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.
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