SPX 30-Minute Chart 8/34 MA Cross

The 8 MA stabbed down through the 34 MA signaling bearish markets for the hours ahead. Will Lucy pull the football away from Charlie Brown the bear again? As seen from the negative cross back on 11/19/13, the bulls quickly reversed the negativity in a couple day's time. This has occurred over and over in recent months so if the bears can maintain the negative cross for more than 2 days, it would be a revelation. The pink circles show how the bears attempted 5 times to drive markets lower but the bulls would not allow the negative cross. Uncle Bernanke is always there to pay the markets off and send them higher. Today is a double Fed POMO pump day which is a happy wild card for bulls.

The red lines show the negative divergence spank down that created the top during the Friday shortened session. The indicators are all weak and bleak wanting to print lower prices even after a bounce occurs. Since this chart is 30-minute candlesticks, the anticipation would be at least 2 to 4 more candlesticks of time needed before any positive divergence should develop so equities may remain weak for the next couple hours, followed by some afternoon buoyancy that will shed more light on the direction forward. For now, the bears are driving the bus. 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.

XLF Financials Weekly and Daily Charts Overbot Rising Wedges Negative Divergence

Financials are key nowadays since they will lead the way higher if equities do intend to move higher. Traders are tripping over each other to buy the banks all firmly convinced that financials will lead the bull parade. The Fed has the 2-year yield anchored at 0.29% due to their monetary policies so when the 10-year yield creeps higher, increasing the 2-10 spread, steepening the yield curve, traders salivate at profitable banks ahead. With everyone believing that the QE tapering announcement will create a catapult higher in yields, traders believe banks are a great investment due to a steepened yield curve moving forward. Keystone's prior articles highlight the 255 basis point 2-10 spread number as a signal for happy banks. With the 10-year at 2.80%, and 2-year at 0.30%, that is 250 basis points for the 2-10 spread, close but not yet a cigar to signal happy financials ahead. The jury remains out concerning the financials trade. Those buying banks over the last few weeks may regret the move.

The charts were posted a couple weeks ago and were open to some additional upside. A jog move was anticipated, up, down, up, down, on the weekly chart (short green lines), which has played out with a stronger up move rather than the jog, as traders become more and more bullish each day on banks and need to push all the Fed's easy money somewhere. The weekly chart is now negatively diverged across the multi-month and near-term time frames with the lone exception of the short-term money flow that has a tiny bit more of bull juice. Price is extended above the moving averages in both the daily and weekly time frames (pink dots) requiring a mean reversion (lower prices). On the daily chart, the MACD line and money flow had more bull juice to punch out the high yesterday but this appears played out with universal negative divergence now in place on the daily chart (red lines).

The 21 level was holding as a ceiling until a couple weeks ago so credit to the bulls to push financials higher. Traders are riding momo right now since everyone is telling each other how smart they are to be moving into financials. The charts forecast a roll over to the downside as time moves along. Projection is for lower prices for the days and weeks ahead. The move in XLF will key off of the 10-year Treasury yield. If the yield, now at 2.80%-ish, moves higher, the bull frenzy will increase since it will reinforce the long side argument about a steeper yield curve and happy banks. If yield moves flat or lower, however, and the 2-10 spread remains under 255 or lower, banks will have no advantage since the yield curve will not be steep enough, and instead the chart weakness will take over and send the XLF lower. The impact of lower financials on the broad market will be significant since the entire bull argument moving forward is based on happy bank and financial stocks leading the way. If there is no leader, equities will appear exhausted, and the much-awaited more significant market correction would be firmly on the table. 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.

RUT Russell 2000 Small Caps Daily Chart Bull Flags Upward-Sloping Channel Overbot Negative Divergence Price Extended

The RUT is pumped higher this year from the upside orgy in the biotech spec stocks. Thus, weakness in biotech will indicate weakness in the RUT moving forward. The brown upward-sloping channel is in play with price tagging the top rail and receiving a spank down from the negative divergence (red lines). The chart indicators show a loss of upside oomph in July-August but price continued higher on the momo. Price respected the bull flags on the way up (blue, purple and maroon). The last bull flag pattern (maroon) shows leg one from 1050 to 1125, 75 handles, then the sideways consolidation flag with a drift lower in price, textbook bull flag behavior, and the second leg begins at 1075 that targets 1150, achieved.

The pink dots show the price extensions above the moving averages that always result in mean reversions at least back to the 20-day MA, now at 1113, and perhaps the 50-day MA, now at 1099. Price has not back kissed the 200-day MA at 1014 for one year's time, unprecedented behavior. This is all due the Fed, BOJ and other central bankers printing money to keep the stock markets elevated. No one can hold back the ocean forever. Price will want to tag the 200-day MA moving forward, perhaps on the next down move. In addition, price will need to spend time under the 200-day MA to match the time spent above the 200-day MA. Projection is lower prices moving forward with lower targets at 1113, 1099, 1078 (lower channel rail) and 1014. Of course the moving averages and channel line are all sloping upwards so these targets will slightly increase as each day passes. The market bears should have their day moving forward. 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.

VIX Volatility Daily Chart

Volatility was the big story yesterday that the main stream media missed. VIX is up from 12.2 to 14.2 in 5 days, +16%. The thick red line highlights the 13.94 level, identified by Keystone's trading algo, Keybot the Quant. This is a bull-bear line in the sand and the equity weakness yesterday afternoon began when VIX moved above 13.94. The VIX moves higher with equities moving lower and volatility moves lower as markets move higher. The higher the VIX, the more fear and panic enters markets, while a lower VIX reflects complacency and a rising stock market. Equities should continue lower moving forward as long as the VIX stays above 13.94.

A level and signal anyone can watch is the VIX 200-day MA. Market bulls are drinking wine enjoying bullish markets as long as the VIX is under the 200-day MA. The market bears steal the booze bottle and send markets lower when VIX moves above the 200-day MA. The green circles show the go-signals for market bulls while the red circles show the go-signals for market bears. The HOD yesterday is 14.31 six pennies shy of the 200-day MA at 14.37 so the bears have the champagne in the frige but have not yet popped the corks; they need 14 pennies higher today and then the bear celebration can begin in earnest. The indicators show the positive divergence bottoms and are all now long and strong indicating a desire for higher VIX prints even after any pull back in the VIX would occur. This chart is very friendly for those bearish the markets. Today is a big day. Watch 13.94 and 14.37 for signals on market direction. 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.

TNX 10-Year Treasury Note Yield Daily Chart Sideways Channel Negative Divergence Inverted H&S

The 10-year yield is monitored more closely these days than the ladies on the beach in summertime. Yield tags 2.80% with many traders continuing to believe in the QE tapering bond-smashing move coming where yields will jump violently higher. Keystone continues to not ride on this band wagon and instead expects sideways Treasury yields for months, perhaps years, forward. The red rising wedge, overbot conditions and negative divergence spanks yield down from the 3% top 3 months ago. Then the yields pop off the bottom with the green positive divergence and oversold stochastics, however, the RSI never became oversold making the bottom in yields a bit cheesy one month ago. 2 weeks ago the chart shows how yield printed a higher number but the indicators were negatively diverged creating the spank down. Yield recovers again in recent days to print the 2.80% now and the indicators remain negatively diverged, so a flattening of yields and sideways stumble is anticipated moving forward.

The light blue lines show an inverted H&S pattern. Keystone prefers to only use the inverted H&S's after a stock or index has sold off substantially not when the chart is elevated like this one. Nonetheless, the pattern is highlighted with head at 2.5% and neck line at 2.8% which would target 3.1% if yield does punch higher above 2.8% over the next few days. The brown lines show an ongoing sideways channel through 2.5%-3.0% for the last 6 months. Projection is for yields to simply stagger sideways going forward. Traders expect an explosion higher once the QE tapering is announced, however, this scenario is the grand consensus, even the paper boy this morning said that is what he expects. No one entertains the thought that the central bankers obscene actions may actually become exposed as no longer helpful and in fact hurtful moving forward.

There is universal consensus that the stock market will move higher until QE tapering begins and at that point the yields will leap higher and stocks will drop. This is why the equity markets remain elevated currently, purely liquidity-driven by the central bankers, and traders are completely trained like Pavlov's dog to stay long equities until the QE tapering is confirmed. The consensus is typically wrong. Perhaps yields move sideways for the foreseeable future as the central bankers continue the money-printing programs indefinitely since they have no other choice (they would have to admit failure otherwise). At an important market juncture like now, where equities may be printing a multi-year top, watch out for the geopolitical event out of left field. A negative global event would cause traders to run to Treasuries as a safe haven thereby keeping yields low as well. 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.

NYMO McClellan Oscillator Daily Chart

We started watching this sideways triangle on the NYMO a couple weeks ago. When price moves above the zero line the bulls are happy moving forward and when price drops below zero the bears are happy. When the NYMO reaches +60, +80, +100 and higher, the markets are topping out. When the NYMO reaches -60, -80, -100 and lower, the markets are bottoming. The red squares show where the broad indexes topped out; the green squares show where the markets bottomed. For the last month, the NYMO staggers sideways but interestingly, equities run strongly higher. The last worthwhile signal was the sell signal in late October so this hints that the SPX price may want to visit the 1740-1780 area to sort things out.

The break from the pink triangle is key and identifies the winner moving forward. Bulls need the NYMO to move back above zero and then above +20 to signal blue skies ahead for markets. The bears already have the sub zero reading in their favor and only need a drop under -20, a handful of points away, to lock in a downside move for equities. 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.

Keystone's Morning Wake-Up and Midday Market Action 12/2/13; Cyber Monday; ISM

The Black Friday retail sales are off -13% compared to last year and the weakest sales since the Fall 2008 market crash. If you combine Thursday and Friday, retail sales are +2% compared to last year. This hints that the folks that continue to suffer through structural unemployment ran out on Thanksgiving to grab bargains to help the family budget. The wealthy are not concerned about sales since Chairman Bernanke's obscene QE money-printing has made the rich richer as well as making the too-big-to-fail banks even bigger. Retailers are likely pulling sales forward and the heavy discounting will pull down margins. Retail stocks typically top right now each year; the first week of December. There are only 22 shopping days remaining before Christmas. Today is Cyber Monday the busiest Internet shopping day of the year. The dollar/yen is 102.75 this morning so the stock markets remain elevated although the price is more due to a stronger dollar than weaker yen. The weaker yen has fueled the stock market move higher over the last month.

Bulls need UTIL 491 and JJC 39.75 to finally confirm sustainable market upside, however, the 10-year yield jumps to 2.80%, which should cause utes to drop, and copper is lower in early trading. Bears need UTIL 483 and VIX 13.89 to start the market downside. If UTIL moves under 483 (a market trap-door) and VIX moves above 13.89, the markets will be selling off in force. If all 4 parameters remain as is, markets will stagger sideways. For the SPX starting at 1806, the bulls need to touch 1814 today to send the SPX to the 1820's in quick order. The bears need to push under 1804, only 2 points lower to accelerate the downside. A move through 1805-1813 today is sideways action. Key support below is 1807-1808, 1803, 1798-1799, 1796 and 1791. December begins at 1805.81 so write this number down for reference this month. New money typically enters the markets the first few days of the month, however, the new moon occurs today and markets are typically bearish through the new moon. The month of December is typically up about 80% of the time since the 1940's.

China PMI's continue to show expansion, albeit slightly, call it perceived stability. European PMI's all show improvement. The central banker money printing is doing its job. Construction Spending and ISM Mfg Index at 10 AM will create a market pivot point. The 8 MA remains above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Bears got nothing until they receive the negative 8/34 cross. Watch UTIL 491, 483, JJC 39.75, VIX 13.89 and SPX 1814 and 1804 to determine market direction. Bulls need higher utilities and copper while bears need lower utilities and higher volatility.

Note Added 12:57 PM: The bears made a push but did not eat enough Wheaties for breakfast. Note how UTIL came down to tease the trap-door at 483, and bounced. VIX printed above 14 above the bull-bear line in the sand at 13.94 (use this instead of 13.89) providing the bears a go signal but alas, volatility is pushed lower to VIX 13.79, as well as the TRIN, now down to 0.65, to create the lift. The Fed is pumping and of course, Banzai!!! The dollar/yen moves above 103 to 103.07 with the weaker yen counteracting any bearishness today creating the market lift and recovery. DXJ is up +0.6%. Look at the fight on the SPX 30-minute chart; the 8 MA stabbed down through the 34 MA signaling bearish markets ahead, however, the bulls are running higher courtesy of Uncle Banzai, and are about to send the 8 MA back above the 34 MA. This drama may continue moving forward. If the SPX drops sharply within the next hour that will show that the bears do mean business after all. The SPX ran up to the 1807-1808 resistance and broke through so a test of 1813-1814 is not unreasonable today. The HOD is 1810.02. UTIL is non-committal remaining between 491 and 483. The bulls need UTIL 491 and/or GTX 4806 to receive strong upside market fuel. The bears need UTIL 483, the market trap-door, and/or VIX above 13.94 to receive strong downside market fuel. The 10-year yield remains elevated above 2.80% so this makes it difficult for bulls to move utes higher. Gold and gold miners are bludgeoned today but remain attractive on the long side. Miners should be a success story for 2014. Much of the gold and miner selling is likely tax loss selling. Traders are taking profits on the big gains this year in equities and throwing these overboard to offset the gains. The band plays on.

Note Added 3:27 PM:  VIX 13.96; can the bears hold it this time? UTIL 485.33 only 2 points above the trap-door. GTX drops to 4766. Equities hang on floating sideways. Bears have it on a silver platter only needing to keep VIX above 13.94 and push UTIL under 483 and there would be nothing but downside ahead. Surprise, surprise, the 8 MA remains under the 34 MA on the 30-minute chart signaling bearish markets for the hours ahead. Dollar/yen is 103.06 losing some gas from the 103.10+ levels, hence, a stronger yen, and some of the air deflates out of equities. TRIN 0.78.

Note Added 3:33 PM:  VIX 14.10. UTIL 485.22. TRIN 0.80 moving up. Your chance is here bears; stab the utilities 2 more points and you will receive the much-awaited market downside.

SPX Monthly Chart Overbot Rising Wedge Negative Divergence

The bulls keep running higher fueled by the Fed and BOJ easy money. The monthly charts receive a new print last Friday. Note how the RSI squeezed out a slightly higher high as compared to 3 months ago. The MACD line is also showing long and strong behavior. The remainder of the chart says down. Negative divergence exists across all indicators comparing the current top to the 2007 top, sans the MACD line. The shorter term behavior is also negatively diverged except for the RSI and MACD line mentioned. This behavior hints at a jog move to top the markets off. The red rising wedge, overbot stochastics and elevated MACD are all negatives. Note the cheesy bottom in 2009 that did not occur due to positive divergence (except for money flow) but instead due to the Fed refusing to allow capitalism to do its work announcing QE1 for the sole purpose to save the stock market. This leaves unfinished business for some point in the future. The Fed has pumped the stock market for nearly 5 years. This 4-1/2 year plus rally is one of the longest in stock market history.

The last couple months push higher is a result of the Yellen dove rally as she skates through the nomination as the new Fed Chief. Then 2 or 3 Fed members walk to the microphones on a daily basis making dovish comments to further pump the stock market. Then, to complete the trifecta, the BOJ is bludgeoning the yen again, sending the dollar/yen up through 100, 101, 102 and today moving towards 103. The weaker yen keeps the Japan and U.S. stock markets elevated. Moving forward, a market top would be expected with a potential jog move ahead; down for December, then back up in January and then roll over to the downside creating a market top moving forward. This action would allow the RSI and MACD line to negatively diverge in the short term and lock in the downside moving forward. This timing would also coincide with the potential for QE tapering to begin in early 2014. 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.

SPX Support, Resistance (S/R), Moving Averages and Other Key Levels for Trading the Week of 12/2/13

SPX support, resistance (S/R), moving averages and other important levels are provided for trading the week of 12/2/13. The bulls keep running higher fueled by the central bankers. The SPX prints another intraday all-time high at 1813.55 on Friday but not a new closing high; the all-time closing high is 1807.23. Key support below is 1807-1808, 1803, 1798-1799, 1796 and 1791. December begins at 1805.81 so write this number down for reference this month.

For Monday, 12/2/13, starting at 1806, the bulls need to touch the 1814 handle and the 1820's will occur in quick order. The bears need to push under 1804, only 2 points lower, to accelerate the down side. A move through 1805-1813 is sideways action. S&P futures are flat at this writing about 3 hours before the opening bell. A strong support gauntlet is formed at 1798-1801 so bulls will be content all week if they stay above this level but bears will growl if this level gives way.

1814 (11/29/13 All-Time Intraday High: 1813.55) (11/29/13 Intraday HOD for 2013: 1813.55)

1813.55 Previous Week’s High

1813.55 Friday HOD

1809

1808

1807 (11/27/13 All-Time Closing High: 1807.23) (11/27/13 Closing High for 2013: 1807.23)

1805.81 Friday Close – Monday Starts Here

1805.81 December Begins Here

1805

1803.98 Friday LOD

1803

1802

1800.58 Previous Week’s Low

1799 (11/18/13 Market Top: 1798.82)

1798 (11/15/13 Market Closing Top: 1798.18)

1797

1796

1791

1788

1783.54 (20-day MA)

1782

1775 (10/30/13 Market Top: 1775.22)

1772.42 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)

1772 (10/29/13 Market Closing Top: 1771.95)

1770

1768

1763

1762

1759

1756

1752

1747

1745

1742.11 (50-day MA)

1737

1736

1733

1730 (9/19/13 Market Top: 1729.86)

1726 (9/18/13 Market Closing Top: 1725.52)

1722

1720

1716.05 (20-week MA)

1710.06 (100-day MA)

1710 (8/2/13 Market Top: 1709.67)

1708

1706

1703

1700

1698

1697

1696

1693

1692

1691

1689

1688

1687 (5/22/13 Intraday High Top: 1687.18)

1686

1685

1683.18 (150-day MA; the Slope is a Keystone Cyclical Signal)

1683

1682

1680

1675

1672

1669 (5/21/13 Closing Top: 1669.16)

1666

1664

1661

1659

1657

1652

1650.24 (200-day MA; not seen for 1 year extremely odd behavior)

1650

1649

1648.11 (10-month MA; a major market warning signal)

1647

1646

1640

1639

1636

1634

1629

1627

1626

1624

1623.20 (50-week MA)

1623

1618

1617.11 (12-month MA; a Keystone Cyclical Signal) (the cliff)

1614

1611

1609

1607

1606

1605

1600

1598

Keystone's December Seasonality Factors for Trading the Markets

The turkey leftovers are long gone as the aroma of freshly baked Christmas cookies fills the air. The December winds are blowing now with only four weeks of trading remaining in 2013; 21 trading days with markets closed on Wednesday, 12/25/13, for the Christmas holiday.  Markets close early on Christmas Eve, Tuesday, 12/24/13, at 1 PM EST. The markets are typically up 1.4% for December. This is the best month for the SPX (S&P 500), INDU (Dow Industrials) and RUT (Russell 2000 Small Caps). Markets have been up in December 80% of the time since the 1940's.

The largest market gains for the year occur between November and April with December the second month of this six month period.  Money managers typically put money to work starting November and that is obviously the case this year. Everyone believes in the power of the Fed's unlimited QE Infinity. The fourth quarter (Oct-Dec) of the year typically returns 4.3% for the markets. The SPX started October at about 1680, thus, now at 1806, is a +7.5% jump higher in the last 2 months, already blowing past the expected 4.3% gain for Q4. If the SPX finishes at the average +4.3% for Q4, the SPX would have to drop about 50 or 60 handles in December to 1750-ish.

The trading pre-holiday is typically bullish so keep this in mind for 12/20/13 thru 12/24/13.  OpEx Friday is 12/20/13 and is typically an up day. The markets are typically bullish from the Tuesday into the Wednesday of OpEx week so watch for some market buoyancy from a low on 12/17/13 to a high on 12/18/13. On the Monday after OpEx Friday, markets tend to move in the opposite direction as compared to the OpEx Friday direction.

Markets tend to be bearish when Congress is in session and with the ongoing fiscal cliff drama playing out in Washington D.C., this is a market negative. Congress has committed to providing a detailed road map to solve the budget crisis by 12/13/13. The FOMC meets on 12/17/13 and 12/18/13. Chairman Bernanke will conduct a press conference and take Q and A on 12/18/13 so this is a major inflection day this month. The ECB Rate Decision and Press Conference is Thursday, 12/5/13, and will move markets. A further rate cut would weaken the euro and equity markets should trail lower. Technology and biotech are strong sectors during Q4 but with the stellar year already on the books, further strength is questionable.  Window dressing will play a role during the final few days of this month, between Christmas and the New Year.

Retail stocks typically peak on December 1st. You will hear lots of talk about a Santa Claus Rally. This typically occurs in and around Christmas, especially between Christmas and New Years and a week or so into the New Year, so keep an eye out for market buoyancy in this period. Markets are up about 75% of the time between Christmas and New Years with about a 1% positive move. An old adage on Wall Street is that "if the Santa Claus Rally fails to call, there's a breakdown at Broad and Wall." In other words, the markets have an underlying problem if the Santa Claus rally does not occur.

The largest amount of tax loss selling occurs during the first week of December, since traders can buy the issue back in early January and avoid the wash sale rules, so some market weakness tends to appear. This year the selling of gold and gold miners is likely due to tax loss selling as traders seek to offset the equity market gains with losses. This behavior hints that gold and the miners should bottom and recover into 2014. The dollar tends to sell off at the end of the year and tends to strengthen in the New Year. Buying oil just before Christmas and selling the first week of January tends to work as a trade.  The last trading day of the year, EOY, 12/31/13, is up about 80% of the time. The last two days of the year tend to be flat overall. Trading volume tends to drop off drastically for the last couple weeks of the month. This is because the larger money managers have difficulty adjusting positions on lower volume so typically the higher volume action occurs during the first half of the month. Traders are more focused on eggnog and other holiday cheer in the back half of the month.

Keystone's Eclipse Indicator identifies this current period through 12/11/13 as having a higher potential for a major market selloff.  A major Bradley turn occurs on 1/1/14 to begin the year and another Bradley turn date follows quickly on 1/9/14 so December and into early January may be volatile for equities. Bradley turns can be up or down; they do not predict direction only that a market inflection point will occur. The new moon occurs on 12/2/13, today, and markets are typically weak moving through the new moon. The full moon is 12/17/13 and markets are typically bullish moving through the full moon. Note that 12/17/13 is also OpEx Tuesday, mentioned above, so the markets may be a buy on 12/16/13 and 12/17/13 for a couple day pop into the FOMC meeting 12/18/13. The Monthly Jobs Report is Friday, 12/6/13, and very important considering the emphasis the Fed is placing on data.

The second Monday in December is called Green Monday and one of the busiest shipping days of the year as holiday shoppers rush to order for fear of not receiving the items in time for Christmas. Sometimes a seasonal low in copper occurs in December. TJX typically moves higher from late December into early January but this is another stock that has seen obscene gains this year already. Seasonality factors are never something to directly trade off of but instead use them to determine the underlying current of the markets.  Seasonality factors help traders keep the wind at their backs.