Monday, September 15, 2014

SPX 60-Minute Chart 200 EMA Cross

The SPX is above the 200 EMA on the 60-minute at 1982.77 signaling bullish markets for the hours and days ahead, however, note that there is an intense fight occurring for this critical level. Very bad things will happen to the stock market if the 200 EMA fails. The bulls keep finding a way to keep their heads above water and today they are floating pennies above danger.

The  lower lows in price are met with positive divergence so a sideways to sideways higher path ahead is a reasonable expectation. The Fed announcements and circus is Wednesday afternoon less than two days away so markets may float sideways until then.

Reference the previous chart where the 8 MA remains under the 34 MA on the SPX 30-minute chart signaliing bearish markets for the hours ahead so one of these two charts will flinch. Either the 30-minute 8/34 MA cross will turn bullish verifying market upside ahead, or, the 60-minute 200 EMA cross will turn bearish with the SPX falling through 1982.77 signaling big trouble ahead.

Keybot the Quant remains short and the algo is active today printing four numbers thus far. Utilities and semiconductors are the two major parameters effecting market direction currently. Watch UTIL 550 and SOX 632.85. Both turned bearish a couple hours ago creating the market negativity but then turn bullish again creating the come back in the stock market today. VIX 12.37 is another important level and volatility is far higher which provides the bear's a large feather for their caps moving forward. Remember, the VIX 200-day MA is another important market signal level and with VIX currently  printing 13.88, bears are comfortable seeing price remain above the 200-day at 13.57. If VIX drops under 13.57 this afternoon, the bulls will be mounting a strong move higher in stocks into the closing bell.

So watch the 30-minute and 60-minute charts as describved above to see who flinches and which side wins. Use UTIL 550, SOX 632.85 and VIX 13.57 and 12.37 as your key levels to gauge market direction. Key S/R is 1991, 1988, 1985-1986 and 1973. 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 1:30 PM: SPX 1982.45. As the astronauts proclaim decades ago, "Houston, we have a problem." It is odd to see price sneaking under the 200 EMA since UTIL and SOX are remaining bullish and well bid above their critical levels identified by the Keybot the Quant algorithm.

Note Added 1:35 PM:  The SPX is above 1983 again. Bears need weaker utes and semi's to create the next strong leg lower for stocks, otherwise, markets may stagger sideways until Fed Chair Yellen tap dances on Wednesday. If SPX loses the 200 EMA at 1982.77 and remains under it is curtains for equities. Bulls are fine as long as they do not permit 1982.77 to fail.

Note Added 1:41 PM: The SPX is 1982.34 as Keystone sings, "You put your right foot in, you put your right foot out, you put your...." The bulls and bears are pushing and pulling the SPX along the key 1982.77 each side realizing the critical importance of this level. Ute and semicondutors are holding up on the bull side so a failure of the 200 EMA would not be anticipated, for now.

Note Added 1:50 PM: SPX 1982.77. You cannot make this stuff up; price is balancing directly on the tight rope. If 1982.77 fails, bears need to hold the failure for 7 to 10 minutes, if that occurs, the SPX should be at 1973 support in a heartbeat.

Thursday, September 11, 2014

SPX 30-Minute Chart 8/34 MA Cross

At 2 PM Thursday, 9/11/14, the bulls punch the bears in the face with the 8 MA crossing above the 34 MA signaling bullish markets for the hours ahead (green circle). The tight standard deviation bands are squeezing out a big move that appears to be up already bouncing from the 1990-1991 support to 1998. Price has already tagged the upper band so if the bears want to make a stand and stop the upside they need to come to play immediately from the opening bell on Friday. The histogram and stochasics want to see weakness for a candlestick or two (30 minutes or one hour) but then the green lines for the RSI, MACD line and money flow want to see higher highs, thus, the chart is set up well for the bulls to squeeze out some upside juice.

The key S/R is 2011, 2007, 2005, 2002-2003, 1998, 1995, 1990-1991, 1988 and 1985-1986. Price is  held in check late day today at the 1998 resistance. Considering the neggie d on the histogram, the 2002-2003 area may serve as a topside target for price. That would provide time for the other indicators to negatively diverge, however, if the RSI keeps moving higher and into the overbot area above 70, the SPX will be moving higher to 2005 and 2007.

The bulls are in the driver's seat in the VST. Bears got nothing without the negative 8/34 cross so price will need to print at 1994 and lower to curl the 8 MA downwards. Bears will need negative geopolitical news overnight to create a sour mood, otherwise, the bulls appear ready to move above 1998 R, then attack 2002-2003 R to contemplate a move to 2005 R.

VIX 12.35, identified by the Keybot the Quant algo remains key to market direction. Overall, market bears are fine as long as the VIX remains above 12.35. If the VIX drops under 12.35, the SPX is going to explode higher to the all-time highs again and Keybot will likely flip long. If the markets rally higher but the VIX remains bearish above 12.35, the bulls got nothing and markets will reverse off the highs and begin selling off in earnest again. 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 Saturday 9/13/14: The bears came to play on Friday smacking the markets lower with the higher volatility. VIX jumped above 14 but retreated to 13.31 at the closing bell so the bears need to push VIX above 13.56 (200-day MA) on Monday to receive more downside juice. The bears sent price lower in concert with the new sanctions against Russia and the non-stop move higher with the US dollar that is hammering commodities, oil and gold. The 10-year yield sneaks above 2.60% but financials did not run higher. Utilities are beaten with the higher yields. For the 30-minute chart above, the 8 MA crossed down through the 34 MA signaling bearish markets for the hours ahead. The tight standard deviation band squeeze highlighted in the chart above quickly reversed the up move that was at the top band and squeezed the price move strongly lower from 1997 to 1980 a squeeze lower of 17 handles. The last hour of trading sent markets up as the indicators on the chart developed positive divergence with the low in price at 3 PM EST. The RSI never reached oversold territory. Note how the SPX violated the 200 EMA on the 60-minute chart at 1982.80 which would guarantee lower equities but price recovered to 1985.54 at the closing bell keeping the bulls in this driver's seat with this critical 200 EMA cross signal on the 60-minute. Pay attention to the 1983-ish level for the 200 EMA as a key market metric for next week. Very bad things will happen to the stock market if SPX loses the 1980-1983 area. Market bulls will be able to recover and push stocks higher if they can maintain price above 1983. Note how price parked itself directly on the strong 1985-1986 S/R as identified in Keystone's SPX S/R missive last weekend. There is an air pocket to 1973 support so since the 1985-1986 was violated, the door is open to 1973. If the 200 EMA on the 60-minute fails, the SPX will be at 1973 in a heartbeat and that will fail with price moving to 1968 and 1963 support levels.

VIX Volatility Daily Chart

Volatility provided drama yesterday with the VIX taking out the 200-day MA which will usher in significant equity market downside. The VIX ran above 14 as the bears popped the champagne corks but as the session played out the VIX collapsed to 12.88 so the bears were frantically trying to place the corks back in the bottles as equities recovered.

Two levels are key; 13.56 and 12.35. The 13.56 is the 200-day MA which signals a bull versus bear market (currently bullish under 13.56). The 12.35 is the current level identified by the Keybot the Quant algorithm as a key bull-bear line in the sand affecting stock market direction. In other words, below 12.35 and the bulls are on easy street with the SPX back above 2000 and rising. Between 12.35 and 13.56, the stock market will move sideways but continue a weak overall profile. Above 13.56 and the stock market will collapse. The VIX begins at 12.88 so market bears are fine as long as price stays above 12.35. Bulls win below 12.35. 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 9:39 AM: The bears push the VIX higher after the opening bell spiking to 13.53 but then receiving a spank down from the 200-day MA at 13.56. The bears are trying to punch up through 13.56 to create market carnage but fall flat on the first try. VIX is printing at 13.23.

Note Added 11:10 AM: The bears push VIX above 13.56 to usher in the market weakness and send the SPX down over 9 points, however, the VIX falls back below the 200-day MA so stocks recover once again. The ebb and flow continues. VIX is now printing 13.17.

Note Added 7:52 PM: The bears fold like cheap suit with volatility collapsing again like yesterday intraday. The VIX drops to 12.80 providing bull fuel into the closing bell. Keybot the Quant continues to track VIX 12.35 as the key market directional driver so the market bears are fine with VIX above 12.35 but bulls will rule the stock market if VIX drops under 12.35. Friday's opening bell should prove dramatic.

AAPL Apple Weekly Chart Bull Flag and Cup & Handle Patterns Overbot Negative Divergence

Apple is receiving lots of attention with the new product launches this week. Technically, the chart is setting up for the bears. The thin blue lines show a bull flag pattern already played out with the first leg from 55 to 80, then sideways consolidation, then the second leg begins at 70-75 which targets 95-100, achieved. The purple cup and handle pattern is also in play with break out line at 80 and base of cup at 55 so the target is 105. Thus, the patterns target 95-105 and price has printed above 103; close enough for government work so a few more potential points of upside is not worth chasing.

The red lines show universal negative divergence across all indicators as compared to the last price peak in 2012 as well as over the shorter term few-month time frame. The stochastics and RSI are overbot and price moves up through a rising wedge; both bearish. The neggie d creates an initial slapdown and there is no reason for price to print another high from here. The negative divergence is firmly in place and the RSI, stochastics and money flow are all weak and bleak starting to print lower lows.

The projection is for lower prices ahead for the weeks and months to come. Perhaps a couple-few more bucks to 105-106 may print but this would likely be a gift for shorts if it occurs and is akin to picking up nickels in front of a bulldozer. Price never back kissed the 80 breakout level so it would be prudent to visit this area and the last large volume candle at the start of the year at the 70-80 range is a realistic target for the months ahead in 2015. A short position in AAPL can be developed here forward. Keystone has no current position in AAPL. 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 9:42 AM: AAPL immediately drops to test the 20-day MA at 100.21 and bounces slightly. Use this 100.20-ish level as an important indicator for Apple strength, or lack thereof. AAPL is printing 100.53. The 50-day MA is 97.26 and rising.

Wednesday, September 10, 2014

SPX 60-Minute Chart 200 EMA Cross Sideways Channels Lower Band Violation

The SPX remains above the 200 EMA at 1981.10 on the one-hour chart signaling bullish markets for the hours and days ahead. Bad things will happen to the stock market if the 1981 fails. Yesterday's low bounced off the strong 1985-1986 support. Key S/R is 2005, 2002-2003, 1998, 1991, 1988, 1985-1986 and 1973. The 1980 and 1982 levels are support levels within the stronger structure listed and considering the 200 EMA is 1981.10, the 1980-1982 level takes on significant support importance as well.

Price has violated the lower standard deviation band so a bounce would be expected like the prior violations within a day or three. The green lines show positive divergence for the histogram and stochastics which want to bounce price in this one-hour time frame. The other indicators are more open to lower lows in price so a test of the strong 1985-1986 is likely and if that fails, the big enchilada test occurs at the 200 EMA which will dramatically affect the stock market moving forward.

Three weeks ago the bears tried to stab down through the 200 EMA but instead they were slapped in the face and the bulls continued higher. The chart hints at sideways ahead perhaps through a 1985-1998 sideways channel. Since the Fed is on tap next Wednesday, and there is now talk about a rate hike sooner rather than later, the stock market may start to line out sideways into that drama. Fed Chair Yellen will extend her arm next Wednesday and point up or down with her thumb determining the fate of the markets. Bulls are fine if they stay above 1981. Bears will begin biting off chunks of bull meat with blood and carnage accelerating if the 1981 fails. 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 12:06 PM: Lots of price drama today using the S/R levels above. Note that VIX has moved above the 200-day MA at 13.56 a very bearish signal. Markets will deteriorate if the VIX stays above 13.56. The bears cannot make headway lower since the bulls are maintaining buoyancy in the financials with XLF a touch positive. The TRIN sits at dead neutral at 1.00 unable to choose a winner in today's trading. SPX LOD 1982.99 so a 1982 handle prints teasing the 200 EMA described above now at 1981.33. Bears will win big if they keep the VIX above 13.56The bulls must send volatility lower immediately or they will lose today. The beat goes on.

Note Added 12:29 PM: VIX falls through the 200-day MA at 13.56 so the bulls push the SPX up through the strong 1990-1991 resistance and the path in the chart above is playing out. Watch the VIX 13.56 level today as the main rudder steering the market ship. Bears will receive lower equities with VIX above 13.56. If VIX stays under 13.56, then equities stumble sideways with an upward bias.

Note Added 12:32 PM: SPX 1992.19. VIX 13.47. Bears need VIX above 13.56 to receive extra juice. XLF 23.32. TRIN 0.93. The lower VIX and TRIN off of today's intraday highs drives the stock market higher.

Note Added 7:08 PM:  The SPX plays out as the lines in the right margin of the chart showed this morning. Indicators have recovered and are long and strong in the short term so more upside for a few hours is a reasonable expectation. The bears made a run lower by pushing the VIX above the 200-day MA at 13.56 creating excitement in the morning but then VIX collapses down to 12.88 providing bull fuel all day long. A VIX above 13.56 will signal market carnage ahead. The VIX remains above the critical 12.34 level identified by the Keybot the Quant algorithm so market bears are fine. The bears have not yet tested the 200 EMA now at 1981.73. The 20-day MA is 1988.49. The SPX may stagger sideways. The Fed decision is now only 4-1/2 trading days away. Financials helped the bulls today.

XJY Japanese Yen Weekly Chart Downward-Sloping Channel Sideways Triangle Positive Divergence

The recent drop in the yen basket sends the stock market to new all-time highs. Price is printing completely under the lower standard deviation band for the last month; a phenomenal and very rare event. Yen is slammed and beaten severely to a six-year low; bludgeoned form the BOJ money printing. ECB President Draghi fired the QE money bazooka causing the euro to plummet sending the dollar higher. The higher dollar is in concert with a weaker yen that sends the dollar/yen currency pair to six-year highs at 106.79. The stronger dollar will continue to pressure commodities, oil and gold moving forward.

Note the tight band squeeze that occurred and the yen shorts win. The red sideways triangle is in play, however, there are no real touches to the top rail so the pattern does not have a lot of credibility for its 91.50-ish downside target. The lower rail of the downward-sloping channel is at 89-92. The green lines show positive divergence across all indicators after the new lows are printed, however, there is lots of momo to the downside so some sideways is likely and another basing period. It is surprising to see the big drop since a very nice base was formed for the yen over the last few months.

The ADX shows the last strong trend was down in 2013; the current trend lower is not yet considered a strong trend lower it is simply a price move lower in a sideways stumble. The drastic drop in the yen clearly shows the fuel behind the obscene +30% gain in the US stock market in 2013 as well as gains in Japanese stock and European stocks and bonds. The BOJ saved the day last year but only dug a deeper hole for themselves.

The lower boundary band violations must be rectified so the yen should moderate going forward and at this time the lower projections mentioned above are not expected instead the yen would be expected to move sideways to catch its breath and re-base 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 7:16 PM:  The yen drops to 93.60 a complete collapse. The yen is down from 98.30 to 93.60, 4.70 points, a drop of -4.8% in only 26 days. The yen is dropping at a pace of about -0.20% every day for the last month.

Tuesday, September 9, 2014

AAPL Apple 2-Minute Chart New Product Releases iPhone 6 and 6 Plus, Apple Pay and Apple Watch

Minutes before the Apple announcements, AAPL is up +2% to 100.65. At 1:10 PM EST, AAPL unveils a larger screen iPhone 6 and iPhone 6 Plus. The new phones have curved glass and are a hair thinner. The live feed from the event goes down embarrassing Apple. The company wants you to store all your personal data on the cloud but cannot carry out a successful rookie remote video feed. AAPL stock fluctuates higher and lower remaining uncommitted.

CEO Tim Cook announces Apple Pay the new mobile wallet platform that allows smartphone users to pay for goods and services at point of sale. The user holds their thumb on the front of the phone while a store device scans the phone to access the personal credit data. So biometrics are key to providing security for Apple Pay. Apple makes the assumption that no one will care about using a fingerprint to validate the sale. Young adults are quick to give up their freedom and privacy in this technological age but in the future, when the computer hackers breach security and steal information, they will now take control of a users fingerprint. The mobile payment system is applauded and AAPL stock launches higher up +3.2% above 103 on the news. The stock market catches a bid climbing steadily higher. The Nasdaq turns positive. The VIX drops under 13. The bulls are staging a strong come back today fueled by the Apple product releases.

The presentation continues with the announcement of the Apple Watch. So the Apple name is used for the new Apple Pay service and the Apple Watch instead of naming the items iPay and iWatch, respectively. The watch looks like all the other wearable watches and will be available in early 2015. Apple provides the products in line with what was expected without any dramatic surprises. At about 2 PM, everyone looks at each other wondering if this is all they got? The band U2 offers a free album today via iTunes and begins to play at the event as AAPL peaks at 103 and begins selling off. Perhaps instead of singing Beautiful Day U2 should be singing, I Still Haven’t Found What I’m Looking For. From 2 PM to 3 PM, AAPL drops from above 103 to 96 a 7-point drop; almost -7% intraday. AAPL staggers sideways into the closing bell at 98.

The support companies for Apple trade wildly. Long darling GTAT is smacked in the face losing -13%. GT Advanced Technologies makes the sapphire glass and appear to not be part of the new iPhone system although GTAT should play a role for the Apple Watch. Apple giveth and Apple taketh away. INVN surprisingly drops -2% since InvenSense handles the stabilization software and gyroscope type functions for the smartphone which are state-of-the-art. EBAY pukes nearly -3% since PayPal may be negatively affected by the new Apple Pay mobile payment system. V and MA credit card companies trade higher since they will work in conjunction with Apple Pay but tumble to the negative side into the bell. FOSL is a fashion watch provider and drops over -2% on the Apple Watch news.

After the smoke clears, AAPL sits at 98 as traders decide if they should trade With Or Without You. AAPL will need to recover above 100 to get its mojo back, otherwise, if lower the next three days, the weekend may end as a Sunday Bloody SundayThis 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 7:15 PM on 9/10/14:  AAPL recovers today gaining +3.1% to 101.00 on the dot.

NFLX Netflix Weekly Chart Overbot Rising Wedge Negative Divergence

RBC Capital Markets analyst Mark Mahaney says buy Netlfix with a 600 price target. The chart is telling you to run from this stock not to it. It is a nasty chart set up with overbot stochastics, a wicked red rising wedge, and negative divergence across all indicators. Keystone called the prior spankdown in July, however, the histogram and money flow remains strong so you knew that price wanted to come up for another look at those highs after the spankdown, which it did.

Note the MACD line remains long and strong in the shorter term so there is maybe 1 to 3 more of sideways to up remaining and then the path down should quickly appear. The large short interest may create a big short-covering rally but those events are more prone to occur when a stock is already being beaten down and there may be weak short hands at play. Many of the shorts in Netflix will likely stay on moving forward. Today is a big +1.4% pop so some shorts threw in the towel to create these new record highs.

If you enjoyed big profits from the run simply exit and move on to other ideas. If not in NFLX, a long position is not attractive. Playing NFLX on the short side is more attractive but for a momo and news-driven stock like Netflix it is a dangerous play. Since the MACD is long and strong in the short term, NFLX can probably be viewed as a short play that can be started over the next 1 to 3 weeks with lower prices expected for the weeks and months ahead. A purple H&S pattern may form into 2015; it will need a drop towards the neckline then a recovery to build a right shoulder and then eventual failure at 325 (which would target 150), however, that is a long way off; a year or two. Take things one step at a time and assess the chart as the weeks move 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 7:04 AM:  NFLX prints an all-time high today at 489.29 and then drops to close down on the day at 479.01. The 20-day MA is 470.70 and rising so a reasonable expectation is for price to take a look at 470-472 for a bounce or die decision.

Note Added 7:05 PM on 9/10/14: Suntrust upgrades Netflix with a price target of 525. NFLX is at 484.

SPX 30-Minute Chart 8/34 MA Cross Sideways Channel

The SPX is staggering sideways like a drunk in Times Square on Saturday night. Key S/R is 2011, 2007, 2005, 2002-2003, 1998, 1995, 1990-1991 and 1988 (brown lines). Reference the SPX S/R missive posted on the weekend by scrolling back or typing "SPX S/R" in the search box at the right for further study with support and resistance levels. Note how price recovered late day and stopped at the 2002-2003 resistance ceiling. A move above 2003 opens the door to 2005. The bears will push for a test of 1998 and try to break through to send price to 1995.

The blue sideways channel through 1995-2005 is in play. Bulls win above 2005. Bears win below 1995. The indicators are not tipping their hand traveling trendless and sideways. The histogram hints that another price high is on tap but the stochastics indicate that a lower low in price is also desired. Thus, flip a coin. The movement through the S/R highlighted above as well as the 8/34 cross will dictate the path forward.

The 8 MA is under the 34 MA signaling bearish markets for the hours ahead, however, price is above the 8 MA at 1999.82 which will curl the 8 MA higher and set up a potential bullish 8/34 cross. For now, the bears are driving the bus. In the last seven days, the SPX has moved a huge 136 points of distance, 7% of its overall value. So intraday, the SPX is moving through 1% of its value. And these wild whipsaw swings are occurring with volatility in the 12's; remarkable. Just think when vol returns to 20 and higher. In the days and weeks ahead, daily moves of 20 to 50 SPX handles may become commonplace.

Keystone's algo, Keybot the Quant, is short with copper and volatility the two main market drivers currently. JJC is 38.67 exactly on top of the 38.67 bull-bear line identified by the quant and copper leaked lower overnight now down -0.7%. For today, as copper goes, so goes the markets. Weak copper will keep the bears in the driver's seat. Watch VIX 12.34. Markets will continue leaking lower as long as the VIX stays above 12.34. Bulls will retake control with either JJC above 38.67 or VIX below 12.34, either would do, and if either one turns bullish, and the SPX moves above 2007 and higher, Keybot will likely flip long. The AAPL new product release circus begins at 1 PM EST (6 PM London time). 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 11:27 AM:  The bears push with VIX above 13 and copper tanking. The SPX loses 1995-1996 support then bounces off of the strong 1990-1991 support, now back kissing the 1995-1996 for a bounce or die decision. Bears smile broadly seeing copper collapse. The AAPL circus can change the entire market mood, now only 1-1/2 hour away at 1 PM EST. TRIN is 0.89 favoring bulls despite the down markets. This hints that the bulls are given the benefit of the doubt with the Apple show on tap. Bears need the TRIN above 1.0 to prove the downside is the way forward. Watch the S/R levels listed above. The 8 MA remains under the 34 MA and the 8 MA trials lower favoring the bears. The 8 MA is 1997 so the bears need to keep the SPX under 1997. Bulls will fight back if they break up through the 1995-1996 resistance and move above 1997 and higher. The SPX is at 1996.29.

Note Added 6:51 PM: The bears ride copper weakness to victory. The VIX remains elevated near 13. The SPX falls through the 1995-1996 and 1990-1991 support levels and was snagged by the 1988 support where price sits to think things over. The 1990-1991 is such important and strong resistance (it was support until today) that a back kiss would be needed to show it respect. The support levels below are 1988, 1985-1986, 1982, 1980, 1978, 1976 and 1973. If 1985-1986 fails the bulls are in trouble since price will target the strong 1973 next with the intermediate support levels providing areas for give and take on the way lower. The SPX bounced off the 20-day MA at 1985.39. LOD 1984.61. So note that intraday today, price failed at the 1988 but the strong 1985-1986 support held price in check. Will 1985-1986 hold tomorrow? Another critical bull-bear signal to watch is Keystone's 200 EMA on the SPX 60-minute chart now at 1981.10 favoring bulls for the hours and days ahead (price is 1988 above 1981). Markets are in big trouble if 1981 fails. Marry this level with the support numbers and the 1980-1982 level takes on a stronger role as support. If the 200 EMA fails at 1981, it is likely that price will venture down to 1973. Keybot the Quant remains short. Watch VIX 12.34 and XLF 22.92. Bulls need VIX under 12.34 to stop the bleeding. Bears need XLF under 22.92 which would create market carnage. So keep your ears open for any bank news. The 8 MA remains under the 34 MA on the 30-minute chart signaling bearish markets for the hours ahead.

Sunday, September 7, 2014

CP Canadian Pacific Railway Weekly Chart Overbot Rising Wedge Negative Divergence Price Extended Keystone XL Pipeline Discussion

President Obama refuses to approve the Keystone XL pipeline project for the last few years despite extensive environmental and other studies that approve the project. The president does not approve Keystone XL since the environmentalists are typically democrats and he wants to maintain these voters in the democratic fold. Shamefully, however, the middle class and poor desperately need jobs and the pipeline approval would bring high-paying jobs to the Midwest and support thousands of other jobs. The president's allegiance is with the democratic-leaning and liberal major cities such as New York and Los Angeles and he has little interest in the heartland that is mainly made up of republicans. The president says he will not act on Keystone until after the election but he changes his mind like the weather so perhaps he will surprise everyone. Nonetheless, Keystone XL may be approved before year's end.

The rails have been on fire in recent months. There was a hint that the president would approve the Keystone XL pipeline project earlier this year as one of the major environmental studies finished and said the project is not hazardous to the environment. President Obama, however, placed the kabash on this and refuses to approve the pipeline. The rails were dropping on the Keystone approval possibility but once it was squashed by the president the railroads catapult higher since more oil must be transported by train. Note that the train accidents are increasing resulting in fiery crashes due to hauling far more volatile oil. President Obama's buddy Warren Buffet of BRKA and BRKB own rails so it is one rich buddy taking care of another rich buddy. The elite live a different life than you.


With elections now only about 8 weeks away, two months, the political atmosphere becomes more charged. The republicans may take over the Senate (which may be contributing to the stock market rally recently) so the president may pull a rabbit out of the hat before the election by approving the Keystone XL pipeline to goose enthusiasm and have voters thinking that the democratic incumbents are not so bad after all and they can be reelected. Of course this is conjecture but you must think like a politician, or criminal, same difference, to be a good trader. If the president allows the Keystone XL pipeline project to proceed, the railroads will tank. Even if he does not approve the project before the election, the approval is likely on tap for the months ahead and may occur by December.


The rail stocks are running nearly parabolic. The CP chart above shows a red rising wedge, overbot conditions and negative divergence that forecast a spank down in price. The MACD, however, remains long and strong so after the initial spank down in the weekly time frame, price will come up for another look at these levels, then likely roll over since the MACD will go neggie d as well. So a short can be played for the initial pull back but for such a momo move over the last few months the trade is only for experienced nimble short traders. When price returns higher say in one to three weeks that will likely be a far better place to start scaling in to a short position. Of course if the president announces Keystone XL, CP will immediately collapse. Canadian Pacific is the rail stock most dramatically negatively impacted if Keystone XL is approved just as it has benefited greatly by the president refusing to approve the project. Other rails, however would venture lower in sympathy.


CSX is the same sick chart as above only its MACD line is already neggie d so it can be shorted now. CNI has gone parabolic and follows the same technical analysis as CP. NSC, mainly a coal hauler, is already negatively diverged across all indicators like CSX so that one can be faded now. The tight standard deviation bands (purple) for CP above squeezed out two strong moves higher. Price needs to move down to the middle band at 181 and rising at a minimum and the lower band at 151 and rising is in play.


Thus, keep an ear open for any news concerning Keystone XL pipeline. CSX and NSC can be scaled into on the short side going forward and CP and CNI can be viewed from the short side in a couple or three weeks. Whenever the president decides to approve the Keystone XL pipeline, the rails will collapse, receiving extra juice from the negative chart set-ups discussed, and CP will be bludgeoned more than the others. Until then, playing the rails on the long side is like picking up nickels in front of a bulldozer. If you have strong profits in any rail position, take half off and begin scaling out to exit within the next month or so. 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 9:14 AM on 9/9/14: CP begins the week losing -0.8% to 205.70.