Federal Reserve Chairman Powell cooed dovishly yesterday pleasing his investment bank masters. Powell plans to maintain easy monetary policy forever so stocks jump higher. The S&P 500 gained 9 points in the hump day trade. Typically, over the last decade as this obscene Keynesian financial experiment continues, the dovish Fed statements create 25 to 30 handles of SPX upside, thus, where's the other 21 points?
Perhaps traders are waiting for the second act to play out in the central banker double-header this week. ECB President Lagarde conducts her first major monetary policy meeting this morning. Super Mario is out to pasture. If Madame Lagarde delivers joy in this holiday season, the other SPX 21 points will likely appear creating new all-time highs. If Lady Lagarde delivers coal in the stock market stocking, the stock market may roll over and die, finally starting some serious downside for equities that is overdue for the last couple weeks or so.
Lagarde's words will move the euro. Since the euro and US dollar hold about 60% of each other's currency, the baskets move inverse to each other. The USD displays an H&S (head and shoulders) pattern while the XEU displays an inverted H&S (blue lines).
The US dollar has maintained the 97.05-ish support level for five months. If Lagarde is dovish, the euro will drop and the dollar will rise. If Lagarde is hawkish, the euro will bounce higher and the dollar will sink. Commodities typically rise as the dollar drops. All this is well and good, however, the dollar and euro charts hint at more sideways action ahead than anything.
If USD loses the 97.05 neckline, and the head is at 99.05, a difference of 2, the downside target is 95.05 if the neckline fails. For the XEU inverted H&S, with head at 1.09 and neckline at 1.1155, a difference of 0.0255, the upside target is 1.1410, if the euro can breakout above 1.1155. One now understands the importance and seriousness of Lagarde's speech today. Prices are teetering on the edge and her words will determine the path ahead. Lagarde is gulping down orange juice at the free buffet while an attendant is wiping a jelly doughnut stain off her blouse.
The 200-day MA's are support/resistance lines. Note that the dollar has already failed below the 200-day MA at 97.39. Price will likely want to come up and back kiss the 200 where it decides if it wants to truly fail, or, if it wants to jump back above the 200 and remain above. Conversely, the euro 200-day MA is at 1.1161 with price at 1.1132 not yet able to move above.
The 200-day MA will tell you a lot today and through next week. The euro and dollar will have to agree on the path ahead so either the euro moves above its 200-day MA to agree with the USD dropping below its 200, or, the dollar will move back above its 200-day MA to agree with the euro below its 200. One of them will flinch, perhaps in a few hours.
The outer standard deviation bands are violated for both currency baskets so the middle band at 97.82 is in play for the dollar and the middle band at 1.1057 is in play for the euro. It's all in Christine's hands now.
On the US broad stock market, the VIX was jammed lower in the final minutes of trading yesterday and remains below the critical 15.12-15.20 line in the sand (identified by the 200-day MA and the Keybot the Quant algorithm). The stock market bulls win going forward as long as the VIX remains below 15.12. The stock market bears win going forward if the VIX moves above 15.20.
At 5:50 AM EST, the euro, XEU, is trading at 1.1129 and the US dollar index, USD and DXY, the dixie, is at 97.15. Dollar/yen 108.65. Pound 1.3192. The UK election is in progress. Prime Minister Johnson's butt is on the line but he is expected to win. Bitcoin 7144. Gold 1479. Silver 16.84. Copper -0.2%. 10-year yield 1.80%. S&P futures +2. VIX 14.94. 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 6:14 AM EST: Euro 1.1128. USD 97.20. The euro is down a tiny hair expecting a dovish ECB so the dollar floats higher by a hair. Dollar/yen 108.666. Pound 1.3171. Bitcoin 7191. Gold 1475. Silver 16.92. Copper -0.3%. S&P futures +3. VIX 15.09. Look at volatility moving higher approaching the 15.12-15.20 resistance gauntlet. It is difficult for the Fed and other corrupt global central bankers to keep the VIX beachball underwater. Oddly, the futures are up one more point as volatility also climbs; one of them is wrong. China announces plans to support its economy no matter what occurs going forward (this news is hitting the tape). Markets are having trouble pricing in these soundbites since they have a cryptic nature. Investors wonder if they should simply keep buying stocks since the PBOC (China's central bank) now pledges easy money forever, or, is China announcing this message because the trade talks may fail and they are front-running the trouble telling their markets to not worry because rich Uncle PBOC is here to pat everyone's behiinds. Obviously, a failure with the trade deal that triggers more tariffs, which come into place on Sunday, would smack the US stock market. Traders are sorting out exactly what the Chinese soundbites say; it smells like a bunch of chop suey. The ECB rate decision is at 7:45 AM EST, Lagarde presser at 8:30 AM EST and US markets open for trading for the regular session at 9:30 AM EST. The festivities are set to begin.
Note Added 6:31 AM EST: VIX pops above the critical 15.12 level to 15.14. The stock market bears are stretching their limbs and paws and beginning to growl. Perhaps they view Lagarde as fresh meat? S&P +2.
Note Added 7:51 AM EST: The ECB leaves monetary policy unchanged as expected. Euro 1.1131. USD 97.16. The seesaw action in the euro and dollar continues. Lagarde's palms become sweaty; she takes the stage in about one-half hour. Dollar/yen 108.64. Pound 1.31666. Bitcoin 7177. Gold 1475. Silver 16.93. Copper -0.3%. S&P futures +2. VIX 15.19. The VIX poped above 15.20 for a few minutes and is now bouncing around inside the critical 15.12-15.20 bull-bear level. Global traders and investors await Madame Lagarde's comments. Lady Christine will stand before the huddled masses, extend her right arm, and provide a thumbs up, or thumbs down, dictating the fate of global markets, a la the days of ancient Rome and the Colosseum.
Note Added 8:04 AM EST: Euro 1.1131. USD 97.15. Dollar/yen 108.59. Pound 1.3173. VIX is above 15.20 to 15.24. S&P futures -4. Whoopsies daisies. That is a little bit of an air pocket. Dow -53. Nazzy -16. Russell -2. Copper -0.4%.
Note Added 8:31 AM EST: The flash bulbs are creating a strobe affect as Lagarde is on stage smiling for the cameras. Euro 1.1138. USD 97.15. S&P -3. VIX 15.41. Jobless claims are up big to 252K the highest number since late 2017. Are the layoffs beginning? The PPI data shows that inflation remains on a milk carton. Lagarde starts speaking at 8:32 AM EST and her track record at the European Central Bank begins.
Note Added 8:42 AM EST: Euro 1.1144. S&P -5. Dow -55. Nazzy -18. Russell -2. VIX 15.52. Copper -0.6%.
Note Added 9:22 AM EST: Euro 1.1142. USD 97.13. Bitcoin 7198. S&P -2. VIX 15.35. Copper -0.7%. Lagarde continues talking. Super Mario always kept his news conferences to one hour or less. The euro is slightly buoyant as Lagarde answers questions so her words are not viewed as dovishly as traders had hoped. The US market is set to begin trading in a few minutes. Some of the market softness is due to an analyst saying that iPhone sales in China are weak. AAPL trades lower.
Note Added 9:31 AM EST: US stocks begin trading and are slightly negative to begin the day. Euro 1.1142. USD 97.13. President Lagarde held her own; she's a pro and great communicator but the love affair may be short-lived. She sets an optimistic and positive tone. The central bankers are modern-day Money God's that control the price action inside The Temple.
Note Added 11:56 AM EST: The S&P 500 receives that extra 25 handles today. Soybean Donny rides to the rescue proclaiming that a US-China trade deal is "very close. They want it, and so do we!" The 'so do we' part catches your attention. Donny chooses a submissive position in the negotiation and clearly wants a deal. Trump knows it is now or never. Once 2020 begins, the impeachment trial and election campaign will take all the attention and a trade deal will be difficult. Also, over one-half of the states in the US are experiencing farm bankruptcies. These are all the hayseed's that voted for Soybean Donny. Trump likely wants to bring the trade deal to a close so the markets can rally into his re-election next year. Amazingly, Donny may cut the existing tariffs by 50% and cancel the tariffs set to start on Sunday, 12/15/19, to close on the deal. Comically, King Donny tweets the happy message minutes after the opening bell with the full intent of pumping the stock market higher. What a joke it all is; the final breaths of crony capitalism playing out in the months and few years ahead. The SPX prints a new all-time record high at 3176.28 now at 3157. Volatility drops so stocks pop. The VIX collapses below 15.20 and 15.12 creating stock market joy. Stocks are typically bullish through the full moon which peaked about 12 hours ago. Euro 1.1111. USD 97.40.
Note Added Friday Morning, 12/13/19, Friday the 13th, at 5:37 AM EST: The euro is at 1.1177. The pound climbs above 1.34 after the Johnson election in the UK. The USD slips below 97 to 96.83 as the euro rises.
The utes are important for intermediate and long-term planning. As viewers have seen for the last few years, Keystone uses the utilities to determine if a given stock market pullback has extended multi-month and multi-year downside, or not.
The weekly trend of the utilities dictates whether the stock market is in a healthy uptrend, or not. The closing price from 15 weeks ago is used as the comparison number. The other important number is the 50-week MA which is a trap-door for the broad stock market.
For this week's assessment of the weekly trend, the closing price 15 weeks ago was 845.52 (brown circle). UTIL is at 852.58 only 7 points above this critical bull-bear line in the sand. If UTIL fails below 845.52 this week, the utes slip into a weekly downtrend and this will create serious negativity in stocks. For next week, the week of 12/16, the 15-week lookback number is 848.30 (orange circle). For the week of 12/233, the lookback comparison number is 846.99 (blue circle) and for the week of 12/30, the lookback number is 862.90.
Thus, for the next 13 trading days, through Christmas, UTIL must not fall below this 846-848 support level. If utes do fail below 846-848, the stock market is in big-time trouble and not only for the near-term but potentially for the long term (many months even a year or three or more). Note that for the last week of the trading year, the last week of December, UTIL must be above 863 or the stock market is in trouble. So the table is set.
The pricing behavior is following a two-leg bear flag pattern since the September top at 880. The first leg down is from 880 to 835, a difference of 45 points. UTIL then performs a sideways consolidation move with a slight upward bias which is textbook behavior for this pattern. Now it is time to make a decision. If price falls from here, say starting at 855, that will target 810 for the downside to complete the second leg of the pattern. Note that price is respecting the 20-week MA support at 851. If this 20-week fails, it tells you that the bears may win going forward. Bulls need to keep price above the 20-week.
If stocks rally, watch the utes. UTIL must be in a weekly uptrend, as defined above, to prove that the stock market can continue higher. If stocks rally but the utes slip into a weekly downtrend, the stock market will weaken. If stocks rally, and UTIL remains above that 846-848 gauntlet over the next 3 weeks, and then above 863 as the month ends, the bulls are fine and will be singing songs and throwing confetti in early 2020. It's that simple. It's not rocket science.
If utilities slip into a weekly downtrend, that means the two-leg bear flag pattern is playing out. The downside target for the pattern is 810. The other critical parameter for utilities is the 50-week MA now at 806 and rising. You can see that over the next couple weeks, the 50-week MA price will float up closer towards the 810 bear flag target. Strong price support is also in the 815 area. Thus, the 806-815 area is a landing zone for UTIL and may act as a magnet to pull price lower.
If the 50-week MA at 806 fails, all hope in the stock market is lost. Once this occurs, a trap-door opens and the S&P 500 will likely dump a quick 30 handles within an hour or two of the 50-week MA utility failure. The stock market could go into a crash if the 50-week MA fails. So there is lots of fun stuff to watch ahead.
Is the above analysis clear as mud? In summary, UTIL must remain above 846-848 over the next 3 weeks, and above 863 at month-end, for the broad stock market to move higher. If instead a failure occurs, and utilities slip into a weekly downtrend, the stock market will be selling off going forward. You can forecast the time extent of the potential selloff by monitoring if UTIL remains in a weekly downtrend, or not. If stocks selloff, but investors flock into the perceived safety of utes, and UTIL rallies higher, regaining and maintaining the weekly uptrend, the stock market will also recover going forward.
If UTIL slips into a weekly downtrend, stocks are toast and if the 50-week MA fails, the stock market may potentially go into a crash scenario. Today, Federal Reserve Chairman Powell speaks and tomorrow morning ECB President Lagarde speaks. The central bankers are the market so these two top-tier global central bankers will dictate the path ahead.
The US-China trade deal remains up in the air with new tariffs set to start on Sunday, 12/15. Dictator Xi and Soybean Donny only have four days to reach a deal. China wants a rollback or delay of tariffs before a deal is reached but if this is the agreement, King Donny's wings will be clipped and his tariff leverage would have peaked out. It is hard to believe that President Trump would give up this tariff leverage but who knows?, he is a political animal like all the other Washington bureaucrats, so Trump's decisions are based on what helps his re-election campaign.
Watch the utes going forward. If you are long the market and watch the utilities roll over this month and fail, you will likely lose one-half of your money over the next year or two. If you are long the market and UTIL maintains the current weekly uptrend staying above the levels listed, you are fine for a few more months going forward.
On Friday at 4 PM EST when the trading week ends, see if UTIL is above or below 848.30 (the 15-week lookback number for next week) since this will give you a heads-up on stock market direction for Monday morning. 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 VIX pops above the important 200-day MA at 15.11 ushering in stock market negativity. At the same time, the Keybot the Quant algorithm remains bullish, however, the VIX fails into the bear camp at 15.20 yesterday sending equities lower. The VIX 15.11-15.20 level is for all the marbles.
Very simply, bears win big the longer the VIX remains above 15.20. Conversely, the bulls win big if the VIX drops back below 15.11. It's not rocket science. The VIX is currently trading at 16.46 with S&P futures down -11 about 90 minutes before the opening bell for the Tuesday trading session.
Five and six days ago, the bears flexed their muscles pushing the VIX above this critical bull-bear line in the sand. That was short-lived. The bears were slapped in the face quickly with the bulls jamming the VIX lower to send stocks higher.
The stock market, however, is a crapshoot right now since the Federal Reserve two-day policy meeting is beginning as this message is typed. The Fed rate decision and Chairman Powell's news conference is tomorrow afternoon. It should not be a market-moving event. Powell will likely try to simply kick the can down the road, feeding the doves and hawks equally, and get through the day without causing turmoil. The bigger story may be when Madame Lagarde, now ECB President Lagarde, provides monetary policy direction for Europe on Thursday morning; her talk will definitely move currency, bond, options, futures and stock markets.
Stocks are usually bullish the day or two in front of and through the Fed meetings 80% of the time so the bulls have the wind at their backs. This has not worked out that way thus far this week with the 20% playing out with negative action in stocks. Dip-buyers may be willing to buy the lows today hoping that the Fed buoyancy will create a mini-rally into hump day afternoon when Powell will bring the tablets down from on high and tell global traders how to trade. The central bankers are the market.
The full moon peaks at 12:12 AM EST Thursday morning so the overnight period is very bright outside these days. Stocks are usually bullish moving through the full moon so that is another tailwind for bulls. Of course, the stock market will ebb and flow depending on what Soybean Donny tweets before the US stock market opens. Isn't so-called free market capitalism a joke? America is best described as a 'faux free market crony capitalism financial system'. The truth is painful.
The 10-year Treasury note auction is tomorrow and very important. Then Pope Powell will be the focus Wednesday afternoon. Traders will be parsing his statement overnight into Lagarde's news on Thursday morning. In the US, Unemployment Claims and the PPI will be released Thursday morning. Retail Sales hit on Friday morning.
Keybot the Quant is long and tracking volatility, retail stocks and commodities as the main drivers of stock market direction currently (so spend more time watching these Three Stooges than other market parameters). According to the Keybot algo, the bulls need VIX below 15.20 as soon as possible otherwise they are in serious trouble. Bears need RTH below 117.97 and GTX below 2451 which will create market mayhem. The movement of these three parameters tell you the direction of the stock market. There is likely choppy waters on tap until we hear from the central banker nobility; Pope Powell (Fed) and Lady Lagarde (ECB).
If stocks rally today but the VIX does not fall below the critical 15.11-15.20 support level, stocks will reverse to the downside and fall apart. 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 8:52 AM EST: WSJ and CNBC reports that the US and China are in discussions to delay the 12/15/19 tariffs. The happy talk sends futures higher. S&P +5. VIX 15.32. The VIX quickly drops to test the critical 15.11-15.20 battleground level. Futures are joyous but volatility is still thinking about things. Copper +0.1%. 10-year 1.82%.
Note Added Wednesday Morning 3:31 AM EST: The bears create a downward bias this week thus far which is typically not expected in front of a Fed meeting. The Fed decision day is here. Pope Powell places his purple robe across his thin shoulders and will stand at the podium this afternoon professing central bank wisdom. It is a one-two punch of central banker entertainment over the coming 30 hours; first Powell then Lagarde. The SPX finishes Tuesday down 3 points, -0.1%, to 3133, call it sideways this week. Traders are waiting for Powell to tell them how to trade. The central bankers are the market.
It has been an interesting month since the low put/call ratios initially registered for the CPC. The red circles show stock market tops occurring after traders and investors become wildly optimistic, complacent, fearless, relaxed, and off-the charts bullish about the stock market. The put/calls are a contrarian indicator. High CPC and CPCE numbers indicate rampant fear and panic and an excellent buying opportunity.
Once the low CPC put/calls occur in early November, the CPCE is monitored and it has room to come down still yet (so you are thinking that a top is coming but not ready to short yet). Once you know complacency is afoot, you focus on the minute, hourly and daily charts to figure out where the top is at. The CPCE prints the uber low number in concert with the CPCE dipping slightly to that 0.85 level, so a top should be at hand. Looking at the hourly and daily charts it is all systems go for the top (due to negative divergence), and it occurs, however, if you blinked you missed it.
It was the tiny pullback mid-November of only about 35 SPX handles. Happy trade talk and central banker stimulus news keep saving the stock market day after day. So stocks bottom and rally exactly when the panic and fear was touched on the CPC chart. Note that the CPCE is not even close to its panic and fear level for almost 2 months.
Stocks rally into the Friday, 11/29/19, top and remain set up for the top due to negative divergence on the SPX hourly and daily charts, and the top occurs. This drop is about 80 points which tests that thick blue support level at 3070-ish. At that point, as would be expected, Soybean Donny runs to a microphone and announces that a US-China trade deal is progressing swimmingly. Stocks rally placing the gap-up moves. The blue circles show gaps that will need filled at some point in the future.
Stocks rally strongly after the Friday, 12/6/19, jobs report, but not due to the strong 266K jobs number but rather the one-tick miss in wages (on-month; the on-year number was a one-tick beat but remaining at a paltry 3.1%) and the ongoing lack of wage growth. Inflation cannot exist without wage inflation. This is the losing battle the Federal Reserve faces for the last 11 years with their obscene Keynesian money-printing experiment that has only served to make the wealthy class super filthy rich. Such is the corrupt crony capitalism system.
The lack of wage growth means low inflation will remain for an extended period so stocks rally big since central banker easy money will continue forever. The central bankers are the market. Have you finally realized this or are you still stupid?
So the charts want a pullback but the Soybean Donny happy trade talk and Federal Reserve and other central banker money-printing maintain elevated stock prices. Interestingly, the US plans to raise tariffs on Chinese goods 12/15/19 which is Sunday only 5 days away. President Trump has to make a decision this week on the trade deal and obviously this will have a great impact on markets.
The stock market has likely priced-in a US-China trade deal and not only for ag products but language addressing the IP theft problem and enforcement mechanisms. This may be a bridge too far. If King Donny agrees to a deal and it is viewed as weak, stocks will be in big trouble. Watch copper this week since it will tell you how the trade deal is going. China has drawn a line in the sand saying it wants tariff relief, not more tariffs, to make a deal.
At the same time this week, the Fed begins a 2-day meeting Tuesday with Chairman Powell's rate decision and press conference on tap Wednesday afternoon. This may be a milk toast event with no major moves or news expected by Pope Powell. The more important central bank meeting may be the next day, Thursday, when President Lagarde will swim into power as head of the European Central Bank and provide policy direction. Stocks are usually bullish into the Fed meetings.
The trade deal has many parts and it is hard to see an agreement that will please markets. Soybean Donny continuously talks out of both sides of his mouth saying 8 weeks ago that the Phase One trade deal was done and it simply needed to have the i's dotted and t's crossed which will take a couple weeks. This turns out to be more fibs and half-truths, what-the-H*ll call them what they are; bullsh*t, lies and talking out of one's arse but, that's our Donny. Everything becomes entertainment in the bread and circus days.
So lots of excitement is in store this week with trade and the central banks, the two main movers of markets these days, providing updated information and decisions. Keybot the Quant is on the long side and tracking retail stocks as the main mover of stock market direction currently. Volatility, the VIX, is also key. So bulls want strong retail stocks, commodities and lower volatility this week and they will be fine. Bears need weaker retail stocks and commodities and higher volatility and they will growl. There are retail earnings on tap which will be key and on Friday the Retail Sales data is released.
The major indexes missed printing new all-time highs by a hair on Friday so it will be interesting to see if it occurs today. The NYA prints a new 52-week high but remains a hair below its all-time high.
So, the search for the Godot Top remains in play. The charts say down but Soybean Donny, Dictator Xi and Pope Powell want higher stock markets. Something should give this week. S&P futures are down a couple points about 2 hours before the opening bell for the Monday trading session. VIX 14.34. Copper +0.3%. 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 NYA prints a new 52-week record high at 13612 but this remains a hair below the all-time record high at 13637 from 1/26/18. The NYSE Composite came within 25 points of an all-time record high. This is fascinating because the NYA is an index that is not yet able to overcome the 2018 market highs but other major indexes such as the S&P 500 (SPX), Dow Jones Industrials (INDU; DJIA; DJI), Nasdaq Comp (COMPQ), Nazzy 100 (NDX) and Semiconductor Index (SOX) have all printed all-time record highs recently. The Russell 2000 small caps (RUT) has also not yet been able to come up and overtake the 2018 record highs.
Interestingly, the SPX, INDU, COMPQ, NDX and SOX did not print new all-time record highs today although they are a hair away but the index that did overtake the November record highs, the NYSE Composite, has not printed an all-time high in almost 2 years. One wonders if the robots are simply cycling into the lagging indexes and stocks in a constant circle jerk that uses central banker liquidity to keep riding the overall stock market wave higher (algo's rotate from sector to sector and index to index as long as the central banker music keeps playing). The Russell 2000 has also recovered to its November high today, like the NYA, so the robots are buying-up the lagging indexes in today's action.
The rising wedge is worrisome since the collapses from this pattern can be dramatic and fast. The NYA failed 4 and 5 days ago, on bad trade war news, but Soybean Donny ran to a microphone and proclaimed that the US-China trade deal is going swimmingly. Prices have gapped-up ever since and are pumped higher this morning after the US Monthly Jobs Report.
President Trump is touting the 266K jobs report, and he should, it is on his watch, and it is a robust headline number, but as usual, poking around beneath the hood provides an education. The consensus for the headline jobs number was 180K, some said 187K, and others lowered their estimates after the ADP payroll numbers came in lighter than expected. The 266K jobs surprised everyone and is about 80K or 90K above the expectation. The prior months were revised higher which is an important positive.
Off the top, and as reflected by the manufacturing sector, 50K jobs are due to GM employees returning to work after the strike. This is not a recurring number. The jubilation in the 266K number is people thinking 'wow, it will be like this here on out'. No, it probably will not. That 50K jobs will not repeat next month. Market participants are extrapolating today's job numbers into the future painting a beautiful mosaic but they are mistaken since many of the gains appear one-offs or seasonal and holiday employment. The return of the GM workers also opens the door to calling back employees at the local support businesses such as the doughnut shops, restaurants, copy centers, caterers, cleaning people, etc.., which has to be a few thousand adds and helps create the broad-based gains in the report.
The largest gains are in education and health services. Let's see. What is occurring now? Yes, the yearly Medicare and other health insurance sign-up and policy adjustment period. Many of these workers, perhaps thousands, are probably employed to help with this busy health insurance enrollment period. They can be kicked to the curb in a couple weeks. Merry Christmas.
Leisure and hospitality are another big winner. Again, seasonal and temporary employment. Many companies and businesses take their employees to luncheons and/or holiday parties to try and keep them happy. Holiday shoppers need to refuel at restaurants so they can go buy more worthless crap. Thus, many thousands of jobs are added in this category that are mainly seasonal and again, they will be sh*t-canned come January.
Warehousing is another big winner with jobs while retail jobs are weak. Consumers are buying from AMZN and other online retailers so the warehouse jobs grow while the retail jobs shrink. Again, many of those warehouse jobs are for the busy season and they will not be needed come 2020. Ditto the shippers such as UPS and FDX hiring workers to help with deliveries but their foreheads will be stamped with "No Return" come January. Adding up these seasonal boosts put you in the ballpark of the 70K to 90K beat. However, nothing can be taken away from the surprise boost in jobs. It is the best jobs growth that central banker money can buy.
The unemployment rate fell from 3.6% to 3.5% but was expected to remain steady. The rate is at a 50-year low and you would think that was good news, which it is, kind of, but if the US economy was in a strong robust recovery, the rate would actually be climbing. A great indication of an economy coming out of the doldrums and ramping higher for a sustained long-term joyous path is the unemployment rate initially moving higher for a few months and then rolling back over lower. If the millions of Americans that are out of work, having given-up on the chance of finding jobs, believe that the economy is truly recovering, they will flock into the job market in mass numbers; this behavior creates a temporary higher unemployment rate.
Everyone wants a job and a piece of the pie once the economy takes off like gangbusters. This sends the unemployment rate higher since for a few weeks and months more people are looking for jobs than acquire jobs (which skews the data creating a higher rate) but over time they find a job they like, and the rate comes back down. So it would have been better to see the unemployment rate climb over the last few months, say from 3.6% to 3.7%, then 3.8% and maybe 3.9% or even 4.0%, and then move lower again. This is not happening; the rate remains subdued with companies holding on to workers praying that the backlog increases.
The unemployment rate is remaining at record lows. People are not flocking into the work force since it is status quo with the economy, same-o, same-o. Companies are holding on to the workers they have, a bare-bones staff, but this cannot go on forever. The Unemployment Claims numbers remain subdued because business cannot afford to layoff anyone else; they are hoping for more work to come through the door. In addition, the labor participation rate is actually down a tick this month to 63.2%. So the headline numbers are great for the newspaper headline writer's but create questions for pondering minds.
Keystone has harped on the wage data in the jobs report for several years. The earnings data is more important than the headline jobs number. The mainstream has finally joined this club over the last year or so and focused strongly on the wage data. Today's bright 266K jobs is a shiny object that no one can resist so it is receiving the bulk of the media attention. The monthly wage data misses by a tick up +0.2% but the year-on-year beat by a tick at +3.1%.
Keystone has explained the wage conundrum many times. The Federal Reserve's grand one-decade-plus Keynesian financial experiment, started under Chairman Bernanke in March 2009, remains a complete failure unable to generate inflation. Of course, the obscene global central banker collusion and non-stop intervention in markets is actually a success for the wealthy elite class since they own large stock portfolios and are now filthy rich from the one-decade-plus dovish monetary policies. This was always the intended outcome in America's rigged, crony capitalism system; the wealthy privileged class control the game.
Inflation cannot exist without wage inflation. These concepts are very simple. Do not complicate your life with television hype and misdirection. Wages must be growing for there to be sustainable overall inflation. This is Economics 101 and the problem over the last decade. Wages remain stagnant; ergo, no inflation. You are told it is a tight labor market but when you go in to ask the boss for a raise, he/she tells you to go pound salt. Inflation cannot occur without wage inflation occurring.
Wages are currently rising +3.1% per year. That's pitiful. Just think, you eat all the boss's crap all year long and all you get is a lousy 3% bump in pay. And some people receive a little more, maybe 5% or 6%, which means others receive no increase in pay at all. A 3-handle does not cut the mustard. The dirty little secret the Fed will not tell you is that you need around +4.5% annual wage growth to feed sustainable, guaranteed, steady inflation, above the +2% Fed target, for months and years forward. In this goofy day and age with the sick central banker control of global markets, let's be generous and say a 4-handle is good enough to provide the energy for sustainable inflation. We are a percent away from that, hence, you do not see inflation. It's not rocket science folks.
The narrative for today's price action provided by the business news outlets is that the jobs report created a big rally. Keystone's wet blanket on the data above provides you a more sobering perspective of today's market activity and several of you are placing the Fed wine down for a minute to try and clear your head. Stocks rally on central banker liquidity and nothing has changed. The Fed and its partners in crime such as the BOJ, ECB, PBOC and 20 other central banks, are printing money like madmen providing more liquidity than even after the Great Recession. Things are out of control.
Since the wage data remains subdued, there is no inflation anywhere in sight. Since there is no inflation in sight, the Federal Reserve will not hike rates and the dovish central banker fun will continue indefinitely. In other words, the headline jobs and rate numbers are great but the real focus by professional traders is that the Fed and other central banks plan to remain accomodative forever in a low inflation and disinflation environment so it is party-time; buy stocks.
Copper jumps +3.2% today the red metal exploding higher with investors believing in a trade deal. This huge move tells you that a lot of the rally today was due to a happy vibe about the trade deal rather than jobs number joy. The bulls know just how to nudge markets enough to limp them along at elevated levels especially to end the year. The FOMC rate decision is Wednesday and stocks are typically higher 80% of the time going into a Fed meeting. Chairman Powell will be greasing the market skids with fancy talk on Wednesday afternoon. The full moon peaks at midnight, going into Thursday morning, and stocks are usually bullish through the full moon.
Thus, the bulls have the wind at their backs next week say from Monday afternoon into Thursday. The ECB policy meeting is on Thursday and this may actually be a more important central bank meeting than the Fed. If the bears are going to growl, they probably need to do that out of the gate on Monday morning and try to override the Fed positivity into mid-week.
Perhaps the bulls will run next week until the new ECB President, Madame Lagarde, swims into power (she was an Olympian for France in synchronized swimming in her younger days and she obviously maintains a healthy form). President is a unisex title so she will likely be addressed as President Lagarde. This is a big meeting for Lagarde but she is a seasoned pro at handling the political pressure. Yes, her meeting on Thursday may be far more important than Powell's on hump day. Retail Sales data hit next Friday and we shall see if the American consumer continues to support the economy, or not.
So the bulls win a big victory in the stock market today but after dissecting the drama, we are once again left with a mixed bag of confusion. The charts may need a day or two more to absorb the upside momentum (tiny green lines) but the daily chart above remains in neggie d and bearish. Let a day or two play out and confirm that the indicators remain neggie d which will signal that the top is in.
The top standard deviation band is violated so the middle band at 13462 and lower band at 13321 are on the table. The bands are squeezing in the tightest since late July which resulted in a huge squeeze lower. Tight bands predict a big move is coming but they do not predict direction. Price is extended above the moving averages requiring a mean reversion lower. The Aroon green line is at the 100 max with nowhere to go but down and the red line is at the min zero with nowhere to go but up both are bearish going forward.
The positive sound bites on the US-China trade talks and the belief that the Fed and other central banks will always support markets with easy money keep the stock market elevated. Like other indexes over the last couple weeks, the charts say down but Soybean Donny, Dictator Xi, Pope Powell and other characters continue pumping stocks higher with happy talk. 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 SPX is up 32 points, +1.0%, to 3149, with 10 minutes remaining in the trading day, and week. Traders exclaim that the new near-record highs are beautiful. What's that? I see. Volatility is not cooperating. Considering the huge up day orgy, the VIX should be falling like a rock and at least sporting a 12 handle. Instead, volatility is flatter than a newlywed's souffle. Something is rotten in the state of Denmark. 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.
You hear it everyday on business television about how the American consumer is holding up the US recovery and markets. Manufacturing is in a quasi-recession. The couple-quarter spurts in growth, that are created by central banker money printing, continue occurring and each time they peter out the Fed, ECB, BOJ, PBOC and others are ready to cut rates and provide other forms of monetary stimulus to crank-up the growth again.
So the economy is in a sideways funk. Companies are hesitant to spend on capex (large or expensive equipment and technology) due to the ongoing trade wars or it at least provides an excuse. The real underlying reason is sluggish demand but no one on Wall Street is willing to say this out loud. Against this hazy backdrop, the resilient American consumer carries the mantle of bullishness for the nation.
The US consumer happily skips to WMT or TGT each day, buying all that worthless crap that they do not need. Nonetheless, the American consumer is supporting the US economy. If products are moving off the shelves, people remain employed to make more of those gadgets and tchotchkes. Watch inventories going forward.
Since strategists and analysts are looking for the American consumer to carry the load for at least a couple more quarters, are they in good enough shape? The ladies buy over two-thirds of the products in America with men buying about a third. So, by default, the American woman, in her average Size 14 stretch slacks and sensible shoes, with a purse full of coupons and store advertisements, is tasked with supporting the entire US economy on her thin shoulders.
The RTH retail ETF chart above says its over for the American consumer on the long-term weekly basis. The chart is ugly. The stoch's are overbot and the RSI is coming off overbot territory both agreeable to a relaxation downward in price. The rising wedge is ominous hinting at a drastic collapse ahead. The red lines show the RTH monthly chart in universal negative divergence. It is over. Price no longer has any fuel to move higher.
Despite the record highs, the ADX is down at 15 indicating that the trend higher is not considered a strong trend. That is odd since you would expect the ADX to be above 30 right now. The Aroon green line is at the ceiling with nowhere to go but down and the red line is in the cellar with nowhere to go but up both are bearish. All the above parameters are bearish.
Price has tagged the upper standard deviation band so the middle band at 115 is on tap in the weeks ahead and the lower band at 107 is also on the table. Price is extended above its moving averages requiring a mean reversion lower. More bearish stuff. In addition, the RTH monthly chart is also bearish and negative.
The chart is sick. It is telling you that a long term multi-week (and multi-month and multi-year top considering the monthly chart) top is in for the retail sector. It probably hints that there will be a lot of retail bankruptcies after the first of the year. It means that the great American consumer, mainly all our lovely ladies that do all the spending and buying, can no longer hold the weight of the US economy on their pretty, but thin shoulders. 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.
You hear it everyday on business television about how the American consumer is holding up the US recovery and markets. Manufacturing is in a quasi-recession. The couple-quarter spurts in growth, that are created by central banker money printing, continue occurring and each time they peter out the Fed, ECB, BOJ, PBOC and others are ready to cut rates and provide other forms of monetary stimulus.
So the economy is in a sideways funk. Companies are hesitant to spend on capex (large or expensive equipment and technology) due to the ongoing trade wars or it at least provides an excuse. The real underlying reason is sluggish demand but no one on Wall Street is willing to say this out loud. Against this hazy backdrop, the resilient American consumer carries the mantle of bullishness for the nation.
The US consumer happily skips to WMT or TGT each day, buying all that worthless crap that they do not need. Nonetheless, the consumer is supporting the US economy. If products are moving off the shelves, people remain employed to make more of those gadgets and tchotchkes. Watch inventories going forward.
Since strategists and analysts are looking for the American consumer to carry the load for at least a couple more quarters, are they in good enough shape? The ladies buy over two-thirds of the products in America with men buying about a third. So, by default, the American woman, in her average Size 14 stretch slacks and sensible shoes, with a purse full of coupons and store advertisements, is tasked with supporting the entire US economy on her thin shoulders.
The RTH retail ETF chart above says its over for the American consumer on the long-term monthly basis. The chart is ugly. The stoch's are overbot and the RSI is coming off overbot territory both agreeable to a relaxation downward in price. The rising wedge is ominous hinting at a drastic collapse ahead. The red lines show the RTH monthly chart in universal negative divergence. It is over. Price no longer has any fuel to move higher.
Despite the record highs, the ADX is down at 22 indicating that the trend higher is not considered a strong trend. That is odd since you would expect the ADX to be above 40 right now. The Aroon green line is at the ceiling with nowhere to go but down and the red line is at zero with nowhere to go but up both are bearish. All the above parameters are bearish.
Price has tagged the upper standard deviation band so the middle band at 107 is on tap in the months ahead and the lower band at 92 is also on the table. Price is extended above its moving averages requiring a mean reversion lower. More bearish stuff. In addition, the RTH weekly chart is also bearish and negative.
The chart is sick. It is telling you that a long term multi-month and multi-year top is in for the retail sector. It probably hints that there will be a lot of retail bankruptcies after the first of the year. It means that the great American consumer, mainly all our lovely ladies that do all the spending and buying, can no longer hold the weight of the US economy on their pretty, but thin shoulders. 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.
Commodities are at a critical juncture. The US has been in a deflationary and disinflationary funk for many years as Keystone has described and discussed. Wall Street fought this thinking every step of the way but now the universal consensus is that low inflation and disinflationary behavior will remain in place for several years ahead. Thus, the radar goes up that the low inflation period may be ending.
Scrolling back to the 30-year bond chart and analysis posted the other day, yields have placed technical lows as per the charts ending the three-decade bond rally. This behavior also hints that inflation is on the come.
However, the sick central bankers have orchestrated the longest economic recovery in history due to their obscene Keynesian money-printing. It is sickening that the wealthy have raped the American system for all its worth since the Great Recession. Humorously, many of the billionaires and millionaires are becoming worried about America's new Gilded Age and opining that more must be done for the common person.
The wealthy class, that destroyed the middle class over the last five decades by shipping jobs overseas, are all of a sudden concerned over the success of the little people and the United States as a whole. Pause for laughter. The politicians, corporate executives, government officials and the elite privileged class sent jobs overseas to lower expenses for companies which increases earnings and sends stock prices through the roof. Of course, the wealthy are the ones that own the large stock portfolios so they stuff big wads of cash into their pockets as they adjust laws and regulations to allow more raping of the American system. One-half of America does not own a single share of stock; stop and think about that.
So the US is left with a near 11-year rally in the stock market created by Federal Reserve and other global central banker easy money wondering how the grand financial experiment ends. Note the big rallies from the early 2016 bottom and early this year's bottom both 100% orchestrated by the Federal Reserve and other global central bankers. Commodity prices stumble sideways into the symmetrical triangles above and must make an important up or down decision.
The price decision from the triangle patterns has serious ramifications on all our futures. If prices fail from here, we are headed for more deflation. Even though the Treasury yield charts, and the universal belief that low inflation will remain, hint that inflation will actually begin slowly ramping higher going forward, an economic recession is the wild card (that may cause disinflation and low inflation to linger).
If commodity prices tank, obviously it will be due to the fact that global demand is in a bigtime confirmed downtrend. In other words, "We don't need no steenkin' oil, copper, iron ore or grains." Raw materials will not be in demand since products will not be in demand. This is the pathway to doom and gloom and a couple years of fear, despair, and agony, as Grandpa Jones would sing.
If commodity prices jump up and out of the sideways triangles, it is party time for the bulls and inflation is truly on the come in the weeks and months ahead, finally, after the Federal Reserve has tried to create inflation for 11 years with their sick (because the central bankers only enrich the wealthy, creating a huge rich versus poor income gap, that is about to morph into a multi-year probably violent class war in the US after the recession hits) monetary policies.
So those are the two paths ahead. Robert Frost opined about the road not taken, but which one is that, is it the one less traveled? Flip a coin for the road ahead since the chart indicators and moving averages are all moving dead flat sideways like price. Price, the 20-week MA and the 50-week MA are all at 2424-2485. It is decision time. Price must bounce or die.
The purple triangle has a side that is 700 points so a breakdown from 2430 will target 1730 and trouble and misery ahead. A breakout above 2430, which price is trying to do now, will target 3130 and market joy ahead. The blue triangle vertical side is about 1300 points so a breakdown from 2350 would target 1050, mayhem for the stock market and millennial's asking why they were not told that life could become so drastically different and hard so fast (recession). A breakout above the top blue triangle line at 2600-ish would target 3900 and record highs in stock markets that continue through 2020. Folks will conclude that central banks can print money forever creating never-ending stock market gains.
The chart does not hint at which way price wants to go (although price is trying to sneak up and out of the purple triangle right now) but realize that if the red arrow failure occurs, the Armageddon scenario plays out for the US economy and markets. Global deflation and disinflation and recession will be on the table for at least a couple years and the stock market will be trending steadily lower and lower.
On the flip side, if the happy green arrow breakout higher occurs, the joyous scenario unfolds where global growth picks up because it is true growth and not the same-o 11 -years of central bank-induced growth (that lasts for a couple or three quarters and then fizzles out requiring more central banker money to create another spurt). Stocks will be printing new record highs through 2020, recession will be off the table, jobs will be plentiful and inflation will be on the rise but it will be good inflation reflective of a healthy economy and markets. Don't hold your breath for this outcome. The former scenario is more likely.
If the breakdown of commodities occurs, the low inflation will linger for another year or two and then recover every year forward after that then likely flying into hyperinflation perhaps about 3 or 4 years out which is going to be a whole new set of problems. The United States faces a wild two decades ahead. Crony capitalism is on its way out and the multi-year class war that is upon us will likely lead to a socialism-light type America in a couple decades or perhaps a compassionate capitalism if you will. At least that new evolving system over the next 5 to 20 years, whatever it is, will attempt to not screw the common people. Capitalism is destroyed by the (greedy) wealthy elite class that benefit the most from the system.
The greedy wealthy probably destroyed any hope that a capitalism system could exist in the very long-term. Capitalism failed because of the same reasons that all other ism's (socialism, communism, fascism, dictatorships, etc...) fail; human greed and non-transparency. It's not rocket science. Watch commodities closely since by January you will likely know the path ahead that has been chosen for the United States, and yourself. 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 M&A (merger and acquisition) talk has gone bonkers in the luxury goods sector in recent days. TIF is on the buyout block and this morning in Europe, Moncler catapults +8% higher on takeover chatter. Life is fantastic for the elite wealthy class. The central bankers have goosed the stock market since March 2009 rewarding the rich (that own large stock portfolios) at the expense of the stupid huddled masses.
The stock market is at an epic top. It is the silly season. The tribal warfare in politics, the social media craze with everyone seeking their 15 minutes of Andy Warhol fame, the public treating each day as entertainment with a care-free attitude about taking on debt, are all hallmarks of the bread and circus days, the topping of a long-term Kondratieff Cycle. America, and the world, has many ugly days ahead over the coming couple years.
XLY is the consumer discretionary ETF. AMZN qualifies under this umbrella since many of the Amazon purchases are frivolous; worthless bobbles and trinkets that are thrown to the curb the following year. Luxury spending is by definition, discretionary.
A $2,000 used Ford Taurus with rusted doors and a smelly interior gets you to the same destination as the $80,000 Mercedez-Benz with leather seats and a wood-paneled dashboard. The winter coat from the Thrift store keeps you just as warm as the $5,000 mink fur coat. The $20 Timex keeps the same time as the $10,000 Rolex.
Alas, the wealthy's pockets are overflowing with money, thanks to the global central bankers, and they spend that money on the latest bobbles and trinkets to flaunt their fortune. XLY is a moonshot once former Federal Reserve Chairman Bernanke started QE 1 to save the US stock market in March 2009 and protect the wealthy class. The Fed and other public officials perform the bidding of the Wall Street investment banks since they are rewarded with lucrative speaking engagements at token luncheons once they leave office. This is the way the crony capitalism system works. It is crooked and rigged.
But all good things do come to an end. After all, your credit card has a limit on it, right? The same thing occurs with the global central bankers that have colluded to save the world's markets daily during the last decade. The only difference is that the limit on the Keynesian money printing is an unknown. Markets go up and the wealthy dance with glee, since they own the large stock portfolios, but the game only continues as long as everyone has full faith and confidence in the central bankers. When that is lost, all is lost.
The XLY monthly chart says the denouement is here. Godot has arrived. The epic multi-month and multi-year top is in. If you are young, run, don't walk, from the stock market. Otherwise, you will lose your money. The brown circles show the distribution taking place over the last few years. Those are the exact months the smart Wall Street money is distributing shares to the dumb money, a.k.a., Joe Sucka, Frank Fool and Bertha Bagholder. The M&A news and talking heads on business television cheerlead the stock market higher encouraging the sucka's to come on in and buy or risk losing out on the fun. The pump and dump is a staple money-maker on Wall Street.
The RSI was overbot for several years and now off those levels but the stochastics remain overbot both agreeable to price pulling back. The red rising wedge is ominous since the collapses from these patterns can be quite fast and dramatic. The red lines show universal negative divergence across all indicators. The top is in on the long-term monthly basis. Git outta Dodge now or you will be the bagholder.
The purple box for the ADX shows how the move higher in the SPX was a strong trend higher so you expect more highs. However, the May 2015 top occurs; remember how Keystone described and explained that topping process in real-time? The stock market had no business to move higher from 2015 on, but the central bankers are always ready to pump stocks higher to please their wealthy masters. One-half of Americans do not own one single share of stock! The coming class war will likely be violent and last for many years probably a decade or two. The gap between rich and poor is the widest in 50 years.
Note the famous Tweezer Bottom in early 2016. Stocks were toast but the Fed stepped in to save the day creating the obscene gains in stocks in 2016 and 2017. Structural unemployment and high debt remains for the huddled masses but the wealthy dance with glee as the central bankers goose equities higher. The day of reckoning came again in Q4 2018 but as Keystone described this year, on 1/3/19, the global central banks panicked again and goosed stocks +25% this year on more Keynesian money-printing. It is sickening and nauseating to watch. Crony capitalism is gasping its last breaths over the coming months and few years.
The ADX shows a strong trend again, due to the central banker goosing, in 2018 but this trend petered out after the Q4 2018 crash. Interestingly, note that despite the obscene money-printing this year by over 20 global central banks, the ADX is down at 19 and indicates that this big upside rally this year is NOT a strong trend higher. The Aroon green line is overbot with nowhere to go but down and the red line is at zero with nowhere to go but up both indications are bearish going forward.
Remember, the chart above is a monthly chart. We are not talking some neggie d that spanks prices back a few days on a daily chart or a few weeks on a weekly chart. The chart above indicates that a major historic top is occurring on a multi-month and multi-year basis in XLY as well as the broad stock market. Watch your wallet going forward. As Eric would sing and play, "Goodnight Irene, Irene Goodnight." 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.
