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.
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