Thursday, May 28, 2020
SPX S&P 500 Monthly Chart with 12 MA Cross and NYA NYSE Composite Weekly Chart with 40 MA Cross; Cyclical Stock Market Indicators
A couple of Keystone's key intermediate and long-term cyclical stock market indicators are the SPX Monthly Chart with 12 MA Cross and the NYA Weekly Chart with 40 MA Cross. Some of you novice investors are asking, "What does that mumbo-jumbo mean?" The SPX 12-month MA cross is one of the most important signals in the stock market. Ditto the NYA 40-week. You must follow these two charts continuously, otherwise you are bush league.
The SPX 12-month MA is at 2995 with price at 3030. Therefore, the stock market is in a cyclical bull market pattern, albeit by only 35 points. Hold your horses. The NYA 40-week MA is at 12634 with price at 11805. Therefore, the stock market is in a cyclical bear market pattern. One of them is wrong. Typically, they agree.
You can see that both charts are in a cyclical bull market pattern into late 2018. Then stocks fall into a cyclical bear market from late 2018 into early 2019 when the stock market was saved again by the Federal Reserve's obscene Keynesian money-printing. Stocks turn cyclically bullish again but then fall into a summer swoom. If you recall, last July, the Keybot the Quant algorithm called out the start of a housing recession. There were obviously major problems behind the scenes in September as the markets were freezing-up. Fed Chairman Powell soiled his shorts twice during September/October. The average person knows nothing about what is going on in the world of high finance and corrupt trading.
The green circles show where the September/October crisis got so bad there was real fear the markets would seize-up and collapse. In rides the Fed to save the day once again. The four horseman of the global financial apocalypse, the Fed, BOJ, ECB and PBOC, will goose markets as long as possible until the entire global financial system collapses. It is only a question of when. When Ron White the comedian was on an airplane trip, one engine began smoking and was shut off for the two-engine plane. Ron ordered another drink while the guy sitting next to him was in full-on panic mode. The hysterical passenger asked Ron, "How far can one engine take us!!?" Ron smiled and said, "All the way to the crash site." It's only a matter of when.
That was a Tweezer Bottom on the NYA last October. The Fed had no choice (in their minds due to the sick direction they began in March 2009 with limitless money-printing to save the wealthy class) but to once again print money like madmen. Both charts were losing their critical levels and stocks were set to crash. All that obscene central bank largess then ran the stock market wildly higher into January and February when the inevitable day of reckoning began. The monthly chart prints a Tweezer Top (red circle).
The SPX 10-month MA at 3002 is another important level mainly watched by old-timer's, and these men, and very few women, move lots of money daily. When the SPX moved above the 12-mth MA, its a huge deal. When it moves above the 10-mth MA, it is confirmation of the upside. Stock market bears need to push the SPX below 3002 pronto or they will lose going forward. A failure of 3002 then opens the door for the critical test of the 12 at 2995.
Okay, so what does all this rambling mean? If you prefer to trade on an intermediate-term and long-term basis such as weeks and months, you want to follow the two charts above so you know if the stock market is in a cyclical bull (where you would weight your portfolio long) or a cyclical bear (where the portfolio should be weighted short). One of the two indicators above, the SPX 12-mth cross, or NYA 40-wk cross, will flinch. Either the SPX will fail at 2995 and open the trap-door to stock market carnage below, or, the NYA will overtake its 40-week MA signaling the all-clear for bullish joy and upside partying ahead. Who do you think will win? It will tell you the path of the stock market for the remainder of the year. If you like to play it safe, wait for the confirmation as to which cyclical direction the markets commit to, and assemble your portfolio going forward based on that outcome. 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 Saturday Morning, 5/30/20: The bears were starting to flex their muscles but Prince Powell and King Trump ride to the rescue. Fed Chairman Powell conducted a press conference via video. Dickey would say, and sing, that he was a Ramblin' Man rambling on and on. The stock market was not impressed continuing to languish. In rides President Trump, speaking in the afternoon, dissolving the relationship with WHO since they prefer to lay in bed with the filthy Chinese communists. Trump pledges to provide that money to other organizations that act more independently. Again, the stock market was generally non-reactive as most of the president's speech centered around the WHO and China screwing the world with the Wuhan Flu. It was what Donnie did not say. Trump did not address the strained US-China trade war which is what the market is fixated on since there are billions involved as well as the fate of many corporations. Stocks rally since Donnie is mainly all bluster as usual and he stays away from commenting on the trade problems. The SPX drops to a LOD at 2999 at 1 PM EST yesterday rupturing the 10-month MA support at 3002 and teasing towards the bull-bear line in the cyclical sand at the 12-mth MA at 2995. The S&P 500 then bounced off the lows anticipating happy talk from King Donnie. When Trump began speaking the SPX came down to retest the low area of the day at...... wait for it........ no, you really have to wait for it a little bit longer...... a bit longer...... yes, price came down and bounced directly off of the 10-month MA at 3002. Of course it did. Not only do the old-timer's consider this a key level but so do the algorithm's. Many of the trading models incorporate the 10-mth cross into their programs. Keybot the Quant does not program the 10-mth MA but does have the SPX 12-month MA cross programmed into the algo. The SPX rocket launches 42 points during the last hour of trading to close the week at 3044. That is 49 points above the key SPX line in the sand, the 12-month MA at 2995. As price moves higher, ditto the moving averages, but as price comes back down the moving averages will relax lower slightly. Thus, watch SPX 3002 and the 3003 palindrome as the first warning signal that serious problems for equities are about to occur. Then, when 2995-2996 fails, it is lights out. The bulls are happy well above these key doomsday levels complementing the Fed on their latest batch of easy money wine. The 200-day MA is at 3002 the same level as the 10-month right now. Of course this key support level has skin in the game but the veteran traders are not concerned about 3002 from the short-term daily perspective (price will move below the 200, and back above the 200, and below, and so forth on the daily trading basis) but rather 3002 because it is the 10-mth MA. Since the SPX 10 and 12-mth MA's have already been taken out by the crash, this ongoing back test is critical. Realize that if the SPX loses 2995-3003, it is over for the stock market for many months forward, definitely this year, and perhaps several years ahead.