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.

JJG Grains ETN Daily Chart Downward-Sloping Channel Falling Wedge Oversold Positive Divergence

The drop in corn and wheat prices has been spectacular. JJG is a grain ETN that shows the carnage. The move lower shows inflation fears subsiding and turning into disinflationary fears. Corn is in many products and a requirement for raising beef, pork and chicken so the food inflation at the supermarket will relax moving forward. The blue downward-sloping channel is in play. JJG is beaten like a rented mule but note that the green lines show universal positive divergence across all indicators, oversold conditions, and a falling wedge pattern (bullish). If you are a nimble trader, this would be a nice long trade to jump into for a quick pop. The weekly chart remains weak so you have to take the money and run once it launches. A move up to the bottom rail of the channel and horizontal support at 40-ish is an upside target. Keystone does not hold a position in JJG currently.

The inflation-deflation debate will rage on but the chart shows that the food inflation is deflating. JJG will bounce but then stagger sideways even making new lows moving forward say through 35-43 for the weeks and months ahead. 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.

HYG High-Yield Weekly Chart Rising Wedge Overbot Negative Divergence

High-yield instruments have rolled over from lofty levels. This is one of the bubble areas Keystone has been highlighting in recent months. SJB (very thinly traded) is an ETF that moves inverse to high-yield (SJB moves up if HYG falls) and Keystone remains long. Collapses out of rising wedges can be quite dramatic. The fall from the top is harsh but still nothing that a rising wedge pattern is capable of. The purple circles show that price has not back tested the 20-week MA, now at 93.63, for close to one year, until now. Price always reverts. The 50-week MA, now at 91.17, has not been tested in one year as well. A collapse from a rising wedge could easily tag the 50-week MA and prices typically overshoot to the downside just as they overshoot to the upside.

That said, the 20-week MA is a logical place for a relief bounce. The MACD and stochastics are weak and bleak. The RSI and money flow, however, can help with a short-term relief bounce. Overall, the expectation is that the top is in for high-yield. Even if price ventures up for an M top, or double top pattern, price is not expected to make new highs again. HYG has jumped from 40 to 95, +122%, due to the Fed's easy money starting with QE1 in March 2009; over +25% per year but the Fed says there are no bubbles in this area. HYG may recover in the near term but lower prices are expected going forward for the weeks and months ahead. 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.

SPX 30-Minute Chart 8/34 MA Cross Tight Bands Squeeze Out Upside Rally Rising Wedge Overbot Negative Divergence

Here is an update of yesterday's chart. The bulls broke up through the sideways channel at 1976 resistance so 1980 R was attacked which also gave way. This opened the door to test the all-time highs at 1985-1986 and bingo, a new all-time intraday high is printed at 1986.24. The tight bands squeeze out an upside move. The 8 MA crosses above the 34 MA yesterday afternoon signalling bullishness for the hours ahead which occurs today.

The red rising wedge is developing, the stochastics are overbot, the red lines show negative divergence in the multi-day frame as well as VST over the last couple hours except for a smidge of juice with the MACD line. So markets would be expected to top out in 1 to 4 candlesticks so in an hour or two. Thus, perhaps a sell off may appear into the closing bell. AAPL earnings are released after the closing bell and will greatly impact the broad markets.

Key S/R is 1986, 1985, 1980, 1976, 1973, 1968, 1963, 1961, 1960, 1956, 1951 and 1949. Keybot the Quant algo turns bullish today but remember that Keybot is operating as a lower risk lower reward type model and not designed to catch exact tops or exact bottoms. A spike in volatility or weakness in retail, financials or copper will immediately turn the markets negative again. For now the bulls are happy with a happy upside orgy day but the projection is for the SPX to top out perhaps this afternoon. 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 3:50 PM:  The SPX remains elevated today dropping down to 1981 a short time ago receiving some of the neggie d spank down action. The topping out behavior remains in play. The SPX 2-hour chart may try to squeeze out 1 or 3 more candlesticks so the top may be on tap tomorrow. There is 10 minutes remaining to see if the SPX can print a new all-time closing high. The SPX will print a new all-tiem record intraday high at 1986.24. Trannies are at all-time highs again and will be looking for the Dow Industrials to confirm. VIX is 11.92 not moving lower to provide more bull fuel, but not moving higher so the bears do not receive help. Market bulls will need a lower VIX tomorrow to take equities higherTRIN 1.00 dead flat neutral refusing to pick a side today not wanting anything to do with bulls or bears.

Note Added 4:02 PM: The SPX does not print a new all-time closing high.

Keybot the Quant Turns Bullish

The ebb and flow continues with Keystone's trading algorithm, Keybot the Quant, flipping to the long side at SPX 1982. Do not hold your breath since it would not be surprising for a whipsaw move to occur back to the bear camp. Volatility is the key market driver since late last week due to the geopolitics so the wild moves in VIX, up and down, sends the broad indexes in the opposite direction, down and up. Watch VIX 12.96 as the bull-bear danger line. VIX is at 11.95 comfortably in the bull camp creating the market upside today. More information is at Keybot's site;

Keybot the Quant

Monday, July 21, 2014

SPX 30-Minute Chart 8/34 MA Cross Sideways Channel Standard Deviation Bands Squeezing in Tight

The struggle for market control continues with the bulls and bears fighting over the 8/34 MA cross on the 30-minute. The red and green circles show the recent bear and bull crosses, respectively. Last Thursday's big loss created a negative 8/34 cross favoring bears but the Friday recovery created the positive cross and happy bulls but today's weakness creates a negative 8/34 cross ushering in market selling for the hours ahead.

The fight continues, however, since the 8 MA and 34 MA are only pennies from each other and the bulls are trying to create the positive 8/34 cross. The SPX is staggering sideways through the 1968, 1973 and 1976 S/R levels (see prior message for support and resistance levels). Price pokes up through 1973 R so the 1976 R is now in play. The 20-day MA is 1968.69 which forms a confluence with horizontal support and provides this level with serious street cred. Thus, price stumbles through the sideways 1968-1976 channel deciding which side it wants to break out from. Bulls win above 1976 and will send price higher to the 1980 R. Bears win big under 1968 which will quickly drop price to the 1960-1961 level for a critical bounce or die decision.

The indicators show a sideways chart pattern. Use the 50% and zero levels to gauge which side is winning. The RSI is a touch in favor of bulls above 50%. The stochastics, however, favor bears under 50%.The histogram and MACD line hug the flat zero line. The standard deviation bands (green lines) show another tight squeeze so a commitment on a strong directional move is likely on tap this afternoon or first thing in the morning. The green arrows show prior squeezes which result in 20-point moves one way of the other. Tight bands tell you a sharp strong move will occur but does not tell you what direction. Watch the 8/34 cross since it constantly identifies the winner 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.

Note Added 1:53 PM:  SPX 1975. The 8 MA on the 30-minute is 1970.87 and 34 MA 1971.58 so the bulls are pushing to create a positive cross with the 8 MA moving higher and the 34 MA sloping lower. Bears must create market weakness right away or they will fold like a cheap suit into the closing bell. The VIX is 12.64 dropping sending stocks higher. TRIN 1.05 a hair on the bear side of one. Bears must hold that 1976 R.

Note Added 3:39 PM: The bulls keep pushing higher with SPX at 1975 knocking on that 1976 R door. VIX 12.67. TRIN is down to 0.84 favoring the bulls and helping create market lift. The pending very sharp move described above is perhaps on tap for tomorrow's opening bell. The price action is sideways directionless like a drunk staggering along Times Square on a Saturday night. The ADX for the 30-minute chart is down at 12 showing no trend up, or down, in price whatsoever. Copper trades higher today moving JJC higher which helps the stock market bulls. Volatility is the key market direction driver currently; VIX 12.95 is the bull-bear line in the sand. At VIX 12.67 the bulls receive upside juice. Bears need the VIX above 12.95 then the bears need to turn a sector such as retail, financials or copper bearish to establish sustainable market selling. Right now, the bears are weak and need to push volatility higher to show they got game. The bears will receive a small feather for their caps if they can keep a lid on the markets by holding the SPX 1976 resistance.

Note Added 3:53 PM: SPX 1974. VIX 12.70. TRIN 0.91.

Note Added 3:56 PM:  Dollar.yen 101.39 so the slight increase in this currency pair from 101.30 this morning (weaker yen) helped create the market lift off the bottom today.

Note Added 4:01 PM: The bears are happy they held SPX 1976 resistance but the bulls are very happy they keep VIX under 12.95 since this will allow them to win tomorrow.

Note Added 4:07 PM: Netflix misses by a penny with 1.15 EPS and beats by a tiny hair on top line revenue with $1.34 billion versus $1.33 billion estimated. Traders push NFLX +2% higher on the knee-jerk reaction blessing the in-line results. As time goes on, NFLX keeps leaking lower, +1.5%.... +1.2% .... +0.8%..... hurry-up, buy a movie to help them out.

Note Added 4:14 PM: Chipotle is a hot tamale reporting 3.50 EPS trouncing the 3.06 estimate. Top line revenue is $1.05 billion versus the $990 million estimate. Sales are increasing with increasing traffic and increasing ticket prices. The popular restaurant is running on all cylinders. CMG gains +8%. Burrito’s are big business.

SPX Support, Resistance (S/R), Moving Averages and Other Important Levels for Trading the Week of 7/21/14

SPX support, resistance (S/R), moving averages and other important levels are provided for trading the week of 7/21/14. Levels shown in bold are strong resistance and support. Bold and underlined levels are very strong and important key S/R levels. The SPX closing and intraday all-time highs occurred on 7/3/14 two and one-half weeks ago at 1985-1986.

Equities remain elevated near all-time highs but the bears fight back today. Thursday was the big market down day, followed by the big recovery day on Friday, and now more weakness today. The VIX above 13 creates market negativity. If VIX drops under 13, equities will recover. Bears win if VIX stays above 13 and moves higher going forward.

The SPX starts the week at 1978 and fell like a stone at the opening bell. The bulls need only two points today, to touch the 1980 handle and this resistance will immediately give way with price running to test the all-time highs at 1985-1986 in very quick order. The bears need to push under the very strong 1960-1961 support level to accelerate the downside which will be substantial if this strong support fails. Even more interesting is that an air pocket exists between 1949 and 1928 so the 1949-1951 support level would be the last chance for the bulls to hold back the selling. A move today through 1962-1981 is sideways action to begin the week which is occurring.

The SPX is printing 1970 as one-half of Monday's trade is over. Note that today is a fight for the critical 20-day MA at 1968.44. Bounce or die. Bulls must hold this 1968-1969 level or failure will occur. Bears need the SPX under the 20-day MA as soon as possible. The bears need to move the SPX under the 200 EMA on the 60-minute chart at 1957.44 to lock in sustainable multi-day and perhaps multi-week and longer downside for the stock market.

As this missive was typed, the VIX drops under 13 and is now down at 12.88 so stocks recover. SPX is 1972.31 now down only 6 points on the day. The 1973 offers up strong overhead resistance. If this should give way, price will seek the strong 1976 R next. The SPX bounces off the 20-day MA today so the bulls are content with the price action.

1986 (7/3/14 All-Time Intraday High: 1985.59) (7/3/14 Intraday High for 2014: 1985.59)
1985 (7/3/14 All-Time Closing High: 1985.44) (7/3/14 Closing High for 2014: 1985.44)
1983.94 Previous Week’s High
1979.91 Friday HOD
1978.22 Friday Close – Monday Starts Here
Currently Printing 1970.16 in Monday Trading
1968.44 (20-day MA)
1968 (6/24/14 Intraday Top: 1968.17)
1963 (6/20/14 Closing High: 1962.87)
1960.82 Friday LOD
1960.23 July Begins Here
1957.44 (200 EMA on 60-Minute Chart a Keystone Market Turn Signal)
1956 (6/9/14 Intraday Top: 1955.55)
1955.59 Previous Week’s Low
1951 (6/9/14 Closing High: 1951.27)
1938.42 (50-day MA)
1924 (5/30/14 Intraday Top: 1924.03) (5/13/14 Closing High: 1923.57)
1907.33 (20-week MA)
1902 (5/13/14 Intraday Top: 1902.17)
1901.89 (100-day MA)
1897 (5/13/14 Closing High: 1897.45) (4/4/14 Intraday Top: 1897.28)
1891 (4/2/14 Closing High: 1890.90)
1884 (3/21/14 Intraday Top: 1883.97) (3/7/14 Intraday Top: 1883.57)
1878 (3/7/14 Closing High: 1878.04)
1873.90 (150-day MA; the Slope is a Keystone Cyclical Signal)
1866.29 (10-month MA; a major market warning signal)
1851 (1/15/14 Intraday Top: 1850.84)
1849 (12/31/13 Intraday High Top for 2013: 1849.44)
1848.36 Trading for 2014 Begins Here
1848 (1/15/14 Closing High: 1848.38) (12/31/13 Closing High for 2013: 1848.36)
1845.37 (200-day MA; not tested for 19 months extremely odd behavior)
1831.45 (12-month MA; a Keystone Cyclical Signal) (the cliff)
1824.35 (50-week MA)

Friday, July 18, 2014

Keystone's Midday Market Action 7/18/14; Israel Invades Gaza; Ukraine Airplane Crash Aftermath; Consumer Sentiment

Retail stocks are the key today since Keybot the Quant algorithm identifies RTH 59.46 as the key metric affecting market direction. Whichever way the RTH pivots from 59.46, so do the markets, and the RTH runs higher now at 59.52 providing a nod to the market bulls sending equities higher. The TRIN is down to 0.71 which will guarantee bull victory today if it stays under one. Now that the bulls take back RTH 59.46 into their camp, VIX 13.06 is the next target, which gives way to the downside (bullish) as this missive is typed. VIX is now at 13.00. Watch the VIX closely since the drop under 13.06 will create a lot more bull fuel and a stronger relief rally.

The SPX bounces immediately so the 200 EMA cross on the 60-minute will not turn negative, at least in the early going, so the bulls sit back and light a stoagie (refernce the previous chart). Markets should pivot at 10 AM with Consumer Sentiment and Leading Indicators so wait for this to pass before seeing how markets settle in for the day. RTH above 59.46, and VIX under 13.06, with the low 0.7 TRIN, says the bulls easily win today. Can they keep it up?

Note Added 9:50 AM: RTH 59.56 (above the 59.46 bull-bear line causing market bullishness). VIX 13.18 (above the 13.06 bull-bear line causing market bearishness). These two parameters are the rudder steering the market directional ship today. Monitor them closely so see which way the broad market will move. TRIN 0.77.

Note Added 9:54 AM: RTH 59.55. VIX 13.30. Sentiment hits in one minute.

Note Added 9:56 AM: Consumer Sentiment is 81.3 the weakest since spring time. Dollar/yen 101.37. RTH 59.56. VIX 13.34. TRIN 0.79.

Note Added 10:00 AM: Leading indicators are up +0.3% missing the +0.5% estimate. RTH 59.58 so the bulls latch on to the retail stocks to keep equities buoyant into the weekend. VIX is 13.32 so the bears latch on to volatility to maintain downward pressure in equities. One of these two characters will flinch and tell you the market direction answer. If they remain status quo, then equities simply stagger sideways into Happy Hour.

Note Added 2:34 PM: The VIX collapses under 13.06 and bears fold like a cheap suit. Keybot the Quant algo remains short but will likely flip long if the SPX moves above 1982.63. The SPX is currently printing 1978 and rising at the highs of the day. VIX is at 12.15. TRIN 1.04 interestingly moving above one today in the bear camp but the low volatility is powerful and forces equities to move higher.

Note Added 2:39 PM: The 8 MA just moved above the 34 MA on the SPX 30-minute chart which which gives the nod to the bulls for the hours ahead. The cross is only occurring by pennies thus far so if the bears want to prevent the 8/34 cross or at least make it very short-lived, the bears must push the SPX lower immediately. If the bulls keep pushing higher they may push higher into and through early next week. There is lots of time remaining in today's trading. The next one-half hour or so will tell a lot. If bears plan on pushing back they have to do it now. VIX 12.22. TRIN 1.03.

Note Added 3:39 PM:  The drama continues. SPX 1978. VIX 12.21. TRIN 1.12Bulls still have time to push higher. The TRIN is maintaining a ceiling on the SPX. Keystone bot QID, a 2x inverse ETF that goes up if tech (Nadaq) goes down, opening a new long position. QID has attractive positive divergence on weekly and daily charts. It may need more time to base but it will simply be added to moving forward.