The Keystone Speculator's Housing Market Indicator; United States Is in a Housing Recession for 20 Months and Counting

Times are truly different this time around. Anytime that the housing market dipped into recession, an overall US recession quickly followed. Not this time. Decades past, life was simpler. No tech wizardry, just folks going to work each day and then having plenty of leisure time each evening and on weekends. All that mattered was the housing and auto industries. When they went south, the US was in recession. Not anymore.

Computer technology arrived on the scene in a big way through the 1980's and 1990's many of us starting with the old amber screens and floppy discs that needed formatted using the DOS program. Chips run computers. Thus, as the railroads opened the door to an economic boon, especially in the Midwest and Western US a century ago, semiconductors, chips for short, fuel the economic path forward for the last 30 years and ahead with NVIDIA's Jensen waving his AI chip in the air.

The US is in a housing recession for 20 months, an ongoing manufacturing recession for over a year, and a labor recession that will be one year old next month. Housing Starts peaked 2-1/2 years ago and have dropped to the lowest in 4 years. How could the United States not be in recession? One reason is the tech industry and chips but there is a second reason; the Federal Reserve.

The Fed's money-printing since 2009 is so obscene it would make Caligula blush. It enriches America's wealthy class to stupendous heights while screwing common folks that do not own any stocks. Further, once the COVID-19 pandemic hit, the Fed fired another huge money bazooka of monetary stimulus, and then Congress stepped in with fiscal stimulus, showering the rich Americans with more free money, manna from heaven. Folks, that dough goes into the stock market driving asset prices bigtime higher and the upper middle class and elite privileged are the ones that own stocks. It is a great racket if you are rich and part of the club, but you ain't part of the club, as the notable scholar George, ahead of his time, said. It will never get fixed.

It is enough to make you vomit. Look at the chart above. The housing market takes off higher with the Fed's and Congress's thumbs on the scale. Obviously, capitalism does not exist. America is a faux free market crony capitalism system on its last legs. Human greed destroys everything throughout man's 'civilized' 5,000 year existence.

Anyhoo, the joy in tech and semiconductors, and the enormous wealth effect felt by America's wealthy class, and the upper middle class sycophants that service the filthy rich, are keeping the US economy afloat over the last year and avoiding overall recession.

Retail Sales earnings and data are important in the week ahead but generally speaking, the top 20% wealthy Americans are accounting for about one-half of the spending currently. Say no more. The middle class is gonzo. America's now lower middle class, disabled, homeless, minorities, and working poor do not have a pot to p*ss in working two jobs and still unable to make ends meet. Meanwhile, America's wealthy, in bed with the Federal Reserve, enjoy vast riches due to the enormous stock market gains. They are still spending money preventing recession and asking why everyone is so glum?

Even the wealthy stop spending eventually. How many brand new $800,000 McMansions, $90,000 Mercedes convertibles, and $5,000 refrigerators do you need? And on the chip front, what happens when the consumer sales for gadgets go south and tech companies have less money to spend on developing the new chips and gadgets? Everything slows down of course; it is called recession.

Keybot the Quant Turns Bullish

Keybot the Quant flips to the long side yesterday at SPX 5520. The face-ripping relief rally receives further juice due to retail stocks and chips joining the party. The VIX 14.83 line in the sand tells the story ahead. Bulls win bigtime if the VIX drops below 14.83; stocks will catapult towards record highs. Bears will stop the stock market rally if they keep the VIX above 14.83, and then introduce further selling if the chips and retail stocks weaken. The stock market path forward depends entirely on VIX 14.83. The VIX is trading at 15.41 in real-time only 58 cents in the bear camp.

Keybot the Quant

Note Added Saturday, 8/17/24: The bulls win the day wrestling Uncle Vix to the ground. King Powell places his jackboot on the throat of VIX holding it below the VIX 14.85 bull/bear line in the sand (Keybot the Quant is continually calculating and recalculating the number so it fluctuates by a few pennies here and there) at 14.80 making sure that stock prices remain high to enrich himself and his wealthy friends. Don't you love crony capitalism? The drama continues Monday morning with the VIX starting trading at 3 AM EST.

SPX S&P 500 Daily Chart; Fibonacci Retracements

The upside rally started in April when the recession call for this year was abandoned and the AI hype was in its glory. Comically, companies have their bright new shiny NVDA chips sitting in the IT room but everyone is looking at each other wondering what to do with them. Anyhoo, stocks rally in May, June and July into the all-time record high in history for the SPX (S&P 500; the US stock market) at 5670 (5669.666) on 7/16/24 three weeks ago.

Thus, from 4967 to 5670 is 703 points. The Fib retracements are 38%, 50% and 62%; the magical percentages found throughout nature. 703 times 0.38 is 267 points so subtracting that from the 5670 top is 5403 close enough for gov't work to the 5396 on the chart; call it 5400. Price fell through the 38% Fib, then through the 50% Fib at 5313, then dropped down to the 62% Fib retracement at 5230 (blue circle). Price fell through to the 5119 low but that was only an intraday event.

Note that the following day, off the bottom, the SPX closed smack-dab at the 62% Fib deciding to bounce, or die. It bounced after a stutter-step lower and the relief rally was underway. 

Now it is time to look at the Fibonacci retracements for the relief rally after the crash from 7/16/24 to 8/5/24. The first 38% Fib retracement is ........ well look at that ....... whoa doggie. ....... wait for it....... wait a bit longer for it ....... smack-dab on top of the 38% Fib retracement at 5344-5346. The SPX is deciding to bounce or die right now and the inflation data dropping in a couple hours will help to push it one way or the other.

If the SPX bounces from the 38% Fib and decides to continue the rally, the 50% Fib at 5407 is the next upside target. Of course the bears want the 38% Fib resistance to hold right now and for price to receive a smack down towards the lows again. The data at 8:30 AM EST will determine the Winners and Losers. Life's a gamble, and you might lose. 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 Thursday Morning, 8/15/24, at 6:22 AM EST: The SPX pops higher on the PPI data on Tuesday morning and the CPI data yesterday showing that inflation continues to gradually subside. Interestingly, services inflation (inflation is made up of goods inflation, that is raw materials orientated, and services inflation, that is customer experience orientated) shows a slump for the first time in many months. America's upper middle class and elite privileged are keeping the economy afloat as they experience the wealth effect from big stock gains for the last 15 years courtesy of the Federal Reserve's money printing; it is called filthy crony capitalism. The rich are the ones that boosted services inflation for the last couple years taking luxurious trips, dining out, buying new cars and diamond rings, and living the dream. If services inflation is now sliding away, that means the wealthy are pulling back on spending; that will sink the economy. After all, how many new $3,000 refrigerators, and fancy washers and dryers, and expensive home makeovers do you need? Even traveling to exotic locations gets old since lots of time is spent sitting in smelly noisy airports. Anyhoo, the SPX takes out the 38% Fib and runs toward the 50% Fib at 5406 taking it out like it was not even there. The 62% Fib is at 5467 and price almost tagged it at with a HOD yesterday at 5463. Price hesitates at the 50-day MA at 5455, sitting exactly at this critical S/R (support/resistance) level to start the Thursday session. Walmart earnings are on tap in a half hour and a slew of economic data also hits the tape. Jobless Claims are uber important since the employment market now has the Fed concerned (more than their other mandate that is price stability (inflation)). If the data is joyous, price will bounce off the 50 and the big test will be at the 62% Fib at 5467-ish. Lots more upside is ahead if this is taken out to the upside. Bears will be hoping for weak data this morning, and for the SPX to collapse from the 50-day, having performed a successful back kiss, and this would light the way for a lot of downside with stocks going forward. Watch the dollar/yen, sticky at 127.25. It is simple. If the dollar/yen pair moves higher (weaker yen) stocks go to the moon. If dollar/yen falls under 127 headed towards 126 and lower (stronger yen), stocks will collapse. In a few minutes, we find out if WMT's yearnings are Respectable.

Note Added Friday Morning, 8/16/24, at 7:50 AM EST: Walmart is more than respectable promising big sales in Q4. Retails Sales are strong creating stock market joy. Interestingly, the boost in sales has a lot to do with higher prices (inflation); unit sales actually decrease; in addition, the top 20% rich folks in America are accounting for nearly 50% of retail sales. The Federal Reserve has given the Creature of Jekyll Island life; it is an economic Frankenstein. Crony capitalism is alive! It's alive!  The dollar/yen leaps above 149 sending US stocks higher and higher. Stocks are singing songs and carryin' on all night long. Family Tradition.

Note Added Saturday, 8/17/24: The SPX stages a historic comeback rally catapulting from 5119 to 5562 in only 10 trading days. That is ridiculous. A 443-point jump, or +9%. The benchmark S&P 500 index is rising 44 points per day nearly +1% per day. Come on, now. Come on, now. The roulette wheels are spinning 24/7 at the corrupt Wall Street casino. At the 5119 low 2 weeks ago, the chart indicators remained weak and bleak wanting more downside but the Fed promises a new easy money party, with rate cuts starting on 9/18/24, launching stocks higher. Stocks are trading off every little data point and recent numbers favor bulls. Volatility dropped on Friday which created further upside with stocks. The SPX daily chart shows long and strong indicators, sans money flow that is flat, which is neggie d, so 2 to 4 days are likely needed for the SPX to top out in the daily time frame again. You will be able to call the top when you see all the indicators in negative divergence. As fate would have it, this likely places markets at Friday morning when Pope Powell will be pontificating from his piehole at Jackson Hole. The dollar/yen moves higher (weaker yen) so the carry trade is back on and US stocks float higher. SPX 5565-5566 is strong price resistance from July so perhaps that is where price stalls ahead of Prophet Powell that will bring the tablets down from On High, sidestepping the moose sh*t, to enlighten the world on Friday morning.

GOLD Weekly Chart; Hanging Man; Rising Wedge; Negative Divergence; Upper Band Violation with Tight Bands Squeezing-In; Gold Euphoria

The gold euphoria is in full swing. Why not? The world is ablaze in war with humans always loving to hate each other. Gold benefits from the uncertainty. US stocks collapse over a 3-day period ending in a low last Monday helping send gold higher. Interestingly, traders sought the perceived safety of gold during the last couple weeks of human turmoil while bitcoin was flat or lower. The US dollar weakens slightly over the same period also sending gold higher. No wonder the gold bulls are euphoric, snorting and partying like its 1999.

Gold prints a record high above the round, whole, psychological 2500 number. The weekly chart, however, says the Party's Over. The red rising wedge is a bearish pattern. The hanging man candlestick last week is glaring. This is a reversal candlestick. The longer the shadow the more street cred the hanging man has, like above. The hanging man also has credibility since volume this year is more robust than last year. Now you look for follow-through. Since it is a weekly chart, the next candlestick will need all next week to play out, but the expectation would be for a gap-down move for gold next week based on the hanging man. The hanging man verifies that the week started with the gold bulls in firm control, but alas, their control slipped-away, and the week played out with the bulls and bears battling for control.

The red lines show gold price making matching or higher highs, but the chart indicators are all sloping down; negative divergence. This means gold has topped-out on the weekly basis and a multi-week down move should begin. Neggie d wants to smack gold lower.

Price has tagged the upper standard deviation band at 2477 so the middle band, that is also the 20-wk MA, at 2369, is on the table, as well as the lower band at 2260. The purple arrows show the bands squeezing in tight which will create a big move in gold but the tight bands do not predict direction.

The blue circles show distribution taking place. This is the smart gold money taking profits and sloughing their gold off onto retail investors getting caught up in the yellow metal hype and global worry. Gold initially topped-out in May from the neggie d and overbot stochastics and money flow but the RSI and MACD were still long and strong so another higher high in price was expected and voila, it occurs. The smart money started unloading gold in May and followed through in July with all indicators now neggie d forecasting a top on the weekly basis.

The ADX is in nosebleed territory with no place to go but down. The ADX shows that the trend higher in gold for these many weeks is a strong trend higher since April. However, there is no more head space so even if gold eked out new higher highs, the ADX would be losing steam indicating that the strong trend in gold is waning. When the ADX drops out of the pink box, it will verify that the strong trend higher in gold is officially over.

The Aroon verifies the over-the-top euphoric bullishness for the yellow metal. Maybe it is because of the gold medals at the Olympics? Yes, the gold-plated cheap discs that are tarnishing before the athletes can step off the winner's podium. The Aroon green line shows that every gold bull believes gold will go up forever. Of course they do; that is why they are gold bugs. The Aroon red line at zero indicates that every single gold bear, bar none, every single one of them, have left town and all believe that gold will go up forever. What does that tell you when everyone is partying on one side of the gold boat? (contrary signal; the boat will tip)

Gold is extended above its moving average ribbon needing a mean reversion lower. The chart is sad and indicating that gold has topped-out on the weekly basis. Perhaps a gap-down move will occur next week. Do not be surprised if gold falls 200 or 300 dollars over the next couple weeks.

Of course, if central bankers goose markets, or maybe Putin dies, or the expected Iran attack on Israel is no biggie, or if the dollar falls lower, the gold hanging man may receive a temporary stay of execution. However, the chart is sick and any further loftiness in the precious metal should be faded.

Keystone does not hold any plays long or short in the gold arena currently. If you bring up the GLD ETF chart, it is exactly the same as the gold chart above. Thus, GLD is expected to drop on the weekly basis going forward. The gold and GLD daily charts are stumbling sideways not providing hints on direction. GLD has been dead money for over 4 months traveling sideways through 212-225. The 2-hour charts are also not providing clues on direction. A sideways symmetrical triangle may be forming on the GLD 2-hour chart with a fake-out move higher on 8/2/24, so a potential collapse from the triangle may occur within days (sideways triangles sometimes show a fake-out move with price, only for it to return inside the triangle, and then exit the pattern in the opposite direction; in this case the path forward would be a collapse and start of the gold down move on the weekly basis).

If you made a bunch of money in gold, now would be the time for profit-taking. If you call yourself a long-term investor (the old Wall Street joke is that we are all dead in the long-term), then you likely will need patience for the next several weeks as gold price likely retreats to the 2100-2200 area. Gold is at a ceiling. The Black Keys sing Gold On The Ceiling. 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 Monday Evening, 8/12/24, at 7:00 PM EST: Gold bugs win the Monday trade as television screens show a cooling tower on fire at a nuclear plant in the middle of the Russia-Ukraine War. That is odd because there is nothing to burn on those hyperbolic cooling towers; they are steel and concrete with a big swimming pool at the bottom. The steam spent from the turbine floor is sent to the cooling tower that has double walls where the water vapor condenses back to water and drops down forming a big swimming pool of water at the bottom that can be reused in the plant. The smoke is thick and black which hints that oil is burning, or tires. An educated guess is that someone probably dumped a barrel of oil next to the tower, maybe with a few tires, and lit it along with other combustibles. The draft of the tower would suck the black smoke up through the tower and make it look like it is on fire. It is a large scale magic trick likely to instill fear. What else ya got, little Ruskie b*tch? Anyhoo, a gold orgy occurs as everyone waits for missiles to fire and bombs to drop on Israel. Oil is up for 5 days in a row with WTIC at 80 bucks and Brent at 82 with the Iran attack on Israel imminent, for the last 2 weeks. Gold will be interesting to watch this week. Gold displays a triple top on the 2-hour chart and hints that a top in this time frame will occur tomorrow, however, triple tops are supposed to not exist, so gold bugs are celebrating the triple top since price would be expected to move higher to nullify the top (about one-half of the triple-tops hold and one-half do not). Gold jumps over 30 bucks today and is up over 2500 now up to 2513. GLD says thank you kindly, like Burn to Shine by Ben and the boys, jumping +1.7% to 228.41. Traders are tripping over each other to buy GLD at the ask with both fists.

Note Added Saturday, 8/17/24: No pull back in gold last week. Instead, the dollar logs a fourth consecutive down week buoying gold. Interestingly, central bankers keep buying gold with both fists driving prices higher. The wars and pending Iran attack on Israel, now about 3 weeks in the making and yet to appear, create geopolitical angst that floats the yellow metal higher. Let's take a look at the charts. Nothing has changed in the gold weekly chart above. The thrust higher last week, however, hints at the need for a week or two of time before rolling over again. Central bankers and all buyers of gold are likely asking themselves the same question; do you buy at these all-time record prices chasing the price even higher? At that point, is it actually a hedge? The big push higher in gold and GLD comes on less volume than the prior week that was soft. The GLD daily chart shows the breakout on Friday to 232. Gold bulls are throwing confetti and Dancing in the Street. The chart indicators should top out this week in the daily time frame; simply watch for the negative divergence to form and you can call the top. Lots of charts are setting up for a big crescendo come Friday when Pope Powell speaks from Jackson Hole.

NYA NYSE Composite Weekly Chart with 40-week MA that Would Signal a Cyclical Bear Market

Long time followers of Keystone know that his two fave indicators that determine a cyclical bull market versus a cyclical bear market are the SPX 12-month MA cross and the NYA 40-week MA cross. If you were on a desert island but could pick only one indicator to know what the stock market is doing, it would be the SPX 12-month MA cross and that remains firmly bullish.

The NYA 40-week MA is no slouch. It is an extremely important stock market indicator. In 2022, stocks were beaten like a rented mule, and then late in 2022, the NYA 40-week MA positive cross started the long party higher to the present. 

All good things come to an end and the NYA is teasing a potential failure at the 40-wk MA at 17484. If it fails, the blood will be flowing on Wall Street, severe carnage, folks will be in panic mode. It's fun.

The banks are playing a key role in stock market direction currently. Keybot the Quant algorithm calls out XLF 41.96 as a key bull/bear line in the sand. The XLF exploded above 42 this morning carrying US stocks on its back but then it fell on its sword at munch time and stocks fell apart from there. The XLF is creating stock market bearishness ending the session at 41.55.

This is important since banks, financials, insurance companies, credit card companies, have tried to recover and head higher to help the stock market on Friday, Monday and today, and all three times have failed to end the day lower. Folks, there is a problem at the banks. We do not know what it is as yet. But there is likely a problem with the banks based on the XLF action.

The XLF 41.96 key metric is explained because it and the NYA 17484 tell the stock market story going forward. If XLF rallies above 41.96, perhaps the fourth time is the charm, stocks will rally and the move higher will have further legs higher. If stocks rally but the XLF does not move above 41.96, the bulls got nothing, and any joy in the stock market will develop into misery with equities rolling back over to the downside.

If NYA loses 17484, Goodnight Irene, Irene Goodnight. There will be a big drop in stocks with serious panic occurring. It is always fun to see the rats scurrying.

Easy-peasy. Stock market bulls need XLF 41.96 or they have no hope. Bears need NYA 17484 and the blood will be flowing like water on Wall and Broad. 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 Thursday Morning, 8/8/24, 11:24 AM EST: US Jobless Claims pull back a touch on-week so the dollar/yen pair drops (yen strength) and US stocks pop and it is party time. XLF was hesitant at the opening bell but is now printing 42.12 with the bull/bear line in the sand at 41.98. It is a game of pennies. The SPX is up almost +100 points as the XLF pushes higher. Bulls came to play today but they must keep the XLF above 41.98 or there will be Hell to pay. NYA floats higher to 18136. Watch the XLF 41.98 rudder that is steering the stock market ship. XLF tags 42.15. Wheeee! Whoopie! Bulls are throwing confetti while chugging Fed wine. Today is 8/8. Chinese folks love their 8's; it is perceived as a lucky number; it is so far, for bulls, but what about bears?

Note Added Friday Morning, 8/9/24, at 2:51 AM EST: The bulls are walking around with their chests puffed-out pushing XLF up to 42.22 with the line in the sand at 41.98 still only 24 pennies away. The stronger financials send US stocks higher. The NYA rallies to 18186. The drama continues.

Note Added Saturday, 8/10/24: XLF wins the day ending the week at 42.40. Bulls win. NYA floats higher to 18267. The battle continues. Keep watching the saga next week. The bull/bear line in the sand for XLF is at 41.99 so bears need a 41 cents drop in XLF (-1%) to usher-in stock market weakness. Watch the banks and financials pre-market to get a feel for the story ahead.

SPX S&P 500 Daily Chart; US Stock Market Crashes -10% Since 7/16/24 (15 Days) and Stocks Crash -8% Since Last Thursday 8/1/24 (Only 3 Days)

The SPX (S&P 500; the United States stock market) peaked on 7/16/24 printing the all-time record high at 5670 and fell to a low of 5119 yesterday. That is a drop of 551 points, -9.7%, in only 15 days. 10% of the US stock market value was wiped out in 3 weeks. The yen placed a bottom on 7/10/24 and rocket-launched higher sending the dollar/yen pair lower and US stocks lower.

The last 3 days was record-setting. The SPX tagged 5566 on 8/1/24 (last Thursday) and in only 3 trading days (Thu, Fri, Mon) fell to 5119 a drop of 447 points, a -8.0% crash. Ouchie. 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.

FXY Japanese Yen Daily and Weekly Charts and SPX S&P 500 Daily Chart; Yen Carry Trade Unwind Sends US Stocks Lower

The SPX (S&P 500; the United States stock market) peaked on 7/16/24 printing the all-time record high at 5670 and fell to a low of 5119 yesterday. That is a drop of 551 points, -9.7%, in only 15 days. 10% of the US stock market value was wiped out in 3 weeks.

Better yet, the SPX tagged 5566 on 8/1/24 (last Thursday) and in only 3 trading days fell to 5119 a drop of 447 points, a -8.0% crash. Ouchie. And over the last month, the television talking heads told Joe Sixpack to buy, buy, buy! Sucka's.

The yen carry trade unwind is receiving much of the blame for the global stock market crash. It is funny. Usually everyone blames, "Those d*mn speculators!" so the yen takes the blame this time. The BOJ raised rates strengthening the yen creating turmoil in global markets. The weaker yen has provided easy money, to make more money, for a decade and more; a funding currency. Everybody and his bro was in the trade and the blue circle shows the start of the dramatic unwind. The yen strengthens, catapulting higher to the moon wreaking havoc in global stock markets.

If you think back to math class in school, you remember that a fraction has a numerator (top number) and denominator (bottom number). The dollar/yen currency pair moves lower, in conjunction with the US stock market, as the yen, in the denominator, strengthens (and visa versa; the dollar/yen will move higher if the yen weakens, like the last decade plus).

Thus, stronger yen (FXY) means lower dollar/yen pair (USDJPY) and lower US stocks. A weaker yen means higher dollar/yen pair and higher stocks.

The yen placed a bottom with the falling green wedge (bullish), oversold conditions and universal positive divergence. It was on the launch pad and ready to explode higher to the moon and voila; there is liftoff. The MACD line was a bit hesitant at the bottom (tiny red line) allowing yen to slump over for a few days to print a matching low and the MACD went possie d and the fuse was lit; the countdown started. Ground Control to Major Tom.

The yen climbs up the top standard deviation line so it is obviously a parabolic move out of control. Looking at the daily chart, there remains upside momo in the histogram, stocastics and money flow. Ditto the RSI but it is topped-out and will likely only move down. The overbot RSI, stoch's and money flow want the yen to pull back for a rest, also the neggie d on the stochastics over the last 2 days. A bit more upside in yen on the daily basis means a bit more pain for US stocks.

On the weekly chart, same dealio. Yen rocket launches from the falling green wedge, oversold conditions and possie d. The yen jumps out of its skin above the top standard deviation line. Traders were desperate to git outta Dodge. Price goes parabolic receiving the positive divergence rocket launch and upside momo remains in force. The stochastics are overbot and the money flow is neggie d over the last 2 weeks which want the yen to take a rest and pullback but the other indicators are long and strong wanting higher yen going forward on the weekly basis. That means pain ahead for US stocks on the weekly basis.

The interesting thing about all this mumbo-jumbo is that the bottom can likely be called in US stocks when the yen tops-out. Trading is playing multi-dimensional chess where the time frames are the dimensions. You have to mesh the time frames together to weave a forecasting story going forward. Yen likely needs a couple days or so to top out in the daily time frame. Simply watch the daily chart and you can call the top. The yen will then take a rest in the daily time frame for a few days or week or so, but then re-strengthen again since the weekly chart exhibits long and strong indicators that still have fuel in their tanks to send price higher.

The 66 level is key price S/R so the yen may target that as the goal in the weekly time frame. The gap at 63-64 is big enough to drive a truck through so that will need filled at some point forward. The weekly chart may top-out in a couple-three weeks; simply watch the chart develop and you will be able to call the top in the weekly time frame. That will signal the bottom in US stocks. So it looks like there is at least a couple more weeks of selling in US stocks where the SPX should make a new low.

JP Morgan says about one-half to 60% of the carry unwind is complete which means they expect the yen to strengthen more which will create softness in US stocks.

The VIX, the so-called fear gauge, shot higher to 65 about 24 hours ago and remains above 30 so that means big wild price moves are on tap intraday and day to day in the stock market. For example, the SPX may run 60 points higher, then collapse 80 points, then maybe finish the day higher by 50 points, then the next morning open down a 100 points, rinse and repeat. You get the idea. Have fun.

Keystone is not holding any trades on the yen long or short but holds index shorts. 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 Wednesday Morning, 8/7/24, at 3:21 AM EST: The BOJ intervenes verbally to stop the yen strengthening. The BOJ proclaims that rates will not be hiked when the markets are unstable. Happy Days Are Here Again. The dollar/yen pair pops over 2% above 147 (weaker yen) sending US stocks to the moon with S&P futures up +61. Don't you love the corrupt Western casino? As the dollar/yen goes, so goes the US stock market. As the yen goes, the US stock market goes inversely. Remember, a weaker yen, in the denominator of the dollar/yen currency pair, sends the dollar/yen pair, or ratio, higher and US stocks higher. A stronger yen, which occurs when the BOJ hikes rates (after a multi-year lull), sends the dollar/yen lower (a bigger number in the denominator) which sends US stocks lower. As the dollar/yen pair moved lower from 145 to 142, US stocks sold off, and now as the dollar/yen pops higher to 147, traders are buying US stocks with both fists. Shiny Happy People with Katie.

Note Added Wednesday Evening, 8/7/24, at 8:32 PM EST: The stock market was joyous this morning moving higher as the dollar/yen pair moved higher above 147. Alas, the dollar/yen rolled over lower (stronger yen) to 146.21 so stocks deteriorate into the closing bell and in the after hours. S&P futures are down from -15 to -35 this evening. The 2-10 spread is down to only -0.02%, or -2 bips, ready to dis-invert and likely welcome recession. As the dollar/yen goes, so goes the stock market.

Note Added Friday Morning, 8/9/24, at 2:56 AM EST: US stocks rally on the happy Jobless Claims number and stronger financials. Dollar/yen is above 147. JPM says the yen carry unwind is about 75% complete. If you study the yen chart versus the SPX you will see that the start of 2023 is when the inflection point occurs and the weaker yen from then to now sends US stocks to the moon. Pulling the numbers off the FXY chart, an educated guess says the carry trade started and gained steam from late 2022 and early 2023, that is a price level of 68 to 73. The FXY shot up to 65 now back to 63. Thus, from a price perspective, the yen has recovered about 80% and more but price is not volume. The carry trade unwind is likely one-half to three-quarters along as JPM states. It makes sense that FXY pulls back to 62-63 since that is strong price support especially from the October 2022 lows. Bank of New York Mellon says the yen carry trade has further to unwind for weeks and maybe months ahead. Macquarie says there are no signs of global contagion during the stock market crash but cautions that there may be vulnerabilities exposed in the coming days in hedge funds, private capital, crypto operations, etc.....

XLF Financials Daily Chart; M-Top (Double-Top); Neggie D Spankdown in Progress

The financials are receiving a neggie d spankdown on the daily chart from the M-top (double-top). Price printed the higher high but all the chart indicators are sloping down, negative divergence, and out of gas, hence, price collapses.

The indicators remain weak and bleak wanting to see lower prices for XLF going forward in the daily time frame. The weekly chart also topped out due to neggie d so the financials are going to be soggy and sick for a few weeks forward.

Look at the huge volume candlesticks the investment banks cannot throwaway shares of the financials fast enough. Joe Sucka bot some banks during the earnings hype a couple weeks ago and now receives his head on a platter. Warren Buffett, the reason the analysts and strategists were pumping BAC the last few years, has been sloughing off shares to any sucka willing to buy them. Buffett has also been unloading AAPL while the television pundits tell you to, "buy, buy, buy!"

There was an ascending triangle (orange) pattern during late April, May and June, that resolves higher as would be expected (a bullish pattern). The vertical side is 2.5 points and the breakout is 42 so the target is 44.5 and 44+ is close enough for gov't work satisfying the ascending triangle pattern as the negative divergence and M-top then created the top and smackdown.

The blue line is 41.96. The chart shows that 42-ish is a key S/R level for XLF. Keybot the Quant remains short and is tracking XLF 41.96 as the key bull/bear line in the sand. The battle started Friday but this number will tell you the stock market story for Monday. As financials go, so goes the stock market. Watch XLF in the pre-market. XLF begins at 42.09 only 13 pennies in the bull camp creating upside for US stocks.

If XLF fails at 41.96 tomorrow, it is lights out for stocks and another leg lower is on tap for the SPX. You can use the XLF 41.96 as a rudder that steers the stock market ship at least into mid-week and it will likely remain important all week. The market remains edgy and moody, like Jack Kerouac. 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 Monday Evening, 8/5/24, at 6:34 PM EST: XLF collapses out of the gate this morning like everything else. XLF finishes the sick session at 40.84 with the bull/bear line in the sand, identified by the Keybot the Quant robot, at XLF 41.87 (this replaces the 41.96). The bulls have a lot of work to do tomorrow if they want to right the stock market ship.

Note Added Wednesday Morning, 8/7/24, at 6:47 AM EST: XLF ran higher yesterday helping to create the stock market recovery, but then fell on its sword, and stocks fell into the closing bell with XLF at 41.50. XLF 41.92 is the bull/bear line in the sand with price trading at 41.96 in the pre-market. Obviously, this range, say 41.87-41.95 is key as Keybot the Quant pointed out before it occurred. S&P futures are up big this morning +50 due to the BOJ verbally intervening sending the yen lower. Watch the XLF 41.92 line in the sand today. If XLF moves above and closes above 41.92, the relief rally is real and has further legs. If stocks rally, but XLF fades dropping below 41.92 and ending the session lower, the bulls got nothing and stocks will fade going forward. There's the 42.00 print for XLF. The bulls are pumping banks higher this morning so they can pump the stock market higher.

Note Added Wednesday Evening, 8/7/24, at 8:30 PM EST: The banks are playing a key role in stock market direction currently. Keybot the Quant algorithm calls out XLF 41.96 as a key bull/bear line in the sand. The XLF exploded above 42 this morning carrying US stocks on its back but then it fell on its sword at munch time and stocks fell apart from there. The XLF is creating stock market bearishness ending the session at 41.55.This is important since banks, financials, insurance companies, credit card companies, have tried to recover and head higher to help the stock market the last three days and all three times have failed to end the day lower. Folks, there is a problem at the banks. We do not know what it is as yet. But there is likely a problem with the banks based on the XLF action.

Note Added Friday Morning, 8/9/24, at 3:14 AM EST: XLF pops to 42.22 above the 41.98 bull/bear line in the sand. XLF did not fade in the late Thursday session like prior days. The bulls create higher stock prices with the strength in the banks. The drama continues. Dollar/yen is above 147. JPM says the yen carry unwind is about 75% complete. Bank of New York Mellon says the yen carry trade has further to unwind for weeks and maybe months ahead. Macquarie says there are no signs of global contagion during the stock market crash but cautions that there may be vulnerabilities exposed in the coming days in hedge funds, private capital, crypto operations, etc.....

Note Added Saturday, 8/10/24: XLF wins the day ending the week at 42.40. Bulls win. NYA floats higher to 18267. The battle continues. Keep watching the saga next week. The bull/bear line in the sand for XLF is at 41.99 so bears need a 41 cents drop in XLF (-1%) to usher-in stock market weakness. Watch the banks and financials pre-market to get a feel for the story ahead.

UTIL Utilities Weekly Chart; Inverted H&S; 2-Leg Bull Flag; Utilities Orgy Due to AI (Artificial Intelligence) Hype

Utilities are enjoying the AI orgy catapulting higher as advanced technology (artificial intelligence, blockchain, bitcoin mining, etc...) has high electricity and power requirements. Windmills and solar cells don't cut it; these technologies need real power.

The blue lines show that 950 is a key line in the sand for utes. Price is way above that at 1018. The blue bars show an inverted head and shoulders (H&S) pattern with head at 8 hundo, and neckline at 950. That is 150 difference so the breakout above 950 targets 1100. Price hit 1037. That is close enough for government work.

The light blue lines show a 2-leg bull flag, or pennant if you prefer, with the first leg from 8 hundo to 950, that is 150 difference. The sideways to sideways lower consolidation occurs (flag) and then price starts the second leg from 9 hundo so 1050 is the upside target. That is close enough for government work.

The chart patterns have pretty much played out and done their job. Price makes a new high with the histogram, stochastics, and money flow in negative divergence and the RSI and stoch's overbot. These are bearish indications but note that the RSI and MACD remain long and strong with fuel in their tanks to take price to higher highs still yet on the weekly basis.

Thus, utes need a couple more weeks to play out for universal neggie d to form to be able to call the top in the weekly basis that would begin a multi-week down move. In a couple weeks, utes should set up for a short; you have to wait for neggie d to form across all indicators so you know the top is in.

Keystone has no plays long or short in utilities right now but will be looking to short utes going forward, maybe starting in a couple weeks. The charts will tell you when the neggie d forms. Utes will probably pull back and be soggy in the week ahead but they will likely come back up for a slightly higher high after that so no use trading the utes until they set up properly for the extended multi-week short.

The current move down in the US stock market will likely not lead to the big -20% to -80% flush in US stocks that is likely coming our way over the next couple years. Utes usually lead the way down or are coincidental with the down move but they are rallying now as the stock market slides lower. This is odd behavior and only due to the need for power requirements due to the AI hype.

When the utes roll over and lead lower, and then if stocks roll over as well, that is going to lead to the huge painful move lower so the utes may be hinting now that the huge stock market carnage and Wall Street bloodbath may not begin in earnest for another few weeks. Utes should be on your short watch list but wait until you see the whites of their eyes (universal neggie d across all chart indicators). 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.

YC2YR US Yield Curve (2-10 Spread) Daily Chart; US Yield Curve Inverted for Over 2 Years the Longest Period in History; Recession?; YIELD CURVE DIS-INVERTS FOR FIRST TIME IN OVER 2 YEARS

Keystone has been tracking the yield curve and the last post on the chart chronicles the crazy path to the present day. In March 2022, the spread fell below zero indicating inversion but it quickly recovered. In June 2022, the yield curve inverted and it has remained that way for over 2 years the longest period in history.

You look like Rip Van Winkle if you have been watching the yield curve waiting for the recession to arrive. The overall widespread US recession remains on vacation with Godot despite the ongoing housing recession, manufacturing recession and labor recession in play. Go figure. The wealthy, that were made filthy rich by the Federal Reserve's money-printing, have lots of dough to spend to keep the economy afloat in the US toilet bowl.

After the inversion, everyone including the Uber driver, said the recession was at hand. Keystone figured it made more sense for the recession to arrive sooner rather than later but it did not. Common Americans do not have a pot to pee in but the wealthy elite, and the upper middle class sycophants that live in McMansions and service the privileged, are keeping the economy afloat with their spending. That will not last forever and the signs are there that spending is getting pulled-in.

Usually when the yield curve inverts, the recession shows up 18 to 24 months later, and sometimes sooner. This time was not sooner due to the obscene money-printing by the Federal Reserve that created a mass wealth effect for the top 10% of the population that is carrying the whole economy with their spending. America's crony capitalism system makes the rich richer, since they control the rigged game, and the poor poorer. Alas, the 18 and 24 months periods are now in the rearview mirror and the recession remains on a milk carton (missing). Runaway Train.

What next? Simply considering time as the variable, the recession should be at hand and may have already started. The Sahm Rule triggered on Friday which indicates that the recession is at hand right now even though Sahm disputes her own rule. Win Sahm, lose Sahm.

It is not the inversion that solely triggers/confirms a recession. After the inversion, you want to see a hook pattern form where the spread moves higher again, without significant interruption. Over the last 2 years, each time the hook forms and it looks like it has legs higher, thwack, it is smacked like a donkey's behind. This is why the recession refuses to appear; the spread rolls back over each time it shows a sign of recovering. After over 7 times at bat, is this the sustainable move higher? It almost has to be since the curve is only 10 bips from dis-inversion (moving back above zero).

Lots of analysts still call for a soft landing of the economy. Most of them are the sycophants that service the wealthy so consider the rose-colored glasses they look through each day. The illusion of a soft landing is due to the ongoing spending by the top 10% of the population that own stocks and took advantage of the Fed's easy money policies over the last 15 years. Always remember that one-half of Americans do not own a single share of stock so the Fed members taking those dovish actions all those years knew they were enriching the wealthy while screwing the poor. They have to live with themselves. Isn't America great?

The -0.13% level was key resistance that has now given way so it becomes support. It would not be surprising to see the yield curve dis-invert in the days ahead. Bloomberg has the 2-year yield at 3.88% and 10-year at 3.79% so that means the 2-10 spread is inverted by only -.09% or -9 bips. It is a whisker from dis-inverting which will be a major event. Do you smell that? No, not that. That smells like teen spirit. Take another whiff. Yes, it smells like recession is in the air. 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 Sunday Evening, 8/4/24: The cascading global stock market selloff, quickly becoming a crash, continues rotating around the world. The US yield curve (2-10 spread) is up to -4 bips a hair from dis-inversion, and recession. The 2-year yield is 3.76% and 10-year yield 3.72%.

Note Added Monday Morning, 8/5/24, at 3:30 AM EST: The US yield curve (2-10 spread) is at -4 bips a hair from dis-inversion, and recession. The 2-year yield is 3.79% and 10-year yield 3.75%.

Note Added Monday Morning, 8/5/24, at 4:40 AM EST: Traders now estimate a 60% chance that the Federal Reserve will cut 25 bips within the next week. Oh my. That is panic. If the Fed would do that, it would create panic that the economy is far worse than thought, however, investors are already panicking running around with their hair on fire during the global stock market rout since Thursday. The US yield curve (2-10 spread) is at -4 bips a hair from dis-inversion, and recession. The 2-year yield is 3.81% and 10-year yield 3.77%. 

Note Added Monday Morning, 8/5/24, at 7:03 AM EST: The US yield curve (2-10 spread) is at -1 bip almost dis-inverted (bull steepener) and probably, finally, signaling recession. The 2-year yield is 3.7581% and 10-year yield 3.7435%. The S&P futures are down -148 points, -2.8%. VIX is 50+.

Note Added Monday Morning, 8/5/24, at 7:33 AM EST: The 2-year and 10-year yields sit at 3.73% remaining only one tiny hair inverted. The S&P futures plummet -163 points, -3%, to the lows of the session. VIX 50.68. NVDA pukes -13%. MSFT collapses -7%. Bitcoin is at 50,947.

Note Added Monday Morning, 8/5/24, at 8:42 AM EST: The 2-year is at 3.6559% and 10-year yield is at 3.6672%. Sound the Seven Trumpets!!  THE US YIELD CURVE DIS-INVERTS FOR THE FIRST TIME IN OVER 2 YEARS. Normalcy returns with the 10-year yield a single hair above the 2-year yield.

Note Added Monday Evening, 8/5/24, at 6:02 PM EST: If you blinked during the dis-inversion of the yield curve, you missed it. The yield curve re-inverted quickly this morning with the spread widening again. The 2-10 spread then dropped from the slightly positive number back down to the -0.13% support. The 2-year yield is at 3.92% and the 10-year yield is at 3.79%. The zero level and dis-inversion is obviously a big deal so it would be expected for yield to stab at the zero resistance once or three times before thrusting up through. The spread likely re-inverted as traders believe that a 50-bip cut is likely not coming. The hook pattern is continually spanked back down delaying the recession.

Note Added Tuesday Morning, 8/6/24, at 4:32 AM EST: The 2-year yield is at 3.97% and the 10-year yield is at 3.85%. The spread is at -0.12%. The back kiss is successful so far; the -0.13% support is holding.

Note Added Tuesday Afternoon, 8/6/24, at 4:15 PM EST: The 2-year yield is at 3.98% and the 10-year yield is at 3.90%. The spread floats higher to -8 bips. The back kiss is successful so far; the -13 bip support is holding.

Note Added Wednesday Morning, 8/7/24, at 4:32 AM EST: The 2-year yield is at 4.00% and the 10-year yield is at 3.91%. The spread is at -9 bips. The -0.13% support is holding. The spread has been at -9bips, with that brief increase to -8 bips, for the last half-day as the yields fluctuate up and down. The BOJ stepped in verbally to weaken the yen and create lift in US stocks.

Note Added Wednesday Morning, 8/7/24, at 9:09 AM EST: The 2-year yield is at 3.99% and the 10-year yield is at 3.93%. The spread is at -6 bips. 

Note Added Wednesday Evening, 8/7/24, at 8:33 PM EST: The 2-year yield is at 3.96% and the 10-year yield is at 3.94%. The spread is at -2 bips. Only 2 measly bips from complete dis-inversion, and recession.

Note Added Thursday Morning, 8/8/24, at 8:50 AM EST: The 2-year yield is at 4.04% and the 10-year yield is at 3.99% after the US Jobless Claims happy data. The spread is at -5 bips. 

Note Added Friday Morning, 8/9/24, at 3:18 AM EST: The 2-year yield is at 4.02% and the 10-year yield is at 3.96%. The spread is at -6 bips. 

UST10Y US 10-Year Treasury Note Yield Weekly Chart; Sideways Symmetrical Triangle Breakdown; YIELD CURVE DIS-INVERTS FOR FIRST TIME IN OVER 2 YEARS

Here is an update of the ongoing sideways symmetrical triangle pattern that Keystone previously described. It is obvious how the sideways triangle resolved; to the downside in dramatic fashion. Notes and bonds are a different animal than stocks so yields that drop dramatically means traders are buying Treasuries with both fists (price up, yield down). The stock market is sold off in force and some of that dough makes its way into notes and bonds for perceived safety.

Comically, as Keystone has explained, the investment banks have been unloading stock market shares to Joe Sixpack, Jane Windedrinker and Carlos Bagholder over the last few months (distribution), and placed that money and profits into Treasuries now enjoying more gains. Meanwhile, the three sucka's are standing there looking at each other realizing they are the bagholdin' sucka's that got caught up in the banksters latest pump and dump scheme. It's funny. Now Warren Buffett comes clean that he has been selling off BAC and AAPL like a madman while analysts and his sycophants on television are telling the sucka's to buy. Pump and dump, baby, how do you think he got rich? Enjoy your bed of money, Warren, you can't take it with you, buddy.

Anyhoo, there are actually two triangles we can draw with blue and purple crayons. Keystone likes purple crayons because they taste like grapes. For the blue triangle, note that yield tried to break out higher, fighting and fighting, as all the Wall Street analysts said yields have nowhere to go but up, but then yield fell back into the triangle and collapsed out the bottom. This behavior, of an upside fake-out with triangle patterns, was explained in the previous post.

For forecasting, Keystone does not like using the vertical side of the triangle at the end, he likes to come in to the first touch and use that vertical. In both cases, those lines run from about 3.9% to 4.8% a difference of 0.9 percentage points. That is the move to be expected out of the triangles. There is no use providing upper targets since yield has now committed to the downside.

Yield fell out of the purple triangle at 4.4%, and note that it also came up for a back kiss at the apex, that was successful, and then completely collapsed. That is a commitment to the downside. 4.4% minus 0.9% is a 3.5% target. The blue triangle breakdown occurs from 4.2% with no back kiss yet occurring, it only happened last week. 4.2% minus 0.9% is 3.3% downside target. Thus, a landing zone of 3.3% to 3.5% is in play for the weeks ahead.

This is using the vertical sides that are in one touch. If you use the triangle end vertical lines the projections would drop to 3.0%. There is uber strong support at 3.3%-ish. If that is lost, it is lights out. 3.0% would be guaranteed and then likely 2.7%-2.8%.

The RSI, MACD and histogram are weak and bleak wanting lower lows in yields but the stochastics are possie d and oversold wanting yield to bounce for a week or so to catch its breath after that punch to the gut last week.

The ADX shows that the big up in yields in 2022 was a strong trend higher (pink box) but that petered out as 2023 started. Yields stumbled sideways in 2023 but then indicated a strong trend higher again, on the weekly basis late last year. However, that was short-lived and the strong trend higher in yields ended last December. As yields fall, watch the ADX. If it moves higher above 25 and then 30, it will tell you that the down move in yield is very strong and sustainable on the weekly basis.

What does all this mumbo-jumbo mean? The sideways symmetrical triangle breakdowns tell you that the 3.0% to 3.5% range is likely on tap for the 10-year yield in the weeks ahead. The daily chart remains weak and bleak wanting a few more days of lower yields. Thus, probably more downside and choppiness for yield in the days ahead, then a small upside move for a week or so, then a roll over lower with yields dropping on the weekly basis towards the 3.0% to 3.5% range going forward. Simply watch the possie d and neggie d on the charts to guide any trades.

TLT jumped higher like a rocket and TBT collapsed down the cellar stairs as mentioned in the previous analysis. Keystone is not playing any Treasury ETF's or derivatives long or short currently. 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.

It is great to see hostages freed from scumbag Dictator Putin's prisons in dirtbag Russia. Decades ago, Tony and the Girls (Dawn) told the story about a man coming home from prison not knowing if anyone cared about him anymore; they cared. Tie a Yellow Ribbon.

Note Added Sunday Evening, 8/4/24: The cascading global stock market selloff, quickly becoming a crash, continues rotating around the world. The US yield curve (2-10 spread) is up to -4 bips a hair from dis-inversion, and recession. The 2-year yield is 3.76% and 10-year yield 3.72%.

Note Added Monday Morning, 8/5/24, at 3:30 AM EST: The US yield curve (2-10 spread) is at -4 bips a hair from dis-inversion, and recession. The 2-year yield is 3.79% and 10-year yield 3.75%.

Note Added Monday Morning, 8/5/24, at 4:40 AM EST: Traders now estimate a 60% chance that the Federal Reserve will cut 25 bips within the next week. Oh my. That is panic. If the Fed would do that, it would create panic that the economy is far worse than thought, however, investors are already panicking running around with their hair on fire during the global stock market rout since Thursday. The US yield curve (2-10 spread) is at -4 bips a hair from dis-inversion, and recession. The 2-year yield is 3.81% and 10-year yield 3.77%. 

Note Added Monday Morning, 8/5/24, at 7:03 AM EST: The US yield curve (2-10 spread) is at -1 bip almost dis-inverted (bull steepener) and probably, finally, signaling recession. The 2-year yield is 3.7581% and 10-year yield 3.7435%. The S&P futures are down -148 points, -2.8%. VIX is 50+.

Note Added Monday Morning, 8/5/24, at 7:33 AM EST: The 2-year and 10-year yields sit at 3.73% remaining only one tiny hair inverted. The S&P futures plummet -163 points, -3%, to the lows of the session. VIX 50.68. NVDA pukes -13%. MSFT collapses -7%. Bitcoin is at 50,947.

Note Added Monday Morning, 8/5/24, at 8:42 AM EST: The 2-year is at 3.6559% and 10-year yield is at 3.6672%. Sound the Seven Trumpets!!  THE US YIELD CURVE DIS-INVERTS FOR THE FIRST TIME IN OVER 2 YEARS. Normalcy returns with the 10-year yield a single hair above the 2-year yield.

Note Added Monday Evening, 8/5/24, at 6:02 PM EST: If you blinked during the dis-inversion of the yield curve, you missed it. The yield curve re-inverted quickly this morning with the spread widening again. The 2-10 spread then dropped from the slightly positive number back down to the -0.13% support. The 2-year yield is at 3.92% and the 10-year yield is at 3.79%. The zero level and dis-inversion is obviously a big deal so it would be expected for yield to stab at the zero resistance once or three times before thrusting up through. The spread likely re-inverted as traders believe that a 50-bip cut is likely not coming. The hook pattern is continually spanked back down delaying the recession.

Note Added Tuesday Morning, 8/6/24, at 4:32 AM EST: The 2-year yield is at 3.97% and the 10-year yield is at 3.85%. The spread is at -0.12 bips. The back kiss is successful so far; the -0.13% support is holding.

Note Added Tuesday Afternoon, 8/6/24, at 4:15 PM EST: The 2-year yield is at 3.98% and the 10-year yield is at 3.90%. The spread floats higher to -8 bips. The back kiss is successful so far; the -13 bip support is holding.

Note Added Wednesday Morning, 8/7/24, at 4:32 AM EST: The 2-year yield is at 4.00% and the 10-year yield is at 3.91%. The spread is at -9 bips. The -0.13% support is holding. The spread has been at -9bips, with that brief increase to -8 bips, for the last half-day as the yields fluctuate up and down. The BOJ stepped in verbally to weaken the yen and create lift in US stocks.

Note Added Wednesday Morning, 8/7/24, at 9:09 AM EST: The 2-year yield is at 3.99% and the 10-year yield is at 3.93%. The spread is at -6 bips. 

Note Added Wednesday Evening, 8/7/24, at 8:33 PM EST: The 2-year yield is at 3.96% and the 10-year yield is at 3.94%. The spread is at -2 bips. Only 2 measly bips from complete dis-inversion, and recession.

Note Added Thursday Morning, 8/8/24, at 8:50 AM EST: The 2-year yield is at 4.04% and the 10-year yield is at 3.99% after the US Jobless Claims happy data. The spread is at -5 bips. 

Note Added Friday Morning, 8/9/24, at 3:18 AM EST: The 2-year yield is at 4.02% and the 10-year yield is at 3.96%. The spread is at -6 bips. 

SPX S&P 500 Daily Chart; Island Reversal; Head and Shoulders (H&S); Jobs Report Aftermath

The stock market will continue absorbing the disappointing jobs report. Only 114K jobs are reported and prior numbers are revised lower. Strike one. The unemployment rate pops from 4.1% to 4.3% triggering the Sahm Rule that indicates a recession is at hand. Strike two. Wages drop to +0.2% on-month and +3.6% on-year. Strike three yer out! Inflation cannot exist without wages rising. Stocks tank. Thursday and Friday are Wall Street bloodbaths.

The island reversal pattern that Keystone has mentioned a couple times (scroll back to prior charts), plays out; it is textbook. You can see the gap-up in early June from 5380 to 5410 creating the start of the island. As time went along, the bulls kept partying on the island erecting Party Town. There is a coconut tree on the island that Keith Richards wants to climb. Nothing lasts forever, however, and the SPX receives a negative divergence smackdown as previously explained.

Price falls to the 5410 shoreline even wading into the water at 5400, but recovered, and then in the back half of last week, the SPX falls back through the gap to 5377 to start the Friday session. That is a textbook island reversal. Oliver's Army can finally escape the island.

While the S&P 500 was in party town on the island where Rock 'N Roll is King, a head and shoulders (H&S) pattern forms. The head is at, say, 5660 and the neckline is 5400, to keep the math simple, that is a 260 difference, thus, if the neck fails at 5400, the downside target is 5400 minus 260, that is 5140. The neck failed. There are gaps down there big enough to drive a truck through so they will need filled at some point forward (orange circle).

The SPX collapses on Friday, falling through the 50-day MA at 5449, to 5302 holding the psychological 5.3K support but more importantly, the 100-day MA support at 5307 held. This is a big number going forward because lots more downside is ahead if it fails next week. The 5300-5310 range is where dip-buyers started buying stocks with both fists. At the peak, you can see that price was elevated above the moving average ribbon and desperately needed a mean reversion lower.

Price tags the lower standard deviation band at 5355 so the middle band, that is also the 20-day MA at 5527, sloping downward, is an upside target when a relief rally occurs. When's that?

Price makes the lower low so the chart indicators can be assessed for potential positive divergence to call the bottom. Not yet. The green lines show that the histogram and stochastics are possie d ready to send price higher but the red lines show that the MACD and money flow are weak and bleak wanting more lows in price on the daily basis. The RSI is slipping away and remains in bear territory below 50% agreeable to more price softness.

The stoch's are oversold and agreeable to a bounce. The red line for the Aroon shows that all the bears, 100% of them, believe that stocks have nowhere to go but down. When the boat is fully loaded to one side, that is a contrary indicator, and actually bullish for the SPX in the daily time frame going forward. The Aroon green line shows that the bulls are in flight or fright mode, like a deer in the headlights, sitting at the 50% level not knowing where stocks are going next.

So that is a mixed bag. Looking at the SPX 2-hour chart, it is set-up with possie d so it wants price to bounce and rally in the VST. This bullishness can be married to the histo and stoch's above for a bounce in stocks on Monday or Tuesday. The MACD and money flow, however, want lower lows, so price would roll over again until a proper bottom can be placed with possie d in the daily time frame. A jog or two is likely needed for all the indicators to set up with possie d (up-down or up-down-up-down) so that is a couple-four days. The SPX will likely bottom in the middle or back half of next week in the daily time frame. You do not have to guess. Simply watch the charts develop and the possie d across all indicators will call the bottom.

Also remember, that even when the SPX stages its relief rally in the short-term time frame, the weekly chart has topped-out and the neggie d on that chart wants a multi-week down move to continue. Thus, the SPX will probably remain soggy next week until the bottom is placed in the days ahead, then a rally for a few days or week or so, but then price will roll over for another leg lower as the sick weekly chart re-exerts its influence (sell the rallies). Of course, happy talk from the Fed can always change the picture and the charts will then need a little bit of time to price-in the latest goose. 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.