Tuesday, October 21, 2014

STOCK MARKET BULLISH -- LONG

Keybot the Quant remains long as the bulls slap the bears silly from start to finish in the Tuesday session. The algo printed one number gaining strength up to -7. RTH exploded higher at the opening bell and an upside party followed; the biggest day of the year for equities. For the Wednesday session, it appears the algo is most focused on financials. Watch XLF 22.90 as the bull-bear line in the sand. XLF begins at 22.87 only three pennies on the bear side. If XLF stays under 22.90 and leaks lower, the upside broad market rally will stall and the broad indexes will flatten out sideways with a downward bias. If XLF moves above 22.90, only three pennies away, the stock market will explode into a sustainable and extended upside move and the bears will be toast.

For the SPX starting at 1941, the bulls only need to push above 1942.50 less than two points higher and an upside acceleration will occur to 1951. So watch to see if the S&P futures hand the bulls a couple points overnight, or not. The bears need to retrace Tuesday's large up move, a formidable task, so instead the bears will focus on pushing financials and semiconductors lower. If either XLF or SOX, respectively, moves higher, the bears will fold like a cheap suit. The bulls are driving the bus and they ran over a few bears today. For Wednesday the financials, the pivot from XLF 22.90, will determine the broad market direction forward. Watch it like a hawk and listen for any news, good or bad, concerning the banks.

10/26/14; 7:00 PM EST =
10/21/14; 9:36 AM EST = -7; signal line is -23
10/20/14; 2:12 PM EST = -23; signal line is -24; go long 1900; (Benchmark SPX for 2014 = +2.8%)(Keybot this trade = +2.2%; Keybot for 2014 = +8.9%)(Actual this trade = +2.3%; Actual for 2014 = +9.7%)

Monday, October 20, 2014

STOCK MARKET BULLISH -- LONG -- CAUTION

Keybot the Quant flips to the long side this afternoon shortly after 2 PM EST at SPX 1900. Utilities powered higher after the opening bell this morning so the fix was in for higher markets. The SPX moved steadily higher from start to finish following the game plan for the bulls laid out this morning. Utilities rocket higher then the SPX overtook the 1895 which provided bull juice. Price then moved above 1898 so an upside acceleration was on tap and Keybot went long at 1900. Price ran higher to close at 1904 one-point off the HOD at 1905.03. As always, stay alert for a whipsaw.

The Keybot the Quant algorithm computer program gained +2.2% on the last trade and the actual trading gained +2.3%. The benchmark SPX is up +3% this year with Keybot's actual trading up nearly +10% (this is the actual return allowing for all commissions, fees and any mechanical inefficiencies). Keybot exited DOG and entered DIA.

The algo is tracking the retail sector and the SPX 1895 level as the two key influences on market direction for Tuesday. Watch RTH 61.95. The RTH begins at 61.82 only 13 cents away from the bull-bear line in the sand that will guarantee bull victory ahead. The bears need to prevent RTH 61.95 with all their might. If RTH 61.95 gives way to the upside, the bears will fold like cheap suit. So listen closely for any retail news. The bears need to push the SPX under 1895 or they got nothing.

For the SPX starting at 1904, the bulls only need one point, to push up through 1905, and an upside acceleration will occur. Watch the overnight S&P futures to see if the bulls plan to continue the party by printing one positive point or more. The bears need to push under 1882 to get their mojo back a formidable task, so instead bears will focus on keeping RTH sub 61.95 and sending SPX under 1895. A move through 1883-1904 is sideways action for Tuesday.

10/26/14; 7:00 PM EST =
10/20/14; 2:12 PM EST = -23; signal line is -24; go long 1900; (Benchmark SPX for 2014 = +2.8%)(Keybot this trade = +2.2%; Keybot for 2014 = +8.9%)(Actual this trade = +2.3%; Actual for 2014 = +9.7%)
10/20/14; 1:23 PM EST = -23; signal line is -24 but algorithm remains short
10/20/14; 12:34 PM EST = -37; signal line is -24
10/20/14; 12:06 PM EST = -23; signal line is -23 but algorithm remains short
10/19/14; 7:00 PM EST = -37; signal line is -22
10/17/14; 12:15 PM EST = -37; signal line is -20
10/17/14; 11:37 AM EST = -23; signal line is -19
10/17/14; 10:00 AM EST = -36; signal line is -18
10/17/14; 9:00 AM EST = -37; signal line is -17
10/16/14; 10:35 AM EST = -37; signal line is -15
10/16/14; 9:47 AM EST = -53; signal line is -14
10/14/14; 12:56 PM EST = -37; signal line is -12
10/14/14; 12:24 PM EST = -21; signal line is -11
10/14/14; 12:22 PM EST = -7; signal line is -11 but algorithm remains short
10/14/14; 11:48 AM EST = -23; signal line is -11
10/13/14; 3:24 PM EST = -37; signal line is -12
10/13/14; 1:51 PM EST = -23; signal line is -12
10/13/14; 12:32 PM EST = -7; signal line is -12 but algorithm remains short
10/13/14; 9:52 AM EST = -23; signal line is -13
10/13/14; 9:36 AM EST = -7; signal line is -12 but algorithm remains short
10/12/14; 7:00 PM EST = -23; signal line is -12
10/9/14; 11:54 AM EST = -23; signal line is -11; go short 1943; (Benchmark SPX for 2014 = +5.1%)(Keybot this trade = -1.0%; Keybot for 2014 = +6.7%)(Actual this trade = -0.9%; Actual for 2014 = +7.4%)

STOCK MARKET BEARISH -- SHORT -- CAUTION

Keybot the Quant remains short moving into the new week of trading. As the prior post mentions, Monday's fight is between UTIL 599.43 and SPX 1895. If UTIL remains above 559.43 and SPX under 1895, then equities stumble along sideways all day. If UTIL fails at 599.43, equities will take a leg lower. If SPX moves above 1895, the relief rally is gaining strong steam and durability and Keybot will likely flip long above 1898.

For the SPX starting at 1887, the bulls need to move above 1898 to lock in an upside acceleration and sustainable recovery rally. The bears need to push under 1865 to create a downside acceleration. A move through 1866-1897 is sideways action. S&P futures are flat well off the +12 highs last evening. The bears are in control to begin the week. UTIL 599.43 and SPX 1898 should determine market direction as described above. Keybot does not print any pre-scheduled numbers this week.

10/26/14; 7:00 PM EST =
10/19/14; 7:00 PM EST = -37; signal line is -22
10/17/14; 12:15 PM EST = -37; signal line is -20

Saturday, October 18, 2014

STOCK MARKET BEARISH -- SHORT -- CAUTION

Keybot the Quant remains short through the weekend. UTIL is at 562.56 above the critical 559.43 bull-bear line in play for all of next week so this helps the bulls maintain elevated equities when the Monday bell rings. The bulls took out the important SPX 1895 line in the sand in Friday trading but retreated back under to help the bears. If the bulls overtake 1895 again, it will probably be enough to flip the algo long. The areas and levels of interest for Monday can be identified once the Sunday pre-scheduled number prints tomorrow. Looks like Monday will be a fight between the SPX 1895 that bulls need and the UTIL 599.43 that bears need. The caution flag is out since the bulls may try to continue the rally early next week.

10/19/14; 7:00 PM EST =
10/17/14; 12:15 PM EST = -37; signal line is -20
10/17/14; 11:37 AM EST = -23; signal line is -19
10/17/14; 10:00 AM EST = -36; signal line is -18

Friday, October 17, 2014

STOCK MARKET BEARISH -- SHORT

Keybot the Quant remains short as the upside market orgy plays out. SPX is above 1892 gaining nearly 30 points so far today. The SPX key level to watch is 1895 only three points away. Bulls will receive substantial juice to easily push the SPX above 1900 if price moves above 1895.

UTIL is at 561 launching higher after teasing the 554.27 level three times over the last day and this morning teasing the 559.53 twice before price just popped up through. Many algorithms follow the 15-week look-back technique described in the previous post and that is clearly visible by the exact price action at these levels. Watch UTIL 559.53 and SPX 1895. For now, the rally is the dead-cat variety, but if the SPX moves above 1895 during the session or the UTIL closes above 559.53 at the end of the day, this will create market lift today and come Monday and sustain the market buoyancy.

10/19/14; 7:00 PM EST =
10/17/14; 10:00 AM EST = -36; signal line is -18
10/17/14; 9:00 AM EST = -37; signal line is -17
10/16/14; 10:35 AM EST = -37; signal line is -15

STOCK MARKET BEARISH -- SHORT

Keybot the Quant remains short moving into the last trading day of the week. S&P futures are up a large +26 as global traders sniff out unlimited central banker stimulus. Utilities are the most important sector to watch today. As previously mentioned, the UTIL 554.27 bull-bear line in the sand is important until the closing bell where it will be replaced with 559.43 for all of next week. If UTIL drops under 554.27 today, that should weaken equities but with the robust futures this is likely not on tap. Instead focus on the UTIL 559.43 bull-bear line in the sand applicable for each day next week and UTIL begins at 558.94 this morning. Thus, if UTIL closes the day where it is now (under UTIL 559.43) it will cause market weakness next week. If UTIL moves above and closes above 559.43 today, that will create broad market bullishness come Monday morning.

Watch the SPX 1893 line in the sand. If the SPX feels the same love as the overnight futures, the SPX should jump to the 1888 resistance and then plot a move to 1893 to lock-in extended market bullishness and a solid relief rally ahead. For the SPX stating at 1863, the bulls need to push up through 1876 and that will accelerate the upside, which appears to be on tap. The bears need to push under 1835 to regain their downside mojo, a formidable task, so instead bears will focus on smashing utility stocks lower. A move through 1836-1875 is sideways action today, but again, an upside orgy appears on tap. The bears are in full control so the strength after the opening bell will be interesting to see how much it can boost the bull case. Keybot prints two pre-scheduled numbers this morning one before the bell and one after the bell. Watch UTIL 559.43 especially this afternoon.

10/19/14; 7:00 PM EST =
10/17/14; 10:00 AM EST =
10/17/14; 9:00 AM EST =
10/16/14; 10:35 AM EST = -37; signal line is -15

Note: A reader asked about why lower utilities would be bad for stocks since typically a flight to safety occurs into divvy and defensive stocks during an economic downturn or general economic malaise. This is true but you must compartmentalize the major market techniques such as fundamental trading, technical trading and algorithmic trading. Keybot is an algo so all it sees is 1's and 0's. In general, weakness in any sector typically leads to broad market weakness. In the short term the effect in the first sentence may hold, but over the longer term it will not. The defensive plays such as utes and consumer staples will hold up better in a market downturn but they still go down; they simply go down a little bit less than other sectors. Getting back to the algo, after years of operation a very interesting facet surfaced with the algo; the ability to identify key sectors and other parameters that most greatly effect market direction in the very near term. This simply turned out to be something that came to be as the data was assessed and has turned into an excellent tool to aid trading. The only reason that utilities are important now is because the algo says they are important; no other reason. In a couple weeks, the algo may consider utes to not be important at all and they may sit in the background for weeks or months. Currently, however, the utes are key and the UTIL 559.43 number for all of next week is very important. As an aside, and has been mentioned in the past many times, the utility parameter can be followed by you independently. Go to YHOO and bring up the historical data for the Dow Jones Utilities (^dju). Go to weekly data and count back 15 weeks. The utilities are in a weekly uptrend if price closes each week above the closing price 15 weeks prior. This is an old-time indicator that young and novice traders are not aware of. The ole-timer's watch it closely and it has its roots at the very core of technical analysis and Norman G Fosback's work decades ago. As long as the weekly trend for utes is up the broad market is happy. If utes fall into a weekly down trend then there is big trouble ahead for equities. The 15-week look back number is currently at UTIL 554.27 ending today and 559.43 for next week. Keystone discusses the techniques for utilities in more detail on his site The Keystone Speculator so reference that site and type 'UTIL' in the search box in the right margin. Bring up those prior charts and articles to better understand the above.

Thursday, October 16, 2014

STOCK MARKET BEARISH -- SHORT

Keybot the Quant remains short. UTIL failed at 554.27 this morning creating further stock market weakness but then recovered. Watch both 554.27 and the critical 559-ish for next week as previously explained. UTIL will tell you a lot at 4 PM tomorrow afternoon depending on where it closes in relation to 559.43. There you go; current price for UTIL is 559.49 already knowing that this level is a big battle area for the next week. Equities will sell off if UTIL drops under 554.27. If UTIL stays above then equities will float along sideways to sideways higher. The bears remain in firm control.

10/17/14; 9:00 AM EST =
10/16/14; 10:35 AM EST = -37; signal line is -15
10/16/14; 9:47 AM EST = -53; signal line is -14
10/14/14; 12:56 PM EST = -37; signal line is -12

Wednesday, October 15, 2014

STOCK MARKET BEARISH -- SHORT

Keybot the Quant remains bearish. The bulls were bludgeoned today but did stage a comeback late in the day. The algo motored along all day and did not print any numbers. The algo is tracking UTIL 554.27 and SPX 1893 as the two top priorities in this circus type market. UTIL 554.27 is important for the next two days and then for the two following weeks UTIL 559-ish is key. This sets up an interesting path forward. It is amazing how the algo always identifies interesting things to watch.

The current price for UTIL is 558.64 four points above the bull-bear danger line at 554.27 but note that for the two following weeks price is under the 559-ish. This means the utilities will create market weakness next week and moving forward. So not only watch the UTIL 554.27 today and tomorrow but be aware of where price is in relation to 559-ish. If UTIL drops lower, especially under 554.27, markets take another big leg lower. If UTIL remains steady and floats higher and ends the week above 559-ish it will be all systems go for the bulls next week.

Bulls will create a sustainable rally if they can move SPX above 1893. Bulls got absolutely nothing if they cannot move above SPX 1893. For the SPX starting at 1862, the bulls need to touch the 1874 handle and bingo, the upside will accelerate. The bears need to push under 1821 to regain their mojo, a formidable task, so instead bears will try to beat the utility stocks lower. A move through SPX 1922-1873 is sideways action for Thursday. The circus continues. Utilities are important and they typically move with rates. So higher yields should weaken UTIL and lower yields should send UTIL higher so this will give you a heads-up overnight if you watch what direction rates are moving in.

10/19/14; 7:00 PM EST =
10/17/14; 10:00 AM EST =
10/17/14; 9:00 AM EST =
10/14/14; 12:56 PM EST = -37; signal line is -12
10/14/14; 12:24 PM EST = -21; signal line is -11

Tuesday, October 14, 2014

STOCK MARKET BEARISH -- SHORT -- CAUTION

Keybot the Quant remains short moving into the Wednesday session. The algo was active on Tuesday printing four numbers and potentially flipping Keybot long but the bulls did not have enough juice. The markets prefer to leak lower but four parameters may create market lift in order of importance; JJC 37.48; SPX 1894.50; RTH 62.13 and XLF 23.02. Any of these four will create bullishness. If 2 of the 4 turn bullish, and the SPX moves above 1899, Keybot will likely go long. JJC is copper so the direction of copper overnight will provide a heads-up on the path ahead.

For the SPX starting at 1878, the bears need to push under 1872 and a downside acceleration will occur. The bulls need to push above 1899 to accelerate the upside. A move through 1873-1898 is sideways action.

10/17/14; 10:00 AM EST =
10/17/14; 9:00 AM EST =
10/14/14; 12:56 PM EST = -37; signal line is -12
10/14/14; 12:24 PM EST = -21; signal line is -11
10/14/14; 12:22 PM EST = -7; signal line is -11 but algorithm remains short
10/14/14; 11:48 AM EST = -23; signal line is -11
10/13/14; 3:24 PM EST = -37; signal line is -12

Monday, October 13, 2014

STOCK MARKET BEARISH -- SHORT

Keybot the Quant remains short as the stock market gives up the ghost collapsing through key support levels. The algo was active today printing five numbers. Continue watching UTIL 554.27. UTIL is above here all day long which helped create market lift today. However, this positivity was smacked in the face by retail stocks and the SPX. Watch RTH 62.13 which failed today causing negativity in equities. Also watch SPX 1895 as a key bull-bear line in the sand. Bears need UTIL under 554.27 and the stock market will collapse another leg lower. Bulls need either RTH above 62.13 and/or SPX above 1895 to create a relief rally.

For the SPX starting at 1875, the bears only need a smidge of red in the overnight S&P futures and another several-point acceleration lower is on tap. The bulls need to push above 1912 to regain their mojo, a difficult task, so instead the bulls will concentrate on keeping utilities, retail stocks and the SPX moving higher especially the SPX above 1895 which will create a stability and buoyancy to markets going forward. The bears are in charge.

10/17/14; 9:00 AM EST =
10/13/14; 3:24 PM EST = -37; signal line is -12
10/13/14; 1:51 PM EST = -23; signal line is -12
10/13/14; 12:32 PM EST = -7; signal line is -12 but algorithm remains short
10/13/14; 9:52 AM EST = -23; signal line is -13
10/13/14; 9:36 AM EST = -7; signal line is -12 but algorithm remains short
10/12/14; 7:00 PM EST = -23; signal line is -12