Friday, August 22, 2014

SPX 30-Minute Chart 8/34 MA Cross

The 8 MA is above the 34 MA signaling bullish markets for the hours ahead and this has been the case for the last couple weeks since Putin's words created the 8/8/14 price bottom at 1905. Bears got nothing until the receive a negative 8/34 cross. The SPX is under the 8 MA so this will curl the 8 MA downwards to the 34 MA. The red lines show the negative divergence top just created. The 2-hour and 1-hour charts are also negatively diverged agreeable to market weakness ahead for the short term. Markets take Fed Chair Yellen's speech today without much reaction. ECB Prescient Draghi's notes will hit at 2:30 PM EST so market will pivot on that news. The dollar is running higher sending the dollar/yen above 104. The 10-year Treasury yield moves higher to 2.44% with the higher dollar.

The red lines show weak and bleak indicators wanting to see lower lows with price so it looks like the chart is set up to decide if it wants to create a negative 8/34 cross exactly when Draghi will be walking to the podium this afternoon.

Keybot the Quant algorithm remains long and is watching volatility and copper as the key market drivers currently. Copper remains strong helping bulls. The VIX, however, keeps inching higher now at 12.44. Bears need VIX above 12.80 which tells you the market sell off is real. If the VIX remains under 12.80, the bears got nothing. 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 11:07 AM: The 8 MA is curling downwards with a negative slope while the 34 MA continues higher with a positive slope creating a collision course for this afternoon where a winner of the 8/34 cross will be decided going forward. Mario Draghi holds the fate of the markets in his hands. Draghi speaks in 3 hours and 20 minutes. The SPX will probably move sideways through 1985-1992 to create higher drama into the Draghi pronouncements.

ARO Aeropostale Daily Chart Inverted H&S Potential Island Reversal

ARO was a fun one to ride. The stock was pointed out about three weeks ago at the exact bottom. The dark green lines show the falling wedge, oversold conditions and universal positive divergence forecasted a bounce, which occurs. In addition, the weekly chart was set up the same way which typically leads to a double whammy of joy, and it did. You win with some of these speculative stocks, and others you lose. This was/is a clear winner. Today ARO is smacked -9% but it was up +23% on the week. Keystone is out of the trade having exited on the pop but ARO can be held as a long-term trade. The weekly chart is very constructive going forward. Note the buying interest that has developed in the stock (volume).

Aeropostale is so far beaten down it should weather the storm better if the broader market sells off strongly. Price gapped up strongly due to the strong possie d so price will likely want to play around sideways to consume that 3.2-3.5 gap area. The purple lines show an inverted H&S pattern with 3.10 head, 3.55 neck line, so a 4.00 target which price ran towards. Price is now back kissing the neck line at 3.55 for a bounce or die decision. The indicators want to see a higher high in price so perhaps a bounce occurs, however, some price exploration in that 3.20-3.50 area is likely needed at some point forward. Note that price remains on an island after the gap down from 4.4 to 4.0 (light blue lines). So as price moves up over time and it prints at 4.0, the potential exists for price to launch immediately to 4.4 and higher creating an island reversal pattern but you can watch for that as the days and weeks play out.

All in all, for a place to park some dough for the long term, ARO is a possibility. It should proceed the same way forward like NFLX after its beating, or JCP, there are others. They are beaten down and left for dead but the charts set up with possie d and the recovery begins. RSH is a stock, however, that has not recovered. AEO and COH were also mentioned with the same set-up with ARO and they launch higher as well. AEO launched like a rocket. ARO, AEO and COH can all likely be held as long plays going forward for the months ahead and there are not many attractive longs in the market currently. Scaling-in at measured steps over the coming weeks will likely lead to success. 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.

BDI Baltic Dry Index

Global oil demand is slowing especially from China. The oil weakness matches the long-term ongoing weakness in dry bulk goods, the Baltic Dry Index, for the last few years. The sideways symmetrical triangle played out in 2012 and 2013 sending price higher. The the negative divergence top (red lines) was also highlighted previously which created the spank down. The BDI has dropped like a stone as coal, coke, cement, grains, rubber, resins, powders and other dry bulk goods see lesser demand. If the global economy was robust the BDI should be flying higher. There does remain a strong capacity pulling the BDI lower as new ships are coming on line which keeps the freight costs low. Shippers cut each other's throats to keep the fleet busy.

Nonetheless, the lackluster BDI is another piece of the disinflationary and deflationary puzzle ongoing around the world. The chart indicators are long and strong wanting to see higher highs for prices going forward. The 1200 resistance should give way. The expectation, considering the lackluster global economy along with the chart metrics above, would be for the BDI to stagger sideways through 700-1600 perhaps for a year or two. If the BDI takes out 1600 moving higher, the inflationists will win the battle moving forward since the global economy should pick up quickly and the velocity of money will take hold. A BDI remaining under 1600 likely predicts a continued world disinflationary and deflationary funk going forward. With the ongoing near-term upside, the shipping stocks should be explored as potential longs. 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.

CPC Put/Call Ratio Daily Chart

The CPC drops to 0.72 yesterday verifying the ongoing market complacency. Market bulls are smoking cigars with their feet up on the desk without fear or worry of any market selling. Complacency identifies market tops and fear and panic identifies market bottoms. The red circles are recent tops resulting in the following pull backs in the SPX; 60 handles, 55, 40 and 20. This is an average drop of 44 SPX points over 2 to 5 days time so this would be the expectation say beginning now, today, or Monday. The central banker cheer leading talk out of Jackson Hole Wyoming may provide some market joy today, in fact, many traders fully expect Fed Chair Yellen to flap dovish wings and send the SPX above 2000. 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 2-Hour Chart Overbot Rising Wedge Negative Divergence

We have been waiting for the neggie d to form on the 2-hour this week and it is comically like waiting for Godot. The positive news bites such as Putin happy talk keep creating upside spurts and once an indicator produces a higher high to become long and strong, another higher high in price is needed. Well, Godot finally arrived. The thick red lines show universal negative divergence across all indicators so a smack down in price is desired. RSI, stochastics and money flow are all overbot and the red rising wedge pattern is playing out to its apex both bearish indications. The SPX should roll over from here and receive a neggie d spank down, however, considering that Fed Chair Yellen speaks at 10 AM EST and ECB President Draghi at 2:30 PM, the markets may react violently either way. Traders are very optimistic this week and expect Yellen to flap dovish wings and also Draghi to hint at stimulus. All traders care about is central banker easy money so the stock market can move higher forever.

During the selloff move in July into August, note how the ADX ran above the mid to high 30's and above 40 signaling a very strong downward trend in place for the stock market. The Putin happy talk created the exact bottom at 1905, helped by the positive divergence (green lines) and oversold conditions and falling wedge, but the money flow wanted to see further weakness. So after this straight vertical upside two-week rally orgy, note that the ADX is 30 not signaling the trend strength that the down move showed. Market bulls need to see the ADX hitting 35 and 40 and higher to prove the upside trend is strong.

The expectation is for stocks to roll over from the neggie d. Price may play around at these new historic highs since Yellen's talk begins only one-half hour after the opening bell only a couple hours away. Traders will remain on pins and needles into Draghi's words in the afternoon. The last hour of trading to end the week, after Yellen's and Draghi's dovishness, or lack thereof, is known, may be quite a ride. Perhaps Putin happy talk will turn to sad talk since futures fell about one hour ago when news hit that 20 Russian convoy trucks are entering Ukraine territory and may be accompanied by pro-Russian separatists. 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, August 20, 2014

SPX 2-Hour Chart Negative Divergence Developing

We have been watching the SPX 2-hour chart the last few days waiting for it to properly set up with negative divergence to signal the top is in but the bulls keep eking out upside juice with long and strong indicators. When the FOMC Minutes were released at 2 PM, the SPX 30-minute and 1-hour charts were negatively diverged across all indicators and the 2-hour chart was as well, except, for the RSI and MACD line that squeezed out tiny higher highs. Thus, a higher high is needed for price again, and especially with the money flow jumping on the long and strong band wagon again as well. Sometimes waiting for all the indicators to line up properly is like herding kittens.

So the bulls can keep the SPX price elevated for another 1 to 3 candlesticks, 2 to 6 hours of trading time which is the bulk of Thursday trading. So same-o, same-o. Watch for the neggie d to form with RSI and MACD line rolling over. The TRIN prints an uber low 0.50 and the low put/call ratios point to a near-term top as soon as  the RSI and MACD line and money flow oblige.

Watch the all-time record closing high at 1987.98 and all-time record intraday high at 1991.39 from 7/24/14 four weeks ago.  Price moved above the closing high today but could not print a new closing high. The two upside gaps are now filled so price has no reason to move higher except for the RSI, MACD line and money flow long and strong indicators. Volume is very light the last three days as price moves higher. Today the RUT small caps and Nasdaq indexes closed negative. The bulls keep finding a way to squeeze juice out helped by positive Putin geopolitical soundbites. Markets should top out tomorrow (as soon as neggie forms across all indicators above) and a 20 to 50-handle drop is anticipated barring any positive geopolitical news bites that goose the markets a few handles higher.

Keystone's algo, Keybot the Quant, is long and indicates that JJC 38.73 is the critical bull-bear line that is determining overall equity market direction right now so pay attention. JJC begins tomorrow at 38.70 only 3 pennies on the bear side. Watch copper trading overnight since higher copper will create an upside market orgy tomorrow with the SPX and other indexes printing new all-time highs and a big market party occurring. If copper trades negative overnight the bears plan on coming with game on Thursday. 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.

TRIN Arms Index Daily Chart Signaling Near-Term Market Top

The TRIN prints an uber low 0.50 showing that the bulls were in full control today. Under one the bulls rule the roost and above one the market bears rule the markets. The 0.80-1.00 area is consistent with steady eddy buying that can last a while. The uber low 0.50 print is over-the-top bullishness where a top typically occurs. The red circles show prior market tops. The drops in the SPX were (pulling them off an SPX chart give or take a few handles); 45 points, 25, 35, 30, 70, 70, 50, 50, 55, 35 and 35. So the average drop in the SPX after the low TRIN occurs is 45 points. From the current SPX 1987 price that would target 1942. If bulls push a bit higher tomorrow say into the low 1990's the downside target is the 1940's.

The early July low TRIN marked the July 4th top. Remember that joyous market move into the holiday weekend then the selling afterwards? Stay alert. Markets would be expected to top now and the SPX to sell off 45 handles over a few days time. The timing is tricky with the TRIN so simply take it day to day hour to hour. 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.

TNX 10-Year Treasury Note Yield Weekly Chart Downward-Sloping Channel H&S Pattern

The 10-year yield is a major focus of traders nowadays. The Wall Street consensus, over 95% and more, except for Keystone, predicted yields far above 3% by now if not 4%. Inflation remains on a milk carton as the bond market says the economy may not be as rosy as thought. The Cup and Handle (C&H) pattern from 2012-2013 targets 2.7%-2.8% which was achieved. As yields climbed in 2013, nearly everyone was convinced that inflation was here and it was time to strap yourself in for a wild ride. The ADX moved above 25 showing that the trend upwards in yields was strong. It did truly look like break-out time until Keystone poured cold water on the move at the first top in 2013 due to neggie d on the RSI, stocastics and histogram, and then the top at 3% to begin the year when the warning was for a big down in yields due to the universal neggie d (red lines), which occurred.

Price staggers sideways this year with a downward bias. The 2.45% level was key support for over one year but it ruptured three weeks ago. The purple lines show an Head and Shoulders (H&S) pattern in play now with neck line at 2.45% and head at the 3% top. This is a 55 basis point difference that now targets 1.90% since the 2.45% neck line failed. A back kiss of the neck line is expected and may be in progress now with yield moving up to 2.42% a short time ago. The 200-week MA is 2.39% so pay attention to this level.

The daily chart for TNX is very agreeable to the current upward buoyancy in yields, however, note the weak and bleak RSI and MACD line in the weekly chart above. The histogram, stochastics and ADX are positively diverged with the drop in yield and help create this current bounce action for yield but the RSI and MACD are going to want lower yields going forward. The horizontal support and lower rail of the channel coincide at 2.20%-2.30% which serves as a downside target over the next month or so. Meanwhile, watch for the back test at 2.45% where yield will either bounce, or die. Failure will truly lock in the lower 1.90% target going forward. The RSI is not at oversold levels so there would be plenty of room available for lower yields in the months ahead.

The pink ADX box shows how the up in yields was the real deal in 2013 and the trend was strong (above 25), however, that fell apart to begin this year. Watch the ADX mid-20's level since that would indicate that the trend lower in yields is very strong and the lower 1.90% target becomes even more doable. If the ADX does not want to move higher the down in yields is not a strong trend and yields will once again begin the trek higher to 3%.

For now, yield should back kiss the 2.45% for a bounce or die decision. If a bounce occurs yield would be expected to stall before 2.50%, and move lower towards the 2.20%-ish support level, placing a lower low in yield than the 2.30% bottom prints as the weeks move forward. The two 2.30% long lower candlestick shadows from 2 and 3 weeks ago create a Tweezer bottom and hinted that a recovery move higher in yields was needed. 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 PM: TNX came up for a high at 2.44% back kissing the neck line of the H&S discussed above and closed at 2.43%. The 20-day MA is 2.45% so price may want to touch and test this level perhaps overnight.

Tuesday, August 19, 2014

SPX 2-Hour Chart Upper Band Violation Negative Divergence Developing

The 2-hour chart marches along with long and strong RSI and MACD line wanting higher highs. Money flow, stochastics and the histogram are all negatively diverged wanting price to drop from here. The strong 1976 resistance did not hold for bears. The 1976 held for the first one-half hour of trading then a tape bomb occurs that says Russian President Putin and Ukraine President Poroshenko will meet on 8/26/14 to discuss a resolution to the Ukraine civil war. The SPX pops to 1979. Perhaps the Ruskies have large blocks of index call options and the positive news, firmly in their control, places dough in their wallets.

Listing the key SPX S/R from the weekend missive; 1991, 1989, 1988, 1987, 1986, 1985, 1982, 1980, 1978, 1977 and 1976. The breach of 1976, since it is a very strong S/R level opens the door to the 1985 resistance since it is the next very strong resistance. In the middle the 1976-1978 zone is a resistance zone, and price has overtaken this resistance. The 1980-1982 area is next with price now printing a 1979 handle. There is a gap that needs filling at some point forward at 1985-1987 and in some respects bears may be best served to simply fill the gap and drop from there. A back test move to the important 1976 support would be prudent.

The SPX is at the upper standard deviation band (pink line) so a move back to the middle band at 1955, and rising, at a minimum, is required. Note that price has retreated back to the middle band twice over the last week and a trip back to the lower band at 1927, and rising, is on the table and overdue. The SPX cannot roll over until the neggie d is in place across all indicators so watch the RSI and MACD line. 1 to 3 candlesticks are needed to produce the neggie d so that is 2 to 6 hours of trading time which will take up the bulk of today's trade and into the opening bell tomorrow morning.

Since the SPX blew threw 1976-1979, the 1980-1982 and 1985-1987 levels are in play for the top price print as the 2-hour chart tops out. Marrying the chart above with the CPCE put/call ratio chart highlighted last evening verifying market complacency, equities are likely topping today or first thing tomorrow morning.

Keystone's proprietary trading algo, Keybot the Quant, is long the market and watching copper and volatility; JJC 38.61 (price is under creating market negativity) and VIX 12.84 (price is under creating market bullishness). At the opening bell, copper was moving higher and volatility lower which provides bull fuel. Copper has since rolled over to the negative side but cannot help the market bears much since volatility is collapsing with the VIX now sub 12. The Fed steps on the neck of volatility when they want the stock market to rise. The dollar/yen is runing higher in recent days today up to 102.75 so the weaker yen (created by BOJ money printing) also fuels the stock market upside.

The bulls need JJC above 38.61 if they want to create new all-time market highs so watch copper. The bears need the VIX above 12.84 or they got nothing. The VIX collapsing under 12 is a bear killer today. TRIN is 0.63 uber low so say no more; the bulls are in full control today. The low TRIN will jive with a low CPCE and the neggie d developing in the 2-hour chart above all pointing to a near-term market top coming likely today or tomorrow. Watch the RSI and MACD on the chart above to know when the fix is in. 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 11:55 AM: SPX 1979. JJC is 37.81 under the 38.61 bull-bear level dropping today which makes for happy bears. VIX is 11.97 well under the 12.84 bull-bear line making for very happy bulls. The low volatility is rocket fuel for the indexes. Ditto the low TRIN at 0.63. Dollar/yen 102.84. Banzai! The VIX and the dollar/yen are key today.

Note Added 7:26 PM: The bulls kept running today and the RSI and MACD line remain long and strong like the chart above shows so another 1 to 3 candlesticks would be needed to form neggie d (about 2 to 6 hours of trading time). The SPX stalled at the 1982 resistance mentioned but since higher highs in price are desired by the RSI and MACD, price likely wants to fill the gap and touch the early July highs at 1984-1987. Bears may as well allow the SPX to fill the gap to get it over with since it is only a couple points away; this would button-up any need to go higher. The daily chart indicators remain long and strong so on a daily basis the SPX will want to revisit these price levels after any near-term sell off (a down move of a few days). VIX recovers to 12.21 so when the SPX cmae up to test 1982 R you knew it would not go through. If VIX was under 12, the SPX would have sliced up through 1982 like a hot knife through butter. Dollar/yen 102.92 running towards 103. Banzai! The weak yen helps create the stock market orgy. TRIN finishes at 0.80 after the 0.57 low firmly bullish all day reinforcing the light volume rally. Watch volatility, copper, dollar/yen, and the RSI and MACD line on the 2-hour chart above; they will tell you which way the market ship is going. Copper dropped -0.8% today.

COMPQ Nasdaq Weekly Chart Price Prints Above 4500 at 14-1/2 Year Record Highs Price Extended Overbot Rising Wedge Negative Divergence

The Nasdaq moves above 4500 as traders toast the Fed for the never-ending upside market orgy that would make Caligula blush. The Nazzy is at 14-1/2 year highs now at levels not seen since March 2000 when the dotcom bubble burst. The wine is flowing like water as traders high five each other each day and rape the market upside with the Fed's easy money. Too bad the other half of America suffers through unemployment and underemployment. There are winners and losers every day in the big city.

All the euphoria aside, the red lines show a rising wedge pattern (bearish). Stochastics are overbot (indicating a reversal is nearing) and the RSI is coming off overbot levels. The red lines for the indicators show negative divergence across the board (wanting to see a price spank down). The red dots show what happens when price is way extended above the moving averages and the green dots show what happens when price is way extended below the moving averages. What do you think is going to happen 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.