CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts Near-Term Bottom at Hand

The markets are a violent roller coaster ride each day since volatility is elevated and the VIX is near 30. Choppy markets chew up bulls and bears alike. There is elevated fear and panic in markets currently. Traders are wringing their hands worried about what is around the next corner. The mini-crash in Japan last week with the Nikkei Index losing over -7% has the attention of professional traders. You know what happens when fear is elevated and the CPC is high at 1.48 above 1.20 and the CPCE is elevated at 0.89 above 0.80. Yes, a near-term market bottom is at hand.

The first spike higher due to dramatic market selling occurred at the 8/24/15-ish date. As soon as fear and panic spiked to the uber high, Keystone said a robust rally would occur which happened. The expectation would be for the put/calls to drop towards complacency to wash out the fear and normalize trading, however, the put/calls would not retreat very far during the rally. As a previous missive pointed out, the CPCE dropped at the end of August to 0.66 which helped create a near-term top in stocks. Stocks began selling off again and tumbled lower late last week as fear grows over China, Japan, global deflation, the European migrant crisis and sluggish economic growth in the United States. The spike in the put/call ratio shows many traders seeking protection from the falling stock market buying puts sending the ratios higher.

Since the recovery in markets in late August did not create a proper amount of complacency (red circle), fear is running rampant with traders and the Japan breakdown last week increases the angst and worry. As soon as everyone jumps on one side of the boat, the other side of the boat is a better place to be. The charts above show that a rally is at hand and will begin any day ahead. The rally may be very robust gaining from 60 to 150 handles of upside. Once the upside gathers momentum, short traders will be running for their lives creating a short squeeze and sending stocks vertically higher. So it is prudent to bring on some long index plays for the rally ahead and would have been smart to buy some index calls late Friday. The stock market should begin rallying at any day forward and the rally should continue until the put/calls print inside the red circles in the right margins.

Can the stock market continue selling off? Sure it can but as it drops the fear and panic would be expected to increase further (higher CPC and CPCE put/calls) which only guarantees a near-term bottom for equities and long-side stock plays can be pursued more aggressively (when there is blood in the streets) for a trade. 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 8:22 AM EST on Wednesday morning, 9/9/15: The stock market catapults higher as the above technical analysis explained. The CPC drops to 0.93 and CPCE to 0.66. The CPC likely needs to go sub 0.80 and CPCE sub 0.60 to verify that the bulk of the upside rally has run its course.

Keystone's Morning Wake-Up 9/4/15; Monthly Jobs Report

The Monthly Jobs Report is imminent (8:30 AM EST; 1:30 PM London; 2:30 PM Frankfurt and Paris; 8:30 PM Shanghai; 9:30 PM Tokyo) and is the most important information for the ‘data-dependent’ Federal Reserve ahead of the rate decision on 9/17/15. The consensus is for 223K jobs and an unemployment rate to dip slightly to 5.2%. The extremely important average hourly earnings are expected to remain flat at +0.2%. The average workweek is expected to remain unchanged at 34.6 hours.

Credit Suisse and Deutsche Bank analysts say August job reports in the States consistently miss expectations. CS expects 180K jobs and a 5.2% unemployment rate. DB expects 170K jobs and a 5.2% rate. BCS is more optimistic expecting 225K jobs with a 5.2% rate.

Traders and analysts are focused on wages since inflation cannot exist without wage inflation (the Fed is trying to create inflation for over six years with their obscene Keynesian money printing). It is very unlikely the Federal Reserve will move with the first rate hike on 9/17/15, only 13 days away, if wages are flat to lower.

If the jobs number is robust and wages increase nicely, the Fed will be more likely to announce a rate hike in 13 days. Treasury yields will move higher. If the jobs number is weak under 200K and there is no wage growth, the Federal Reserve is unlikely to announce the first rate hike on 9/17/15. The stock market direction is tricky. If a rate hike is coming, stocks may retreat with traders thinking the easy  money party is ending. If the data is weak and a rate hike appears unlikely, that means more easy money into the end of the year, so stocks should rally.

Note Added 7:30 AM: S&P futures -19. Dow -170. Nasdq -43. Euro 1.1138. Treasury yields are; 2-year 0.68%, 5-year 1.46%, 10-year 2.13%, 30-year 2.91%.

Note Added 9:08 AM:

Minutes before the jobs report, S&P -16. Dow -146. Nasdaq -35. DAX -2%. CAC -2.1%. FTSE -1.6%. Euro 1.1139. USD 96.24. Euro/yen 132.79. Dollar/yen 119.21. Pound 1.5231. Mexican Peso 16.8559. Canadian Dollar 1.3239. Aussie dollar 0.6984.

WTIC oil 46.51. Brent oil 50.46. Natty gas is down -1.7% to 2.68. Gold 1122. Silver 14.62. Copper -1.6% to 2.346.

US Treasury yields are; 2-year 0.68%, 5-year 1.45%, 10-year 2.12%, 30-year 2.90%. German bund 0.681%. Japan 10-year yield 0.368%.

At 8:30 AM EST, the Monthly Jobs Report is 173K jobs with an unemployment rate at 5.1%. The unemployment rate is the lowest since March 2008. June and July revisions are up 44K jobs. Average hourly wages are up +0.3% showing a slight improvement in wages over last month’s +0.2%. The average hours worked is 34.6 hours.

The labor force participation rate is 62.6% sticky at the same level for the last three months and at the lowest rate since the 1970’s. Lots of folks remain out of work unable to find a job. The U-6 unemployment rate improves slightly to 10.3% the lowest since June 2008. Jobs are averaging 221K over the last three months which is a good enough number to prompt the Fed to announce a rate hike.

The headline 173K number is disappointing barely enough to cover the new entries into the job market this month, however, analysts are quick to point out that August future revisions average 30K jobs higher or more so the headline number may be revised to 200K-plus next month or the month after. The unemployment rate at 5.1% is better than expected which will encourage the Fed to raise rates. The wages are better than expected at +0.3% also a feather in the cap for raising rates on 9/17/15. Traders and analysts are looking past the 173K jobs number and instead keying in on the other data viewing the jobs report as a good report despite the weak headline number.

US futures react violently dropping then recovering to better numbers than before the data then rolling over to the downside. Treasury yields are up slightly so traders are viewing the jobs report as a good report and encouraging for a rate hike announcement by the Fed in 13 days. Yields are up and stock futures down so the report is viewed as favorable (the Fed may hike rates sooner rather than later so the easy money party ends sooner rather than later so stocks leak lower).

At 8:37 AM, S&P -23. Dow -210. Nasdaq -48. 2-year yield 0.705%. 10-year yield 2.13%.

At 8:45 AM, S&P -20. Dow -182. Nasdaq -43.

At 8:49 AM, S&P -22. Dow -200. Nasdaq -46. DAX -2.3%. CAC -2.2%. FTSE -1.8%.

Treasury yields are; 2-year 0.72%, 5-year 1.49%, 10-year 2.16%, 30-year 2.92%. German bund 0.688%.

At 8:51 AM, S&P -27. Dow -240. Nasdaq -57.

At 8:54 AM, S&P -32. Dow -275. Nasdaq -67. DAX -2.7%. CAC -3%. FTSE -2%. Euro 1.1138. Dollar/yen 118.84. Pound 1.5215.

Oil is sticky at the whole number levels. WTIC oil 46.00. Brent oil 50.00. Natty 2.68. Gold 1124. Silver 14.64. Copper is down -2.7% to 2.3195.

Treasury yields are; 2-year 0.71%, 5-year 1.47%, 10-year 2.13%, 30-year 2.90%. German bund 0.688%. Treasury yields are whipping all over the place. Each time you look at the screen it is different. The 10-year yield pops to 2.15%, now 2.14%. Time is needed for markets to settle. The tape is very jumpy after the jobs report.

At 9 AM, S&P -29. Dow -255. Nasdaq -59. Gold 1122. USD 96.40. Euro 1.1125. (note the higher dollar move and lower euro). Dollar/yen is 118.97 running back up to 119. Pound 1.5195 under 1.52. CAT drops -2% on a downgrade. JOY is down -2% receiving multiple downgrades after reporting weak earnings this week. When less construction and mining machinery is needed around the world, a global economic slowdown is in progress.

US futures are falling apart. S&P -35. Dow -296. Nasdaq -72.

(As always, the daily machinations of the stock market are chronicled and explained by Keystone the Scribe. The monthly publication of the Daily Chronology of Global Markets and World Economics is the only detailed and concise document available on the internet or in print  that describes the historic stock market topping behavior this year and roll over to the downside. The publication for August, 2015-08 is available from Amazon via the link in the left margin.)

DAX Germany Daily Chart Death Cross

The DAX joins the Death Cross parade. In the United States, the SPX (S&P 500), INDU (Dow Industrials) and RUT (Russell 2000 small caps), and AAPL (Apple) are all in a death cross chart pattern. The 50-day MA stabs down through the 200-day MA creating the Death Cross. Moving averages are simply a smoothing mechanism which averages the stock price over the specified number of days. As mentioned by Keystone many times, seasoned technicians do not pay a lot of attention to the death cross but it is important and does guarantee weakness ahead--as long as the death cross remains.

Typically, when the death cross occurs, price will actually bounce since it has already been beaten down for many weeks to create the death cross in the first place. The DAX has been trying to stage a recovery rally in recent days. After the relief rally period which may last a few days or weeks, the stock or index will be lower 100% of the time, by definition, as long as the death cross remains.

It is comical to listen to pundits commenting on the death cross chart pattern. In troubling market times, everyone turns into a market technician. As is the case in life, those equipped with minimal knowledge become instant experts and espouse confusing and incorrect information. One pundit said the death cross forecasts a market crash.  The death cross chart pattern does not forecast a market crash. The DAX is bleak going forward and the German bulls can only save the day with a golden cross where the 50-day MA recovers back above the 200-day MA. If the death cross remains, the DAX is going far 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.

SPX S&P 500 2-Hour Chart Fibonacci Retracements Sideways Symmetrical Triangle

There is a lot going on with those lines of spaghetti above. Starting with the blue Fibonacci retracements of the drop from 2102 to 1867, price recovered 50% of the move to 1984 where it received a spank down. Price gathers itself and makes another run higher and meets resistance at the 38% Fib at 1958. The 50% Fib retracement at 1984 carries clout so if the SPX jumps higher after the jobs report watch to see if price can move above 1984, or not. If so, it will run higher above 2000 and likely target the 62% Fib at 2012.

The SPX is running sideways squeezing into to the pink sideways symmetrical triangle. Note how price moved higher but bumped its head on the top side of the pink triangle, then dropped to the lower side of the triangle, and bounced, and then today up to the top of the triangle, and is spanked back down again to close the day at 1951. Price is set up to make an important up or down decision probably based on the jobs report tomorrow morning.

The stakes are high since the vertical side of the pink triangle is about 140 points. Thus, if the bulls win and price breaks up and out of the triangle at 1960-ish, the upside target in play is 2100. If price breaks down out of the triangle at 1940, the downside target in play is 1800. The indicators are not tipping their hands. The green lines show the possie d bounce and the red lines show the neggie d spank down with price now staggering sideways about to make an important directional decision. All eyes are on the jobs report released at 8:30 AM EST New York, USA, time (1:30 PM London; 2:30 PM Frankfurt and Paris; 8:30 PM Shanghai; 9:30 PM Tokyo). 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 Cap Index Daily Chart Death Cross

The Russell  2000 small caps join the S&P 500 and Dow Industrials with a Death Cross chart pattern where the 50-day MA stabs down through the 200-day MA. Moving averages are simply a smoothing mechanism which averages the stock price over the specified number of days. As mentioned by Keystone many times, seasoned technicians do not pay a lot of attention to the death cross but it is important and does guarantee weakness ahead--as long as the death cross remains.

Typically, when the death cross occurs, price will actually bounce since it has already been beaten down for many weeks to create the death cross in the first place. The RUT has been trying to stage a recovery rally in recent days. After the relief rally period which may last a few days or weeks, the stock or index will be lower 100% of the time, by definition, as long as the death cross remains.

The Nasdaq is the only major index that has not yet created the death cross. The SPX, Dow and RUT are now in the bearish camp. The four major indexes that Keystone tracks  are the SPX (S&P 500 the broad market), INDU (Dow Industrials blue chip large-cap dividend stocks), COMPQ (Nasdaq Composite tech and biotech stocks) and the RUT (Russell 2000 small cap speculative stocks).

It is comical to listen to pundits commenting on the death cross chart pattern. In troubling market times, everyone turns into a market technician. As is the case in life, those equipped with minimal knowledge become instant experts and espouse confusing and incorrect information. One pundit said the death cross forecasts a market crash.  Keystone has to pause a few seconds because this is hilarious every time he hears it; a death cross chart pattern does not forecast a market crash. Small caps are bleak going forward and the bulls can only save the day with a golden cross in the weeks ahead with the 50-day MA recovering back above the 200-day MA. If the death cross remains, stocks are going far 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.

TNX 10-Year Treasury Note Yield 2-Hour Chart Tight Sideways Channel Breakout or Breakdown Imminent

The TNX is dancing through a tight sideways channel and the breakout to the upside, or breakdown to the down side, will be of monumental importance. The super-tight black channel has 2.19% as resistance and 2.15% as support. The 10-year yield is currently printing in the middle at 2.17% and will have to make a decision one way or the other. The red channel is between 2.14% as support and 2.21% as resistance. The 200-day MA is at 2.13% so let's call the lower bound 2.13%.

Thus, bond bears win big if the 10-year yield moves up through 2.19% and then up through 2.21% (Treasury prices lower, yields higher). This is the inflationary outcome ahead with stocks rising and Treasury yields rising. The bond bulls win big if the yield falls through 2.15% and then falls through 2.13% (Treasury prices higher, yields lower). This is the deflationary outcome ahead with stocks and Treasury yields moving lower. Of course the Fed decision on raising rates, or not, will impact this projection.

The red lines show an expansion pattern in play with yield throwing up and over the top rail so a move to test the trend line at 2.12%-ish may be on tap. If the 2.12%-ish level fails, yield is likely headed sub 2%. The red dots show yield extended to the downside so the bond bears had fuel to drive yields higher.

The indicators are stumbling sideways not tipping their hand. The RSI is above 50 at 51 supporting the bond bear case with higher yields. The MACD cross, stochastics under 50 and ROC under the flat line are favoring the bond bulls and lower yields ahead. So if the RSI drops under 50%, yields will be dropping lower. If the RSI stays above 50% and stochastics move above 50%, yields will move higher.

The table is set with yield at 2.17%. The stock market should catch a stronger bid if yield moves up to 2.19% and if yields punch up and out of the sideways channels at 2.21%, yields will run higher and so will the stock market. If yield slips under 2.15%, the stock market is likely selling off and becoming weaker (as bonds become stronger; more bullish with yields lower). If yield drops under 2.13%, losing the 200-day MA and lower sideways channel trend line, a test of 2.12%-ish will occur quickly. The stock market will be selling off. If yield then loses the 2.12% level it will likely begin dropping in earnest and the stock market will probably be falling down the rabbit hole.

Watch for the initial breakout either above at 2.19% or below at 2.15% which is the first indication of the path ahead. Then the 2.21% confirms the upside breakout in yields and 2.13% confirms the breakdown in yields. RSI and stochastics, as discussed above, verify the direction. The 10-year yield is at 2.167% and realizes it must make a decision likely in sync with the Monthly Jobs Report on tap in the morning at 8:30 AM EST; 9/4/15. 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 Saturday, 9/5/15: The 10-year yield teased higher to 2.16% after the Monthly Jobs Report but then fell to test the critical 2.12% level described above and closes at 2.13%. This 2.12%-2.13% support level is very important and a major bounce or die decision will occur next week.

RWLK ReWalk Robotics Daily Chart Falling Wedge Oversold Positive Divergence

The robot IPO ReWalk showed great promise. Traders were throwing money at it but the price is cut in one-half over the last few months. Robot technology likely has staying power in the overall economy moving forward. The weekly and daily charts are positively diverging but this is another dangerous and speculative knife catch. The lower standard deviation band is 7.86. Keystone's 80/20 rule says 2's lead to 8's so the breach of 8.20 opens the door to 7.80 but the stock may base at this 7.7-8.0 level and recover.

Price is below the moving averages requiring a mean reversion higher. Keystone bot RWLK yesterday opening a new long position. Will likely add to it if it drops to the 7.7-7.9 area. This a dangerous speculative trade but the risk-reward is attractive since the positive divergence launch may send price sharply higher. There are other small speculative stocks setting up with possie d that are potential longs all are dangerous plays such as AVP, DCTH, UNXL, SYNC, STRI, SGOC, SHOS, NAO, PRGN, ATRS, CPST, ETRM, MGPHF, ENZR and MCRB to name a few. These stocks need intense scrutiny with fundamental analysis before considering a spec long play but technically they are looking attractive. Speculative long plays are only for money  you are willing to lose.

Keystone still likes sugar this year although it has slip-slided away. Keystone bot SGG as a new long position and will likely increase the position steadily going forward through year-end looking for a sweet recovery in sugar into the EOY. Everyone hates IBM. The charts are starting to set up favorably so Keystone may start into IBM on the long side say in 2 or 3 weeks time. SSYS and the 3-D stocks have taken a nice initial bounce off the bottom six days ago. 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 9/3/15 in the evening EST time: RWLK got punched in the face yesterday losing over -5% and in today's trade fights back gaining +0.7%. Price is at 7.60 so the 7.20 to 7.60 area would be looked at as the potential basing area. 

NYA NYSE Composite Weekly Chart 40-Week MA Cross Cyclical Bear Market

The NYA 40-week MA cross is a key Keystone cyclical market signal. The NYA is under the 40-week MA signaling a cyclical bear market in play for the intermediate term for weeks and months ahead as long as price remains under the 40-wk MA. The chart shows the cyclical bull market driving higher to the triple top in 2011 and August 2011 waterfall crash when markets fell into a cyclical bear. In early 2012, the bulls were celebrating again and after a test in May-June 2012, the bulls verified that they will wear the pants going forward and the cyclical bull continued into this year's top fueled by Fed, ECB and BOJ easy money wine.

The party is over. The only question is how long will the cyclical bear growl? A few weeks? A few months? Perhaps for the next couple years? The most reliable stock cycle is the 18-year cycle which was a secular bear to August 1982 then a secular bull 1982 to 2000, then a secular bear 2000 to 2018 (now). It is very common to have huge intermediate rallies in a secular bear such as 2003-2007 and 2009-2015. Since the secular bear cycle will revert into a secular bull in 2018 and beyond (2018-2036), the bears may extract a huge amount of flesh from the market over the next three years.

When stocks catapult higher in the 2020's in the secular bull cycle it will likely be a result of excessive inflation and hyperinflation. The Dow will launch to 30K, SPX 3K and higher, gold to 3 or 4K or higher, all assets will inflate in the 2020's as the flood of money gains velocity in markets from say 2018 and beyond (remember, however, that the drop in the dollars value will nullify much of the real gains). In the meantime, say over the next couple years or so, disinflation and deflation will likely rule the roost.

The red lines show the overbot conditions, negative divergence and ominous rising wedge pattern that forecasted the market top. Keystone described the action in real time this year and used the monthly charts to call the top in the stock market which occurred as predicted. The collapses from rising wedges can be quite dramatic as the chart shows. The indicators remain weak and bleak wanting lower lows in price for the weeks ahead after any bounce occurs. Stochastics are oversold and positively diverged which will create a bounce for price in the near term.

The bears are running the show now. It was a long 6-1/2 year rally fueled by central banker money printing but the party is over, the booze is gone and people that overindulged are puking in the front yard. The bears rule the markets as long as the NYA stays under the 40-week MA. 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 S&P 500 Daily Chart Sideways Channels

The 2-hour chart is sly not tipping its hand. The idea from the last chart was to watch negative divergence form with the red lines to forecast a market top, which occurs, however, the MACD line remained long and strong sloping higher with price already rolling over. That hints that price will want to come back up. The indicators are weak and bleak but stochastics are oversold so the SPX should bounce. The SPX may need 2 or 3 candlesticks before printing positive divergence for an upside move so that would take up the bulk of tomorrow's trading. Perhaps it takes stocks into the Beige Book on Wednesday afternoon where stocks make a decision.

The wide sideways channel is through 1872-1998. The tighter channel is 1889-1988. Key S/R is 1951, 1942, 1928, 1924, 1897, 1889, 1884, 1878, 1874, 1872 and 1848. The SPX begins Wednesday trading at 1914 so bulls win big above 1924 and bears win big under 1897. The LOD on Tuesday is 1903. The failure at 1924 is an air pocket to 1897 support and price sure did fall into this air pocket. Price may want to come back down to test 1897 after any bounce occurs. Projection would be for stocks to find a base and move higher beginning anytime Wednesday using seasonality bullishness and bullish put/call ratios to helps stage a rally into the holiday weekend.

S&P futures are +15 on Tuesday evening but if this holds and a bounce occurs, the SPX may want to come down to test 1897; that may be where the indicators establish positive divergence to allow a stronger bounce. Price may establish a sideways triangle pattern going forward where the directional decision out of the triangle be it up or be it down occurs on 9/17/15; the date of the Federal Reserve rate decision when Chair Yellen brings the tablets down from on high to tell global traders how to trade. 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.

CPC and CPCE Put/Call Ratio's Daily Charts

The markets are a daily soap opera. This week begins with more strong selling to the downside. It is odd to see a first day of the month down since new money should be coming into the market. The red circles show the complacency rearing its head in early August which creates the stock market top. Then the green circle occurs identifying a tradeable near-term bottom for stocks, which occurs late last week.

The expectation was, and is, that the put/calls should drop into the red circles and as that happens stocks should float higher. But this week bulls are slapped in the face instead. Note the CPCE came down to 0.65-ish showing complacency at the same levels as the early August top. This drop in the CPCE helped create the pullback in stocks to begin this week. Both the CPC and CPCE remain elevated and need to rectify the uber high prints so the expectation remains that stocks should float higher and the put/calls lower towards the red boxes.

Seasonality remains in the bulls favor this week with the new month beginning and the pre-holiday bullishness expected on Thursday and Friday. S&P futures are up +15 as this is typed on Tuesday evening, 9/1/15. 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.