After Keystone has explained the topping process the last couple posts, the SPX daily chart has finally arrived at the neggie d top. The uber multi-year low CPC and CPCE put/calls signal rampant complacency and fearlessness in the stock market and, just like the March downdraft, traders and investors must pay for their uber bullish optimism by losing their Money.
The Aroon green line shows that every single bull in the stock market, 100%, believe that stocks will continue higher forever. Humorously, the red line down at 12% shows that nearly all the bears also believe that stocks will go up forever. The Aroon directly verifies the ridiculous positive sentiment in the put/calls.
As previously mentioned, the SPX can run a couple hundo points higher after the low put/calls and it may take a week or two to top out (unlike years ago where a top would occur days after the low put/calls). Honey, we're home.
As also previously explained, Keystone's 80/20 Rule says 8's lead to 2's on the way up and 2's lead to 8's on the way down, so the breach of SPX 6800 on the way up was key since it opened the door to 7200. It was a twisted path with the March swoon in the middle but it got there. Price is at 7209 so 7208 was breached so 7212 will likely print. If 7218 is tagged, 7220 is next and if 7228 is attained, that will likely lead to 7232.
The daily chart above is finally topped out with full neggie d across all indicators (red lines) so the 7220-7230 area is a logical place from which the stock market will start its down move on the daily basis. You had to wait for the SPX daily chart to top out with negative divergence and the pesky MACD line was not cooperating. The kittens are finally herded and price is topped out now with neggie d and a down move on the daily basis should begin. The only thing that can stop it would be happy talk such as the Iran War ending or the Strait of Hormuz opening or other such rosy words.
Focus on the MACD line. It is definitely sloping down as price printed another high locking in neggie d but you have to give it a day or so to make sure. The MACD line is flat as a newlywed's souffle so it would not take much for the bulls to try and jam price higher to boost the MACD a tiny bit for a matching or higher high. This would extend the top but only by a day or two. If the MACD line remains sloping down, the top is in on the daily basis. The Keystone Speculator is the Father of Divergence Trading.
The upper standard deviation band was violated so the middle band, that is also the 20-day MA at 6976 rising sharply, is on the table as well as the lower band at 6579 rising sharply. The volume was robust yesterday. Bobby Bagholder, Savita Sucker, Freddie Fool, Carmelita Retail and Antoine Sixpack could not buy shares fast enough. The two blue circles show distribution days where the so-called smart money is dumping shares on the dumb money idiots listed above. Are you ready to hold the bag? It is fun watching the human reactions especially when they are losing their shirts.
You have been patient waiting for the top to form on the daily basis and it is now topped out with neggie d. Plan accordingly. The SPX 2-hour chart remains in neggie d, however, it is feeling the thrust from yesterday, so it may take a few hours today for the neggie d negativity to soak into everyone's bones. Plan your trading today and next week knowing that a historic Black Monday or Black Tuesday may occur next week. These set-ups have been occurring, like last week, but the happy talk has been delaying the inevitable. Of course if negative news occur, it will act as an accelerator and catalyst for the downside.
AI will likely not live up to the hype in the near-term; it is something that will need to grow and find its way over the next 4 to 8 years before companies likely see a benefit. They tell you AI is increasing productivity now, but that is because they are using it as an excuse to get rid of the dead wood, then take their tasks and dump them on the remaining employees. There's your efficiency. Make sure you tell your kid that you cannot go to their big soccer game because you are kissing the boss's arse. Is this your life? Pity you. Cats in the Cradle.
Today, May Day, is Mexico's Labor Day. How come they celebrate labor by taking a siesta? They have to rest-up for the Cinco de Mayo parties in 4 days. Since there are many cockroaches in the markets now that are starting to show themselves as the lights are turned on, it is only fitting to sing La Cucaracha. Keystone was handed a "SPX 7.2K" hat but gave it to Carmelita. 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 8:20 AM EST: Iran War happy talk occurs so S&P futures pop +22 points as oil prices and volatility drops. It is a minor blip. Are traders getting sick of the Iran War baby games?
