Keystone's trading robot, Keybot the Quant, turns bullish on Friday at SPX 5612. The upside orgy started with the banks and retail stocks on hump day and copper was the cherry on top late in the week. The stock market is erratic and unstable currently so expect anything including a potential whipsaw back to the short side. Watch copper.
Saturday, September 14, 2024
Saturday, September 7, 2024
SPX S&P 500 Daily Chart; Fibonacci Retracements
Price heads lower and stalls at the 50% Fib retracement at 5395. Price is at 5408. The LOD Friday is 5403. The 100-day MA is 5379 where price likes to test and bounce. The 20-week MA support is 5406 and the reason that price stopped at 5408 to think things over during the weekend. Well, what's it gonna be boy? What's it gonna be?! Let me sleep on it, and I'll tell you in the morning. Paradise by the Dashboard Light.
Grouping all those support numbers together is a S/R range of 5379 to 5406. Price may stumble and stagger around in this area as it decides to bounce, or die. If price loses 5379, the 62% Fib at 5336 is next support.
Note the 150-day MA at 5291 starting to flatten. This is bad news. If the 150 flattens and rolls over to the downside, that triggers a cyclical bear market. Price will need to fall below 5291 and linger below for a while to roll the moving average over so put it on a list of things to watch this month. 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 Saturday, 9/14/24: The bulls came to play last week pumping banks, retail stocks and copper sending the stock market higher. Scamazon rallied +9%. Let's take a look at things. The SPX daily chart shows price collapsing down to 5400 on Wednesday morning, a matching low to the low shown in the above chart, and the indicators were positively diverged, so a big bounce occurs. The 100-day MA is at 5406 so the general support in the 5400-ish area held for now. The 20-week MA at 5432 also holds as support both these moving averages are bigtime important going forward so continue to track them. The SPX comes up to print a triple-top that is supposed to not exist (If price comes up to a triple-top, the Wall Street adage is that price will continue higher negating the top that is why traders will say that triple-tops do not exist. In reality, Keystone has noted over the years that about one-half the time the triple-top holds and the other time it does not and gives way to a rally). What will happen with this triple-top with the obvious crescendo occurring this coming Wednesday when Pope Powell rides his pale green horse into the FOMC meeting and announces the 25-bip, or 50-bip, rate cut. Negative divergence is in play on the daily chart but the Fed this week overrides everything. The SPX weekly chart remains ugly in negative divergence. If it were not for the Fed's games, the S&P 500 would have already begun a multi-week slide lower. Hump day will provide clarity and even if stocks rally, they would be expected to set up again negatively in short order due to the ongoing neggie d on the charts. If you bring up the SPX 2-hour chart, price is making the matching high with the indicators negatively diverged so barring any happy bullish news tomorrow, stocks are set up to fall in the hourly time frame to begin the week. Watch copper futures; if they are down more than -0.3%, stocks will be soggy. However, stocks are typically higher, about 80% of the time, on the Tuesday into a Wednesday Fed meeting. Despite the bullish calls for SPX to run over 6K this year, the SPX weekly chart wants a multi-week decline to begin. The SPX monthly chart is also ugly with neggie d across all indicators. Folks, you are watching an epic stock market top occur in real-time. A few months or year from now you will be looking back and opining, "What happened?". Where Have All the Flowers Gone?
The Keystone Speculator's Unemployment Rate Indicator; US LABOR RECESSION STARTED 9/8/23 AND IS NOW 1-YEAR OLD AND COUNTING
THE UNITED STATES LABOR RECESSION STARTED ON 9/8/23 AND IS 1-YEAR OLD AND COUNTING. The country also remains in a housing recession and manufacturing recession but an overall US recession continues vacationing with Godot. it is the Godot Recession.
The US economy used to be dominated by the housing and auto sectors. When they go into recession, the whole country would drop into recession. 100 years ago, the railroads ruled the roost. Housing and autos/manufacturing are now second tier players in the recession prediction game. Semiconductors are the new sheriff in town and the chips are now the dominant influence on the stock market and economy. Think about it. Nearly every product you buy nowadays has a chip in it.
Despite the lousy labor, housing and manufacturing industries, the Godot Recession occurs (the recession never shows-up). This is because semi's now rule the roost and are the most important metric. The AI hype has only served to bolster this top-spot, king-of-the-hill position. In addition to the chips holding up the markets and economy, so are the wealthy class.
The top 20% of Americans, the have's, made filthy rich by the Federal Reserve's obscene money-printing, account for 50% of the consumer spending in the United States nowadays. The other 80% of have-not's account for the other half of spending and they are not buying another vacation home, or yacht, or rare diamond bracelet, or brand new Mercedes convertible. The have-not American peons are buying food, diapers, baby formula, and necessities; consumer staples. They wonder how they will pay rent or the mortgage with the car and home insurance rates going through the roof.
So 2024 is a tale of the have's and have-not's. Even the wealthy cannot spend limitless. They only need one $15,000 freezer, $2,000 wine rack and $40,000 cement driveway. After that it is time to kick back and enjoy life.
The unemployment rate drops on Friday from 4.3% to 4.2%. The prior month was 4.253% rounded up to 4.3% while the Friday number is 4.221% rounded down to 4.2% creating the 0.1% differential but in reality the numbers are only 0.03%, 3 bips, apart. The US unemployment rate has been 4.25% for the last 2 months. The low prints were a 3.4% rate in February 2023 and May 2023. The US unemployment rate is now 0.8% above those lows and was 0.9% above last month; not good.
The blue line is diverging up and away from the red line which means trouble ahead and it is time to watch your wallet. Over the coming weeks and months, some of you will be called into the boss's office that will tell you to clear your desk drawers, pack up your family pictures, house plant that needs watered, and change for the coffee machine, and get the Hell out. Oh yeah, hand in your badge and door card since you are no longer allowed in the building. Beat it.
Young adults under 40 years old will learn a lot about yourselves and the people around you as the country slides into recession this year. You lived through the pandemic recession but that was an oddball animal in its own right. In an economic recession, you or your significant other will likely lose your job, maybe both of you, so obviously you should already be planning for such an outcome. Also understand, that if you think it is easy to get another job now and you are not worried, you are living a false reality. In a recession, hundreds of other folks will now want the same available job and the guy that told you to call him anytime you wanted to work for him now does not even take your phone calls.
For the next Jobs Report on 10/4/24, the unemployment rate can be 3.9%, 4.0%, 4.1%, 4.2% and higher, for the US labor recession to continue. The rate would need to drop to 3.8% or lower to nullify the labor recession indicator and instead point towards a steadier growth pattern ahead. With the rate at 4.2% now, remaining in an uptrend, it is hard to imagine that a 3.8% print will occur in 4 weeks; it is very unlikely. It would be a huge 0.4% pullback. It is easier to envision the rate remaining above 4% going forward and actually expand higher.
The tech and semiconductor stocks ran out of gas last week so that is one of the two linchpins faltering. The rich are still spending money but that should lessen going forward. The weak chips, and wealthy folks turning cheap with their spending, will join the somber labor, housing and manufacturing sectors, and all ride that recession Highway to Hell.
Wednesday, September 4, 2024
YC2YR Yield Curve (2-10 Spread) Weekly Chart; Yield Curve Dis-Inverts for 2nd Time in a Month but if You Blinked You Missed It; Inverted H&S; Godot Recession; Yield Curve Dis-Inversions on 8/5/24, 9/4/24, 9/5/24 and 9/6/24; Yield Curve (2-10 Spread) Normalizes on 9/6/24 to +0.06% 1st Close Above Inversion Since 7/1/22
The yield curve/recession predictor saga lingers on like the stink of garbage on a hot August day. Waiting for the recession is like waiting for Godot. It is the Godot Recession. However, some of the mocking of the yield curve as a recession predictor is unwarranted. Typically, as the yield curve dis-inverts, the recession is at hand. A prior chart, linked here, explained the yield curve drama. Every time over the last 2 years when the 2-10 spread started moving higher (less negative), it got smacked back down. This is why the recession has not yet appeared. Also, a recession usually appears 18 to 24 months after the inversion which targeted the December 2023 to July 2024 window, but we are only a couple months right-translated from this target.
The funny thing about a recession is that you do not know you are in one until you are already in it (like stepping in dog sh*t). As the months and year or so play out going forward, data is revised and the economic Einstein's will proclaim that guess what?, remember during the summer and early Fall (now), we were actually in a recession. It will be interesting to see if the economy and markets fall off a cliff going forward.
In the past, as previously explained in the prior housing recession chart, housing and autos dictated a recession. If these two sectors went south, bye-bye, a recession begins. In 2024, these two key market parameters take on a second tier importance overrun by semiconductors, that now rule the entire roost, and the wealth effect, courtesy of the Federal Reserve's money-printing that made the wealthy filthy rich, that is driving big consumer spending by the well-to-do that is keeping the economy afloat.
The elite privileged class and upper middle class sycophants that live in McMansions and service the wealthy, are sitting on huge stock market gains since 2009 wondering why everyone else is so glum? One-half of the consumer spending currently is due to the upper 20% of the population, the have's that control the rigged game. The other 80% (common Americans) are rubbing two nickels together hoping that the Publisher's Clearing House guy shows up at the front door with a big cardboard check.
Anyhoo, the yield curve, the 2-10 spread, inverts in March 2022 but that was short-lived. In late June 2022/early July 2022, the inversion occurs again and it is for real this time. Most folks expected recession in 2023, including Keystone, but alas, the Godot Recession was born.
The yield curve was inverted for over 2 years; it was inverted 26 months to be exact, the longest period in history, until 8/5/24. The yield curve dis-inverted and Keystone got up for a cup of coffee but when he got back it was inverted again. What? Who? Where?
The spread played around at the critical -0.13% resistance level during August, that now serves as support, and the spread makes its way to dis-inversion again. At 10:03 AM EST, the 2-year yield was 3.785% and the 10-year is at 3.787%. Bingo. Old guys say 'bingo' a lot. The yield curve (2-10 spread) dis-inverts to +0.002%; the second dis-inversion in the last month. The 3.78%-3.79% level is where the 2's and 10's meet. It does not last. Blink your eyes and the yield curve is inverted again now negative below zero.
The expectation is that the recession is so close you can taste it. The US is currently in manufacturing, housing and labor recessions but no overall US recession yet since semiconductors, the new most important sector, and the wealth effect spending by the have's, are keeping the economy afloat creating the Godot Recession.
When the spread dis-inverts and normalizes, the first upside target will be the 200-week MA at +0.10%. The long 2-year inversion saga has an inverted head and shoulders (H&S) vibe to it. Thus, with a neckline at -0.13, and head at -1.03, that is 0.90 difference so adding that to the neck is +0.77% as the upside target now that the neckline has given way to the yield moving higher. Interestingly, the 0.77% is resistance and congestion from late 2021 early 2022 and serves as a magnet for the yield curve.
The US Monthly Jobs Report on Friday morning will likely dictate the Fed decision on 9/18/24. If the unemployment rate drops to 4.2% as expected, or lower, the 25-bip is likely, but if the rate jumps higher above 4.3%, the 50-bip cut is likely on the table. Powell may commit to the 25-bips thinking this will be a slow and steady course but that thinking could lead to the ...... policy error....... growth scare..... danger, Will Robinson....... danger ..... because if the economy is actually deteriorating quickly, Powell will have to jump to 50-bip cuts or more and that will signal confusion and market mayhem as traders realize he has lost control of the market ship. The Fed's credibility will be in question.
Powell is trying to play it cool and plans on performing the song "You're So Impatient" by the Pixies at the 9/18/24 meeting for everyone that is in a rush to cut rates. It does appear that if there was a mistake and policy error, it would be likely that the Fed waited too long to cut rates. We will know the answer over the next month or two. Powell may be coming upon his Waterloo if he waited too long to cut rates. 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, 9/5/24, at 5:08 AM EST: The 2-year yield is 3.77% and the 10-year yield is 3.77%. The 2-10 spread (yield curve) sits on top of the zero line not knowing whether to stay inverted or make its way higher and commit to dis-inverting and normalizing.
Note Added Thursday Morning, 9/5/24, at 5:34 AM EST: The 2-year yield is 3.76% and the 10-year yield is 3.76%.
Note Added Thursday Morning, 9/5/24, at 6:20 AM EST: The 2-year yield is 3.768% and the 10-year yield is 3.767%. The yield curve is inverted by a single hair; -0.001%.
Note Added Thursday Morning, 9/5/24, at 8:06 AM EST: The 2-year yield is 3.7600% and the 10-year yield is 3.7627%. Bingo. The yield curve is dis-inverted by three hairs; +0.003%. The yield curve drama continues with three days of dis-inversions occurring over the last month; 8/5/24, 9/4/24 and 9/5/24. The Godot Recession pokes his head up out of the bushes and starts peeking in windows.
Note Added Thursday Morning, 9/5/24, at 8:22 AM EST: The 2-year yield is 3.723% and the 10-year yield is 3.738%. The yield curve is dis-inverted at +0.015%. The ADP Jobs data lays an egg with only 99K jobs versus the 145K expected hinting that the labor market is starting to weaken faster than expected.
Note Added Thursday Morning, 9/5/24, at 8:22 AM EST: The 2-year yield is 3.72% and the 10-year yield is 3.73%. The separation is at one bip now. Houston, we have separation. Houston, we may have a recession problem.
Note Added Thursday Morning, 9/5/24, at 8:22 AM EST: The 2-year yield is 3.73% and the 10-year yield is 3.74%. The Claims data is better than expected with 227K versus the 230K expected. Ride My See-Saw.
Note Added Friday Morning, 9/6/24, at 5:25 AM EST: The 2-year yield is 3.716% and the 10-year yield is 3.704%. The yield curve is inverted by one basis point (0.012%). Will there be a third consecutive day of intraday dis-inversion? The critical US Monthly Jobs Report is on tap in 3 hours. The jobs circus is coming to town. If you listen closely, you can hear the calliope.
Note Added Friday Morning, 9/6/24, at 8:46 AM EST: The 2-year yield is 3.66% and the 10-year yield is 3.69%. The yield curve has dis-inverted, or normalized, to plus 3 basis points the third consecutive day of dis-inversions. The jobs report disappoints on the headline jobs number and with prior revisions, but the rate drops from 4.3% to 4.2% as estimated. Index futures bounce around after the report that has something in it for everyone. Futures say there is a 50/50 chance of a 50-bip cut in 12 days. Check this out. The unemployment rate last month was 4.253% and rounded up to 4.3%. Today's rate is 4.221% rounded down to 4.2% providing the 10 bips of separation but in actuality, the two rates over the last month are only 3 bips, or 0.032%, apart. The wages beat by a tick on the month to month and annually so the inflation folks are waving these numbers in the air proclaiming persistent inflation ahead. Wages are key. That is why it was comical to hear folks clamoring about inflation from 2009 on, when quantitative easing started, but inflation was on a milk carton (missing) for many years. The wages did not go above 4% so you knew inflation was not going to be a problem and it was not. In recent years, however, wages jumped above 4% fueling inflation. The annual wages had fallen back below 4% and this morning's number maintains that trend at 3.8% annual wages. This is not a problematic number for inflation. When annual wages are above 4.0%, that is the time you start to factor in inflationary concerns and if wages tag 4.5%, inflation is guaranteed going forward. We are not in this situation now. This is why the Fed is worried about the labor picture more than inflation. The SPX will probably stagger around 5500-5520 until it decides which side to exit.
Note Added Friday Afternoon, 9/6/24, at 2:40 PM EST: The 2-year yield is 3.65% and the 10-year yield is 3.71%. The yield curve has dis-inverted, or normalized, to plus 6 basis points. The spread ends the week at +0.06% the first close above the zero inversion level since 7/1/22; that's a big deal. The 2-year yield drops to 3.65% the lowest since March 2023 and September 2022. The 10-year yield also drops to 3.65% the lowest since June 2023. Creepy Mister Recession is knocking on the back door and wants your bag of sugar and this time it is No More Mr Nice Guy. Cool, Orianthi was on tour with them then. The consensus is that Powell will stick to the 25-bip cut in 12 days but this may lead to a policy mistake. The next FOMC meeting after 9/17/24-9/18/24 is in November. Thus, if the economy and markets go off a cliff a couple days after the 25-bip cut on 9/18/24, the Fed will have made a policy mistake (they should have likely started the cuts sooner, maybe in July, or go stronger on 9/18/24 with a 50-bip cut). If the economy and markets hang in there this month and through October, Powell will look like a genius with a 25-bip cut. What will be the outcome? Will Powell stick with the 25-bip cut? Can America's have's, made filthy rich by the Fed's obscene decade and a half of money-printing, continue to support the economy and stave off the recession, or will they join the have-not's and opine about the way things used to be while standing in the unemployment line? The stock market tanked yesterday the SPX collapsing 95 points, -1.7%, to 5408 exactly at the 20-week MA support at 5406; time to bounce, or die. The 100-day MA is 5379 and typically acts as interim support when price is dropping.
SPX S&P 500 Daily Chart; Holding at 5500 Support Before the Critical US Monthly Jobs Report
Stocks are uninspired until the jobs report so tomorrow may be another placeholder day. There is other jobs data including Claims tomorrow morning that will provide warm-up entertainment for the big jobs show on Friday morning. Welcome Back My Friends. Come inside, the show's about to start.
The SPX came all the way up to near all-time highs again to fill that gap at the prior top (orange circle). Now the bears become smarter, buttoning-up the price action as she comes off the top this time not leaving any gaps behind (no reason to go back up). There are several gaps below that need filled.
Price falls Tuesday to touch the 50-day MA at 5506 and bounce. Note that the 20-day MA was crossing up through as well creating a triple-confluence at the 5500-5506 area. The SPX comes down again today to test the 50-day MA for the second time, and bounce again, and then end the session at 5520 sitting on the 20-day MA at 5518 and rising.
The signal could not be louder. Take a purple crayon and bite the tip off so it makes a thick line. Keystone likes purple crayons because they taste like grapes. Draw a critical support/resistance (S/R) line at the 5500-5520 range encompasses the 20 and 50-day MA's and the price action over the last couple days. Put simply, bulls win big going forward if they send the SPX above 5520 heading higher. Bears win big if the SPX falls below 5500; there will be Hell to pay.
Tomorrow will not matter too much since the jobs report will be imminent. If the SPX starts dropping like a rock, the 100-day MA at 5372 and rising would be a strong support level for price. The entire US stock market and global markets are riding on the BLS data that is known to be problematic. That's funny. 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 Friday Morning, 9/6/24, at 6:03 AM EST: The SPX fell through 5500 yesterday but regained its footing to close at 5503. The jobs report drops in 2-1/2 hours. The 50-day MA is 5507. S&P futures are weak but none of this matters until 8:31 AM EST. All eyes are on the unemployment rate now at 4.3% and expected to drop to 4.2%. This will usher-in the 25-bip cut on 9/18/24. If the rate jumps higher, the 50-bip cut will be on the table. The jobs circus is back in town including the food trucks and market clowns. If you listen close, you can hear the calliope.
Note Added Friday Morning, 9/6/24, at 8:50 AM EST: The 2-year yield is 3.66% and the 10-year yield is 3.69%. The yield curve has dis-inverted, or normalized, to plus 3 basis points. The jobs report disappoints on the headline jobs number and with prior revisions, but the rate drops from 4.3% to 4.2% as estimated. Index futures bounce around after the report that has something in it for everyone. Futures say there is a 50/50 chance of a 50-bip cut in 12 days. Check this out. The unemployment rate last month was 4.253% and rounded up to 4.3%. Today's rate is 4.221% rounded down to 4.2% providing the 10 bips of separation but in actuality, the two rates over the last month are only 3 bips, or 0.032%, apart. The wages beat by a tick on the month to month and annually so the inflation folks are waving these numbers in the air proclaiming persistent inflation ahead. Wages are key. That is why it was comical to hear folks clamoring about inflation from 2009 on, when quantitative easing started, but inflation was on a milk carton (missing) for many years. The wages did not go above 4% so you knew inflation was not going to be a problem and it was not. In recent years, however, wages jumped above 4% fueling inflation. The annual wages had fallen back below 4% and this morning's number maintains that trend at 3.8% annual wages. This is not a problematic number for inflation. When annual wages are above 4.0%, that is the time you start to factor in inflationary concerns and if wages tag 4.5%, inflation is guaranteed going forward. We are not in this situation now. This is why the Fed is worried about the labor picture more than inflation. The SPX will probably stagger around 5500-5520 until it decides which side to exit.
Note Added Friday Afternoon, 9/6/24, at 2:40 PM EST: The 2-year yield is 3.65% and the 10-year yield is 3.71%. The yield curve has dis-inverted, or normalized, to plus 6 basis points. The spread ends the week at +0.06% the first close above the zero inversion level since 7/1/22; that's a big deal. The 2-year yield drops to 3.65% the lowest since March 2023 and September 2022. The 10-year yield also drops to 3.65% the lowest since June 2023. Creepy Mister Recession is knocking on the back door and wants your bag of sugar and this time it is No More Mr Nice Guy. Cool, Orianthi was touring with them then. The consensus is that Powell will stick to the 25-bip cut in 12 days but this may lead to a policy mistake. The next FOMC meeting after 9/17/24-9/18/24 is in November. Thus, if the economy and markets go off a cliff a couple days after the 25-bip cut on 9/18/24, the Fed will have made a policy mistake (they should have likely started the cuts sooner, maybe in July, or go stronger on 9/18/24 with a 50-bip cut). If the economy and markets hang in there this month and through October, Powell will look like a genius with a 25-bip cut. What will be the outcome? Will Powell stick with the 25-bip cut? Can America's have's, made filthy rich by the Fed's obscene decade and a half of money-printing, continue to support the economy and stave off the recession, or will they join the have-not's and opine about the way things used to be while standing in the unemployment line? The SPX loses the 5500 support. The stock market tanks yesterday the SPX collapsing 95 points, -1.7%, to 5408 exactly at the 20-week MA support at 5406; time to bounce, or die, from this uber important support. The 100-day MA is 5379 and typically acts as interim support when price is dropping.
Keybot the Quant Turns Bearish
The Keystone Speculator's proprietary trading robot, Keybot the Quant, flips bearish yesterday afternoon at SPX 5544. The semiconductors were taken to the shed out back and beaten with a leather strap creating market mayhem.
The quant is tracking RTH 206.25 as the retail stocks bull/bear line in the sand. If RTH 206.25 fails today, the broad US stock market will take another leg lower. If RTH remains above 206.25, stocks will stumble sideways into the crucial US Monthly Jobs Report on Friday morning only 53 hours away.
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