of the gate. Investors were smoking doobies and fatty's buying Tilray stock like madmen. They were too high and the price was too high so now they drown their troubles in booze as they shun pot.
As a speculator, you keep an ear and eye on sentiment. Nobody wants to own these pot stocks anymore. The short interest is at historic levels. Aunt Harriet, as she sips her third glass of wine this morning, says no one should be smoking it let alone buying stock in it. The news stories are negative across the board. Tilray is beaten like a rented mule.
But within that negativity is opportunity. Keystone posted a TLRY chart a couple weeks ago and the idea was to watch for the bottom potentially at hand. The stochastics are oversold agreeable to a rally going forward. Ditto the RSI that has now made three touches on that low 30% bar--watch this closely since a slip lower will create a couple more weeks of softness. Keystone's 80/20 Rule says 2's typically lead to 8's, and visa versa, so the breach of 22 hints that 18 may be on the table (the chart, however, is very positive and would not expect this).
The falling green wedge pattern is bullish and the launches out of these patterns can be sudden and sharply higher (the opposite of a rising wedge which is an ominous pattern). The green lines show universal positive divergence across all indicators wanting to see a move higher. The ADX shows that the move lower this year was a strong trend lower but it petered out in the summer in favor of a bottoming process. The red Aroon line is pegged at one hundo and the green line near zero both with nowhere to go but down and up, respectively, which means price will go up.
The lower band is violated so the middle band at 35.35, and falling, is on the table, also the upper band at 54. This is speculation on full display. If the massive shorts begin covering, the stock may rocket launch. As Clint Eastwood (aka Dirty Harry) would say, "Well, punk, do you feel lucky today?" Keystone is a buyer of TLRY 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 Saturday Morning, 10/26/19: TLRY receives the possie d launch gaining +11% this week. Price tagged 25.68. That was fun. Yes, sir, may I have another.
Market pundits continue touting the strength of the consumer and retail stocks. RTH prints a record high at 118.30 last week. Analysts proclaim a rosy picture ahead. The price move is phenomenal. Keystone's 80/20 Rule says 8's typically lead to 2's, and visa versa, so the breach of 80 in 2017 opened the door to 120-ish now. The 118, if it is sustained, should lead to 122, or, price may simply fall from 118.
That is two weeks of serious momentum so price may need a jog move for a couple weeks (down one week, up the following week and that is the top). The upper band is tapped at 118.66, almost, so the middle band at 111.77, and rising is on the table (do not discount a further touching of the 118-119 level over the coming days). Price is extended above its moving averages requiring a mean reversion lower. The stochastics are overbot agreeable to a pullback.
The chart is in universal negative divergence across the couple year time frame. Note a sliver of bull juice over the last month with the MACD line which may help price jog sideways for a week or two more. The chart is ugly. That red rising wedge is ominous since the collapses out of this pattern can be epic. Do not discount the possibility that price could fall into the 80's by year end or at the start of 2020.
The ADX indicates that the big-time rally this year is NOT a strong trend higher. Isn't that something. The charts are not impressed with the price move higher; it is occurring on happy fumes. The ADX was in a strong trend higher in late 2017 early 2018 but that petered out after the pullback. Then in September 2018, a year ago, the ADX started to sneak into territory that indicated a strong trend higher but alas, the market started crashing and down came RTH with the whole shooting match. Interestingly, during the Q4 drop of last year, the ADX was just about to indicate that the selling was a strong trend lower but alas, the Fed and other central banks panicked and colluded during the first week of January to goose global equities higher. That is telling to see the ADX way down at 12 considering the historic record-setting rally and new highs. It hints that this party should not last long.
The green Aroon line is at the ceiling at one hundo with nowhere to go but down. Look for a potential negative cross there during the weeks ahead.
The RTH monthly chart is also in negative divergence but shows the strong price action higher over the last 3 to 5 months. It tagged its upper standard deviation band so 104 is on the table for the months ahead. The Aroon is pegged at 100 and the red line at zero designating an uber top in price on a monthly basis. The monthly chart may jog one month down another back up then rollover, so mixing the weekly and monthly together, RTH is printing its historic multi-month and multi-year top as the year ends like most other tickers. It can be shorted going forward.
If you are a longer-term investor, you can short RTH now, and then add to the short in 2 or 3 weeks, then add to it again 2 or 3 weeks after that and then sit on that short trade. By New Years and early 2020, you will likely be a happy camper. Keystone is not in RTH on the short side but likely will be going forward. It is interesting how the XRT retail stock ETF has been trending flat for the last five years while RTH goes to the moon.
The RTH ETF's major 10 holdings are; AMZN, HD, WMT, LOW, COST, TGT, CVS, TJX and WBA. RTH is riding the wings of Amazon, Home Depot, Wal-Mart that has now gone parabolic, ditto COST, TGT is straight vertical and TJX remains the retail superstar since all the ladies like the bargains there. It is easy to see why RTH is at a record high. King Bezos leads the way higher.
If RTH tops out and fails going forward as the above analysis indicates, that means the market darlings AMZN, HD and others would get punched in the face and kicked in the groin. 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 Saturday Morning, 10/26/19: RTH slips -0.4% this week to 117.23 dropping to 115.87 during the week.
Investors and traders keep believing in the chips as evidenced by the dip-buyers buying each pullback in the semi's. The stochastics are overbot but the RSI is not, although it was overbot at the April peak. Chips will be in trouble if the SOX falls below that red trend line. The red rising wedge vibe is bearish. The red lines show negative divergence across all indicators. The MACD has a little bit of near-term upside juice so price may jog, one week down, the next week up, to form the top at that time.
The SOX prints an all-time record high on Tuesday, 10/15/19, at 1629.53 and new all-time record closing high at 1625.69. SOX is at 1607 above 16 hundo.
The ADX shows that the big upside rally in 2017 into early 2018 was a very strong trend higher (purple box) but that petered out in March 2018. The chips rolled over to the downside in 2018 and the wheels fell off the cart at the end of last year into early this year. That was when, on 1/3/19, as Keystone had described at the time, the central banks colluded and orchestrated the huge rally and upside joy in 2019. Stocks were falling down the rabbit hole and ready to collapse and take out the Christmas Eve low. If that would have happened in early January, and it was happening, the stock market could have went into a crash. Fed Chairman Powell got religion and the global central banks (Fed, ECB, BOJ, BOE, PBOC, etc...) started announcing many stimulus plans at 2 to 3-day intervals through January and February that pumps equities higher to today's levels.
The ADX was just starting to show that the downside move into January of this year was a very strong trend but boom, the central bankers closed the door and goosed equities higher always protecting the wealthy elite class that own large stock portfolios. Despite the humongous run higher this year in the SOX, the ADX does not consider the rallya strong trend.
The Aroon green line is pegged at the maximum 1 hundo with nowhere to go but down. The Aroon red line was recently at zero with nowhere to go but up and that goes for its low 20 value now. Look for the potential negative Aroon cross going forward. The upper band at 1652 has to be respected but the chart is in weak shape with the neggie d showing that the fuel has run out.
Semiconductor companies such as NVDA goosed the chip indexes higher this week but they are likely on borrowed time. The SOX, XSD and SMH chip indexes charts are similar and rhyme with the analysis above. Look at SMH as a short now. Keystone is not in the chips right now but will be looking for potential short entries into SMH and XSD going forward. SSG is a 2x short semi ETF and a potential long play going forward although it is thinly traded. As would be expected, SSG is printing a low, in oblivion as chips print record highs. The SSG weekly chart is set up with oversold conditions, a falling wedge and positive divergence across all indicators (a mirror image of above) so that looks like a nice little long trade to play the chips short.
If you are a young person buying chip stocks, bragging at the office water cooler, thinking that you cannot go wrong, well, you are. It would be wiser to exit the chip longs stage right and/or short them going forward, otherwise you will look foolish at the office water cooler come the holidays. 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 Saturday Morning, 10/26/19: SOX prints another record all-time high at 1650.20 up +3.7% this week to 1649 a record closing high. The chips (a belief in technology) and banks (steeper yield curve) carry the stock market towards new all-time record highs.
