There is a lot going on in the spaghetti above. It is best to start with the most sensational news. The Death Cross. Oh my, hide the women and children. Take cover; it's a death cross! Well, not quite, but it will be tomorrow or Tuesday when the 50-day MA, now at 5760, crosses down through the 200-day MA, now at 5754. The black circle shows the pending death cross that portends bad things for the stock market ahead. Not so fast.
As Keystone has explained many times, stocks typically pop when a death cross occurs, and drop when a golden cross occurs. Huh? What'd he say? For the death cross, it takes many days for the 50-day moving average to roll over and die so by the time the death cross occurs, price is ready to bounce, and at a minimum take a dead-cat bounce. No offense to any cats reading this. The trick to the death cross pattern is that when the expected price bounce occurs as the death cross occurs (now), as long as price remains below the 50-day MA, it will continue to drag it lower, and this will portend bad things ahead for stocks. So keep an eye on it and get ready for wall to wall television and internet headlines promoting the "Death Cross."
The charts show the stock market top on 2/19/25 due to the negative divergence on both the daily and weekly charts. It is not rocket science, and Keystone knows rocket science. When price continues higher, and ALL the chart indicators on the daily and weekly charts are sloping lower (negatively diverging down and away from price that keeps floating higher), a neggie d spankdown is on tap and start of a multi-week down move. Voila. Nuttin' to it.
Stocks continue lower for 8 weeks playing-out the multi-week smackdown so now you wait for positive divergence to form to call the bottom in the various timeframes. The matching or lower low in price occurs on the daily chart and you can easily see that all the indicators were possie d (green lines). The RSI and stochastics were also oversold agreeable to a bounce. Voila; the bounce occurs as King Donnie balks on his tariff drama sending stocks higher. The combination of short-covering, ongoing stock market complacency and euphoria wanting to buy the dips, the possie d, and Trump balking, create the huge up day.
The stoch's and MACD on the daily chart are long and strong wanting price to make higher highs in the daily time frame although the RSI and money flow are flattish and soggy not so convinced the upside is that strong ahead. Note that on the weekly chart, the RSI, histogram, stochastics and money flow were possie d joining the bullishness on the daily chart to create the upside relief rally orgy last week.
The orange circle on the daily chart show a juicy gap that needs buttoned-up if the bears want to take things far lower. The lower standard deviation band was violated so the middle band at 5517, and falling, is on the table. This is inside the orange gap so that is shaping up to be the potential top of the rally run. King Donnie buckled again on the weekend now exempting smartphones and other electronics from the Trump Trade and Tariff Wars. Idiot. That may create another big rally and the daily chart is agreeable to some more upside say to 5500-5600 to fill the orange gap and then set-up neggie d.
The daily chart shows the megaphone pattern, or expansion pattern, or megaphone expansion pattern if you prefer, and it has lots of price touches on the top and bottom rails. If price continues higher with the relief rally, the 5500-5600 area would provide another nice top-side touch of the megaphone that could usher-in the next move lower. Comically, the drop lower from there is a doozy (SPX 4000-4600). It is something to respect and keep an eye on.
On the weekly chart, the chart indicators are agreeable to price beginning a multi-week up move, sans the MACD that remains weak and bleak wanting to see a lower low in price on the weekly basis. The MACD is telling you that the downside is not done on the weekly basis. Sure, the upside rally may continue, especially with Trump retreating from his asinine tariff nonsense each day, and nullify the negativity still desired on the weekly basis. This will likely come to light in the days and couple weeks ahead. Simply watch the charts develop.
The 200-wk MA at 4680-ish should be shown respect going forward and that hints the bottom rail of the megaphone pattern may be in our future in the months ahead.
The Aroon is comical. The red line shows that 100% of the bears remain bearish on the stock market. No surprise, right? The green line, however, shows that nearly all the bulls still remain bullish on the stock market. That is hilarious. It is as if the selloff so far has not even happened. Traders and investors remain as bullish as ever and champing at bit to buy any dip. It smells like a major top and we have only felt the first wave lower.
In addition, the CPC and CPCE put/call ratios have plummeted again, further verifying the ongoing uber complacency and fearlessness in the stock market. Despite the daily Donnie reality television drama and stock collapsing, everyone is whistling past the graveyard singing songs and having a good time fully expecting the stock market to recover all losses and catapult skyward. What are they smoking? Keystone would like some of that stuff, it makes you see things.
So what does all this windbag technical analysis mean? It sounds like a lot of voodoo, and smoke and mirrors, or astrology. Isn't that what everyone says--until there is a big selloff and then every jackal becomes a chart technician?
The relief rally likely has legs, especially with King Donnie, donning his paper crown that he got with his Burger King happy meal, retreating on the tariff fiasco. The topside target is to fill the orange gap, tap the top rail of the megaphone and likely overshoot, tag the middle band and 20-day MA at 5517 and dropping, and to test the price congestion from March at the 5600-ish level.
From there, and if/when price makes the higher high on the daily basis (thin red line), you can assess if the chart indicators are neggie d to call the top on the daily basis, or if price needs to float higher a while longer. After the move up to 5500-5650, the downside would be expected to reexert itself and the SPX likely wants the lower lows on the weekly chart due to the weak and bleak MACD line. That will open the door for price to drop to 4600-ish or lower to tag the lower rail of the megaphone, perhaps by July 4th. There will be fireworks.
The weekly chart is clearly oversold and everyone and his brother wants to call a bottom but the weak and bleak MACD tells you to cool your jets. Remember one important fact about technical analysis. Stocks crash from oversold levels not from overbot levels!!
Keystone is not long or short the indexes right now after enjoying the long ride down after the top call and the relief rally back up. From the set-up above, and if nimble, or a day-trader, you can likely chase the upside (depending if there is a big pop on Monday due to Donnie's tariff retreat), if you want to try and ride price up to that 5600-ish. There should be a couple hundo points of upside there.
Keystone does not plan on chasing the long side right now. It is spring time and there is lots of ongoing outside work getting the flower beds and property cleaned-up after winter. Mowing will begin soon. The low put/calls keep you away from chasing the upside since at any moment, a wild and nasty reversal is likely sending stocks lower to satisfy the weak and bleak MACD on the weekly basis. These scenarios may happen quickly this week with price popping 2 or 3 hundo points early in the week, and then falling on its sword again as the dip-buyers turn into sucka's, again.
Going forward, Keystone will not play the long side but instead watch the charts develop and build-up a nice short position again. Watch the 2-hour chart to time the top when it occurs. If a huge pop occurs, Keystone will likely start shorting again and then build that short position larger as the potential top at 5500-5600-ish occurs. Get ready for the death cross headlines this week. Watch the charts; they will dictate the decisions. It is not rocket science. Ground control to Major Tom. 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 7:21 PM EST: S&P futures pop +60 points when they came on line but King Donnie is backpedaling from the electronics exemptions after backpedaling from his hardline tariff stance. It is a confusing and chaotic mess orchestrated by Captain Chaos himself, Donnie Trump. It is reminiscent of the pandemic mess. Trump is a poor manager. S&P futures retreat to +20. Japan says they will not use US treasuries as a tool for the Trump Trade and Tariff War (the worry is that Japan would sell US treasury holdings increasing supply, decreasing price, increasing yield; this almost got out of control last week; communist China will likely play games with their US debt because they have no other cards to play except starting a war). S&P futures remain buoyant up +35 points on the Japan news. Donnie Trump is negotiating with himself and his tariff bluster seems to have peaked and is headed in reverse, thus, futures ramp higher. We need some Sue to get us in a groove; hanging out in a blues bar, the Ice Queen performing Queen Bee; what a talent.
Note Added 8:36 PM EST: S&P futures are up +45 points despite Donnie trying to reverse the rhetoric concerning electronics exemptions. It is confusion so traders figure the orange head will loosen-up tariffs so stocks rally. It is the Sabbath so we must enjoy Black Sabbath; Paranoid, before Ozzie fried his brain on drugs.
Note Added Monday Morning, 4/14/25, at 5:10 AM EST: S&P futures are up +85 points choosing to believe that the relaxation of tariffs on electronics will be eased despite King Donnie saying that news on exemptions was a mistake, the tariffs are moving from one bucket to the next, and the electronics tariffs are coming. Whozitt? Whatzitt? The tariff drama is a joke like communist China proclaims. Obviously, Trump is clueless making it up as he goes along. The stock market will rally if it thinks Donnie is backing-down away from the tariff drama. For now, the above analysis and forward scenario is playing out. Watch the SPX daily and 2-hour charts to see when the tops are going to occur in those time frames since it may be the start of the next big slide downwards.
Note Added Tuesday Morning, 4/15/25, at 2:36 AM EST: The death cross occurs yesterday so the headline writers will have an easy day today. The SPX rallies to 5406 with a HOD at 5459 and 20-day MA at 5504. King Donnie retreats again with the tariff garbage, now talking tariff carve-outs for the automobile industry. Dufus. Why is the orange head putting on tariffs destroying the global economy, and bringing on Great Depression redux, when he keeps watering-down his initial bravado? Because Hollywood Donnie wants the cameras and attention on him every day all day long. Donnie creates daily drama so you must tune-in tomorrow for the next episode of the Trump reality television show, season 2, that is, if you want to waste your time in life.
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