The task the last few days was to wait for the neggie d to set up in the charts so a top can be called. The red lines above show that negative divergence rules the day across all time frames. Stick a fork in it, it's cooked.
Stock trading is like playing multi-dimensional chess with the time frames the dimensions. This is why long or short calls on stocks by television evangelists are stupid and meaningless if they do not provide a time frame. That leaves the story-teller a way to weasel out of the call that is wrong by saying he was referencing a different time period. That is called baby games. The only reason analysts and money managers appear on television is for the publicity to attract money into their funds.
Conceivably, you can have the stock market bullish in the 2-hour time frame (very short-term; VST), bearish on the daily basis (short-term; ST), and bullish on the weekly basis (intermediate-term; IT), and bearish on the monthly basis (long-term; LT). That is why a person that makes a call on the market and in the same breath also identifies a time period for that call is a good analyst. He/she may be wrong but at least they had the guts to make a call on the market and not hide behind the ambiguity bush playing baby games.
Right now, as the charts above demonstrate, the US stock market is set up for the bears in the 2-hour, daily, weekly and monthly time frames. If you are holding stocks long, you are known as the bagholdin' sucka. Hi sucka. Every top needs sucka's.
The 2-hour shows universal negative divergence with price printing a new all-time record high at 5523.64, call it 5524, and then falling on its sword receiving the neggie d spankdown. The RSI and stochastics drop below 50% into bear territory and remain weak and bleak. The MACD and money flow are about to print lower lows.
The standard deviation bands are pulling in tight so a big move is expected and down may be the direction. The lower band remains on the table at 5446. The pink arrows show prior tight squeezes resulting in a down move in May and up move in June.
The potential island reversal pattern was previously mentioned and a palm tree remains on the island. The bulls kept the SPX elevated after the WWDC Apple and AI hype and Fed dovishness extending the length of the island that was formed due to the gap-up from 5375 to 5410. An island reversal pattern will occur if the SPX falters and sinks down to 5410, and then in a heartbeat, collapses back down through the gap to 5375. So that is something to watch for going forward. If the island reversal does not occur, price may simply trail lower and trail down through the gap, filling it, and then drifting ever lower.
Note how there is a big volume candlestick a week ago on the buy side as the hype was in full swing. Price sinks to the same price range area on Friday and the selling volume candlestick is the same amount as the buying volume candlestick showing that price is in a sideways funk and not thrilled about either direction with the bias favoring the bears.
On the SPX daily chart, same-o, same-o, you lame-o. Double-top, or M-top if you prefer, universal negative divergence across all indicators, and the RSI and stochastics coming off overbot conditions; are all bearish indications. Price needs a neggie d spankdown in the daily time frame as well as the 2-hour time frame.
Price has violated the upper band so the middle band, that is also the 20-day MA, at 5408, is on the table as well as the lower band at 5268 moving sharply higher. The SPX is above the moving average ribbon so a mean reversion lower is required.
Those are some big selling volume candlesticks over the last week. The blue circles show bigtime distribution occurring. Price shot up so Joe Sixpack, Jane Winedrinker and Carlos Bagholder run in to buy the market on the hype and the institutions are all too eager to slough-off shares to the sucka's. Those 2 blue circles show the smart money handing off shares to the dumb money.
On the SPX weekly chart, what do you see? Neggie d. I see a red door...., er, red chart.... Paint It, Black. I see the girls walk by in their summer clothes. Ooh-la-la. The red rising wedge pattern is more prominent on the weekly chart; this is a bearish pattern that shows price is spent when it makes it to the apex of the triangle, like now.
Again, the red lines show universal neggie d. Price moves higher but all the chart indicators that fuel the move higher are out of gas. There are not even any fumes remaining. On that last push higher due to WWDC and AI hype and Fed hype, the RSI came up but note how it is flat again and remains overbot and in negative divergence. It is beautiful stuff for bears and those shorting the market now.
Price violated the upper standard deviation band so the middle band, that is also the 20-wk MA, at 5215, is on the table and the lower band down at 4938. Two selling volume candlesticks this year are higher than all other volume candlesticks for the whole year and going back to December. In other words, the two biggest volume weeks for the US stock market over the last half-year are selloffs.
The last of the four charts is the monthly chart that is a long-term picture of the US stock market. It is also an ugly chart that walked into an ugly forest and bumped into every tree. The ramifications of this chart are huge since it is forecasting for months and a year or few. We could be looking at stock market prices at all-time record highs that may not be seen again for 5 or 10 years.
The red rising wedge is bearish. So is the universal negative divergence (red lines). The MACD line is trying to create some additional strength in the monthly time frame but it is muted by the ongoing neggie d over the last 2 years. Same-o with money flow. After the multi-week down move plays out going forward, stocks will bounce and rally in the weekly time frame. That is when you will see how much upside oomph remains on the monthly chart. There is not much.
The monthly chart either begins its long journey south now, with a multi-month down move starting, or, price will trail lower for a month, but then show buoyancy again for a month or so, then roll over and die for the multi-month move lower. The charts will tell you so there is no need to guess.
The upper band is violated so the middle band, that is also the 20-mth MA, at 4538, is on the table as well as the lower band at 3590. That would get everyone's attention. The 12-month MA at 4824 is one of the most important numbers in the stock market. If the SPX drops to 4824 and loses this support, the stock market will be in a crash profile from there forward.
What does all that mumbo-jumbo mean? It sounds like he's feeding us a lot of bull, or in this case, bear. All four of the time frames above are in negative divergence across all chart indicators (red lines) so a spankdown should begin in all time frames. The CPC put/call ratio is at 2-1/2 year lows signaling out of control uber bullish euphoria another indication of a significant stock market top. Sell, Mortimer, sell! Are you ready?
The 2-hour and daily chart will create weakness in stocks in the daily time frame and near-term (the week ahead). Once the weakness on the daily chart plays out, say a week or three down the road, simply watch the chart, and for positive divergence to form, and you will know a rally will occur in the daily time frame for a few days but that will roll over again and die since the multi-week down move is in progress (sell the rallies going forward). The charts will help you trade any time frame but obviously on the short side is where you want to be.
Keystone is holding index shorts now. The Keybot the Quant robot remains long the stock market but will likely want to flip short if the XLF loses 41.02 and the SPX falls below 5451 heading lower, so watch these two parameters like a hawk on Monday and Tuesday.
It is time for the bulls and bears to battle. The bears are bringing bazookas and firepower while the bulls have a pen knife to defend themselves. Time to rumble. Beat It.
That said, new money flows into the stock market at the start of a month and especially the start of a quarter and second half (Q3 and H2). This activity may extend the buoyancy in stocks for the first few days of July. It is also a goofy weak with July 4th Independence Day on Thursday so markets will be closed. Also of interest is the excessive window dressing that occurred in late June where every money manager had to buy NVDA, Mr Softy, and other tech and AI stocks to show these holdings on the quarterly statements going out to clients, but a lot that may be unwound in quick order as traders and investors cash-out and lock-in profits choosing to sit-out for a little bit and look to reload stocks at lower prices. Monday and Tuesday will be interesting days.
The stock market is going to be lots of fun going forward. That is, if you are a shark in the water. It will be interesting to see how fast a panic may set in once the neggie d kicks in. As usual, the Fed may save the day on Monday or King Jensen may show up with more AI hype and razzle-dazzle; he knows how to sell the sizzle and not the steak, and also sell the picks and shovels like the Gold Rush days.
The Fed has technicians chained to desks in the basement of the Eccles Building, they use the hidden entrance behind the full-grown arborvitae, so Fed Chairman Powell and his gang, and Treasury Secretary Yellen and her staff, know what is coming. The Fed is probably telling Jensen to start waving another black chip box in the air while also telling Cook to cook the books to save the stock market.
I love the smell of napalm in the morning; perhaps Monday morning. Apocalypse Now. Pull back your units, boys, get the Hell out of there, we're going to light it up. Bring in the air ships. You know, someday this stock market and the crony capitalism system, is going to end. 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 Tuesday Morning, 7/2/24, at 4:46 AM EST: SPX 5475.
Note Added Wednesday Morning, 7/3/24, at 6:36 AM EST: Pope Powell brags that the improvements in inflation are "significant" hinting that cuts are likely coming sooner than most think. Let the orgy begin. The SPX pops 33 points with traders throwing confetti as dove Powell flies around the trading floor. New money for the new half and quarter, a dovish Fed, more AI hype, and the happy holiday tomorrow create lift in stocks. Banks remain elevated keeping stocks elevated. Bulls are trying to pump copper higher to extend the rally. The SPX closes at 5509.01, closing above 5.5K for the first time in history. The all-time high is 5523.64 on 6/28/24. America is off tomorrow and the Jobs Report is Friday morning, and trading volume will be more robust next week. Interestingly, the new moon peaks Friday and stocks are typically soggy moving through the new moon each month. Nothing has changed in the charts; neggie d still rules going forward.
Note Added Monday Morning, 7/8/24, at 7:33 AM EST: Stocks rally after the Jobs Report on Friday with the unemployment rate rising to 4.1%. Cuts are likely coming faster than most think so stocks rally last week; the holiday also helps to create joy. Bullish euphoria is over the top. More Americans are playing the stock market than ever before in history. Oppenheimer's Stoltzfus raises his SPX forecast to 5900. Evercore's Emmanuel predicts SPX 6K. CNBC commentator Jim Cramer tells traders to embrace Big Tech and their dominance in the stock market. Much of the recent behavior is reminiscent of the dotcom bubble in 1999-2000. It remains comical that 7 rate cuts were priced into stocks as the year started, then this went to zero cuts, but the stock market went higher anyway, and now with the path clear to cuts as the labor market rolls over, stocks go up again. It is Pavlov's economic dog that buys stocks every time the Fed hints at a rate cut regardless of the price level of the stock indexes. There must be 10 price cuts, or 2.5%, already priced-in to US stocks and not one has occurred as yet. It will be fun to watch going forward.
Note Added Tuesday Morning, 7/9/24, at 7:45 AM EST: Stocks rally on Monday sending the SPX to 5573 its 35th record high for the year. The bullish euphoria continues. The low CPC, CPCE and CPCI indexes verify the uber bullish euphoria these days with the Fed wine flowing like water. Only 10 stocks in the SPX account for nearly 30% of the index. That's hilarious. 10 years ago, those stocks accounted for only 14% of the index. CNBC commentator Jim Cramer proclaims big upside for stocks next month based on past history leading the bull bandwagon. Nine of the top 14 Wall Street investment banks and trading houses predict that the SPX will finish the year, less than 6 months away, above 5500 with Evercore at 6000, Oppenheimer at 5900 and RBC at 5700. Yardeni updates his SPX target to 5800 In other words, the Wall Street greed machine says stocks will continue rallying far higher, perhaps to a 6-handle on the SPX (an +8% gain above current levels), within the next 24 weeks. There is little talk of downside. Piper Sandler is no longer releasing end of year SPX targets saying the indexes are too disjointed due to the runaway tech/AI sector. No guts, no glory; Pied Piper babies. Pope Powell speaks to the US Senate today. The drama continues.
Note Added Saturday Morning, 7/13/24, at 7:00 AM EST: Pope Powell rode in on his pale green horse last week preventing the stock market from falling to protect his wealthy butt as well as his elite handlers. Isn't the crony capitalism system sickening? Fear not, it is on its last legs. The Powell orgy saves the day with the SPX catapulting higher from 5458 on 7/2/24 to an all-time record high in history at 5656 yesterday, a humongous +5% gain in only 7 days of trading. The Fed dovishiness already guaranteeing from 7 to 10 rate cuts going forward, along with the AI hype machine, continue sending stocks higher. Money managers are in heaven since it is also easier to slough-off shares to the young excited naive investors that serve as the bagholders. The behavior is similar to the dotcom bubble top. Let's take a look at the charts again to see what Powell and AI may have changed. On the SPX daily chart, price makes 3 matching highs for Wed, Thurs and Friday. Thus, the chart indicators can be assessed for neggie d to see if a top is in. Check. The RSI, MACD, histogram, stochastics and money flow are all negatively diverged and out of gas unable to push price higher in the daily time frame. The MACD is flat but that is the same as neggie d with price elevated. The money flow receives a boost late last week but remains far below prior levels and some of that joy is short-covering along with the Fed and AI hype machines. The selling volume for the down day on Thursday is substantively higher than the up days that bookend it (bearish). So the daily chart is topped-out again after the 1-1/2 weeks of July 4th holiday hype. If you bring up the 2-hour chart, price makes the new high on Friday with neggie d across all indicators and voila, the SPX is spanked down in the 2-hour time frame as witnessed on Friday afternoon. On the SPX weekly chart, it is easy to see the steady move higher over the last year in an organized machine-way. About 95% of the trading over the last year is performed by robots. Anyhoo, price makes the new record high and the RSI is flat, neggie d, and definitely neggie d since the last price peak in early April. Yinz may have better eyes than Keystone looking at that little RSI line. The MACD line is neggie d across the last 4 months but showing a little bit of lift over the last couple weeks as Pope Powell flies above Wall Street in his white dove costume dropping bundles of cash channeling prior Fed Chairman Bernanke that dropped money from helicopters (the Fed is leaning more towards starting rate cuts). Wall Street cheers Powell. Traders carry him around on their shoulders singing For He's A Jolly Good Fellow; he is the goose that lays the golden eggs for America's wealthy class that own stocks. The histogram, stochastics and money flow remain neggie d so the charts are reset for the top again now that the holiday is in the rearview mirror and the Fed and AI hype have worked through the system over the last 11 days. The week ahead should be lots of fun. Stock market bulls need good news and more AI and Fed dovish hype to keep the upside party going. Otherwise, without happy talk, stocks would be expected to roll over and begin a multi-week slide lower. Bank earnings are key since they will either initiate the downside in the stock market going forward, or, provide oxygen for the sick stock market patient allowing him to hang on for another week or two before topping-out on the weekly basis.
Note Added Tuesday, 7/16/24: SPX prints a new all-time record high at 5670.
Note Added Wednesday, 7/17/24: SPX 5588. The Powell, inflation data and jobs numbers euphoria over the last couple weeks appears to be priced-in.
Note Added Thursday, 7/18/24: SPX 5545.
Note Added Friday, 7/19/24: SPX 5505. LOD 5497. The SPX drops -3% in 3 days. The S&P 500 falls -1% for each of two days following the record high which has never happened before in the history of the stock market.
Note Added Wednesday Afternoon, 7/24/24, at 5:15 PM EST: The US stock market sh*t the bed today. The SPX mini-crashes 129 points, -2.3%, to 5427. The Dow collapses 504 points, -1.3%, to 39854 below 40K. The Nazzy mini-crashes 655 points, -3.6%, to 17342. .
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