The previous CPCE chart signaled a market top coming in a few days. As always, each one is a little different. The low 4/6/15 print at 0.50 signaled uber complacency and traders buying stocks on the long side without any fear or worry. Stocks sold off from SPX 2090 to 2075 intraday but if you blinked you missed it. Stocks then traveled higher continuing to place the near-term top required by the low put/call number. The CPCE only moves moderately higher at that 0.60-ish area then comes back down for another uber low reading at 0.55. With this low reading the prior chart and analysis can simply be repeated. The uber complacency signals a top occurring any day forward and in three days the top was in.
The SPX peaks at 2110-ish and drops to 2072 during the back-half of last week; 38 handles. Okay, big deal, what next? The CPCE is up to 0.74 not yet at the 0.80 and higher level where the near term stock market bottoms have printed recently (green circles). Thus, the expectation is further selling until the negativity and fear reaches a point where a firm near-term bottom can occur (CPCE above 0.80). The prior TRIN chart spiked to a huge 4.00 which says a relief rally should occur quickly. Thus, taking the two tools (TRIN and CPCE) and combining them, markets may rally early to middle next week, to bring the TRIN back down from its loftiness, this would be in concert with the CPCE dropping back down to say 0.65 in another zig-zag move. Then the expectation would be for market selling to reinitiate and continue until the fear and panic is firmly displayed above CPCE 0.80 and higher (which will identify a market bottom).
Bring up the CPC put/call chart and you will see its uber low print under 0.80 on 4/15/15 which signaled excessive trader complacency and marked the exact top in the stock market on 4/15/15. The CPC is up to 1.12 and typically a 1.20 or higher is needed to signal excessive bearishness and identify a near-term market bottom; very similar to the CPCE set-up explained above. The stock market may need to drift lower over the next week or two (after a quickie rally due to the high TRIN) until the CPC moves above 1.20 to signal a firm stock market bottom. If the CPCE prints above 0.80 and CPC above 1.20 on Monday or any day forward you will know a firm rally is at hand and set to begin or already started. 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 8:15 PM on Monday evening, 4/20/15: The relief rally desired by the uber high TRIN occurs right away today, Monday, 4/20/15, with stocks recovering most of Friday's losses. Interestingly, the CPC and CPCE put/call ratios plummet and are signaling complacency again. CPC is 0.79. The CPCE drops to 0.56. Markets are preparing to print another near-term top any day forward. The markets continue the choppy sideways behavior this year.
The previous TRIN chart scenario plays out with a market top occurring a few days after the low 0.42 print (red circle). The 0.50-ish area is uber bullish euphoria so markets need to sell off to bring everyone back to earth which they did. The red square shows where the SPX topped out at 2110-ish. Then boom; payback time. Stocks drop and the TRIN sky rockets to 4.00 a big-time spike higher so now the shoe is on the other foot.
The spike higher signals that the bearishness was off the charts on Friday and that a near-term market bottom will occur at any time in the days ahead. It would not be surprising to see a recovery move on Monday, if not, then the stock market may toy around with sideways to sideways lower bias for a couple days but the near-term rally will occur and begin since the negative sentiment ran too high as shown by the TRIN at 4.00. Reference the prior chart to get a feel on how the TRIN can be used as a timing tool; the prior chart with the uber low TRIN forecasted the market topping process and a selloff while the uber high TRIN now forecasts a market bottoming process and near-term comeback rally to occur. 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 8:15 PM on Monday evening, 4/20/15: The relief rally desired by the uber high TRIN occurs right away today, Monday, 4/20/15, with stocks recovering most of Friday's losses. Interestingly, the CPC and CPCE put/call ratios plummet and are signaling complacency again. CPC is 0.79. Markets are preparing to print another near-term top any day forward. The markets continue the choppy sideways behavior this year.
Keystone's trading algo, Keybot the Quant, flips to the bear side shortly after Friday's opening bell at SPX 2086. Semiconductors and retail stocks create the drop and in the afternoon financial stocks. Pay attention to XLF 24.17 as a key bull-bear line in the sand. As financials go, so goes the markets. More information is found at Keybot's site;
Keybot the Quant
The TRIN prints an uber low at 0.42 yesterday verifying the excessive bullish euphoria in markets currently. Typically the extreme low TRIN readings (red circles) identify market tops as the enthusiasm for stocks is at fevers pitch. When the TRIN rockets higher on the positive side (green circles), the negativity is too excessive and a market bottom occurs. The TRIN chart is much more of a nuanced signal than other signals. The low reading at 0.42 indicates that a market top should occur at anytime in the days ahead.
Interestingly, two prior fractals played out with a drop of 10 to 20 SPX handles over a day or two period, then stocks recover back to the current levels for one to four days, then the SPX dropped from 50 to 100 handles. So the expectation is that equities should top out at any day forward and stocks sell off until fear and worry enters the market with the TRIN running above 2.0; that will identify time to buy the dip. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
The trannies never printed new all-time highs this year to confirm the new all-time highs in the Dow Industrials so the stock rally has not received a Dow Theory confirmation blessing as yet. The blue channel shows a steady downward drift to the transportation stocks and that is with lower oil prices. The push lower over the last month does occur as oil prices recover. Price lost the 200-day MA, a bearish development, and now at lows comparing back to October about six months ago. Note how price back kissed the 200-day MA yesterday.
The RSI has not reached oversold conditions. The stochastics are oversold and open to a bounce; ditto the falling green wedge. So price may recover for a better back test of the 200-day MA at 8668. The pink boxes show the strong trend in the ADX. The upward trend was strong late last year but in December the strong trend disappeared and you can see the multi-month weakness that occurs to the present. The ADX is climbing again indicating a strong trend ahead and this trend is down for price.
The TRAN weekly chart indicators are weak and bleak wanting lower lows in price after any relief bounces occur. Lower transportation stocks do not portend good things for the economy. Watch price action in relation to the 200-day MA that provides a bull-bear line in the sand. 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 pointed out the bottom in stocks with the high print in the CPCE the second week of March, which occurred. The worry had grown to levels where prior stock market bottoms had occurred (green circles). The SPX ran higher from 2040 to 2120, about 80 handles. In general, 2015 is sideways choppy action chewing up bulls and bears alike spitting out the bears one day and the bulls the next. The SPX is in the 2000-2120 range for the first three months of the year.
The CPCE collapses to 0.50 as traders drink left over wine from the Easter holidays, already drunk as skunks buying any stock with a heartbeat. The euphoria and joyous mood is cascading around the world with a large US stock rally yesterday and happiness in Asia and Europe overnight. The CPCE is at the same level that identified the top in markets late December and selloff that began the year. From late December to early January, the SPX fell from 2095 to 2000, about 95 handles in only five short days.
The CPCE signals rampant complacency in the stock market with everyone, even the cab driver and neighbor Nancy Jones, the housewife that is now trading each day from a laptop on the kitchen table, proclaiming that stocks will continue higher due to the global central banker easy money. These folks and the majority of market participants have no worry and do not see any reason to buy protection (puts) since stocks only go up and never go down anymore. What a Utopian world the central bankers have created. Kneel and worship at their feet!
Due to the low put/call, you do not want to be going long right now, instead, lighten up on longs, exit any position that you were thinking of selling, and if a short-seller, you can feel comfortable bringing on more shorts going forward in the near term. The stock market should top out any day moving forward and the SPX should drop from 40 to 90 handles. US futures are catching a bid ahead of the opening bell which is perfect to exit some longs and enter some shorts. 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 ISM is trailing lower for the last six months negating the glimmers of hope. As a rule of thumb, when the ISM moves above 55, that signals a sustainable recovery ahead. The economy was looking good in 2013 but then fizzled. The central banks keep goosing markets with easy money but the bang for the buck diminishes. Markets and the economy again show joy in 2014 but that faded as well.
Stocks and the economy were prevented from washing out properly in 2009 by former Fed Chairman Bernanke's QE1 and bailout packages for the wealthy bankers. After six years of obscene global Keynesian spending and the Fed and other central banker have nothing to show for it economy-wise, but the wealthy are filthy rich due to the higher stock markets. Stocks are goosed by buyback programs fueled with the Fed's easy money. Companies are not using the Fed's free money to buy equipment or hire workers, instead, they are pumping the stock prices to make the wealthy, that own stocks, richer.
America is separating into a rich and poor society with the gap between the two social classes the greatest in over 40 years. 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 courtesy of Econoday, an excellent site to monitor the economic releases, and annotated by Keystone.
Keybot flips back to the bull side this morning.
Keybot the Quant algorithm flips back to the short side this morning.
Keystone's proprietary trading algorithm, Keybot the Quant, flips to the long side this morning at SPX 2082.
