The S&P futures are up +41 this hump day morning with the VIX down to 28.21. Positive vaccine news from companies such as MRNA and AZN create bullish joy. The day will begin with Shiny Happy People. Whhheeee! Whoooppie! Virus, schmirus. It's party time!
The SPX moves sideways through the blue channel at 3000-3200 for the last few weeks. Price is teasing the bottom rail of the upward-sloping purple channel so watch to see if that gives way in the days ahead. The maroon rising wedge pattern is ominous and price initial collapsed from the wedge but happy talk from the Fed, and more promises of stimulus, and more joyous vaccine talk, creates that sideways blue channel. Price is simply reacting to the hourly bombardment of news items.
The red line shows price coming up intraday and matching the price high from early June, which is all right around the starting year number of 3231, so keep an eye on that resistance. The SPX is trying to turn positive on the year. The red lines for the chart indicators show universal negative divergence after price made the matching high. Price prints a high but the indicators have run out of gas. A neggie d spankdown would be expected but the joyous news on vaccines holds the bear at the door.
In addition, the ECB (European Central Bank; one of the four central bank horseman of the financial apocalypse which includes the Fed, BOJ and PBOC) is on tap tomorrow and Madame Lagarde will be tossing out easy money goodies like a fireman in the town parade, riding on the back of a shiny firetruck, tossing Tootsie Rolls to the excited children. Easy money makes the world go 'round. The globe is awash in liquidity with more on the way. All Praise, Glory and Honor to the Central Banker Money God's! Kneel and Worship in Their Presence!
The ADX shows that the rally into February was strong petering out just at the end of January (pink box). Then the record-setting crash occurs and the ADX identifies that move as a very strong trend lower but it peters out in early April as the Federal Reserve started printing money like madmen in the basement of the Eccles Building. Cohorts Greenspan, Bernanke and Yellen also returned to the scene of the crime, loading up helicopters full of cash, and dropping it from the sky. This so-called capitalism is a complete joke. Stocks rally ever since and become even higher in price if the news is bad since the Fed and other global central bankers will have to keep printing more money. What a glorious time if you are wealthy; the money flows into accounts like water. However, not so much if you are one of the huddled masses that do not own a single share of stock. The Aroon green line is overbot and the red line oversold, both indicators are negative going forward.
The Golden Cross occurs. It is surprising that the media has not made a big deal of this happening (the 50-day MA crosses up through the 200-day MA). Usually, the arm-chair technicians leap off the sofa and declare that the stock market is guaranteed to go up from here now that the golden cross occurs. Wrongo. The golden and death (50 stabbing down though the 200) crosses are one of the most misunderstood chart patterns and they are super simple to understand. The mistake everyone makes is that they think the crosses immediately forecast that direction forward. Actually, in the near-term, the opposite is true. Price will usually sell off and pull back after a golden cross occurs and conversely, price will typically rally after a death cross occurs. In the case of the death cross, the reason price bounces is that it takes a long time, many, many days, to cause the 50-day MA to roll over and head lower long enough to create the cross so by the time it gets there price is typically exhausted at heading lower and simply needs a relief rally bounce. The golden cross is the mirror image. Price took a long time, in this example from March, to push the 50-day MA higher and higher until it finally pierced up through the 200 for the golden cross but price is tired after all that and typically needs to take a break.
Thus, when a golden cross forms, but then price sells off, technician-hater's will proclaim that technical analysis is voodoo and hocus-pocus with a little bit of guessing sprinkled in, and never correct. In actuality, the selloff is what you do expect just as you should expect price to bounce when the death cross occurs. The next stage is to watch price behavior after that relief pop or pullback occurs when the cross forms since that will then dictate the road ahead. As long as the golden cross remains in place, price will recover from the pullback and head higher and higher again. If the golden cross reverses back into a death cross, look out Nellie, because she is probably going to break hard and fast to the downside.
The excitement continues. Comically, traders and investors are so complacent and carelessly fearless, that they are complacent about complacency. The CPC and CPCE put/call ratios remain at record lows. Nobody is worried about a pullback in stocks and if it occurs it will be a buying opportunity since the central banks plan on printing money forever. Lagarde is going to ride into the ECB meeting tomorrow on a brand new shiny pony with saddle bags packed full of euros and dollars. When stocks roll over it is likely going to go down hard and fast. Black Monday, Tuesday, pick your day, and/or a Flash Crash are all on the table due to the erratic and unstable price action and historic euphoric bullishness. It actually feels a lot like the tech stock mania during the dotcom bubble. The crazy behavior in TSLA is reminiscent of the frenzy for Webvan and Pets.com.
Note the distribution taking place (brown circles). Five big distribution days over the last couple weeks. Those volume candles verify that the smart money is handing off stocks to the bag-holdin' sucka's. Every top needs a sucka. Those buying stocks now expect a bigger fool to be available tomorrow to sell to. When you look around and find out there is no longer anyone to sell to, you sir, or madam, are the bigger fool.
Stocks may pause today waiting on the ECB since Lagarde's decision will impact the euro, which obviously impacts the dollar which will then impact rates, the banks and commodities. The Keybot the Quant algorithm remains long the market and identifies the banks and commodities as the two key parameters currently supporting the market for the bulls. Traders are waiting for Countess Christine to return from the sacred central banker mountaintop tomorrow, bringing the tablets down from on high, and telling global traders how to trade. 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 8:32 AM EST: S&P +44. VIX 28.15. The bulls are running joyously higher with vaccine needles sticking out of their biceps. Whhheeeee! Whoopie! Have fun now because this stuff always ends in tears. Whoopsies, daisies. New US coronavirus cases hit a single-day record at 67.4K. Wowza. Adding 28 days as per the Keystone Model, means the active cases chart, representing the maximum strain on US medical personnel, will not occur until 8/12/20. Thus, coronavirus pain will be with the American people for several weeks ahead well into mid-August. Traders celebrate the dire news since the Fed will have to print more money and the US government will shell out more free dough all of which will send stocks higher and make the wealthy class richer. The corrupt crony capitalism system is a hoot. Get ready since you may witness historic price activity in the stock market over the next week or two.
Note Added 8:43 AM EST: S&P +45. VIX 28.11. MRNA +15.666%. AZN +4.8%.