Tuesday, July 29, 2014

RUSSELL 2000 SMALL CAP INDEX 150-DAY MA SLOPE TURNS NEGATIVE SIGNALING THE START OF A CYCLICAL BEAR MARKET

The RUT 150-day MA slope highlighted here over the last three weeks finally rolled over today. This is a major market event. The 150-day MA has sloped higher for over two years correctly prognosticating the cyclical bull market rally, until today. Yesterday's 150-day MA is 1154.09; today's is 1154.05. The slope of the 150-day moving average now falls by four pennies turning negative for the first time in years. As the astronauts said decades ago, "Houston, we have a problem." The bears pop champagne corks since the long awaited major market multi-year pull back and potential negative finish to the secular bear market 2000-2018 has likely begun.

The green box shows the slope of the 150-day MA moving higher as it has for month after month after month continually verifying the cyclical bull market rally, until today. The only way bulls can stop the failure is to jam markets higher immediately beginning tomorrow. The remainder of trading this week could not be any more important. If bulls plan on maintaining the cyclical bull rally, they must send markets strongly higher from now into the weekend. If the 150-day MA prints negatively tomorrow (Wednesday), then Thursday, and also Friday, the small caps are lost and the broad indexes will follow the small caps lower; markets will break down. This is an important day in market history for you are witnessing the exact inception of a cyclical bear market for the RUT index. We will know over the coming days if it sticks and is official moving 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.

Monday, July 28, 2014

VIX Volatility Daily Chart 200 MA Cross

Volatility jumps higher today above 13 but is languishing on each side of this psychological 13 number. As a rule of thumb for the VIX using it as a tool, market carnage is guaranteed with the VIX above its 200-day MA now at 13.60. The market bulls can make a come back and recover if they can keep the VIX under the 200-day MA. Note that eight days ago price ran above the 200-day MA but it was a one-day event. Keystone described the market selling then as a volatility event. No meat and potatoes sectors had rolled over so once fickle volatility dropped markets would recover and that is what happened. Since late last week, however, for this recent three-day market sell off, volatility moves higher but this time with a semiconductor sector that has broken down and a weakening retail sector. Note that the VIX ran higher today to test the 200-day MA printing a HOD at 13.64 but it could not stay above and was spanked lower.

Keybot the Quant remains short with RTH 59.62 and VIX 12.70 the key bull-bear lines in the sand that control market direction currently. Both are bearish, but only by pennies, hence the broad indexes stagger sideways unwilling to commit either way. These two parameters will point the way ahead. RTH is printing at 59.59 only three pennies on the bear side causing market negativity. VIX is 12.99 bearish by 29 cents (remember volatility moves inversely to equities).

The VIX 12.70 line is identified by Keystone's algorithm, Keybot the Quant. So use the 12.70 level and 200-day MA at 13.60 as the two key indicators on this chart. Markets will remain weak and drift lower with the VIX above 12.70 and bears win big above 13.60. Equities will recover and move higher if VIX drops under 12.70. The red lines above encompass the 200-day MA over the last few months, all of this year, so use the 13.6-14.5 range as a key resistance area for VIX. Market trouble occurs above VIX 13.60 and serious trouble, with the SPX dropping into free fall when VIX moves above 14.5. The VIX is printing at 12.95 as this message is typed. The RTH is 59.58. The SPX is down barely three points to 1975.75. 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 1:26 PM: The RTH moves higher to 59.65 above 59.62 so equities will recover today and move higher. VIX is 12.82. A big rally will occur if VIX drops under 12.70. Bears will resume selling pressure if RTH drops under 59.62.

Note Added 1:31 PM: RTH 59.64. VIX 12.80. SPX 1977.56. TRIN is at 1.20 representing a preference for steady-eddy selling today so if the Arms Index had its way it wants to see RTH, the retail sector, weaken again.

Note Added 1:55 PM:  The market price action displays more drama than a Shakespearean play; comedy and tragedy all at the same time. The VIX drops under the 12.68 bull-bear line in the sand (use this number instead of 12.70--Keybot is constantly calculating numbers in real-time) creating a further move higher in the stock market. The bulls recover today meeting the RTH 59.62 and VIX 12.68 goals. Keep watching these levels since the movement above or below these two key levels for these two parameters will tell you which way the market is going.

Note Added 1:58 PM: RTH 59.68. VIX 12.67. SPX 1980.49. TRIN 1.27. The beat goes on. Keystone took profits on the JJG trade exiting the long position. JJG likely has some more near-term juice (days) but is tricky since the weekly chart remains weak. No use turning down a profit and moving on especially after catching the exact bottom.

Note Added 2:06 PM: The VIX back kissed the 12.68 critical level and failed now at 12.61 so the bulls may plan to run further today.

Note Added 10:36 PM: The VIX ends at 12.56 in the bull camp sticking a thumb in the bear's eye. The bears, however, declare victory by pushing RTH back under 59.62 which created the broad market weakness into the closing bell during the last one-half hour of trading. So Tuesday is very simple. Watch VIX 12.69 and RTH 59.62 to determine market direction. Bears will rejoice as equity markets crumble if the VIX moves above 12.69 and above 13. Bulls will toast victory ahead if they push RTH above 59.62. If VIX stays under 12.69, and RTH remains under 59.62, then markets stagger sideways like the town drunk unable to make a decision. The 8 MA is under the 34 MA on the SPX 30-minute chart signaling bearish markets for the hours ahead, however, the 8 MA is running upwards, and the 34 MA is dropping downwards, so a potential positive 8/34 MA cross may occur placing the bulls back in charge. The 8 MA on the 30-minute is 1978 so the bears must send SPX price under 1978 and lower immediately after the opening bell to stop the 8/34 positive cross from occurring. If the SPX begins the day hanging around 1979-1983, say for the first hour of trading, markets are going to head higher and RTH will likely turn bullish. If the bears push the SPX lower from the get-go, under 1978 and down towards 1967, the long-awaited sustainable market selling event may be at hand with the VIX moving above 12.69. As explained and highlighted in the above chart, the VIX 200-day MA is key. Bears need VIX above the 200-day MA at 13.60 to growl strongly and guarantee sustainable market carnage. If the VIX stays under 13.60, the bears got buptkiss. Dollar/yen is buoyant at 101.88 moving higher so the weaker yen creates lift in the NIKK tonight and will help the bulls tomorrow. Market bears want to see the dollar/yen lower to 101.80, 101.70 and lower. Market bulls want to see the dollar/yen higher above 102. Use the 101.88 as a reference to see who wins overnight.

Note Added 11:04 PM: Scroll back to the RUT chart or type 'RUT' into the search box at the right to bring the chart up and study the 150-day MA slope cyclical indicator that is explained. For any stock or index, the slope of the 150-day MA tells you if the stock is in a cyclical bull, or cyclical bear, pattern. The RUT has enjoyed an upward-sloping 150-day moving average for many long months but in recent days the slope is flattening and may roll over. If the RUT 150-day MA slope rolls over to a negative slope you are witnessing the exact inception of a cyclical bear market that may last months or a year or two. The last four days result in the following 150-day MA prints for RUT; 1153.67, 1153.92, 1154.00 and 1154.09. The differences are 25 cents, 8 cents and 9 cents. Wow! This is intense and very important; one of the most important things you will witness. The 150-day MA slope is only 8 or 9 pennies from slipping negative for the Russell 2000 Small Cap Index. Obviously, by definition, if price continues printing under 1154.09, this will drag the 150-day MA lower to make for happy market bears. If you see the RUT starting to run higher tomorrow and this week, above 1154.09 the fix is in and the bears will get slapped in the face again as markets run to the all-time highs. It is a huge deal if the RUT 150-day MA slope turns negative; it cannot be understated. It would mean that all the bullish prognostications on the market are wrong. Watch it like a hawk.

Note Added 10:04 PM on 7/29/14: VIX regains 12.69 and higher creating market negativity. VIX is 13.28 and the 200-day MA is 13.58. Bears need thirty cents more to move VIX above 13.28 which will unleash market carnage. Bulls can stage a recovery if they prevent VIX 13.58. Note that the RUT 150-day MA is 1154.05. Bingo. Bears pop champagne corks after being kicked in the teeth for months, and years on end. The RUSSELL 2000 SMALL CAP INDEX 150-DAY MA ROLLED OVER TODAY PRINTING A NEGATIVE SLOPE FOR THE FIRST TIME IN OVER TWO YEARS. The CYCLICAL BULL MARKET NOW TURNS INTO A CYCLICAL BEAR MARKET. The expectation is that the small caps will roll over much more going forward and the Nasdaq and broad indexes will follow along lower each index then rolling over with its 150-day MA turning negative in the days, weeks and months ahead. The bulls must reverse this major negative market signal immediately and the only way they can is to drive markets sharply higher starting tomorrow. Bulls need a big rally to save the day and turn the RUT 150-day MA slope positive again.

Friday, July 25, 2014

Keybot the Quant Turns Bearish

Keystone's trading algorithm, Keybot the Quant flips back to the bear side at SPX 1975 today. The collapse in semiconductors is a big deal. SOX 624 will be important at Monday's opening bell. Volatility and retail are also important for next week. As always, stay alert for a whipsaw on Monday but the bulls will need happy news and positivity in chips to regain the upside mojo. More information is found on Keybot's site;

Keybot the Quant

Keystone's Midday Market Action 7/25/14

The market drama continues. Semiconductors suffer a serious breakdown today. The news on chips has been weak over the last couple weeks. SOX collapses to a 619 handle. Keybot the Quant remains long but is in position to go short in part due to the weak semi's. Keybot is only hanging on to the long side by a thread and the algo will likely flip to the short side if the SPX drops under 1979 and holds this lower level for about five minutes time. The SPX is currently 1981.

If the SOX recovers today from 620 up to 622 and higher, equities will recover. Keybot the Quant identifies the SOX 624 level as a bull-bear line in the sand. SOX collapsed under 624 at the opening bell and this is what creates the majority of market directional weakness today. If the SOX drops further through 619, 618, etc..., the stock market will be falling like a stone. The VIX is 12.12 helping the bulls. Keybot identifies VIX 12.95 as the bull-bear line in the sand. Thus, the markets will fall apart if the VIX moves above 12.95. If the bulls can send the SOX steadily higher into the closing bell and keep the VIX tame at 12.12, equities will stabilize and float higher into the weekend. Any weakness in SOX or increase in VIX will send equities lower.

Interestingly, as this missive is typed, the SPX recovers to 1983 but the SOX remains flat across 619.49. VIX is 12.07 so the slight drop creates market lift. TRIN is 0.75 firmly bullish so it will help the broad indexes recover. Dollar/yen 101.82 dropping from the 101.90 plus highs only an hour or two ago so a stronger yen creates market weakness. The 10-year yield is 2.48% after teasing a hair above 2.50% earlier.

Keystone bot JJG opening a new long position. This long trade requires a nimble touch since a positive divergence bounce is expected from the daily chart but then weakness should return via the weekly chart. So perhaps a launch and gain of a few percent will be good enough to exit the trade quickly and move on. Reference previous chart on JJG a few posts back.

Note Added 10:36 AM: SOX 619.68. VIX 12.04. TRIN 0.76. SPX 1982.43The 8 MA stabs down through the 34 MA on the SPX 30-minute chart at the opening bell today signaling bearish markets for the hours ahead.

Note Added 5:51 PM: SOX 616.65 so semiconductors knock stocks lower. VIX rises to 12.69 but the bears need another 26 cents or so to create mayhem. TRIN came up to 1.03 a single hair on the bear side as the day worked out. Retail stocks are weak and will play a key role next week. The main market directional drivers currently are semi's, volatility and retail stocks. Listen for any news in chip land or retail land over the weekend. Dollar/yen 101.82 remaining steady during the session so equities remained steady. Keybot the Quant flips to the bear side today at SPX 1975 at the lows of the day. The new moon occurs tomorrow and stocks are typically weak moving through the new moon. The Russian sanctions play a key role in markets now. When the threat for the deeper Level Three sectoral sanctions is on the table stocks drop when the fear of sectoral sanctions subside, stocks move higher. Germany is getting whacked on sanction concerns. Late in the day the rumor mill says stronger sanctions are coming early or mid next week.

Thursday, July 24, 2014

SPX 30-Minute Chart 8/34 MA Cross Overbot Rising Wedge Negative Divergence

The 30-minute receives an initial smack down due to the negative divergence. The chart would be content with this mornings price high, a new record all-time high at 1991.39, as a near term top. The previous 2-hour chart hints at a recovery move to play around at the highs again after an initial selloff occurs. The 8 MA remains above the 34 MA signaling bullish markets for the hours ahead. The bears need to push the SPX under the 8 MA at 1989 to start curling the 8 MA downwards to create a negative 8/34 cross. The bears got nothing until they receive the 8/34 negative cross.

Projection is sideways to sideways lower moving forward with current price levels serving as a near term top. Watch the MACD line cross to see if the bulls may try to thrust higher; the RSI also did not become overbot, but overall, the chart is consistent with price topping out and rolling over. Key support below is 1986, 1985, 1984, 1982, 1980, 1976, 1973, 1968, 1963, 1961, 1960 and 1956. Note the TRIN today down at an uber low at 0.74 creatign bullish lift today. Ditto dollar/yen at 101.82. Banzai! The weaker yen sends stocks higher. Interestingly, the VIX is up today, so is the SPX, so one of them is wrong. VIX is at 11.78 languishing under 12 continuing to create lift in the stock market. Bears need VIX 12.95 to create sustainable market selling. 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 7/25/14: The 8 MA stabs down through the 34 MA on the SPX 30-minute chart at the opening bell today signaling bearish markets for the hours ahead.

BPSPX S&P 500 Bullish Percent Index Remains on Market Buy Signal

The BPSPX remains on a market buy signal. You recall the drama in May when the buy signal triggered and the bulls have never looked back ever since. When the BPSPX reverses six percentage points a directional change is verified and when the 70% is crossed the double whammy buy or sell signal occurs. The 35 level is also important but the over 5-year bull market rally has left that lower level in the dust. In the years forward we will be talking about the BPSPX when it is down between 10 and 60; all things revert back to the mean eventually. In February the reversal occurs from 62 to 68 so the bulls had mojo and then once the 70 level was taken out the market buy signal verified the upside rally.

In March, equities peaked and the BPSPX reversed to the bear side from 77 to 71, then losing the 70 level, the bears were in clover. Then the bulls slap the bears in the face in early May recovering from 65 through the 70 and 71 levels receiving the buy signal again. The top print is 84.60, call it 85 to keep things simple, so a six percentage-point reversal is 79 for the bears to receive the initial market sell signal. Then under 70 the market downside will be locked firmly in place. However, the bulls are keeping price above 79 not allowing the bears to have a day in the sun, for now. The BPSPX will drop under 79; it is only a matter of when. For today, the bulls continue to ride the market buy signal. 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 on 7/25/14: BPSPX ends the week at 82.60. Thus, the bears still have their work cut out for them. Bears need 79 and lower to receive a market sell signal. Otherwise, they got buptkiss and the bull party will continue.

SPX 2-Hour Chart Overbot Rising Wedge Negative Divergence

The theme the last couple days is waiting for the SPX to peak out in the near term. The bulls keep finding a way to add oomph. The key driver from late Tuesday through yesterday is the West backing down from announcing the strong sectoral (Level Three) sanctions against Russia. Once Europe and the US showed that they were weak-kneed and not willing to take the economic hit from sanctions, along with Russia, global stock markets rally higher. This accounts for the upside action from the 1982 intraday low seven candlesticks ago (Tuesday).

The bulls needed to punch up through 1989.50 to create an upside acceleration and the bulls keep pushing printing new all-time highs as this missive is typed now above 1991. The 2-hour chart above shows overbot conditions; the stochastics are cooked. The RSI is not overbot, however, so the sneaky bulls may plan some additional upside. The indicators are universally negatively diverged over the last few weeks but the very near term (the last couple days) RSI and MACD line want to squeeze out another price high after the initial spank down occurs. Price would be expected to drop down into the upward-sloping purple channel moving forward. The blue dots show the price extensions above the moving averages when the mean reversions typically occur.

The expectation continues for price to top out at any time today or at the latest early tomorrow. Since the RSI and MACD is trying to squeeze out more juice, one to three more candlesticks (two to six hours) may be required for price to top out so the bulls may be able to keep markets buoyant moving into the closing bell today. 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.

Wednesday, July 23, 2014

RUT Russell 2000 Small Caps Daily Chart Cyclical Market Signal

Keystone has mentioned the slope of the 150-day MA on RUT a couple of times over the last month. The slope of the 150-day MA for any index or stock is very important since it tells you if the price action is in a cyclical bull, or cyclical bear market. Keystone uses the 150-day MA slope on the SPX as a key broad market indicator but since small caps typically lead, the flattening and potential roll over of the RUT 150-day right now is very important.

If, actually when, the slope of the 150-day MA turns negative the RUT will fall into a cyclical bear market. The RUT last flattened in late 2012 where the markets were going to roll over but the Congress saved the day to begin the new year in 2013. The last significant cyclical bear for the RUT with a  negative 150-day slope was mid 2011 through early 2012 and of course this encompasses the August 2011 waterfall crash. In fact, the slope turned negative as the crash occurred. By the time a few days went by and the slope was clearly moving down, the RUT had already dropped from 870 to 640, -26%.

Sticking to the here and now, the RUT remains in the cyclical bull since early 2012 over two years time. Using YHOO Finance's interactive chart for ^RUT, with a 150-day MA, the last several days of 150-day MA end-of-day prints are; 1152.23, 1152.38, 1152.47, 1152.80, 1153.09 and 1153.41 yesterday. Looking at the differences and rate of change between each; 15 cents, 9 cents, 33 cents, 29 cents and 32 cents. The market bears were within nine thin pennies of turning the 150-day MA slope negative and officially beginning a cyclical bear market in small caps.

But alas, the bulls slap the bears in the face again, backed by the Fed's easy money, and the RUT recovers. Check the 150-day MA each day forward to see if that spread tightens and if the slope turns negative. When that day occurs the market bears can pop champagne corks since their long wait for extended and significant market downside is finally at hand. Until then, however, the bulls continue to rule the roost with an over two-year cyclical bull market in small caps continuing. Obviously, if the RUT prints below 1153 going forward this will help create the roll over in the 150-day MA and a cyclical bear market ahead. The market bulls must keep RUT price above 1154 and heading higher to keep the cyclical bull market party alive with an upward-sloping 150-day.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.

Tuesday, July 22, 2014

SPX Weekly Chart Rising Wedge Overbot Negative Divergence

As usual, as has been the case for well over one year's time, the bear's are slapped in the teeth again and hit over the head with a 2x4. The market bulls crush the VIX under 12 and create an upside orgy rally today that would make Caligula blush. We have been monitoring the weekly chart for the last month and as you recall we were waiting for a 1 to 3 weeks more and another matching or higher price high, due to the MACD line remaining long and strong in the very near term, and today, voila, it appears. Market bears are happy to see this chart although the money flow may further delay the bears day in the sun by a couple more weeks.

The new price high occurs today and the indicators are lined up with negative divergence across the board both on a multi-month time frame and in the near term. The little red circles may potentially delay the market top for a week or two but the top appears at hand. When Friday prints, check this chart because the MACD line and money flow very short term move (little red circles) will likely be flat or sloping down (neggie d) sealing the fate of the SPX. Regardless, she is very very close now and this is a potential multi-year market top.

The neon green circles show the touches for the 20-week MA occurring at least once every 4 to 6 months at the most so it is time for price to revert to the mean. Price has not touched the 50-week MA since November of 2012, 20 months ago! This is long overdue for a back kiss and price always overshoots to the downside just like the upside. Remember, the collapses from rising wedge patterns can be quite dramatic; sharp and quick where the markets are down -5% before anyone even notices and that is only the beginning. Exercise extreme caution moving forward.

Cash is a nice place to be and do not let people tell you that it is stupid letting money sit in cash. Be patient and let things play out for a few weeks or months forward. Despite the non-stop woodshed beatings the bears receive, they manage a smile on their black and blue swollen face. The bear's bloody eyes display a calm resolute look since they know the chart above will lead them to victory very soon. Projection is for sideways to sideways lower for the weeks and months to come with a multi-year market top potentially printing right now. Index shorts can be continually scaled into here 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.

CAT Caterpillar Weekly Chart Rising Wedge Overbot Negative Divergence

CAT has finally run its course. Notable short-seller Jimmy Chanos of Kynikos Associates will be happy since he is short CAT and has been professing its ills for many months. He will now finally be able to breathe easy. Caterpillar can be shorted here forward. The green sideways symmetrical triangle was highlighted as it developed and played out with an upside break out as many of you long time readers remember from last year. The vertical side of the triangle is about 25 handles so from the breakout at 85, add 25, and voila, 110 target is achieved. That bull rally was basically straight up.

While the triangle pattern target is snagged, the red lines show a rising wedge in place with overbot indicators and negative divergence across the board (red lines). This is an attractive stock to short going forward. Purple lines provide support. Economists and traders say the global economy is running on all cylinders but that is in conflict with CAT rolling over for the weeks and months ahead. All construction, bridges, buildings, roads and houses begin with a hole in the ground made by a yellow excavator or dozer. Watch rubber and tire makers to see if their sales drop since there will be less need for big industrial tires for the CAT equipment. Projection is sideways to sideways lower prices into the end of the 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.

Note Added 7/24/14: CAT reports disappointing earnings this morning. The stock plummets -3.4% printing an intraday low at 104.09 at that 104-105 first level of support.