Keybot the Quant Turns Bearish

Keystone's proprietary trading model, Keybot the Quant, flips short yesterday at SPX 3229. More information is found at Keybot's site;

Keybot the Quant

SPX S&P 500 Weekly Chart; SPX Prints All-Time Record High at 3352; Overbot; Rising Wedge; Negative Divergence; Price Extended

The SPX prints a new all-time high at 3352.26 and new all-time closing high at 3352.09 on Monday, 2/10/20. The band is playing late into the evening with traders and investors drunk as skunks singing songs and carryin' on. Irving Fisher's casket was exhumed today. The gravedigger's opened the lid, Irving sat up, pointed his bony index finger to the sky and exclaimed, "I think the stock market is at a permanently high plateau and we never have to worry about stocks going lower ever again."

The SPX weekly chart prints the record high with universal negative divergence across all indicators (red lines). A spankdown is on tap on the weekly basis. Note, however, that the MACD line is pointing ever so slightly higher in the near-term. Watch that closely. Since the week just started, that candlestick is in progress and so are the end points of the chart indicators. If stocks begin selling off, which is expected, that MACD can come down a touch and display neggie d against the price high which would signal that the selloff will be longer and more substantive. The red rising wedge is ominous. Remember, the collapses from rising wedges can be quite dramatic; price typically jumps off a cliff from this pattern.

The smackdown off the top should last for several weeks. It can start right away, which would be in sync with the daily and hourly charts, or the bulls may play around a bit more and try to keep stocks elevated for a few more hours or day or two especially expecting Federal Reserve Chairman Powell to speak dovishly before Congress this week. The central bankers are the market.

The expectation is for the stock market to begin selling off now. If there is negative news overnight or some type of negative catalyst, stocks and futures will likely be flushed down the toilet quickly since it would kick the neggie d into high gear. Barring any happy talk from the Federal Reserve, other global central bankers, or President Trump and his henchmen, stocks are set to start tumbling lower. Watch that MACD line 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.

Note Added on Sunday, 3/15/20: The SPX crashes from the all-time record high at 3393.52 on 2/19/20, to a low at 2478.86 on 3/12/20, last Thursday; a dramatic bloodbath of 915 points off the top, -27%, into a bear market in only 16 trading days!!! That is a record that President Trump does not appear to be touting. The 18-year secular bear cycle is growling; it should have ran from 2000 to 2018, finishing up a couple years ago, but is right-translated into this year (sharp upside cyclical rallies such as 2003-2008 and 2009 to present are very common within secular bear patterns). The secular bull cycle will begin at some point over the next year or two (it should have started in 2018 running to 2036 but is likely delayed because of the decade of obscene Keynesian intervention by the Federal Reserve) sending stocks to epic highs in the years ahead but it will likely be under a devastating hyperinflation scenario (your purchasing power will be in the toilet even though stocks and houses will be highly priced). First, remaining in the here and now, we will likely deal with some more deflationary fun ahead. Most analysts and strategists still don't get it. The world has a demand problem going forward which will be difficult to stimulate. A deflationary spiral may kick in once consumers realize that if they keep waiting to buy something, it will be a little bit cheaper next week. The Fed fears deflation more than inflation and Chairman Powell is unable to sleep the last couple months worrying about a potential deflationary spiral; simply look at Japan stuck in a disinflationary and deflationary quagmire for over two decades!. As Keystone always refrains, "the collapses from rising wedges can be quite dramatic." It was.

SPX S&P 500 Daily Chart; S&P 500 Prints Record High at 3352; Overbot; Negative Divergence; Price Extended

The SPX prints a new all-time high at 3352.26 and new all-time closing high at 3352.09 on Monday, 2/10/20. Summon the dancing girls! The SPX daily chart prints the record high with universal negative divergence across all indicators (red lines). A spankdown is on tap on the daily basis.

However, the bulls created momentum in the last hour of trading so tomorrow morning will tell if they can squeeze out another day of bullish joy before the smackdown occurs.

The expectation is for the stock market to begin selling off now. If there is negative news overnight or some type of negative catalyst, stocks and futures will likely be flushed down the toilet quickly since it would kick the neggie d into high gear.

President Trump is yelling at Larry Kudlow telling him to come up with a positive news story for tomorrow morning so they can keep the stock market party going. Barring any happy talk, stocks are set to start tumbling lower. 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; S&P 500 Prints All-Time High at 3352; Overbot; Rising Wedge; Negative Divergence; Price Extended

The SPX prints a new all-time high at 3352.26 and new all-time closing high at 3352.09 on Monday, 2/10/20. Sound the Seven Trumpets! The SPX 2-hour chart had a bit more upside energy due to the long and strong MACD line described on Friday. You can see now that with the higher high in price, the MACD is now neggie d. The indicators are in universal negative divergence so the top is in. However, the bulls created momentum in the last hour of trading so tomorrow morning will tell if they can squeeze out a few more hours of elevated stocks before the SPX receives the spankdown.

The expectation is for the stock market to begin selling off now. You will have to watch to see if the bulls can squeeze out a higher high with the RSI, or money flow, but even if they do, that would only extend the top by a few hours. If there is negative news overnight or some type of negative catalyst, stocks and futures will likely be flushed down the toilet quickly since it would kick the neggie d into high gear.

The president and the Fed are no doubt up all night trying to come up with a happy news story for tomorrow morning that can keep stocks buoyant. Do you want to bet that Larry Kudlow shows up on the Whitehouse lawn tomorrow morning touting a tax cut plan for the middle class? Barring any happy talk, stocks are set to start tumbling lower. 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; Bull-Bear Battle at the 200-Day MA; SPX Prints New All-Time High Above 3352

The VIX is battling at the 200-day MA at 15.14 which is a key demarcation line between a short-term bull market versus a short-term bear. The bears are currently winning the game with the VIX at 15.26 which is a dozen pennies above the line in the sand. This is for all the marbles today. Bulls will be emboldened and walk around with their chests puffed out if they can push the VIX below 15.14. Each minute the VIX remains above 15.14, is another nail in the bull coffin.

The thick red line is at 13.76. Keybot the Quant remains long and identifies VIX 13.76 as the key bull-bear line in the sand. Thus, bears win big above VIX 15.14. Bulls battle back but the stock market chops sideways if the VIX is between 13.76 and 15.14. Bulls win big if the VIX drops below 13.76 since stocks will be on their ways to new record highs. 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 11:48 AM EST: The SPX is up 14 points, +0.4%, to 3342. VIX 15.20. The SPX is floating higher today. Remember the 2-hour chart from Friday the MACD was still long and strong. A matching price high is 3346. Bears should simply push the SPX higher 4 more points to tag the matching high which will lock in the neggie d and create the top. The 2-hour chart starts a new candlestick at noon only a few minutes away. She should be topping out right now. This afternoon may be a wild ride lower for stocks. VIX is 15.27 so the bulls cannot push the VIX below 15.14 as yet. The elevated volatility is problematic if you are long the market. Bears dance with glee every minute that the VIX is above 15.14. The SPX may roll over at anytime and collapse under its own weight. Blow on the stock market; that may be enough to knock it over.

Note Added 12:11 PM EST: SPX 3338. VIX 15.33.

Note Added 1:25 PM EST: SPX 3338. VIX 15.42. It's a Mexican standoff. Neither side wants to budge but one of them will flinch. Either the stock market rolls over and dies with the VIX spiking above 16 and higher, or, the bulls are going to drive the VIX below 15.14 to win the game ahead. The next candlestick on the SPX 2-hour chart begins in one-half hour at 2 PM EST. The fifth 65-minute trading segment of the day begins at 1:50 PM EST and the last segment begins at 2:55 PM EST so look for potential pivot points around these times depending on what the robots plan on doing. The PBOC pump overnight supports the stock market.

Note Added 2:13 PM EST: The stock market is a deer in the headlights, frozen at SPX 3337 and VIX 15.45 and too stiff to move either way. The bears could have locked in the top with neggie d if the SPX would have printed 3346 either Friday or today but the bears keep goofing off and playing around. Stocks may simply give up the ghost from here and fall under their own weight since the SPX price was elevated and in the neighborhood of the 3346 with a HOD above 3342. Both sides are sleeping and sluggish on this Monday. The bulls need the VIX below 15.14 to prove they are the real deal but volatility slowly floats higher all day long. The plot thickens. There you go, we are exactly where we were an hour ago. SPX 3338. VIX 15.42. Nowhere, man.

Note Added 2:26 PM EST: Next Monday is the Washington's Birthday/Presidents Day holiday so US markets will be closed. The stock market is typically bullish the two days in front of a three-day holiday weekend so Thursday and Friday may favor the bulls. Therefore, the bears better start the selling fast to do damage on Tuesday and Wednesday, and perhaps straight through the holiday, otherwise, the bulls are going to try and keep the turd floating in the toilet bowl for a couple days because the holiday joy may do some of the lifting as well in the back half of the week. The SPX price still may come up to tag that 3346 price today to lock in the neggie d and officially identify the top, or, the SPX may simply clutch its chest, gasp and keel over. If the bears were smart they would jam it to 3346 for the start of the sixth trading segment at 2:55 PM EST. That would lock in the neggie d and the trading robots would send the stock market into Hades during the last hour. So far, however, today is an easy going, laissez-faire, slow, uneventful day. Bulls yawn while buying stocks.

Note Added 3:31 PM EST: SPX 3347. VIX 15.30. The SPX finally comes up to 3346 and the bears quit goofing around. The bears now have to hold the line at this SPX 3347 and not allow price to move higher. The negative divergence is official on the 2-hour chart, the daily chart and the weekly chart. The pullback may be epic. Enjoy these elevated values since this should be it. The bears have it on a silver platter if they want it; simply push the SPX off the cliff, it is wobbly standing right next to the edge leaning over. Note how the VIX came down to test the critical 200-day at 15.14, and bounced the VIX now at 15.30. The bears are happy, however, they need to turn the SPX over right now in the last half hour. If not, the stock market would likely drop tomorrow; maybe a Black Tuesday? That would be fun. The stock market top is in now. The only thing that can save the day is some kind of uber happy news.

Note Added 3:40 PM EST: SPX 3346. VIX 15.31. It would be wise to make sure you have your shorts on, especially if you walk out in public.

Note Added 3:44 PM EST: SPX 3347. VIX 15.26. Here come the bulls. They are jamming volatility lower to try and create a happy tape. The bulls are gunning for that VIX 15.14 to prove they are in the game still yet. Now we see how many sell orders are coming in late day.

Note Added 3:50 PM EST:  Wheee. Whoopie. Spurt. Spurt. The bulls push the SPX to 3348 while jamming the VIX down to 15.24. Fed Chair Powell is personally standing on the VIX's neck with his jack boot. The bulls need a few more pennies lower in the VIX to try and salvage the day. The negative divergence on the charts tells you that something wicked this way comes; a neggie d smackdown.

Note Added 3:54 PM EST:  Wheee. Whoopie. Spurt. Spurt. The bulls push the SPX back up to 3348 jamming the VIX down to 15.24. The bulls cannot get the VIX under 15.14 as yet but they are pushing hard, with rich Uncle Fed's help. Here you go. VIX 15.20.... they are jamming into the closing bell..... 15.19 ......

Note Added 3:57 PM EST: This is hilarious. VIX 15.17. VIX 200-day MA 15.14. The bulls are fighting to push that VIX below 15.14; they are not giving up.

Note Added 3:59 PM EST: SPX 3352. VIX 15.14. It will take a little while for the numbers to settle out.

Note Added 6:50 PM EST: The SPX finishes up 24 points, +0.7%, to a new all-time closing high at 3352.09 and new all-time high at 3352.26. The VIX settles at 15.04 the bulls win the day in the last minute, as usual. The VIX battle will continue tomorrow and it begins trading at 3 AM EST. The SPX 2-hour, daily and weekly charts are all in negative divergence marking a top in the stock market right now. If there is any happy news, that may be able to squeeze out a few more hours or so of elevated equities but any negative news will be a catalyst to kick in serious downside. The expectation is for a selloff to begin so Tuesday should be an interesting day. Fed Chairman Powell speaks before Congress this week so traders expect more dovishness which supports the stock market. The central bankers are the market as evidenced by the PBOC and Fed today. The coronavirus death toll is over 1,000. Traders and investors are sanguine about the virus. China is telling its farmers to wear masks when working in the field; that's not good. It means the virus can infect through the air, an airborne disease is Apocalyptic. Oh well, no need to worry especially with everyone so busy buying stocks at the ask.

WTIC West Texas Crude Oil Monthly Chart Sideways Symmetrical Triangles

WTIC, West Texas Intermediate Crude oil, is slip-sliding away due to weaker global demand and the coronavirus. China is freezing much of its economy in place to stop the spread of the virus so they 'don't need no steenkin' oil'. The red candlestick shows price losing the lower rail of the yellow sideways symmetrical triangle. The triangle has steep sides and the first price touch inside the pattern shows a vertical side of about 25 handles.

It is a big deal which way oil resolves out of the triangle. A failure here, from 49-50, price is currently at 50.08, leads to a dire outcome that would target 25. That is a deflationary number with the globe in recession. Oil would have to hold that orange support line at 41-42, if not, 25 would become an extremely real possibility.

On the oil bull side, if price can find 10 bucks and break out higher from 60, oil will target 85. This is a monthly chart and the moving averages are lining out sideways which indicates a very strong sideways trend ongoing in oil.

Sometimes sideways symmetrical triangles will morph into longer skinnier sideways triangles like the light blue lines. Watch price in this 49-50 area to see if it can bounce. If oil loses 48-49, the 44 is on tap next than 41-42 then look out below. Oil price may bounce in here and then move higher pursuing that new light blue triangle pattern going forward; a price move sideways through 50-60.

Keystone is not playing oil. A failure of 47-48 would be a short with oil likely losing another 3 or 4 bucks. If price bounces and moves above 52-53, oil will likely want to move up towards 60. 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 7:05 PM EST: WTIC loses -1.5% to 49.57, a 49-handle, so the test of that 49-50 area continues. Bring up a daily chart of WTIC. Price is basically at a matching low with positive divergence showing on the indicators. Oil is a buy if you are a nimble trader in the daily time frame. Any lower number in WTIC can be bot expecting a positive divergence bounce on the daily basis (several days of upside ahead). Look at OIS it is all set up for a nice long on the daily basis. Keystone will buy some for the possie d bounce coming in the daily time frame. Other oil plays should all be set up similarly.

GOLD Candlestick and COT (Commitments of Traders) Weekly Charts

Gold has been living the high-life since the May bottom at 1270-ish. Nine months later, the yellow metal is at 16 hundo. Traders and investors are tripping over each other to buy gold. Many read old textbooks they picked up at the dollar store that says buy gold if you are worried about the economy and markets. Gold continues to shine printing a whisker from 1600 last week.

However, with that higher high in price comes neggie d. Gold prints a higher price than the week before and higher than last August's top. The red lines show the chart indicators sloping down which is neggie d; the indicators are negatively diverging away from the SPX price that continues moving higher making new highs. It means price is out of gas and about to receive a spankdown on this weekly basis. The odd thing, however, is that the stock market is poised to sell off for a few weeks and you would think gold would catch a bid but the chart says gold will sell off with stocks. Perhaps that was such a hefty pop from 1250 a few months ago, gold is ready to digest some of that meal.

The gold monthly chart also shows neggie d for the RSI, stochastics and money flow which will work in unison with the neggie d in the weekly chart above and spank gold down over the coming weeks. However, the monthly chart has a long and strong MACD line. The MACD hints that a higher high will likely occur after the multi-week pullback. Thus, gold may drop a few weeks down to 1400-1500 but then would rally for a few weeks back up to a matching high around 16 hundo or higher.

The candlestick chart shows price rising into a wedge pattern which is bearish. The RSI and stochatics are overbot agreeable to a pullback. As mentioned the neggie d wants to create a multi-week smackdown beginning now or within the coming days. Gold has tagged the upper band for several weeks and needs to pull back to the middle band at 1512 and perhaps lower band at 1431. Price is extended above its moving averages requiring a mean reversion lower like occurred after the August top. None of this stuff is positive; it is all bearish on this weekly basis. The ADX shows that the weekly trend higher in gold price is a strong trend and remains a strong trend. However, the high in the ADX is lower than the prior high as gold made a new high; neggie d. 

For the COT chart, the green bubbles show where gold was at a bottom and began to rally while the red circles show tops where gold began to stumble. You can see the bars on the COT chart blown out to the far edges, top and bottom, so it is logical to assume that they would work their way back, to absorb the big multi-month price gain, for a week or few.

The blue circle shows the orgy in precious metals to begin the year with gold well above 1600. The lower bars of the COT chart show how there is less enthusiasm for this current price high in gold five weeks hence; neggie d. The expectation is for a pull back in gold and it will be several weeks, but after that, gold should move higher again back up to 1600 again say in April or May. There is a lot of price congestion at the 14 hundo level from last summer so price may go back down there to look around.

Since there is strong interest in gold nowadays and there will likely remain a base bid in play for the yellow metal, the pullback may be subdued and the negative divergence may not extract the revenge that it typically does. Price may only come down to tag that middle band at 1511 and then want to bounce again. You will have to se how it goes; in a couple weeks the gold price will be soggy and moving lower and you can check the charts out then.

Keystone does not have trades on in gold currently. Obviously, the play is short on the weekly basis from here forward; there are plenty of ways to play. Short GLD. Short IAU. Short UGL (which is the 2x gold long). Long GLL (which is the 2x gold short). Gold may develop into an attractive trading vehicle for this year if it develops into a trending sideways channel. Silver appears stronger than gold and if it sells off it may be more of a sideways lull rather than deep dive. 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: The COT gold chart is provided by COT Price Charts and annotated by Keystone.

Note Added 8:31 AM EST: Gold 1575. Silver 17.78. 

Note Added 7:10 PM EST: Gold 1580. Silver 17.78.

SPX S&P 500 Weekly Chart; S&P 500 Prints All-Time Record High at 3348; Overbot; Negative Divergence; Upper Band Violation; Price Extended; Multi-Week Stock Market Top to Print Any Day Ahead; PBOC Steps in with Liquidity Injection

The SPX weekly chart has topped-out with neggie d. The S&P 500 prints the highest number in stock market history at 3348 on 2/6/20 (green circle). The Fed easy money wine is flowing like water. At noon each day, a chorus line of beautiful dancers prance across the floor of the NYSE. Their lovely long leg kicks highlight the green sequins, shaped like dollar signs, dotting their flesh-colored leotards.

Every day is a party in the stock market. No one is worried about stocks ever going down again and even if they do, the Federal Reserve will immediately step in and stocks will catapult higher. Moral hazard has arrived. The Fed's grand financial experiment has turned into a Keynesian Frankenstein that now breaks free from the straps on the operating table likely beginning a period of economic terror. The low CPC and CPCE put/calls, and subdued VIX, clearly verify the couple-month period of excessive euphoria, fearlessness and complacency in markets; exactly when a significant top occurs.

The weekly chart above says that time is now. Price prints the higher high, a record high at 3348, but the red lines show universal negative divergence occurring. The SPX is out of gas. All the fuel gauges now read empty so price no longer has any fuel to move higher, on this weekly basis. Thus, it is spankdown time on the weekly basis so the market sogginess will last a little while perhaps into early March (a few weeks).

When the SPX weekly chart starts printing the new candlestick at 9:30 AM EST Monday morning, make sure the neggie d remains in play to identify the top. The indicators cannot move above the thin red lines in the right margin; the indicators have to remain sloping down that is why it is called negative divergence, neggie d, because the indicators are diverging down away from price that still goes up (unlike the popular daytime television game show, the 'price is wrong').

The full moon peaks for the month at 2:33 AM EST and stocks are typically bullish through the full moon so Monday morning may see a lift in prices but that would be expected to be short-lived. The Earth and Moon are at a gravitational inflection point so earthquake and volcanic activity may increases strongly in the coming few days.

If the SPX price pokes out a stronger high, which is possible since it could always seek the upper band at 3383 if there is some type of euphoric financial news, but it is unlikely, it will probably come with neggie d remaining in place and if not, it will appear again in a couple weeks (so the multi-week down slide off the top would begin in a week or two instead of now). The middle band at 3144 and lower band at 2904 are in play going forward on the weekly basis. The SPX has topped out on a weekly basis so several soggy weeks are ahead. Price may target that large volume buy candle area from mid-December at 3200-ish and then lower. Prepare accordingly.

The geopolitical and domestic news is ridiculous nowadays; it is hard to keep track of all the adult baby stuff. President Trump is happy this weekend after the impeachment acquittal, happy job numbers, winning another lawsuit and his job approval is at the high of the presidency at 49% (although the data shows an increase in the republicans surveyed). Obviously, the other big plus for King Donny is the democrat stumble in Iowa and the lack of a strong candidate thus far which tells Wall Street that Donny is the man for four more years.

Comically, the democrats still cannot officially call a winner in Iowa, that has now become a laughing stock. The New Hampshire primary election is on Tuesday. King Donny would eat any of the democrat male candidates for breakfast. The only way the liberals win is with a woman and there are only two to pick from; Warren and Klobuchar. Warren is a lock on the school marm position but appears too fidgety and jumpy for the top job. It looks like Klobuchar is the only democrat hope so it will be interesting to see if the Democrat Tribe understands this and keeps elevating her, or if they do not, which will lead to their easy defeat in November. Biden is as crooked as the president with both men knee-deep in Ukraine scandals. Biden is damaged by the scandals but Teflon Don, the reality television mafia boss, walks away claiming total victory. The stuff is hilarious to watch.

Last evening, Donny pulls out the scythe and lops off a few heads. The president fires the witnesses that testified against him in the impeachment proceedings; Vindman and Sondland. Vindictive narcissism is never an easy image to watch; it is a dish best served cold. Humorously, the folks that place their hands on the Bible, promising to tell the truth to the best of their ability and report what they truthfully saw and heard, are destroyed by the president that will not place his small hand on the Bible and has not permitted his staff, all of which are directly involved in the Ukraine Scandal, from testifying or providing documentation. That's hilarious and it is America in 2020. Donny has to hope that the dirt on the Ukraine stuff does not come out during his campaign; it may be the only thing that could create a stumble. Trump looks like a shoe-in for the second term, at this juncture, and Wall Street responds favorably with the new high in the stock market (although Donny will not be happy after the neggie d kicks in).

The Federal Reserve is the presidents best friend. Trump should be sending gifts to Chairman Powell because Jerome is the man that holds Donny's entire fate in the palm of his hands. If Powell keeps the dovishness going printing money like a madman in the basement of the Eccles Building, Trump will coast to victory with zero effort. The easy money will keep the stock market party going into the election.

If, however, the Fed mis-steps, makes a mistake, spooks the markets, or somehow faith and confidence is lost in the central bank, look-out because things will likely get ugly fast. One potential outcome is that Powell does all the right things, in a sick central banker's eyes, but we are at the end of the 11-year Keynesian experiment, and despite proclamations of dovishness and more money-printing, markets lose confidence and the whole ball game ends.

Interestingly, if the economy tanks this year and recession occurs with stocks dropping like rocks, democrat candidate Warren, would come back into the spotlight, at least to provide commentary if she is out of the presidential race. Warren has warned about the Wall Street banks and if the ugly scenario develops, she will be able to say she told you so. The lesson in it all is that King Donny better treat Pope Powell well over the coming weeks and months. Trump's reelecton does not hinge on what state votes for him or any of that rot, instead it depends on how Powell handles the economy this year. A courier is right now running a box of chocolates over to Powell with best regards from First Lady Malania.

The coronavirus is ongoing with people dropping like flies. No one cares since they are too busy buying stocks. The world is topsy-turvy but that is expected in the bread and circus days when everything becomes entertainment. Sadly, patients are infecting the healthcare workers. The communist party has a gun to the workers heads telling them to shut up and keep working. The world is such a wonderful place. 725 people have croaked from the virus and 35K are infected; you can likely triple those numbers since the dirtbag Beijing leadership lies about all things. Everyone appears sanguine about the virus. That's the way it is with humans; no one gives a crap until danger is at the front door and by then it's too late.

Germany is spewing out some sick industrial and manufacturing data and they are the car making capital of the world. Is Peak Auto about to flush the global economy down the toilet? China's Caixin PMI data is missing estimates and weak and the latest data was before the coronavirus news hit!! Humorously, in the US, everyone celebrated joyous job gains while sweeping the manufacturing recession job losses under the rug. At the same time, the Fed and other academics, armchair and otherwise, continue to have no idea what truly was at the root of the September cash-crunch lack of liquidity event. Powell wants to slow down on all his easy money ways in about 3 weeks. Good luck wit dat, Jerome.

With the SPX topping out, the wild and erratic price action, the uber low put/calls, and other reasons, stay on guard for a flash crash event or all out crash. The weekly chart has topped out so that means several weeks of down ahead. Powell may have to make a quick and major decision at the end of this month into early March which may only worry the markets more. Well, first, let's see the smack down begin and unfold and see how it goes.

If you are new to trading and a long-only player, or a young person, or older person that cannot afford to lose money, you would be best served to get out of the stock market. At a minimum, bring on shorts. She's ready to roll over so everyone better make their decisions fast. Barring any uber happy financial news hitting the tape this weekend or on Monday, the stock market is cooked, stick a fork in it. 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 Sunday Morning, 2/9/20: The death count for the coronavirus is at 813. Two Sunday's ago, 1/26/20, there were about 10 deaths. Last Sunday, it was approaching 100 dead. Now over 800. Using simple math, you can see that the deaths ramp up about 7 to 10-fold each week. Thus, on next Sunday, 2/16/20, you will have to see if there is about 5,600 to 8,000 total deaths. If so, the virus continues to wreak mayhem around the world. If the deaths as of next Sunday total, say 3K or 4K or less, a 4 or 5-fold increase over this Sunday's 800+ number, the virus may be subsiding. The full moon peaks a couple hours ago and overnight in Pennsylvania, with snow on the ground, it looks like daytime. The earthquake and volcano watch begins.

Note Added Monday Morning, 2/10/20, at 4:09 AM EST: The S&P futures are trading all over the map. Last evening, S&P futures are down -15. Of course one of the four central banker horseman of the Apocalypse (Fed, BOJ, ECB, PBOC) must ride in to save the day as is the case for 11 years running. The pale rider, PBOC (Peoples Bank of China; China's central bank), is printing money like a madman overnight, pumping liquidity into its financial system trying to steady the sinking coronavirus ship. As usual for over a decade, every central banker pump is good for 25 to 30 handles on the S&P's. Booooiiiinnnngg. S&P futures recover to +5 overnight a quick 20 handle turnaround on more central banker largess. Global financial markets are a joke nowadays. Interestingly, the S&P's then go negative -5 but then pop to positive territory up +4. No, check that, Keystone blinked so the futures change again. S&P +2. VIX 15.97. The VIX is above its critical 200-day MA at 15.13 so the bears are comfortable. Stock market bulls got nothing unless they can push the VIX below 15.13. The pop in markets from the PBOC goose is not as strong as one would expect. S&P futures should be at +10 or +15 and stable; instead the gains are subdued and the tape is jumpy. Is the end game occurring this year where confidence is lost in the Federal Reserve and other global central bankers? They have papered over problems for 11 years; can they keep the charade going? Watch that VIX 15.13 level; it will tell you a lot about the Monday trade. Note that stocks are a bit bullish moving through the full moon. Remember on Friday, the SPX 2-hour chart wanted price to sneak up for another matching high due to the long and strong MACD line. Perhaps that occurs at the opening bell and then the bears will growl. The PBOC liquidity pump overnight should be doing more for markets. China had over $4 trillion in reserves about 5 years ago. Now the communist nation has about $3 trillion and all this is not dough that can be used to support the economy. Some of that money has to sit there for solvency sake and another portion has to be used for cash flow obligations each month. The end game may be approaching for the commies and the virus may be speeding up the clock. The virus deaths are over 900 with over 40K people infected; deaths will be over 1K tomorrow.

Note Added Monday Morning, 2/10/20, at 4:36 AM EST: S&P -1. VIX 16.01.

Note Added Monday Morning, 2/10/20, at 5:14 AM EST: S&P -4. VIX 16.21.

Note Added Monday Morning, 2/10/20, at 7:10 AM EST: S&P flat. VIX 15.97.

YC3MO 3-Month to 10-Year and YC2YR 2-Year to 10-Year Yield Curve Daily Charts

The 3-month to 10-year yield curve inversion occurred again in late January. YC3MO continues fighting at this zero line where the inversion occurs. The 2-year yield to 10-year yield curve, YC2YR, the 2-10 spread, was last inverted in August. Investors are paying attention to the yield curves since a recession typically follows in 8 months to 24 months time.

Hmmmm, Keystone scratches his bald head, the 3's-10's first inverted in March 2019. Time flies when you're having fun. That is almost a year ago, may as well call it a year ago, when the first inversion occurred. Hang on to your hats. Perhaps the road may become more rocky ahead. A recession is likely approaching far faster than anyone realizes. The global economy has been weakening for a while and the coronavirus is a shiv to the ribs. The question is if the Fed and other central bankers can keep printing money to save the day. 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.

MTRX Matrix Service Weekly Chart; Matrix Crashes -36%

Goodnight Irene, Irene Goodnight. Matrix Service is in the engineering, construction and maintenance business of power plants, chemical plants and other facilities. Matrix has an expertise in the liquefied natural gas (LNG) industry and disappointed on earnings. MTRX crashes -36% last week. There goes one-third of those workers' pension money. Zachariah jumps up from the folding chair in the back of the packed lunch room exclaiming, "But I bot stock through the company share plan!" Management exits stage right.

The coronavirus is another bugaboo in the side of the liquefied gas industry. China is declaring force majeure on LNG shipments. LNG carriers cannot unload cargoes due to the pandemic that has shut down major cities. Natural gas, natty, is shipped via ocean tankers. It is a waste of time to transport actual gas since it takes up too great a volume. Thus, natty is liquefied by lowering it to extremely cold temperatures. This process reduces the volume by 600 times. Liquefied natural gas occupies 1/600th of the volume that natty gas, in its gas state, occupies.

This creates the need for special cryogenic process engineers that can design tanks and equipment properly to handle boil-off gases (vaporization is constantly occurring off the super-cooled liquid) which is a specialty of MTRX. So it is not a pretty sight when there are docking problems for ships since they need to unload those cargoes and it is a black eye for the LNG industry.

A lot of natural gas is likely going to have to be flared to the atmosphere (those are the tall stacks you see at plants that show a flame burning like a candle). These flares are actually for safety at the plants since pipes gather up all flammable waste gases at the facility and send them up the flare to be burned off safely. Matrix takes a nosedive off the side of an LNG storage tank. Better luck next time. EXTN dumps -6% last week. RES crashes -13%. TTI -4%. LNG loses -4%. TELL -3%.

It is a shame the US is stupidly pursuing the electric car craze when natty gas vehicles would be a far better direction to go in. We have gas coming out of our ears and natty burns super clean. The infrastructure plan would create hundreds of thousands of jobs. Alas, it is better to burn coal to create electricity that we can plug into a car and say that we are doing our part for the environment. Aren't humans funny? It's a Wild Wild Life. 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 10-Year Treasury Note Yield Monthly Chart; Oversold; Positive Divergence Developing; Lower Band Violation; 3-Decade-Plus Note and Bond Rally is in Final Throes

After 3-plus decades, the bond rally is finally fizzling out and in its final throes. The 10-year yield has been bumping along the bottom at 1.4%-1.5% since 2012; that is 8 years of basing so far. How much longer?

Yield is not yet down to the lows from last August-September, thus, positive divergence cannot exist. You have to see a lower low in yield first to then see if possie d is in play.In addition, the MACD line remains weak and bleak wanting a lower low in yield. The ADX purple box shows that the trend lower in yield is a strong trend lower which reinforces the idea that the lower low in yield will occur. Interestingly, lower yields will likely occur as the stock market falls apart; money leaves stocks and seeks a perceived safe haven such as Treasuries so note and bond prices move higher and higher and their corresponding yields move lower and lower.

The other indicators are sloping higher ready to be called positive divergence once the yield makes a lower low than August-September. You will know if the 30+ year bond rally is over or not by the MACD line. It is trying to flatten so when yield comes down for the lower low, it may be possie d. You have to wait and see. If it is, the bottom is in and a new long-term Treasury bear market (note and bond prices lower yields higher) environment begins.

What may occur is that yield comes back down for that current February candlestick but the MACD is still sloping down weak and bleak. That will create the need for another jog move where yield will bounce strongly higher because of the possie d in the other indicators, but then roll over again to come down for a matching low. at that time, the MACD will be possie d and the bottom is in; we are only talking a couple extra months.

As market and economic conditions likely deteriorate this year, yields will favor a lower move due to the flight to safety, however, investors, traders and the Wall Street crowd will be very surprised that yields do not move wildly lower. The brown line is 1.42% and the blue line is 1.34%. The expectation would be to not breach these levels. They may be touched intramonth like the prior years but this long-term basing pattern should hold.

What is fascinating is that, as we slip into recession this year, the yields will likely hold pat and then begin rising. The chart above says yields will bottom, on a multi-month and multi-year basis, between now and May. Yields will be rising in the back half of this year. Of course, the entire outcome of this mess, created by the Fed and other central bankers over the last 11 years, is comically depending on the Fed. The drug addict keeps going back to the dealer to get a fix until one day he finds out the dealer is dead. These are epic and historic market times that will be written about and discussed for decades to come.

Keystone is not playing in this arena right now. The above discussion opens the door to a TLT short trade going forward but it depends on how nimble a trader you are. TLT will likely become soggy and drop for the next few weeks but it will recover and come back up to another matching high a month or two ahead. At that time, the monthly chart will top out for TLT and it can be shorted for the remainder of the year. TBT is the opposite of TLT so TBT will bounce for a few weeks, then become a bit soggy again, but then by springtime or so, TBT will be a long for the remainder of the year. It is probably best to sit out the trades until the TLT tops-out, and the TBT bottoms-out, probably in March-April, then play TBT long and TLT short from there. Of course, watch the central banks since they can immediately change the game. 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.

RTH Retail ETF Weekly Chart; Record Highs; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended

RTH, the retail ETF, is on fire to the upside. Retail is a tough sector to trade. RTH pops over +3% this past week when it was a coin flip at the start. The new all-time record price high at 124 is on momentum so you have to see how next week pans out. Price may want to play at that upper band at 124 for a few days.

The chart is bearish despite the upside joy. The stochastics are coming off overbot levels, the indicators are in universal negative divergence, the rising wedge pattern, the upper band violation, and price extension, are all bearish indications. The middle band at 119 and lower band at 114 are on the table. That rising wedge pattern is ominous.

RTH is boosted by some very heavy-hitters such as Scamazon. The top 10 holdings are AMZN, HD, LOW, WMT, TGT, COST, CVS, TJX, SYY and WBA. Check out the RTH daily chart with the Tweezer Top (the upper tails of the candlestick are high like tweezers over the last two days). The RTH monthly chart is trying to squeeze out more juice in the short term but that chart displays universal negative divergence and is likely printing its long term top between now and spring like the broad market. Keystone does not hold any position in RTH currently.

Looking at HD and LOW, those puppies are set up sick going forward. They topped-out. Short them at will. Keystone will play HD and LOW short going forward. Home Depot and Lowe's will probably swing low into May when the spring flower season will provide a boost. However, that will likely only be a short recovery spurt and then both stocks will roll over and die. HD and LOW are excellent short candidates to play either steady, or in and out, for the remainder of the year. HD will likely lead LOW lower. 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 Keystone Speculator's Unemployment Rate Indicator; US Monthly Jobs Report Aftermath

The Keystone Speculator's Unemployment Rate Indicator is flashing yellow. The 2/7/20 jobs report is 225K jobs with an unemployment rate one tick higher at 3.6%. Wages lose a tick on-month but gain a tick on-year to +3.1%. That's nothing. As Keystone has previously explained, the dirty little secret the Federal Reserve will never admit in public is that wages need to grow from +4.0% to +4.5% annually for overall inflation to exist above +2%. Without wage growth, inflation will not increase. The Fed's grand 11-year Keynesian financial experiment is a failure at creating inflation although it did serve to make the privileged class filthy rich.

But let's place wages aside for another day before Keystone becomes too riled up about how the common person is screwed everyday by the crony capitalism system, and instead focus on the unemployment rate. No, before that, a word about the headline jobs number. Much of the US is experiencing a record-breaking mild winter. There should be a foot (0.3 m) of snow outside of Keystone's window right now, and there is, but that is because it snowed yesterday, but before that, there has not been any winter. Construction jobs jump strongly higher as you would expect in a mild winter. In addition, there are seasonal corrections that now pump the numbers higher due to the mild weather. There will be payback on the headline jobs numbers in the springtime. Manufacturing jobs are lost; of course they are, that is what happens in a manufacturing recession.

Okay, now for the unemployment rate. After modeling the data for many years, Keystone's unemployment rate indicator has been very effective in forecasting great times ahead, as well as sadness. The blue line is the US unemployment rate and the dark red line is the signal line. If the unemployment rate is above the signal line (blue above red), we live in troubled times as the economy and markets suffer through a recessionary, and perhaps depressionary, period. Once the rate falls below the signal line (blue below red), it is blue skies and happy times ahead. The economy is on the mend or thriving and everyone is fat, dumb and happy.

The large red circle up top shows the 2008-2009 Great Recession with the unemployment rate at 10%. The unemployment rate was 10.2% on 11/6/09. Alas, how quickly humans forget. On 1/7/11, however, just as 2011 started, the rate drops off that high perch to 9.4% enough to signal that the worst is over and the job market will get better here on out. And it did.

In 2011, the unemployment rate remained above 9%. In 2012, it was 8% and sneaking out a 7%-handle late that year. In 2013, 7%. In 2014, 6% dipping into the 5% territory. In 2015, 5%. In 2016, the unemployment rate was getting stuck around 5% and had difficulty moving lower. This was a major test since the indicator was a tiny hair from triggering trouble ahead on 10/7/16, but, as usual, the Fed saved the day. The Federal Reserve has technicians and smart market folks chained to their desks in the bowels of the Eccles Building. These are smart people; they see what is coming. In addition, President Trump is elected and his plans to cut banking regulations and lower taxes creates joy.

So the economy and markets were saved again by the Fed and other global central banks although on 2/3/17 another scare occurs where the warning signs were flashing. Easy money papers over this as well. In 2018, the rate is at 4% with a dip into 3% territory in the back half of the year. In January 2019, after the Q4 2018 stock market crash, the rate climbs to 3.9% and on 2/1/19 printed 4.0% which triggered a negative for the indicator (red circle). This is when the Fed panicked, as well as other global central bankers, and they started printing money like madmen which created the 2019 global stock market orgy. The rate then remained a 3% handle all year from March 2019 to present. In 2020, the January rate is 3.5% and yesterday, 2/7/20, the unemployment rate is 3.6%.

The reason all this mumbo-jumbo is important is that the US is once again on the precipice of trouble. Fed Chairman Powell must be spending a lot of nights sleepless hugging Freckles the cat while sipping hot chocolate wondering what the future brings. The entire world's economy rests on Jerome's thin shoulders.

If the unemployment rate prints 3.7% next month on 3/6/20, it will trigger the negative cross on Keystone's indicator and forecast the start of serious trouble. So mark the number down and see if it occurs.

Keystone has written for years about the phenomenon where the unemployment rate actually climbs when an economy is starting to pick up. It's not rocket science; every first-year economics student understands the concept. The survey for the rate asks folks if they are actively looking for work, if not, they are not counted. What happens when an economy is coming out of recession, is that folks that had given up hope since they cannot find a job, all of a sudden begin rushing back into the workforce. The economy is picking up and people can feel it. The help wanted signs are out and job advertisements in newspapers and on line increase. Then even more people are excited about getting a job and getting back to work after a couple years of misery. However, initially, there is a ramping up period and what happens, since all these folks are counted as seeking work again, the rate moves higher.

In this scenario, the unemployment rate moves higher because the economy is recovering and there are great times ahead. So when you see the rate climb you are not sad about it, instead it is expected and a great signal that the economy is on the mend. Some of the business media folks were touting this line yesterday, and probably will this weekend, that the higher rate is good, and they are correct in the context explained above, but that's not happening now.

The Fed and other central bankers have destroyed all price discovery and expected business cycles in markets with their obscene 11 years of money-printing. The Fed has artificially-created the longest economic expansion and stock market rally in history. It would be fantastic if the illusion was real but instead it is only a Potemkin Village created by these modern-day Money God's. When the rate goes up yesterday, and perhaps on 3/6/20, it is not due to a robust economy on the mend, quite the contrary. The rate is going up because folks are about to be sh*t-canned as we head into recessionary times. 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; Rising Wedge; Negative Divergence Developing; Upper Band Violation; Price Extended

The Jobs report is a strong 225K jobs but that would be expected due to the seasonal corrections occurring with a very mild winter in play. There will likely be big revisions in the spring. The construction jobs are strong due to the mild winter. Manufacturing jobs are lost; of course they are since the sector is in a recession but pssstttt, keep it quiet. Wall Street and King Donny will be mad if you say this too loud. The wealthy need time to distribute their shares to the bag holding public and then skate out the back door. Company executives and insiders are ditching stocks at five times the pace that they are buying. Obviously, they understand what is going on at these companies better than you do.

The VIX is at 15.32 above the critical 200-day MA at 15.12 so the bears are winning today. The low put/calls signal a significant top is at hand. The SPX 2-hour is useful in determining where this top is at. Remember, you need to see universal neggie d to know the top is in. (At that last price high where the vertical line is drawn down from, if the MACD was sloping down, neggie d, the top would be in now, but instead it still had some energy).

When the 10 AM EST candlestick printed it was down but note that the MACD line was still long and strong. Therefore, price still has some juice to come back up again for a matching high to likely then place the top. Thus, it was best to wait until noon-time when the next candlestick prints to get a better feel for the top.

The new candle starts minutes ago. You can see that the MACD is not yet neggie d. The bears would benefit if price came up for another matching high, since the MACD would then be sloping down in neggie d, and the top would be in. Thus, the stock market may float higher into the afternoon. The top should be in as soon as price comes up for a matching high (perhaps in an hour or two) at the red dot since the MACD line should then show neggie d and create the smack down.

The stochastics are overbot agreeable to a pullback. Ditto the rising wedge. Ditto the price tagging the upper band so the middle band at 3301, and rising, and the lower band at 3220 are on the table. All indications are bearish. Plan accordingly. The bears should have their turn at smiling going forward. As Steve Harley sings, "Come up and see me, make me smile."

Interestingly, the full moon peaks early Sunday morning East Coast time at 2:33 AM EST. Stocks are typically buoyant through the peak of the full moon each month which may create some lift Monday morning. Earthquake and volcanic activity may ramp up substantially in the coming days since the gravitational forces between the Earth and Moon are at an inflection point. Stay aware in the coming days if you are in an earthquake zone such as near the Taal Volcano in the Philippines. 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 12:20 PM EST: The SPX is down 6 points, -0.2%, to 3340. The Fed is jamming the VIX down to 14.92 to try and save the day. If the SPX came up to 3345-3346 which is only a handful more of points, that will be enough to create the matching price high which would then trigger the neggie d spankdown and identify the top. Keep watching it. The SPX is tired so if the ole gal can even muster up a push higher to 3342 or 3343 that may be enough to call the top and watch her drop going forward. She may simply collapse under her own weight. Remember, the SPX daily chart is also in neggie d. Ditto the weekly and monthly charts. These are special historic and epic times in the stock market boys and girls. If you are new to trading, get out before you lose all your money.

Note Added 1:06 PM EST: SPX 3337. VIX 15.14. The VIX 200-day MA bull-bear line in the sand is at 15.13.

Note Added 5:23 PM EST: The SPX loses 18 points, -0.5%, to 3328. LOD 3322. VIX 15.52. The SPX did not come up for a matching high as yet so the door has to be left open for the stock market top to occur Monday morning. The bears would have been better off to see the SPX to print, say, 3346 around noon time today and that would have locked in the neggie d and the top would be in now. Since the MACD was still long and strong at the last price high, the S&P 500 may receive buoyancy Monday morning to print the matching high the MACD desires. The other scenario is that markets simply fall like rocks on Monday morning and if the coronavirus news is worse, that would sink the market ship. Barring bad news, and perhaps even if a bit of good news occurs, that matching price high may print and firmly identify the top. If the coronavirus news is excessively happy on the weekend, then the SPX will probably pop a lot higher and the charts will need a day or two to price-in that happy news. For now, the top is either in right now or will be on Monday morning. All that is needed is the neggie d on the MACD. Keystone is a poet and he knows it.

JNK High-Yield Bond ETF Weekly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation; Price Extended; Potential M Top

The tops are easy enough to call for the high-yield arena, JNK and HYG are the same chart technical-wise, but each time the Federal Reserve or its other crony global central banker friends are quick to step in and save the day. After 11 years, perhaps the jig is up.

Price comes up for a matching high but the indicators are weak and creating negative divergence. JNK may try to play around up here a couple days but it is ripe for a collapse. As long as the neggie d remains in place and the indicators do not move above the thin red lines shown in the right margin, the top is in. Price did not touch the middle band during the last down move so it needs to show respect at 107.75 and since it is a neggie d spankdown on the come, the lower band is in play as well at 105.

The RSI and stochastics are at or coming off overbot levels. The rising wedge is ominous. Price is extended requiring a mean reversion. The ADX was in a strong upward trend last year but not now. JNK and HYG are making new price highs but the ADX trend tool says the trend is weaker not stronger. The Aroon green line is overbot with nowhere to go but down while the red line is oversold, in fact at zero, with nowhere to go but up; both are bearish moving forward as a negative cross may occur. All these indications in this paragraph are negative and bearish.

The week is finishing up now but the volume will likely remain weaker than the selling volume last week. This should be the opposite for a bullish chart. JNK and HYG are topping out now and the historic thing about it is that this may be the true last hurrah. The monthly charts are in neggie d. They may try to squeeze out matching highs again in March or so, but the overall path forward for months and a few years is sideways to sideways down. The central banks are going to try and goose the stock markets again once the selloff occurs so it will be interesting to see what happens at that point in time.

If playing long in this high-yield arena, make a run for it now while the gittin' is good. JNK and HYG can be shorted from now through the remainder of the year. Keystone currently does not hold any position in these tickers. It would be better if the daily chart squeezed out a new price high a wee bit higher which would kick in the neggie d on that chart. The upper band in the weekly charts above have to be respected for next week. In other words, the top is in now, or it may occur next week, but we are likely right on top of it. So prices will top out anytime forward and this top is a multi-month and multi-year top for HYG and JNK. 

LQD corporate's are in the same boat but you see the long and strong MACD line on the monthly chart. LQD will fall in this near-term along with JNK and HYG but LQD will recover and come up for matching or slightly higher highs in price, say, in March-April, however, that will likely be LQD's long-term swan song.

MUB looks like its dragging around a load in its pants acting sluggishly. MUB will roll over in the near-term like the others and it is a toss-up if it can come back up. It will likely make a half-hearted attempt to rally, then roll over and die in the March-ish time frame. All four will retreat for a few weeks forward say into late this month early March and LQD is the only one that will come back up after that, but by March-April, all four tickers should be poison going forward through the remainder of the year. 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.