Sunday, June 28, 2020
SPX S&P 500 Monthly Chart; Bulls and Bears Battle for Cyclical Market Control
The bull-bear battle is raging these days and the holiday-shortened week ahead may be full of surprises. As mentioned many times over the years, two of the top indicators you must always keep track of is The Keystone Speculator's SPX Monthly Chart with 12 MA Cross Cyclical Market Indicator and The Keystone Speculator's NYA Weekly Chart with 40 MA Cross Cyclical Market Indicator. When both of these charts are in agreement, the stock market is in that cyclical (weeks and months) pattern and if bullish you want to make sure your portfolio is weighted long and if bearish you want to weight your portfolio on the bear side.
The NYA has remained below the 40-week MA consistently signaling an ongoing cyclical bear market for stocks. The SPX monthly chart above with 12 MA cross, however, shows that the cyclical bear market pattern, that began in late February when price lost the 12-month moving average, flipped back to a cyclical bull market pattern in May. The Federal Reserve saved the day as usual, in this phony crony capitalism world, promising to print money forever so stocks catapult higher from bear to bull.
Now is the fun time. Since the NYA says stocks are in a cyclical bear market, but the SPX says it is a cyclical bull market, one of them is wrong. With the SPX coming back down and in Friday's trade printing 3005 for the LOD, that was within 3 points of the SPX 12-mth MA at 3002; the cliff edge. This is a back test for the bulls to prove that they can take price higher from here. The bulls must bounce price higher from this 3002 death trap and that will light the path to glory for the bulls. If 3002 fails, run for your lives, since stocks will be dropping like rocks and traders will be screaming bloody murder with their hair on fire.
If 3002 fails, that will confirm the ongoing weakness with the NYA 40-wk cross and verify that the stock market is in a cyclical bear market going forward. If the bulls can bounce the SPX from here, they live to fight another day. The bulls would then work on pumping the NYA higher to receive confirmation with the 40-wk MA for a cyclical bull so their work would need to continue.
It is always comical for fundamental traders and non-technicians to become overnight chart experts during tough times. The 200-day MA at 3021 failed on Friday which is important but the real story is the longer term moving averages breaking down. The 10-month MA at 3012 failed and this is a huge deal. It is why stocks went out at the lows and there was no buying interest at the close. It is a serious failure. The old-timer's and lots of algo's have the 10-month programmed into their models. Keybot the Quant does not but does have the SPX 12-mth MA programmed into its model. It is a big deal that the 10-mth MA at 3012 failed. Watch it closely. Even if the SPX bounces around and finishes a couple points higher on Monday, say 3011, that is not good, the stock market will still fall apart going forward. Bulls must push the SPX above 3012 pronto, or equities are in dire trouble.
200-day MA 3021
10-mth MA 3012
50-wk MA 3011
SPX begins the week at 3009
12-mth MA 3002
50-day MA 2980
That 3002-3012 range is quite a cluster; a gauntlet of support. The bulls have overturned furniture, cabinets, tires and signs on Wall Street as a barricade at 3002-3012 and are trying to hold it with all their might. Bulls know that it is over for them if the 3002-3012 support fails. If 3002 fails, price will likely flush to the 50-day MA at 2980 in a heartbeat. A stutter-step may occur at this moving average, but the S&P 500 will likely fold like a cheap suit and keep stumbling lower. If 2980 fails, and you held on to stocks as a bull, you will see your life flash before your eyes as you lose your shirt. Before leaving for home, tell your spouse to hide the rope and knives.
On the bull side, the positive outcome, the SPX needs to quickly overtake the 3011-3012 level and preferably with force. If price can sneak above this 3011-3012 cluster, the SPX will set its sights on the 200-day MA at 3021 where a bounce or die decision would occur.
The table is set. Lots of folks can watch the stock market festivities since they are home sick with the coronavirus (COVID-19) spreading like wildfire across the US. The bears have the inside track since the NYA 40-wk MA cross has remained in a cyclical bear market signal and because the SPX 10-mth MA at 3012 failed. Who will win this week? The bears need -7 points in the S&P futures that begin trading in 10 hours. Will they smile?
Consumer Confidence is released on Tuesday morning. Tuesday is EOM (end-of-month), EOQ2 (end of the second quarter) and EOH1 (end of the first half of the year). The US Monthly Jobs Report is released on Thursday morning since US markets are closed on Friday for the Independence Day holiday on Saturday. Stocks are usually bullish into the holiday weekend but anything goes nowadays. There are four trading days this week two in June and two in July. New money for the quarter, second half and month may help buoy stocks into the barbecue weekend. The SPX 12-month MA at 3002 determines the entire fate of the US stock market. 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 6:03 PM EST: S&P futures begin trading down -20.
Note Added 6:43 PM EST: S&P futures are trading down -8. Looks like the bulls and bears plan on fighting for the 3002 line in the sand tomorrow morning.
Note Added Monday Morning, 6/29/20, at 2:16 AM EST: S&P futures fluctuate on each side of the -7 point cliff edge. Futures drift lower to -12 but then recover to +3 but then roll back over to become sticky at -7 again. S&P futures are down -7 right now. The writing is on the wall. The bulls know their lives are on the line today; they must hold SPX 3002 or it is over. Interestingly, the Nasdaq futures are lower down -0.5% versus the S&P's down -0.2%. Typically, tech leads so if the Nazzy futures are better than the spu's, stocks will usually recover that day regardless of whether they begin up or down. Conversely, if the Nazzy futures are worse than the S&P's, that usually hints at a soggy negative day ahead regardless of whether the stock market trades up or down in the early going. Today will be interesting. The bulls are 10 stories up on the ledge of a skyscraper. There is a window and safety a few feet away as long as the SPX remains above 3002. If Mr Market inches towards the window but slips on bird sh*t, and the 3002 fails, he becomes a red spot on the sidewalk below.
Note Added Monday Morning, 6/29/20, at 3:21 AM EST: S&P futures are on the move higher up +10. Nazzy +1. The bulls are battling. VIX 35.25. Futures are up and volatility is up so one of them is wrong. Oil -1.5%.