The band plays on. The bulls jam stocks higher on Friday, 11/15/19, the SPX printing a new all-time high and all-time closing high, both at 3120.46. Stocks closed at the highs last week. The Dow Jones Industrials are above 28K. The screen printers can barely keep up with printing hats for all the new ongoing records in the indexes. The bulls exclaim, "It's beautiful." The phase one trade deal hype and of course global central banker largess fuel the upside and maintain elevated equity prices the last few days.
At the same time, the CPC and CPCE put/calls are printing uber lows verifying rampant complacency and fearlessness in the stock market and a significant top at hand. Ditto the VIX which prints an 11-handle on Friday, down to 11.92, now trading very early Monday morning on the East Coast at 12.48. S&P futures are up +5 and volatility is higher so one of them is wrong since both are going in the same direction.
The rampant complacency calls for a 40 to 150-handle, or more, pullback in the SPX, however, much of this negative energy got burned up with all the happy trade talk last week and central banker promises to print money and support stock markets forever. Nonetheless, a large pullback remains on tap albeit from a higher price. On the weekend, the US and China both are touting happy trade talk which does not impress traders all that much; this silly nonsense is getting old. More central bank stimulus, this time from China,however, buoys global markets to begin the week.
The PBOC, China's central bank, lowers its key interbank lending rate. Of course they do. These central banks including the Fed, BOJ, ECB, etc..., are sick pups. One decade of stock gains are all based on phony financial engineering. It will be interesting to see it all collapse over the next couple years. Companies have repurchased mountains of stock over the last 10 years, since QE1 began in March 2009, and the earnings beats have everything to do with the amount of stock being reduced. In other words, the PE's that are at elevated levels right now should actually be increased another 30% or more across the board due to the stock buybacks (equities are highly overvalued despite everybody saying that stocks are fairly valued or undervalued). These are the types of things that analysts will look back on a few years from now and ask, "How come no one saw this?"
Keystone's proprietary trading algorithm, Keybot the Quant, remains long the stock market. The algo was in position to go short last week but the bulls keep pumping stocks higher so they remain in control. The quant is tracking copper and commodities as the two key parameters most greatly impacting broad stock market direction currently. Copper futures are up a smidgeon +0.1%. As copper goes, so goes the market.
The SPX daily chart was in full negative divergence last week ready to spank price lower. The only thing that can prevent this from happening is new news that the chart has not priced-in. Charts can only price in all knowledge known up to the minute. Thus, after the trade talk hype, where investors now expect an imminent US-China trade deal, the daily chart above will need a couple days to absorb this new news.
All indicators remain in neggie d (red lines) except for the RSI that pokes out higher. The RSI and stochastics are overbot agreeable to a pullback in price. The RSI, however, is long and strong now so price may take a jog move of a couple days (down-up) to allow the SPX to print a matching high and the RSI to go neggie d to lock in the downside projection again.
The red rising wedge pattern remains ominous since the collapses can be quite dramatic. Look at how price is extended above the moving average ribbon needing a mean reversion lower. The upper band was tapped a few days ago so the middle band, also the 20-day MA, at 3058, and rising, is on the table. Note the long period in June and July when price was above the 20-day; about 6 weeks. Price was only above the 20 about 3 weeks in September and now price has been above the 20-day about 6 weeks again further increasing the expectation that the SPX should relax downwards.
Investors and traders await the US-China trade deal news. It appears much of it is priced-in but you never know. Wharton economics professor Jeremy Siegel proclaims that the Dow will increase +10% when the trade deal is announced. The happy talk from Fed Chairman Powell last week also served to maintain an elevated stock market. Everyone and his brother, even cousin Larry that is a little bit slow after the accident in the barn, knows that the central banker easy money is the life blood of the stock market. The central bankers are the market.
So the drama and lookout for the top continues. As soon as the RSI goes neggie d, say in a couple days, the top will be in again. Watch the MACD line to see if it begins sloping higher; that will extend the top a couple more days. Bears want to see the MACD remain flat and the RSI to roll over lower. The pullback in stocks can of course occur at anytime if a negative news story hits the tape. For now, the US-China trade deal is in its final-final-double final stage and the PBOC just added more upside juice to the global central banker punch bowl, so investors and traders are singing songs and buying stocks.
Soybean Donny has a health scare this weekend. As usual, the Whitehouse will not release details but says it has nothing to with a sudden problem. Do you believe that? The Trump Administration spins a yarn that the president decided out of the blue to have part of his annual physical, which should not occur until February, performed now. Hopefully, the president's health is well. That early to mid-70's age window is where many heart attacks occur.
The Impeachment Hearings against President Trump continue. The two corrupt political parties, demopublicans and republocrats, flex their muscles and pose for the cameras. The Wednesday testimony of Ambassador Gordon Sondland is key. Sondland may sing like a song bird throwing his orange-headed boss under the bus, or, he may try to finesse his way through the hearing trying not to implicate King Donny. Sondland has to choose his words carefully; global traders, investors and algorithms will be hanging on his every word and sentence. Most humans choose to save their own skin when they are tangled up in a legal matter faced with a choice that potentially involves jail time. As the ole saying goes, 'there is no honor among thieves'.
The markets will be playing close attention on hump day since this is likely the pivot day for the impeachment process. After Sondland's testimony on Wednesday, the impeachment drama either gains steam and republicans start jumping aboard the bandwagon throwing the president under the bus crushing his hopes for re-election, or, the impeachment wagon breaks down, the wheels fall off, the bureaucracy is too bloated to continue with the impeachment, the democrats run for cover, and King Donny emerges as an invincible leader paving the way to re-election next November. We will know in a couple days.
The uber important Housing Starts hit tomorrow morning. The Keybot the Quant algorithm has identified the start of a housing recession on 7/17/19 so going on four months now. Typically, the main stream would be expected to catch-up with the call so tomorrow's data is key. Who knows? Maybe over the next two or three months the Starts may recover and point to happy days ahead, but, for now, the housing recession call remains in place and the numbers tomorrow morning are super critical. Housing and auto industries are the two main drivers of the economy. Copper futures are up +0.2%. The 10-year yield is 1.84%. 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 5:06 AM EST: S&P futures are up +5. Dow is up +66.60. Trip 6's. Nazzy +20. Russell +1. VIX 12.38. Futures and volatility are both higher so one of them is wrong. Copper is up +0.1%.
Note Added 6:27 AM EST: Russell futures slip negative a short time ago. Copper slips negative. S&P +4. VIX 12.44. 10-year yield 1.84%.
Note Added 6:55 AM EST: S&P +6. VIX 12.42. Copper is a hair positive. 10-year yield 1.84%.
Note Added 7:01 AM EST: S&P +5. VIX 12.46. Copper is a hair negative. Both WTIC and Brent oil are down -0.3%. Doctor Copper dances on the bull-bear tightrope performing flips and fancy balancing maneuvers, however, he is becoming whoozy from pills he's been taking in his desk drawer and is about to fall either into the bull or bear camp. Which will it be? As copper goes, so goes the market. Whoopsies daisies. Copper -0.1%.
Note Added 8:39 AM EST: S&P -4. VIX 12.95. Copper -0.5%. Soybean Donny needs to tweet about a trade deal if he wants to pump the futures higher. The VIX is sneaking towards 13 and the futures are negative so volatility was correct this morning and the futures wrong. 10-year yield 1.82%. Traders are taking a slight risk-off posture buying Treasuries. S&P futures lost 9 points over the last hour and one-half so something may be afoot in the background. Someone likely knows something. News wires are quiet. Perhaps rumors that President Trump may try to throw Secretary of State Pompeo under the bus for the Ukraine scandal create the sogginess in the tape. It is comical since eventually the orange-headed leader stabs everyone in the back around him and Pompeo, his closest confidant, may be next in line for the chopping block. The daily Whitehouse drama is a reality television soap opera.
Note Added 8:59 AM EST: China is rattlin' its saber creating the slight dip in futures. President Trump is not agreeable to rolling back tariffs so the communists are playing hardball threatening to hold off on a trade deal until after the election next year. Investors and traders remain happy and optimistic, looking forward to extra helpings of shaky puddin' during the holiday season. S&P -2. Dow +10. Nazzy -3. Russell -2. VIX 12.79. Oil is down -0.8%. Copper -0.2%. 10-year yield 1.82%.
Note Added 4:54 PM EST: Stocks are soggy during the day as copper stunk up the joint the red metal down -0.7% on the session. The bulls managed to push the SPX up 2 points to a new all-time record high at 3124.17 and new all-time closing high at 3122.03. Remember Keystone's 80/20 Rule that 8's usually lead to 2's, so 3118 hinted that 3122 was on tap and it occurs. That takes care of 8's and 2's unless 3128 prints which would hint that 3132 is coming. Also, the bulls are hoping the breach of 2800 will lead to 3200. Watching for this stock market to peak out, especially due to the low put.call ratios that signal uber complacency and a top at hand, is a hoot. Bring up the SPX daily chart. You can see that price prints a higher high and the RSI is flat, which is neggie d; that did not take long only 2 days to price-in the happy trade talk news. The MACD line is sneaking a tiny hair higher over the last few days, however, remains neggie d over the last 4 months. Thus, the SPX daily chart is back in full negative divergence after the Friday orgy. This price print may be the top, its overdue, if not, tomorrow the top will print, and if not, hump day will be the top. The stock market may try to hang on by its fingernails waiting to see if Ambassador Gordon Sondland sings like a songbird on Wednesday morning during the live televised Impeachment Hearings. Sondland's testimony may give King Donny a conniption. This is epic stock market history occurring in real-time.
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