The US-China trade deal, where comically no one knows if we are now in Phase One or Phase Two, creates stock market buoyancy. Trading floors are like wax museums with lots of people standing around but not doing much of anything. Investors wonder if the trade deal is a sell the news event, or not. If the Phase One supposed-deal is not signed for another few weeks (the Chinese-English translations for the text are only beginning; you would think this was done as the deal proceeded), perhaps traders will expect more happy daily news bites going forward.
The SPX prints an all-time high at 3197.71 and all-time closing high at 3191.45 on Monday, 12/16/19.
The big deal in 2019 is obviously the central banks. Their power is astounding. As Keystone explained in early January of this year and several times hence, the global central bankers, that have been acting in collusion for several years now, panicked and began printing money like madmen to save the stock markets on 1/3/19. The Fed, BOJ, ECB, PBOC and over 20 central banks around the globe are injecting liquidity into global financial markets at an astounding pace this year.
The Fed's money injections in October are the highest in nearly one year. The world is awash in liquidity. Traders and investors, and Ma and Pa, pick the money up off the ground that is laying everywhere (cheap loan rates) and buy stupid stuff they do not need or make investments they should stay away from. All asset classes float higher in price including stocks, bonds, real estate, vineyards, art, collectibles, antique cars, etc...
The wealthy elite class benefits the greatest since they own the large stock portfolios. That is why former Fed Chairman Bernanke stepped in to save the US stock market in March 2009; simply to protect the wealthy. This is how the crony capitalism system works. Take a good look at that chart. The low is on Christmas Eve last year at that 2350-ish level where it teased and tested support at the 200-week MA. The power of central bankers is awesome and bewildering at the same time. The central bankers are probably surprised themselves at how powerful they are; they must feel like God's. It's beautiful.
Once the Fed and other central bankers stepped in, look at that rocket launch this year. It sure is something. The best rally that central banker money can buy. Even more impressive and amazing is the rally from October to present goosed by central banker money. The Tweezer Bottom occurs in early October at 2850-ish and the SPX catapults 350 points in only 10 weeks time to 3200; a remarkable +12.3%!!!. Kneel and Praise the Power and Majesty of the Federal Reserve and other global central bankers! The central banks are financial God's!
The Fed, BOJ, ECB, PBOC and the whole hee-haw gang plan to keep printing money to support the stock market. The massive October injection is jamming stocks higher into year--end and many analysts feel the central banker sugar-high will continue into Q1. This is why stocks remain buoyant and refuse to go down. However, even your credit card has a limit. One of these days, Toto will pull back the curtain in the basement of the Eccles Building to expose Powell, Yellen, Bernanke and Greenspan feverishly running the Keynesian printing presses themselves.
The stock market will always go up on central banker money printing; until it does not. Equities are well bid with easy money because traders and investors have full faith and confidence in the Federal Reserve. Once that is lost, all is lost. That is why the last year is so perplexing. Chairman Powell hiked the key rate last December and planned more hikes this year but instead panicked and flip-flopped in early January to save the stock market.
This year turns out to be three cuts instead goosing the stock market to new record highs. You would think all faith and confidence in the Fed would be lost at such a bush league and drastic reversal of monetary policy; obviously the Fed is making it up as they go along. But instead, traders and investors worship at the Fed's altar and agree that all days forward will be rainbows and blue skies. No one cares why stocks go up only that they do go up. The stock market only cares about liquidity.
So price has gone parabolic due to the central banker easy money accomodations and the happy US-China trade deal that still will not be a deal for a month or two, if then. The SPX weekly chart is in negative divergence over the last couple year period. In other words, price keeps moving higher but the chart indicators want it to move lower. The central bankers keep printing money which creates the few-month rallies, and the charts have to price in the action, but then the fun always peters out again and prices relax lower.
On a long-term basis, as Keystone continues to describe, the stock market is very likely placing a multi-month and multi-year top. The waiting game continues for the charts to set up with neggie d and give the all-clear for downside ahead. The RSI sneaks back up into overbot territory, so it is now agreeable to a pullback, but it is a higher high compared to a couple months ago. Thus, the SPX may perform a jog move, down one week and then back up the week after, to allow time for that RSI to go neggie d for this shorter-term. It does not have to as far as a top goes since the drastic negative divergence over the last couple years is striking.
The MACD line is the same dealio as the RSI. It is ramping higher but remains below the two-year high so it may try to squeeze out a couple more weeks at these elevated levels, but again, it does not have to. The stochastics are overbot and neggie d wanting price to move lower now on the weekly basis Ditto the histo. Price has violated the upper standard deviation band (purple) so the middle band at 3024 is on the table and lower band at 2828.
The ADX shows that the trend higher in 2017 and early 2018 was the real deal, very strong, but that petered out in the summer of 2018. Of course the waterfall crash followed in Q4. For the entire move higher in the stock market this year, the ADX says it is NOT a strong trend now sitting way down at 12. That is fascinating. It tells you that it is a central banker money pump rally this year and does not have much to do with global financial fundamentals.
The Aroon green line is pegged at the ceiling at one hundo with nowhere to go but down and the red line is oversold with nowhere to go but up; both signals are bearish going forward. You have to watch for the red line to cross above the green line to signal doom and gloom ahead. Price is extended above its moving average ribbon that are all extended above each other so a mean reversion lower is desperately needed.
These are epic times. If you are young, you must realize, that what you are seeing in the stock market now into early 2020 may be so historic that you will talk about it for the rest of your life. The chart says down but the central bankers say up. 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 5:24 AM EST: S&P futures are down -1, call it flat. VIX 12.17. Copper +0.3%. Traders see the end-of-year finish line ahead, and know that this week is the last full week of trading in 2019, and wonder if stocks can make it that far. Housing Starts are on tap and the most important data point each month next to the jobs report. Keystone's data identifies a housing recession starting on 7/17/19. The central bankers have been pumping markets like madmen, however, the Fed's liquidity injection in October is the highest in almost one year. This creates housing and overall market joy for a few months. It will be interesting to see if Keystone's data lifts itself up and out of the recession call, or not. Even if it does, the expectation is that it would likely roll over again. We are in the longest economic expansion and rally period in stock market history and the first decade that goes by without a recession. Wow. Enjoy the party now because the hangover (recession and likely start of a class war in America) will not be pretty.
Note Added 5:39 AM EST: S&P -6. VIX 12.37. Copper +0.1%. Looks like a little air pocket.
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