SPX 5-Minute Chart Overbot Rising Wedge Negative Divergence Spank Down

The SPX 5-minute chart into the closing bell today is a great example of the expected price action out of a rising wedge. The collapse can be quite dramatic. Remember, chart patterns work the same way in any time frame, so a dramatic drop would be expected out of any rising wedge be it on a 5-minute chart, or a daily chart, or weekly, or a monthly chart. It was surprising to see the bulls keep the broad indexes elevated all day long as the textbook rising wedge formed (both the red and maroon rising wedges) and by the end of the day the bulls ran out of gas and the overbot conditions, rising wedge and negative divergence (blue lines) create the spank down. Once the lower trend line fails, it's over, or, it's ovah, as Keystone's friends in Brooklyn would say. The indicators are now weak and bleak wanting lower lows but this is only a 5-minute chart so it only helps you forecast less than one-half hour forward. Weakness would be expected for tomorrow's opening but indicators are already at oversold levels, thus, perhaps a price basing occurs shortly after the opening bell at 1800-1802, in this time frame. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Keystone's Morning Wake-Up 11/26/13; Consumer Confidence; HPQ

Keybot the Quant remains short. The bulls had the markets on a silver platter yesterday but fell short of firmly locking in further market upside. Today is another day and Keybot is in position to flip long. If the SPX moves above 1808, and stays above, Keybot will likely flip long. The algo is tracking UTIL 490.68 (now causing market bullishness), SOX 498.52 (now causing bullishness), VIX 13.90 (now causing bullishness) and JJC 39.80 (now causing bearishness). Hence, the bears need lower utilities and semiconductors and/or higher volatility while the bulls need higher copper, respectively. If all 4 parameters remain in their respective camps today, the markets will float along sideways. For the SPX starting at 1802, the bulls need 1808+ for an upside acceleration and the bears need to push under 1801 for a downside acceleration. A move through 1802-1807 is sideways action. S&P futures are currently flat as a newlywed's souffle. The market bulls have it on silver platter again today only needing SPX 1808+ to confirm continued market upside ahead.

Two huge data points hit this morning, Housing Starts and Consumer Confidence. These are market movers and a market pivot point will occur at 10 AM on the confidence data. The Starts teased 1 million in April but in the last 3 months are in the 800K's, so watch to see if the number is in the 800's, 900's or over one million. Other housing data is also on tap and the Richmond Fed Mfg Index. The 5-Year Note Auction is 1 PM. TIF earnings are a blowout and the stock pops +5%. The wealthy continue to have lots of money to spend since the Fed helps the rich folks by pumping the stock market higher. CBRL, DSW, TIVO and HPQ are all of interest as well. HPQ is after the bell.

The BOJ weakening the yen over the last month has provided the upside fuel for equities. Yesterday case in point. The weaker yen moves the dollar/yen currency pair higher to 101.70 giving the SPX the early session pop yesterday. Then, around the noon hour, dollar/yen drops (stronger yen) to 101.60, hence, the SPX leaks lower. Then, early afternoon, the dollar/yen rebounds to 101.70 (weaker yen), hence, the SPX moves higher to test the 1807-1808 highs again. Then the dollar/yen collapses to 101.45 (stronger yen) as the U.S. session heads into the closing bell and the SPX collapses to the flat line. How obvious is it that the Fed and BOJ are the markets? It is shameful and obscene the damage the central bankers are performing to markets which will be felt in time. If a war, terrorism, a pandemic, or other serious event occurs, however, markets will drop and the central bankers will never be blamed. This is how the game is played. Dollar/yen is trading at 101.44. Use this 101.45 as a pivot. In general, the stock market will move higher if the dollar/yen moves to 101.50, 101.55, 101.60 and higher. The stock market will move lower if the dollar/yen drops to 101.40, 101.35 and lower.

The VIX and SPX were both up yesterday so one of them was wrong; into the close the SPX faded. The 10-year yield is 2.72% ten basis points off the 2.82% high late last week. Copper is negative. Pay attention to the semiconductors today, SOX 498.52, and of course SPX 1808. The snow falls in Pennsylvania with a couple inches already on the ground.

Note Added 8:03 AM:  Housing Starts are cancelled until 12/18/13 citing the government slowdown. Conspiracy theorists will ponder that the numbers must have been bad. The dollar/yen leaks slightly lower to 101.40 so the U.S. index futures leak slightly lower.

Note Added 8:43 AM:  Dollar/yen climbs back above 101.45+ so futures move higher.

Note Added 9:32 AM:  Dollar/yen 101.59 so stocks move higher. Banzai!! Semi's up. Utilities dropping, whoopsies daisies, directly on top of the UTIL 490.64 bull-bear line in the sand (50-week MA). Bounce or die. The market bears will drive equities lower if UTIL 490.64 fails. Bears will maintain elevated markets if they hold UTIL 490.64.

CPC Put/Call Ratio Daily Chart Signals Significant Market Top

The beat goes on. It is going on 5 weeks since the CPC and CPCE put/call ratios printed uber low readings verifying the uber complacency in markets. The low VIX also bolsters this case. Traders are 100% convinced that QE tapering will not occur until March and the stock market will continue higher until then. Some analysts are now touting SPX 1900 and higher price targets. As always happens, when the hubris and lack of fear reaches these levels, where there is a complete belief that nothing bad will happen, is exactly when something bad happens. The long side, in general, is not worth playing until the CPC moves above 1.20. Now is the time to trim positions and only hold longs that you would be willing to hold for a few years time.

Note how the chart is basically under one for months now, rampant complacency and lack of fear. The markets received a cheesy one-day bottom signal in October which marked the SPX 1650 bottom. Markets are not allowed to properly correct and operate due to the central banker intervention. The Yellen rally pushes markets higher recently and the BOJ chimes in, beating the yen with a baseball bat, so Japan and U.S. markets enjoy some further easy money upside. The CPC says, however, you do not want to be long moving forward. Instead, spend time studying companies and preparing your long shopping list. Then you will be ready to pull the trigger when there is blood in the streets and folks are jumping out of windows when the CPC climbs above 1.20. 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.

Gold COT Chart

The Commitments of Traders chart, courtesy of COT Price Charts, shows the gold price action over the last year. The red circles show tops in gold price and the green circles show the bottoms. Keystone identified the June-July bottom with the COT in the summer time. What do you think will happen next? The COT is always a lagging indicator since the data is days or a week or two behind. The chart is consistent with a bottom being placed in gold currently and the expectation is a recover move like July-August. 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 from COT Price Charts and annotated by Keystone. The site has very useful information on all commodities of interest.

GDX Gold Miners Daily Chart Downward-Sloping and Sideways Channels Oversold Positive Divergence Lower Band Violation

Compare this chart to the gold daily chart. The miners have been bludgeoned since the August top and beat particularly hard the last few days. The negative news on gold and the miners is at a fevers pitch with the majority of traders saying there is nothing but down ahead. You know what happens when the consensus is loaded on one side of the boat. Price has violated the lower standard deviation band so the middle band at 24 is in play as well as upper band at 26, both sloping downwards. The falling green wedge, oversold conditions and positive divergence prefer to see price move higher. The short red lines for the indicators show some near-term downside momo, so a few days of stutter steps may result before price bases. The gold miners in general, GDX, GDXJ, NUGT (this is the dangerous 3X ETF) are all attractive longs moving forward, one of the few attractive long areas since the bulk of the market is extended to the upside. Projection is for price to recover moving forward and seek the sideways brown channel again. Keystone has a long position in NUGT. 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.

GOLD Daily Chart Downward-Sloping Channel Lower Band Violation

The gold miners are more attractive currently, from the long side, than gold, but gold is setting up for upside as well. Gold violated the lower standard deviation band so a move to the middle band at 1290, at a minimum, is on the table. The stochastics and money flow want to see this bounce occur, however, the RSI and MACD (short red lines) want to see more downside after any bounce occurs. If price moves lower, the anticipation is that any matching price low will create positive divergence (watch thin neon green lines), and cause price to recover. The GDX chart in this time frame is very helpful. It shows GDX already collapsing down to the matching lows from July with positive divergence in place. So both gold and gold miners are attractive longs moving forward but the miners are preferredover the metal. Gold price is expected to maintain the blue channel, or return up inside if price does explore the 1200-1240 area, and move towards the top rail at 1300-1320 and/or 20-day MA at 1290 and falling. 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.

GOLD Weekly Chart Long-Term Decade Rally Fibonacci Retracements

Every day results in a new story about how gold is hated. As often happens at times of extreme sentiment, the opposite usually occurs. The decade-long gold rally was remarkable, from 250 bucks to 1900, +660%.  Back at the turn of the century, as savvy investors started to accumulate gold, they were called fools and idiots. Nearly 700% later no one was saying that anymore. Price continues to oscillate around the 32% Fibonacci retracement at 1265-ish, call it the 1250-1265 area. Price is 1251. A continued weakening in gold will create a move to the 50% Fib at 1072. The 62% Fib retracement is 878.

The move off the top is 650 points, from 1900 to 1250, -34%. Gold has lost one-third of its value in the last couple years. The current projection is that gold should hold the 1180-1250 area and recover. The new year, however, brings lots of questions. The majority of traders expect inflation to develop moving forward, and the 10-year yield to hit 3% and higher, which may favor the gold price, but Keystone continues to think disinflation and deflation moving forward and the 10-year yield likely to move lower for months ahead. As long as wages are flat and lower, inflation will not exist, and in a structural unemployment malaise, there will be no reason to raise wages in the coming months, perhaps years. Gold may seek the 50% Fib in early 2014 if the deflationary vibe grows but in the shorter term, days and weeks, gold should recover and hold the 32% Fib as 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.

XJY Japanese Yen Weekly Chart Sideways Channel and Symmetrical Triangle

Banzai!! Simply look at the purple box for the last 5 weeks to see why the Nikkei and U.S. stock markets are running higher. The BOJ is printing money even faster than the Fed, bludgeoning the yen. The weaker yen fuels the upside in Japan and U.S. equities. The blue sideways symmetrical triangle resolves with a collapse to the downside. Weaker yen means the dollar/yen moves higher as well as stocks. The lower target based on the triangle pattern is 92-95, however, the stochastics are already oversold and the chart indicators do not share the downside enthusiasm. Typically, the indicators would be signaling more weakness to attain the lower triangle targets. The same triangle formation is on the NIKK, DXJ and other Japan-related charts. The brown sideways channel range is 97-107. The greater expectation would be for price to seek a bottom in this 96-99 zone instead of fulfilling the triangle target, however, the lower targets must be respected.

The ADX at 20 and higher from late last year through this summer verifies the strong downward trend in the yen but the ADX at 15 now says there is no longer a strong downward trend. As the days and weeks move along, and if price matches the May lows sub 97.50, watch the thin green neon lines. With the lower price low, it is likely that positive divergence will be in place and the indicators will not violate the thin green lines. This will set up a bounce in the yen which corresponds to lower Japan and U.S. equity markets. Long traders have been tripping over themselves to buy Japan as the yen weakens again over the last month and they are reaping rewards with plays such as the DXJ fave that many money managers tout, however, this trade may not have the life that everyone expects. Traders are likely looking forward to another downside yen orgy like 2012 into 2013, which fueled the huge U.S. stock market advance this year, but the chart is not agreeable to this outcome.

Projection is for a basing in the yen at 95-99 and recovery moving forward for the weeks ahead. The BOJ will surely announce more money printing measures to try and beat it lower but they likely received the greatest bang for their buck earlier this year. If the yen weakens, the dollar/yen pair moves higher and stocks move higher. If the yen strengthens, the dollar/yen pair moves lower and stocks move 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.

SOX Semiconductors 15-Minute Chart

QCOM, a big-time fave of long traders this year, is under investigation in China which collapses the stock at Monday's opening bell sending the SOX sharply lower as the red candlesticks show above. QCOM, and the semi's in general, recovered as the day moved along. Semiconductors are a major influence on markets currently. A chip is required for just about any product manufactured these days so a slowdown or other turmoil in chip land would forecast trouble for the broader markets. The rising wedge, overbot conditions and negative divergence created the spank down for yesterday morning, QCOM was simply a catalyst. Price recovered yesterday afternoon for a matching high, however, the indicators remain negatively diverged and created the late-day spank down. Note that price recovered in the final minutes to back kiss the lower trend line. The SOX has to either bounce, to return above the trend line, or die, collapsing lower, at the opening bell.

The sideways channel at 501-505 is important and the winner is identified by whichever side price exits; bulls win above 505, bears win below 501, the fight continues at 501-505. If 501 fails, price will test the thick red line, identified by Keystone's trading algorithm, Keybot the Quant, at SOX 498.52. This is a bull-bear line in the sand and if violated to the downside, the broader market will sell off. SOX gapped-up 3 days ago so price may want to venture lower to fill and explore that gap at 496-497. Keep your eye on the socks moving forward. The sock hanging above the fireplace for Christmas will either be filled with gifts to make for happy bulls, or, coal, which makes for happy bears. 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 Weekend Reconnaissance 11/24/13

Thanksgiving week is typically bullish and the Friday after Thanksgiving is the most bullish day of the year. The EOM is Friday, a shortened session, markets close at 1 PM EST. Markets are closed all day Thursday in Observance of Thanksgiving. Thus, there is only 3-1/2 days of trading remaining in November that started at 1757. If the bears want to create a negative month they will need to be pushing equities lower tomorrow. The bulls begin with an advantage since UTIL is above 489.85. Keybot the Quant is bearish but may finally flip long tomorrow. If UTIL stays above 489.85, and the SPX moves above 1805, and stays above, Keybot will likely flip long.

The markets remain a coin-flip. The bulls need to keep the S&P futures positive overnight and this will set up a run to SPX 1810 for Monday and Keybot likely flipping long. The bears need to push the SPX under 1795 to accelerate the downside. A move through 1796-1804 is sideways action to begin the week. Bulls will benefit from higher utilities, copper and commodities. Bears will benefit from weaker utilities, semiconductors and financials, and higher volatility. The weekend charts are bearish in general and highlight price tops occurring across many individual stocks and sectors. The 8 MA is above the 34 MA on the SPX 30-minute chart signaling bullish markets for the hours ahead. Negative divergence is developing or in place on the SPX minute, hourly and daily charts and should push equities lower beginning tomorrow or Tuesday. When a month is up strongly, like this month, the last couple days or so typically finish weak.

Pending Home Sales and Dallas Fed Mfg Survey are released at 10 AM so markets may take a little stutter step. The 2-Year Note Auction is 1 PM and worth monitoring since the 2-10 spread is very important these days. The 2-10 spread is the difference between the 2 and 10-year yields, in basis points, that indicates the steepness, or lack thereof, of the yield curve. Keystone uses a value of 255 and higher for the 2-10 spread to indicate happy bankers. Long traders are tripping over each other buying the financials believing they will lead the next leg of the markets higher, and they may, however, the 2-10 spread has not surpassed Keystone's magic 255 level sa yet and the banking charts are setting up with negative divergence. The 10-year yield is 2.74%. Thus, the jury is out on the bankers.

The next 3 days may be quite a wild ride despite the holiday week. Lower volume is expected and will help the bulls push the jello around the plate in favor of the market upside but if a negative news event or sour mood develops, the bears may develop some quick downside mojo. The SPX 20-day MA is 1775.32 and rising. Watch UTIL 489.85 and SPX 1805 and 1795 to determine market direction. S&P futures are +2 early Sunday evening. Copper is  higher. Oil is lower on the Iran deal. Dollar/yen 101.27.  Market bulls are running out of the gate, S&P's +4, now +5...must be optimism on Iran.....