The monthly charts will receive new data points on Friday at 4 PM EST and June trading begins on Monday 6/3/19 one week from now. The 10-month MA at 2789 and 12-month MA at 2785 are two key lines in the sand for the US stock market. The SPX is above both parameters and in a cyclical bull market pattern as per this metric.
The bulls are not concerned since the SPX is at 2826 comfortably above this key support confluence at 2785-2789. This level is for all the marbles. If the SPX loses 2785-2789, Pandora's Box opens and relentless selling and bloody stocks will be the order of the day going forward. The bulls are not worried and bounced price last week from 2801 a dozen points from this 2785-2789 Armageddon support level.
The month of May will likely be negative since price needs to recover about 125 points in four days to move back above 2950 but you never know these days. Bulls are fine over the intermediate term (weeks and months ahead) as long as price remains above 2785-2789. If this key 2785-2789 level fails, the stock market may go into free fall. Equities may continue the ongoing sideways whipsaw pattern into the G20 meeting in June where President's Xi and Trump will decide the fate of global markets. 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.
Two of Keystone's favorite ST and VST stock market signals are the SPX 60-minute chart 200 EMA cross and the SPX 30-minute chart 8/34 MA cross. The SPX at 2826 remains well below the 200 EMA on the 60-minute chart at 2868 so the bears rule the stock market for the hours and days ahead.
On the S&P 500 30-minute chart, the 8 MA is below the 34 MA so the bears are also in charge in this very short term time frame by this metric. Note, however, the difference between the 8 and 34 moving averages at only 1.26. The price action at Tuesday's opening bell (US markets are closed on Monday for Memorial Day holiday) is key. The bulls can spike that 8 MA right up through the 34 MA to begin a path of upside bullish joy, or, the bears will need to come to play and jam stocks strongly lower which causes the 8 MA to collapse and maintain its negative, or bearish, posture below the 34.
The stock market is in a short-term and very short-term bearish pattern. The bulls need the 8 MA to cross up through the 34 MA on the SPX 30-minute chart to prove they can take equities higher. If the bulls then push the S&P 500 above the 200 EMA on the 60-minute at 2868, stocks will rally strongly higher. If the bulls create the 8/34 bullish cross on the 30-minute, but then fail to send the SPX price above the 200 EMA on the 60-minute, the bulls got nothing and stocks will slowly roll over again to the downside.
President Trump creates the whipsaw markets over the last couple weeks with his tweets that one minute the US-China trade deal is hunky-dory but the next minute is doom and gloom. Last week, after the markets are taking a hissy fit, Trump said the trade deal will be resolved in three weeks when he meets with President Xi at the G20. So the saga and adolescent dramatics will continue into late June. Perhaps the stock market will experience buoyancy as they hype over a trade deal increases into the G20 meeting, but then the bears take strong control due to the leaders unable to strike a deal or if the deal is perceived to be too weak for the US. The less-expected outcome would be a great trade deal but Trump always has a way of surprising folks. Emperor Xi and King Trump will meet in June at the G20 and tell the global financial markets how to trade.
Check that 8/34 cross on the 30-minute after trading begins on Monday since it will tell you a lot about the stock market direction forward in the short-term. The monthly charts will receive new data points on Friday at 4 PM EST and June trading begins on Monday 6/3/19 one week from now. 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.
India is in the mood for more Modi as evidenced by his landslide election victory. He has the huddled masses buying what he's selling. Global investors are tripping over each other to buy Indian stocks. India is the fastest growing economy in the world. The BSE Sensex pops over 40K and the Nifty prints above 12K at all-time record highs. Indians celebrate with a curry feast. It is interesting that the index continues to list the name 'Bombay' since that word has become less used and moved into the background since it represents the days of colonialism.
AAPL went all-in to China predicting high-growth and big sales numbers. Instead, a trade war occurs and the consumers are more loyal to Chinese products. Apple CEO Cook then jumped over to India predicting unlimited riches as new Indian consumers grab the pricey iPhones. That ain't happening either. Indians are generally thrifty folks, which is smart, and prefer inexpensive phones that perform pretty much all the same functions as an iPhone. Cook may have to cook the books to make his numbers going forward.
The BSE launched higher in Thursday's trade tagging 40,125 the all-time record high. However, the joy quickly faded after the market fell on its sword intraday collapsing to a low at 38652. The curry was taken back to the kitchen. In Friday's trade, today, 5/24/19, the BSE finishes the day at a new all-time closing high at 39435 (green dot).
Caution; the BSE monthly chart is in negative divergence across all its chart indicators so India is actually printing a multi-month and perhaps multi-year major top. Do not chase the upside instead look at shorting opportunities. Keystone does not have any positions currently in India ETF's. IFN, EPI, INDA, INDY and others are possible short plays moving through the remainder of this year. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Keystone's proprietary trading algorithm, Keybot the Quant, flips to the short side at SPX 2829 at Thursday's opening bell. Volatility spikes while the banks, commodities and NYA index fail a quadruple whammy of doom. The NYA recovers as the session played out. More information is found at Keybot's site;
Keybot the Quant
The VIX 200-day MA at 16.82 is a key bull-bear line in the sand. In addition, Keybot the Quant algo identifies 14.78 as a key bull-bear level. The VIX ended yesterday at 14.75 a touch on the bull side ready to take the stock market higher. The VIX begins trading at 3 AM EST this morning and launches above 15.80 with the S&P futures tanking -19. As this is typed less than 4 hours in front of the opening bell for the US regular trading session, the VIX is up to 16.52 with the spoo's down -29. Traders are in a bad mood. It's getting uglier as the morning proceeds. President Trump will have to run to Twitter with happy trade talk to save the day.
If VIX drops below 14.78, the bulls rule the stock market. If VIX is between 14.78 and 16.82 (VIX is now at 16.52), the stock market will chop sideways with a downward bias. If VIX moves above 16.82, the wheels will fall off the stock market with equities falling like stones.
Despite the negativity this morning with the S&P perhaps losing 25 or 30 handles at the opening bell, it means nothing unless the VIX moves above 16.82; this will signal trouble. If stocks sell off as trading begins, but the VIX is not above 16.82, stocks will recover. Typically, the stock market is bullish the two days in front of a three-day holiday weekend. US trading is closed on Monday for the Memorial Day holiday. Professional traders may be willingly to buy the lows at the opening bell and hold into the weekend if the VIX does not move above 16.82. 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. Overnight
Note Added 6:33 AM EST: The VIX is at 16.58 with the S&P's down -28. The bears need another 24 pennies higher in the VIX to prove they have the beans to take stocks lower.
Note Added Friday Morning, 5/24/19, at 9:15 AM EST: The VIX jumps above 16.82 and there was H*ll to pay. Overnight, the VIX drops to 15.96 back below the 200-day MA so the bulls flex their muscles with S&P futures up +19. The sideways choppy slop, responding to news bites on trade or from central bankers, continues.
Note Added Saturday Morning, 5/25/19: The VIX finishes the week at 15.85. Very simply, the bears prove that they have the power to take the stock market lower if the VIX pops above 16.87 and remains above. The bulls prove that they have the beans to take stocks higher if the VIX drops and remains below 14.80. In between, like the Friday session, is more sideways choppy slop and noise.
Tesla drives into a ditch. A Tesla is filmed in a parking garage smoldering then bursting into flames. There are accidents occurring due to the autonomous software. Batteries may explode during accidents. There are few charging stations available for electric cars but there is a gas station on every corner. Future demand for electric cars is questionable. Interestingly, one-half of all electric vehicles sold are in California, the land of fruits and nuts. The competition is ramping up in the electric vehicle market; would you rather drive a BMW or a Tesla? There are quality complaints stacking up against Tesla including door handles that fall off and panels that are not lined up perfectly. The jury is out on the cost and hassle of replacing batteries as the cars age. It is difficult to find skilled technicians to handle the maintenance and service for Tesla cars. And, the cars are not cheap. Other than all that, things are going swimmingly for flamboyant CEO Elon Musk.
Billionaire investor Ron Baron worships at Musk's altar each morning throwing millions of dollars into the Tesla money pit. Baron proclaims Tesla as the Second Coming and best thing since sliced bread and the invention of the wheel itself. Baron is losing his shirt.
TSLA topped out over the last 18 months with the negative divergence (red lines) Keystone highlighted last year. The overbot conditions conspire with the neggie d to smack price lower. The brown circle shows the Tweezer Top that was the last chance to get out. There wasn't any gas, er electricity, left in the tank, so Tesla broke down on the side of the road. Price drops from 382 to 195 basically cutting it directly in half since late last year. Unfortunately, for TSLA, Musk the Magician likely has no chance of putting it back whole.
Keystone's 80/20 Rule says 8's lead to 2's and 2's to 8's so a failure at 220 opens the door to 180. During this -50% crash in 6 months (TSLA is in a bear market down in excess of -20%), a couple of big gap-down weeks occur so price may want to make its way back up to there at some point to fill those gaps (orange circles).
Price is making lower lows and comes down to tap on the 195, the top of that horizontal blue channel at 180-195. This is a congestion zone from 2016 and may attract price like a magnet. This is the battleground from which TSLA may decide to bounce, or die. With the current lower lows in TSLA, the stochastcs and money flow are positively diverged, and the stoch's are oversold, wanting to see price bounce.
However, the RSI and MACD line remain weak and bleak wanting more lows in price so the blue channel may be Tesla's destiny. If price bounces for a week due to the possie d, then rolls over for a week due to the negative-sloping RSI, then bounces another week, then down again because of the weak MACD line, then chop a week or two, that will likely be the bottom on this weekly basis; say, in 3 to 6 weeks. That would be mid-June into July 4th for the potential bottom for TSLA on the weekly chart.
The ADX was in a strong uptrend in 2017 but that petered out about mid-year. The sideways choppiness in price during 2014-2016 and 2018 are verified by the low ADX readings. There is no strong trend; price is simply chopping sideways. The ADX is climbing again and with another 4 or 5 points will identify the collapse in TSLA stock as a strong downtrend. For now, it is not. The Aroon red line is pegged at the maximum 100 reading so a mean reversion lower is the only direction it can go which correlates to some price buoyancy.
Thus, TSLA will likely move sideways to sideways lower for the next month or so, perhaps teasing into that 180-195 congestion zone where the men will be separated form the boys. TSLA should bounce from there and likely regain 2 hundo and perhaps target those gap-fills at 210 and 236-ish. So during the summer, that cat Musk may receive another life as a multiple week rally occurs.
The rally in say, Late June, July perhaps into August, however, will not have staying power and should probably be used as an exit for anyone that holds the stock. The TSLA monthly chart shows a weak and bleak RSI, MACD, histogram and stochastics although the stoch's are oversold. On a monthly basis, the stock remains sick and would be expected to print lower lows. The oversold stochastics on the monthly will conspire with the possie d on the weekly chart above to give a bit of buoyancy to the flailing stocks over the next month. TSLA will likely finish the year in the 150-190 range. Musk better hope it does not get worse than this.
Keystone has no position in TSLA and will likely not play it. If so, it would probably be a no-touch for 2 to 4 weeks, then bring on a long position at that point. Sell that in July after price recovers then turn around and flip that trade short since the monthly chart will re-exert itself into year end. 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 Thursday Morning, 5/23/19, at 6:35 AM EST: TSLA was smacked -6% lower on hump day to 192.73 and in this morning's (Thursday) pre-market collapses another -4% to 185. Musk is likely on the phone asking Baron for more dough.
Note Added Monday, Memorial Day, 5/27/19: Ark Investment strategist Cathie Wood is defending her call that TSLA stock will hit $4,000. Whatever she's smokin' she should pass it around to everyone else.
Keybot the Quant algo is back on the long side at SPX 2859 after this morning's opening bell. The whipsaw action is getting old. This atypical behavior verifies the ongoing bull-bear battle and erratic and unstable nature of the stock market. Watch the banks (XLF) and volatility (VIX). More information is found at Keybot's site;
Keybot the Quant
Treasury yields have been falling like a rock recently as inflation proponents continue proclaiming that inflation is just around the corner and yields will rise. In the last half year, the 10-year Treasury note yield falls from above 3.23% to 2.39%, an 84 basis point collapse (1 basis point, or bip, is 0.01%).
The 10-year yield jumped from 2.06% to 3.23% from September 2017 to October 2018 a huge 117 bip move. Last September, investors and traders guaranteed that yields had no where to go but up and of course, that is when yields plummet. The Q4 stock market crash occurs and traders seek safety buying Treasuries which sends yields lower (note and bond prices higher yields lower).
The TBT chart mimics the move of the 10-year yield chart which is TNX or UST10Y. TBT is a 2x ETF that will move higher when yields rise. TBT is called an UltraShort ETF because it is a double-leveraged offering, hence ultra, and it is a short play that is looking for Treasury prices to drop which will send yields higher. TLT is the mirror image of TBT. TLT moves higher as Treasury yields drop so its chart is at a high now celebrating the drop in yields over the last half-year (rising note and bond prices).
Thus, if yields are dropping like a rock (note and bond prices higher), say the stock market is falling apart and investors are seeking perceived safety by buying Treasuries, the TNX and UST10Y charts displaying yield will be moving lower. TBT will also be moving lower and TLT higher. If investors are dumping Treasury notes and bonds, prices are dropping and yields are running higher. TBT will then be moving higher and TLT lower.
The TBT chart above is setting up with possie d so you know that the TLT is setting up with neggie d. This behavior hints that TBT is a long play going forward and TLT a short play.
The stochastics are oversold but not the RSI so that leaves more room for TBT downside. The green lines show positive divergence developing but will not be in place unless TBT prints a lower low than March (green circle). Watch the MACD line closely. US futures are tanking Monday morning as this is written about 2-1/2 hours before the opening bell, so there will be a flight to safety and lower yields on tap. This will send TBT lower and TLT higher. As/if this occurs, see if the MACD prints a lower low. If so, the bottom in TBT will likely be delayed by a week or so.
Despite the huge drop in TBT, the ADX (purple box) shows that the trend lower is not a strong trend. Typically, you want to be in the high 20's poking into the 30's and higher to prove the trend is strong. In this case, the half-year downtrend is not particularly strong. Price is extended to the downside below the moving averages so a mean reversion higher would be expected soon.
TBT is teasing the lower band at 32.04 but this may need to be tapped convincingly to place the bottom. It will be important to hold 32 because Keystone's 80/20 Rule says 8's lead to 2's but 2's also lead to 8's. So a failure through 32 likely opens the door to 28. The weekly chart above, however, is more encouraging for the bottom to occur at this 31.80-32.30 area.
Keystone does not have a position in TBT but will buy it and/or short TLT going forward. The TBT daily chart is setting up with possie d as well and only needs price to tag that 32-ish. The 2-hour chart is also set up with possie d so Keystone will buy TBT on the likely drop this morning. If you are a longer term trader and prefer weeks and months for positions rather than hours or days, you can scale in to TBT say one buy this week, one next and one the week after that, and then hold that into summer time. At the least, place TBT on your long watch list and TLT on your short watch list.
If TBT loses 32, then the long trade will likely be busted and will have to be exited and then reentered at 28-ish. If this scenario occurs (TBT sub 32), the stock market will likely be collapsing (investors will be chasing into Treasuries driving yields lower).
Taking a look at Treasury yields currently trading; 2-year 2.20%, 5-year 2.17%, 10-year 2.39%, 30-year 2.82%. The 2-10 spread (yield curve) is 18.7 bips. The 2's and 5's are inverted by 3 bips. 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 posted the VIX chart last week mentioning the extreme importance of the VIX 200-day MA cross. Well, look at that. Price tagged the 200-day MA at 16.77, on the dot, and retreated. How do you like them apples? Of course, volatility and the stock market move inversely to one another about 90% of the time, so lower volatility creates bullishness in stocks.
Market bears got nothing unless they push above VIX 16.77. Keybot the Quant algorithm identifies VIX 15.06 as a key bull-bear line in the sand (blue bar). Price pierced below this level last week (uber bullish) but recovered back above (bearish).
Thus, bears win bigtime above VIX 16.77; stocks will fall like rocks. Bulls and bears battle for market control between 15.06 and 16.77. The bulls win bigtime below VIX 15.06; stocks will catapult higher. The new week of trading begins at 15.96. 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 Monday Morning, 5/20/19, at 7:30 AM EST: 2 hours before the opening bell for the US trading session, the VIX pops to 17.08 and S&P futures are down -16. 10-year yield 2.39%.
The BPSPX remains on the double-whammy sell signal for the stock market. The bulls are putting up a heck of a fight and simply will not let equities drop any significant amount. The bulls have rich Uncle Fed in their back pocket. The six percentage-point reversals lock-in the stock market move in that direction.
The BPSPX is trying to stabilize with a low print at 59, thus, adding 6, gives 65. The bulls need the BPSPX above 65 to prove that the stock market is in a solid upward pattern again. If that occurs, and then the BPSPX regains the 70% level, that will be a double-whammy buy signal for equities. The bears are in the driver's seat right now, however, and only need to keep the BPSPX below 65 to rule the stock market going forward. 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.
