SPX S&P 500 60-Minute Chart with 200 EMA Cross

The stock market topping process continues. Every time that equities begin to roll over, either the Fed, or another central bank, or President Trump, or the vaccine makers, or other happy talkers arrive on the scene to save the day. Overnight, the PBOC (China's central bank) provided more easy money liquidity to make sure everyone keeps buying stocks. Interestingly, Europe and the US are not that excited about the latest Chinese cash injection. S&P futures are up +11 when typically a 30-handle pop would be standard fare over the last decade every time a central banker pumped. The central bankers are the market.

The stock market should crack at any time. The June selloff was about 250 points. That top came with negative divergence and rampant complacency in markets. Now we have the S&P 500 throwing off negative divergence across all time frames for all chart indicators and the rampant complacency is off-the charts. Every day is a bullishly euphoric party as verified by the uber low CPC and CPCE put/call ratios and the ever-falling VIX. Considering this backdrop, which is reminiscent of the dotcom bubble top in several ways, such as the bullish orgy ongoing in the FAANG stocks (FB, AAPL, AMZN, NFLX, GOOGL) and MSFT, the pending pullback in equities should be far more substantive than June probably in the order of 200 to 500 SPX points this month into Labor Day and beyond.

The Keystone Speculator's SPX 60-Minute Chart with 200 EMA Cross Indicator is a very important short-term stock market indicator. Back during the June selloff, price made a beeline for this key support test. The bulls held the line. In late June, the bears made another charge lower stabbing down through the 200 but the bulls, powered by Fed Chairman Powell riding in on his pale green horse, and happy stimulus talk, saves the day. Price needs to come back down for another test of the 200 EMA now at 3268 and rising. This will likely just be for starters. This time, the SPX would be expected to slice down through the 200. The 3K level is likely the lower test target for this pending selloff.

The new moon peaks tomorrow night at 10:41 PM EST and stocks are typically weak moving through the new moon each month. However, the bears do not get a break since OpEx is Friday and during OpEx week, a Tuesday low typically leads to a Wednesday high. So these are two background market parameters in direct conflict with each other.

The Keybot the Quant algorithm remains long the stock market. Keystone's individual positions are all shorts with only a couple longs on the back burner. The quant is tracking utilities and copper as the two key parameters currently impacting stock market direction. Bulls need UTIL above 835.50 or they got nothing. Bears need to keep utes trending lower and lower and push UTIL sub 8 hundo which would be a sign of serious stock market trouble coming.

Bears need weaker copper to turn the tables on the bulls. Copper futures were soggy last evening but the bulls are pumping this morning to make sure stocks and futures remain elevated. Copper is up +0.8% currently and the bears need about a -3% drop so now that becomes about a -4% drop from current levels. When the big February/March selloff occurred, the dollar spiked wildly higher. This sunk the commodities, commodity stocks, and other companies relying on the weak dollar to boost exports greatly exacerbating the retreat in equities. This same behavior would be expected to occur again especially with the hedge funds at record levels of shorting the dollar. The hedge funds have not had the best record the last couple years. So watch out for a big spike higher in the dollar. Also watch volatility. Bears need a higher VIX to create mischief. If you see the VIX starting to ramp higher, and print flat to higher numbers as the stock market moves higher, the jig is up, and stocks will likely begin the multi-week descent.

This stock market top is the Godot Top but unlike Godot, the top in stocks will appear and any minute. When price comes down to test the SPX 200 EMA on the 60-minute chart at 3268-ish, a failure would then probably occur sending the SPX down another 200 or 300 points. 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 4:45 AM EST: S&P +11. VIX 22.46. Both futures and volatility are higher so one of them is wrong.