Keybot the Quant is short to start the new trading week. The Sunday number prints and results in no change to the algo number but the signal line drops two ticks. The key item to watch for Monday is SPX 1292 as discussed in the previous message. The 12-month MA is 1292 and should that fail, many robots will kick in and sell the markets aggressively. The exact number is 1291.73 but the moving averages are constantly changing slightly so using 1292 as a rough gauge is fine. If 1292 fails, the caution flag will be removed and the bears will be at full cruise speed.
The oversold nature of the markets right now, however, forecasts the need for a relief rally since late last week. If SPX 1292 holds and the bears cannot push lower, the relief rally should be at hand. There has been serious technical damage done to the markets in May so weak markets are expected moving forward despite any recovery bounce this week. The utilities sector typically leads, or is at least coincidental, when the broad markets perform a substantial bear market move lower. During May, the utes have remained elevated which hints that a market recovery bounce is needed so the sectors can reset. At that point, the utilities, UTIL, will have to be watched to see if they then lead lower which would lock in a longer term bear market. For this week, watch UTIL 450.45, now at 464.16 so comfortably above. If 450.45 fails this week, bulls have zero hope, the markets will move substantially lower if not assume a crash profile. The utes continue to be a lonely feather in the bull's cap, for now.
For the SPX on Monday starting at 1295, as discussed above, the bears need only three points lower to push under 1292 and a bearish acceleration will take place. A rupture of 1292 would need to hold for about seven to ten minutes to lock it in. The bulls need to push higher to touch the 1313 handle which is the 100-day MA to accelerate the upside and provide legs to a recovery bounce. A move thru 1293-1311 is sideways action. The importance of SPX 1292 cannot be underestimated. If 1292 fails, the broad indexes will enter a potential crash scenario. If the bulls need one time to bounce markets, it has to be now. Markets remains highly unstable and erratic. Caution is warranted.
5/27/12; 7:00 PM EST =
5/25/12; 10:00 AM EST =
5/20/12; 7:00 PM EST = -30 signal line -3
5/16/12; 1:25 PM EST = -30 signal line -1
Since i started reading your blog, signal line didn't move below 0. Now it has.
ReplyDeleteIs there any significance to signal like moving below 0?
thanks.
Helo Anon, that is a good question. As far as causing Keybot to flip short or flip long as the zero is crossed, no, it does not have an affect. The cross of hte algo number and signal line is what matters. However, the very nature of oscillators is that they move in a range that is equal distance from a zero line both above and below. Thus, there is value in seeing that the signal line is now under zero in the context that it projects a bearish vibe for markets. In general markets are bearish if you see negative numbers showing and would be bullish if you see positive numbers showing.
ReplyDeleteLike any oscillator, when you reach extremes that is where markets tend to reverse. So as the algo number approaches -80 and lower that is consistent with a market that is oversold while over +80 is a market that is overbot.
Watch the spread between the algo number and signal line, as the spread tightens the algo comes closer to making a turn. Right now the spread is 27 points (-30 compared to -3). If the spread widens the move in that direction is stronger. If the SPX loses that 1292-1294 area, the algo number will likely drop much lower and that would eliminate the need for the caution signal since the bears will be cruising south, the spread would be higher.