The Commitments of Traders (COT) chart continues to trail lower off the July high. The red circles show the significant tops in the gold price and the green circles show a significant bottom where a rally begins. The double circles are key bottoms and tops. The recent top occurs with the large speculators 80% bullish which was an incorrect path ahead while the commercial traders were smarter only about 30% bullish which was the correct outlook ahead since gold price dropped from 1340 to the current 1262.
So the obvious conclusion that jumps out at you is that gold price needs to drop more to place an attractive bottom. Note that the red bars and light blue bars are not yet near the green circles that may call the next bottom. The COT is tricky, however, since the data lags by a few days and up to a week or two. So to some extent you are looking in the rear-view mirror to chart the path forward. Nonetheless, the COT is hinting that gold has some downside ahead before the bottom occurs. Note about one month ago there was a little jog in price with a quickie bottom and bounce occurring only to give way again so the red bars and light blue bars really need to decrease in size to set the gold bulls up for a rally.
If the COT is married to the previous weekly candlestick chart, the expectation would be for the tight band squeeze to send gold prices lower so the 1180-1220 area before a substantive bounce occurs. Any bounce that occurs now, in this near term, would be suspect as time moves along with weaker prices expected until a substantive bottom can be placed. Once the bars appear in the green circles in the right margin the gold bulls will be ready to pile all-in for a ride back up. For now, the COT says lower. 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.
The chart is provided courtesy of the COT Price Charts (click this link) web site that is highly recommended since many other COT charts are available for commodities as well as gold. The chart is annotated by Keystone.
Gold is dropping recently as the dollar rises due to the euro falling. ECB President Draghi fired the QE money bazooka today, or QE Light, or however it may be characterized in the days ahead, which collapses the euro. The dollar flies higher above 83.75 which will pressure commodities that are denominated in dollars. The ADX pink box shows how the drop in gold was a strong trend lower in 2013 but that petered out as the year began. Gold then settles in to a trendless sideways stumble this year refusing to hint which way it wants to commit. As time moves along, price funnels into the sideways triangles and the standard deviation lines (pink) squeeze in to launch a huge move in the coming weeks. Price appears to be committing to the down side as the indicators show weak and bleak profiles wanting to see lower lows after any bounce (short red lines), but the next 2 to 3 weeks will need to play out before the story is told.
Price sits exactly at the bottom trend line. What theatrics. The Monthly Jobs Report is in the morning and will impact global markets including gold. Price will bounce, or die, from 1260. The smaller triangle is symmetrical with a vertical side of 250 bucks. The larger triangle is not symmetrical and has a 450 handle vertical side. Thus, if price collapses from the triangle tomorrow at 1260, the downside target is 1010. And the more dire downside target is 810 for a 8000-1000 landing zone. If the bulls win out by sending gold price up and out of the triangle at the 1300 level, the upside target is 1550 and the uber upside target is 1750 for an upside target zone at 1550-1750.
Gold will make a firm and epic decision over the next two weeks. There is support at 1250 so if that level fails down is the direction. Conversely, there is resistance at 1340 so if the gold bulls overcome this level up is the firm direction ahead. Note that there remains space in the apex of the triangles and gold price may keep playing a sideways game through 1260-1300 for another 2 or 3 weeks before making the firm decision on direction but considering the tight bands it will likely come sooner rather than later and the move will likely be dramatic perhaps a 100 dollar gold move for starters. Gold bears win under 1260 and especially under 1250. Gold bulls win above 1300 and especially above 1340. The battle continues between 1260 and 1300. 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.
The trannies print another all-time high today with TRAN at 8590.33. Interestingly, the Dow Jones Industrials, INDU, remains unable to take out the all-time closing high at 17138 which the Dow Theorists want to see to signal more market upside ahead. The TRAN chart is ominous considering the long-term blue rising wedge. The failures from rising wedges can be quite dramatic. The lower oil prices have been sending the transportation stocks higher since lower fuel costs mean higher profits.
The chart is firmly negatively diverged across all indicators. The red rising wedge and overbot stochastics are also negatives. The monthly chart wants to squeeze out these price levels one more time after a pull back occurs so TRAN will likely take from one to three months to roll over to the downside but the high print today at 8590, call it the 8590-8630 zone, should hold as price tops out now through December. In the near term, price should drop similar to the July sell off then come back up again as the near term juice dictates (short green lines). The longer term neggie d should remain in place so the expectation is a roll over during the coming weeks and for TRAN to head lower for weeks and months ahead (into and through early 2015).
Price is near the upper band boundary at 8656 which is in play. The small circles show distribution taking place as price moves higher over the last few months. After a strong up week, the smart money comes in and sells off stock the following week to Aunt Jane and Uncle Billy that are rushing into trannies due to all the media hype. Every top needs a bag holder. There is no particularly attractive play here. Going long is like picking up nickels in front of a bulldozer, and price may stretch sideways for a few weeks before firmly dropping making a short unattractive.
If you enjoyed nice gains in any transportation stock, take a good look at it since it is likely prudent that you trim and start scaling out; perhaps one-third now, one-third a month from now and one-third in November. Study the chart to see if similar neggie d is forming, or not. Of course the chart above will be updated as time moves along to see how things progress. In the near term, the Dow Industrials need that 17138 closing print, perhaps tomorrow?, to keep the upside party going form a Dow Theory perspective. 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 proprietary trading algo, Keybot the Quant, flips to the short side this afternoon at SPX 1997. The higher volatility creates market weakness and finally places the bear's in the drivers seat, however, anything can occur with the Monthly Jobs Report on tap before the opening bell tomorrow. As always, stay alert for a whipsaw. Watch VIX 12.45 and JJC 38.68; both are creating market negativity. Bulls will recover if either parameter turns bullish. Equities will trend lower if both parameters remain in the bear camp. More information is found at Keybot's site;
Keybot the Quant
The 8 MA remains above the 34 MA signaling bullish markets for the hours ahead, however, the bears have pushed the SPX price under the 8 MA at 2007.28 which will curl the 8 MA downward to set up a negative 8/34 cross in the candlesticks ahead. The green and red circles show how the bulls will not allow the bears to shine. Even when the bears create a negative 8/34 cross they are quickly slapped in the face again. Bears got nothing until they receive the negative 8/34 cross.
The previous 30-minute chart that was posted was set up or setting up with neggie d (a spank down in the SPX price would be expected) with the ECB decision the remaining wild card. President Draghi fired the QE money bazooka with euro's raining down on everyone. He started passing out euro's to alleviate his stuffed pockets. Europe is going to run the printing presses and goose the stock markets with easy money. The SPX bounced today printing a new all-time intraday high at 2011.17. This price print nails the 1.24% Fibonacci extension target at 2009-2013 for the move down from the July top to the 1905 bottom. Got that? Is it clear as mud? In other words, the SPX retraced the entire July-August selling move with the rally during August into September. Since that is a 100% retracement, an additional price level projection can be targeted at the 1.24% Fib extension which corresponds to the 2009-2013 price level. The simple version is that price would be prone to pull back from this level just as it is from any Fibonacci retracement level.
Price violated the upper standard deviation boundary (dark green line) so a move back to the middle band is needed, at 2004.29, and price came down very near an hour ago but did not touch. It should touch to show respect and also the lower band at 1998 remains in play.
The upward-sloping channel is ongoing with price coming off the top rail and in the center of the channel. The maroon lines show universal negative divergence across both the one-week time frame as well as the one-day time frame for all indicators so a continued move lower for price is anticipated. The brown lines show key support at 2005, 2003, 2000, 1995 and 1991. Watch to see if the RSI and stochastics slip under the 50% level into bear territory which would indicate further weakness ahead. Watch the 8/34 MA cross. The bears will need to push under the strong 2005 support to then test the strong 2003 support. If 2003 fails, the bears will move price lower to the strong 1991 support. 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 1:49 PM: The SPX comes down to touch the middle standard deviation band at 2004.29 so that at least satisfies the initial requirements due to price violating the upper band 3 hours ago. As the VIX recovers today now at 12.12 moving higher stocks move lower. TRIN is 0.93 on each side of one today refusing to choose a side for this epic bull-bears struggle. Note that the BPSPX is on the verge of creating a market buy signal so today is very important. Type 'BPSPX' into the search box at the right to bring up the last BPSPX chart. It is on a market sell signal but a six percentage-point reversal will issue a a market buy signal and confirm more upside bullish joy to come. The low a few days ago was 70.50-ish so if the BPSPX prints above 76.50-ish a market buy signal occurs and the bulls will be headed to SPX 2020's. The BPSPX is at 76.20 only a whisker away from 76.50 and printed a high today at 76.40 adding to the drama. Check BPSPX after the closing bell.
Note Added 2:02 PM: Copper is higher all day but off the highs and the JJC is at 38.25 unable to yet attack the 38.68 bull-bear level identified by the Keybot the Quant algorithm. VIX is 12.13 with the bears not yet able to push the VIX above 12.46 the bull-bear level identified by the quant. Thus, markets stagger sideways. The ebb and flow of markets continue with the bears pushing volatility higher the last couple days but could not achieve the VIX 12.46 goal, and now today, with bulls pushing copper higher but unable to achieve the JJC 38.68 goal. One of these two are going to win at any time and the winner tells you the market direction ahead.
Note Added 2:19 PM: For the 30-minute chart above, the RSI is now at 49.99 and stochastics at 48.96 both slipping into bear territory. The SPX has a 2003 handle so a test of the strong 2003 support is occurring. Bears will create a path to 1991 if they can get 2003 to fail. VIX 12.16. JJC 38.23. TRIN 0.87 trending lower for the last two hours; this is bull-friendly to end the session unless the bears can send the TRIN higher to one and higher.
Note Added 5:52 PM: The neggie d spanked price lower this afternoon. The 8 MA stabs down through the 34 MA in the final minutes placing the bears in the driver's seat. The only way the bulls can save the day is with a strong upside opening at the bell tomorrow and as fate would have it, the Monthly Jobs Report is on tap at 8:30 AM EST that may create the wild move. The VIX ran above 12.46 which flushed the broad markets lower. Keybot the Quant flips to the bear side. VIX 12.45 and JJC 38.68 remain important; both are bearish causing market negativity. The bulls must return one of these two parameters into the bull camp to stop the selling. The TRIN ran above one during the height of the market selling after 3 PM but then fell to 0.78 at the close helping the bulls recover into the bell. The BPSPX is 76.20 so the bulls still need 76.50 and higher to receive a market buy signal.
The SPX prints a new all-time record intraday high at 2009.28 on Wednesday, 9/3/14 directly after the opening bell and then leaks lower all day long. The all-time closing high remains at 2003.37 from Friday, 8/29/14. The ECB rate decision and press conference are on tap for 7:45 AM EST and 8:30 AM EST, respectively, which should dramatically impact global markets. ECB President Draghi's words are important and the largest market move would be expected between 8:30 AM and 8:45 AM.
Interestingly, the 5-minute chart above displays a descending triangle pattern favoring bears but of course the market direction depends on Draghi's words and charts will have to quickly react and reset for the path ahead. The vertical side of the triangle is 10 points so failure at 1999.50 would send price to 1989. If Draghi fires a money bazooka and begins handing out easy money to the audience, equities will rocket higher and the 2009.28 resistance will signal if equities continue higher, or not. 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 10:04 AM: ECB President Draghi fires the QE money bazooka and borrows former Chairman Bernanke's helicopter to drop money from the sky. Chair Yellen sends the Fed punchbowl over to Draghi so he can fill it with European easy money booze here on out. The euro collapses to 1.2997 and bounces. The SPX is teasing the 2009 level printing a HOD at 2009.12 only 16 pennies away from the all-time intraday record high shown above but unable to yet overtake this critical level. Here comes the SPX for another run.
Note Added 10:47 AM: At 10:11 AM, the SPX, Dow and TRAN all print new all-time intraday record highs. SPX HOD is 2010.98. INDU HOD is 17161.55. TRAN HOD is 8584.61. The Dow needs a close above 17138.20 to print a new all-time closing high and is now dancing around that level at 17141 so this will provide drama all day long. The lower volatility, VIX under 12, provides the upside fuel. The TRIN is flat near one not a ringing endorsement of today's upside strength. For this type of upside in equities, the TRIN should be 0.80 or lower. Copper also provides market fuel with JJC at 38.25 but remaining below the key 38.68 level identified by Keybot the Quant algorithm. The Keystone the Scribe website explains today's extensive market action including the historic QE announcement by the ECB. The SPX typically pops 20 to 30 handles on a central banker easy money announcement and is currently up 10 points.
The 10-year pops yesterday off the falling wedge and positive divergence (green lines). A cease-fire is announced in Ukraine a couple hours ago launching global equity markets higher. Traders see less need for safety so they exit notes and bonds (lower prices) and yields rise. The 10-year is at the green dot at 2.46%. Note the confluence of horizontal support, the 50-day MA at 2.482% and dropping, and upper standard deviation band (pink) at 2.480% and dropping. Thus, yield will tease the strong 2.47%-2.50% resistance ceiling where either a bounce, or die, decision will occur.
The 200-day MA is sloping negatively which is a continued sign of stronger notes and bonds (higher prices lower yields). The TNX weekly chart had pierced and hugged the lower standard deviation band so a bounce was in order, which is occurring, which will initially target 2.50-2.51%. The 200-week MA holds at 2.384% and this important very long term moving average is flattening hinting that the drop in yields will come to an end in the weeks and months ahead. The MACD line on the weekly chart remains weak so the end result for the intermediate and long term for the weeks and months ahead may be a sideways move through 2.2%-2.6%.
In the short term, the long and strong indicators above want further highs in yield even after yield will pull back so a fight should occur at 2.47%-2.51%. Bond bears win at 2.51% and higher. Bond bulls win if yield stays under 2.47% and trails lower. 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 11:02 AM on Thursday, 9/4/14: Draghi surprises markets firing the QE money bazooka and lowering the key benchmark rate essentially to zero adopting a ZIRP policy. The euro collapses to 1.2997 and recovers, but is now falling under 1.30 again printing new lows. European indexes run higher. US stocks print new all-time highs. The dollar index jumps well above 83 in reaction to the euro dropping. Oil and other commodities trade lower due to the rising dollar. The TNX was rejected from the 2.45%-2.51% resistance gauntlet yesterday and now is back up to 2.46% for another look. The daily chart indicators remain long and strong so higher yields are desired after any one or three day pull back occurs. The TNX weekly chart shows a 20-week MA dropping to 2.52% moving lower. The 50-day MA is 2.48% so in the near-term the battle should continue at 2.45%-2.51% and yield will likely target the 50-day MA resistance first.
Note Added 9:15 AM on Tuesday, 9/9/14: The 10-year yield is up to 2.50% teasing the 2.45%-2.51% resistance gauntlet. The fight continues.
The bulls are running again with the SPX printing a new all-time record intraday high at 2006.12. The dollar/yen prints above 105 so the weaker yen helps send stocks higher. Banzai! The 8 MA remains above the 34 MA signaling bullish markets for the hours ahead. The 8 MA continues higher so the bears need the SPX at least under 2001 and lower to curl the 8 MA downwards. Bears got nothing until they receive the negative 8/34 cross. The red lines show universal negative divergence across all indicators as well as overbot stochastics that want a spank down, however, in the VST (the last couple hours and day) the bulls are long and strong with RSI, MACD line and money flow so another higher high will be needed after a candlestick or two print lower with a pullback.
Price has pierced the upper standard deviation band so a move back to the middle band at 2000 and even the important 1995 level is on the table. Key S/R is 2006, 2005, 2003, 2000 and 1991. The expectation would be for price to roll over in about 2 to 4 candlesticks which is about 1 to 2 hours of trading time. Let's say this afternoon.
Keybot the Quant remains long but will flip short if the SPX drops under 1995 and stays under. Volatility spiked higher today causing the initial market weakness and will continue to create market weakness if VIX remains above 12.44. Alas, for bears, as this message is typed, the VIX is now under 12.44 back in bull territory which will create market lift and the major indexes are all now positive. Use VIX 12.44 as the main rudder for the market directional ship today. Bears need both the VIX above 12.44 and SPX under 1995 for Keybot to flip short. Bulls will send equities higher, as they are now, if VIX is under 12.44. The bull juice just created with lower volatilty should help carry the SPX price to the top after lunch as described above. Perhaps the VIX will move back above 12.44 this afternoon and that will tell you the near term top is in for the SPX. 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 on 9/3/14 at 8:18 AM: The 8 MA is below the 34 MA signaling bearish markets for the hours ahead, however, as always is the case, the opening bell the following day, today, may reverse the move, and news of a Ukraine cease-fire launches global markets higher. The 8 MA is already curling higher at the end of yesterday's session. Thus, the 8 MA should cross above the 34 MA placing bulls back in charge. The chart will need to reset since the new news must be priced in. Watch copper and volatility in the Wednesday trade; JJC 38.71 and VIX 12.45. Bulls win with JJC above 38.71. Bears win with VIX above 12.45. If status quo remains with weak copper, that is trading negatively currently, and low volatility, markets will trade sideways with an upward bias. Wednesday may be more sideways than anything since the real circus begins tomorrow morning with the ECB rate decision and press conference that will send global markets wildly one way or the other.
The euro is dropping towards a 1.30 handle while the dollar index prints 83 this morning. The higher dollar is smacking oil and gold lower. The big event this week is the ECB's rate decision and press conference on Thursday morning. Draghi's words will create a wild reaction in the euro and directly affect the dollar. Traders are sending the euro lower anticipating stimulus but the October meeting is a more likely target for Draghi to fire the money bazooka. The level of shorts against the euro is at the highest levels in a couple years. Even Aunt Nancy, fresh back from driving the local school bus, said she took here entire life savings and is shorting the euro. Traders are all-in expecting a huge stimulus announcement by Draghi. Obviously the risk on Thursday morning is that Draghi under delivers and the euro catapults higher and dollar collapses. A rise in the euro would kick in short-covering that would rocket launch the euro with shorts running for their lives (the euro weekly chart remains weak so lower lows in euro would be expected after a relief rally occurs).
The euro chart was posted last week looking for a bounce which occurred but you need a magnifying glass to see it three days ago (this chart is one day behind). Price is currently trading at the blue dot. The expectation would be that the jog move would create positive divergence with the MACD line but it has not. Thus, a bounce is needed but the euro needs to take one more look at the lows currently printing. Then all indicators should be positively diverged (green lines) and create a more sustainable relief rally. Price is on an island now after collapsing through the 132.0-132.5 gap so an island reversal pattern would be in play as price moves back up to 132 from the underside. An island reversal would send the euro straight back up through the gap from 132.0 to 132.5 in a flash.
So the daily chart above is almost set up for a strong relief bounce that will likely be further fueled by short-covering. This may coincide with the ECB on Thursday morning. The weekly chart remains weak. The stochastics on the weekly are oversold and positively diverged which will help the daily chart create the relief rally. The RSI, MACD line and histogram are weak and bleak on the weekly chart wanting to see lower prices for the euro in the weeks ahead.
What does all this mumbo jumbo mean? In the short term, the daily chart wants to create a relief rally back towards 132.0 and 132.5. Price may recover very strongly depending on how many shorts throw in the towel. Weakness should resume, however, and cause the euro to leak sideways with a lower bias for the weeks ahead. In the intermediate term, weeks and months, the euro will likely travel through 1.28-1.33, and perhaps bottom at 1.28-1.29 in October, however, the chart will be reassessed many times before then. 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 11:11 AM on Thursday, 9/4/14: Draghi surprises markets firing the QE money bazooka and lowering the key benchmark rate essentially to zero adopting a ZIRP policy. The euro collapses to 1.2997 and deteriorates further down to 1.2964. European indexes run higher. US stocks print new all-time highs. The dollar index jumps well above 83 in reaction to the euro dropping. Oil and other commodities trade lower due to the rising dollar. The euro collapses for the daily chart above with the massive amount of euro shorts celebrating with high-five's. Knife-catches and bottom-calling in the very short term can be tricky as the euro continues to stab lower but as highlighted above weakness was expected to continue due to the weekly chart. The stochastics are oversold on the daily chart which will help create a bounce. The RSI, histogram and MACD line all print lower lows on the daily chart now so price will need to stabilize at these levels for a day or few before bouncing. The same basic analysis holds as explained above except that a bounce, potentially fueled by short-covering would occur only after the RSI, histo and MACD set up with possie d (a few days). The euro should leak lower moving forward now that the QE bazooka is fired and after playing around at 1.295-1.300 in the coming days a bounce would be expected but then further weakness will follow. The bounce may target the huge gap created today at 1.305-1.310.
The dollar is jumping higher today tagging 83 (the chart is one-day behind) at the top rail of the upward-sloping channel. The dollar has pierced the upper standard deviation band (not shown) so a move back towards 82.0-82.50 would be expected going forward. RSI, histogram and stochastics are negatively diverged wanting the dollar to pull back for a rest, along with the rising wedge and overbot conditions, but the MACD remains long and strong so a higher high should print above 83 in the day or days ahead before a more solid pull back occurs. The pink box shows a strong uptrend in place for the dollar since June (ADX above 25) but the 50+ level is very overextended.
Price is also overextended above the moving averages requiring a mean reversion. The weekly chart has more upside available but price has gone parabolic for the last two months and desperately needs a rest. The expectation would be for the dollar to trade through 82.3-83.6 for the coming days, a few weeks, call it about one month's time, and then trend flat to lower for the months ahead but the charts will need reassessed in a couple weeks time.
The higher dollar is smacking oil and gold lower today. The euro and yen are weaker. The dollar/yen explodes higher overnight now only a hair under 105. The weaker yen creates a strong up move in the Nikkei Index overnight. The big event this week is the ECB's rate decision and press conference on Thursday morning. Draghi's words will create a wild reaction in the euro and directly affect the dollar inversely. Traders are sending the euro lower anticipating stimulus but the October meeting is a more likely target for Draghi to fire the money bazooka. The level of shorts against the euro are at the highest levels in a couple years. Even the cab driver said he took his entire life savings and is shorting the euro so obviously the risk on Thursday morning is that Draghi under delivers and the euro catapults higher and dollar drops. This behavior would sync up with the chart above that will want a pull back after the MACD line negatively diverges (which could set up over the next couple days). 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.
