The stock market continues chopping along in the sideways slop. However, the broad NYA index has taken the pipe over the last 6 weeks falling from 24867 to 23760, a 1107 point drop, -4.5%, and ending the week at 23913. No one notices since they are too busy buying stocks.
The red rising wedge pattern is bearish and ominous since price is dancing at the bottom rail. It is time to bounce or die. The collapses from rising wedges can be quite dramatic.
The top was an easy call due to the rising wedge, overbot conditions (RSI, stochastics, money flow) and of course, the main reason, neggie d. The red lines show how price made the higher highs in August so the chart indicators can be assessed for negative divergence. ALL the chart indicators were in negative divergence in August (sloping down while price is sloping higher) confirming that NYA was completely out of gas and a top on the weekly basis is in place. Price had no further strength to move higher. Thus, it was time to receive the neggie d spankdown and begin a multi-week pullback.
The Keystone Speculator is the Father of Divergence Trading that is the art, and science, of calling tops and bottoms in the markets.
The fun begins and continues for 6 weeks with price receiving the smackdown and the chart indicators remain weak and bleak wanting to see more lows in price in the weeks ahead even if price will stage a relief rally for a week or two. The stochastics are about to go sub 50 into bear territory. Ditto the RSI.
The chart is ugly but no one wants an ugly face on a Saturday night. Won't you come out tonight, babe? I'd love to see your face. Jesse Welles. The pink boxes for the ADX show that the NYA was in a strong trend higher to begin the year but that fell apart during the stock market selloff. After many months, the ADX once again started to indicate that the trend higher was strong but alas, it rolls over and dies now down to sub 25 indicating that the move higher into August is no longer a strong trend higher.
The Aroon is a hoot. As the summer started, the bears tried to flex their weight, but they were stuffed by the historic bullish euphoria and stock market complacency, and belief in all things AI. The Aroon green line remains oversold so basically all the bulls remain bullish the stock market even after the 6-week -5% pullback. It does not even phase the bulls. They call it a buying opportunity. The funny part is the red line at zero. The bears are totally dejected and given up all hope that stocks will ever go down. There are no bears remaining on Wall Street only various stages of bullishness. The bears have completely given up. That is hilarious. Even funnier than all the bears remaining completely bullish on stocks, the bears are also more bullish on stocks than the bulls. Funny stuff. What do you think is going to happen going forward, idiots? But Keystone, the guy on television said buy, buy, buy.
All of the above doom and gloom aside, let's get down to business. The blue line is the 40-week MA one of Keystone's major market metrics that determine a cyclical bull versus bear market. Note that earlier this year when stocks were falling apart, they bounced from this critical test level. The 40-week MA is at 23313 and this will drift a bit lower as price slumps down for a potential test of this critical support. If the NYA fails at 23300, that is when you realize that you screwed-up by holding on to all your long stocks. You will be bludgeoned and wearing a barrel.
You know what to watch. First, see if the wedge failure occurs, if so, price will likely collapse sharply lower perhaps to immediately test the 40-week. If the 40 fails, it is lights out for the stock market for many weeks and months forward. Let the festivities begin.
Price is at 23913 and the drop to 23300 is 613 points so 613 divided by 23913 is 0.0256 and multiply by a hundo to make it a percentage is a -2.6% from here where it would all be on the line at the 40-week MA and determine the fate of the stock market for the remainder of the year. Watch it closely. The bulls are riding along the happy trail singing hallelujah and celebrating stocks, even with the -5% drawdown, but the wheels are wobbly and starting to fall off the party wagon. Hallelujah Trail by Charley Crockett. 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.
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