Sunday, February 12, 2017

Keybot the Quant and SPX S&P 500 Charts

The importance of the Keybot the Quant's +100 ticks cannot be ignored. At its heart, the Keybot the Quant algorithm is an oscillator with +100 as the maximum level and -100 the minimum level. As with all oscillators, such as an RSI, or stochastics, the +70 to +100 levels indicate a stock market that is becoming or has already become overbot in need of a pullback. Conversely, the -70 to -100 levels indicate a stock market that is becoming or has become oversold and in need of a rally. The uber maximum +100 hints that a multi-year top may be printing in real-time over the coming days and weeks.

The red circles highlight the bottoms that the quant identifies as important corresponding to the lows in the market. The green circles show the tops in the quant's readings and in the stock market.

The future is unknown. Keybot only sees the 1's and 0's in real-time. The quant did not begin operating in sync with the SPX until late 2008 so the peak in the stock market top in October 2007 is not part of the quant's historical data set. An assumption can be made that Keybot was likely printing +100 numbers in June-October 2007 but this can only be verified through back testing and that is too time-consuming to fool with right now.

These are not your grandfather's markets. The Federal Reserve prevented the stock market from correcting properly in early 2009 and has pumped stocks higher ever since. Global central bankers are now acting in collusion to keep the party going. The ECB continues to print money like madmen and will continue their QE (quantitative easing) program through this year, however, the ECB is tapering the monthly asset purchases, the life-blood of markets for eight years, from March to April and these reduced monthly purchases continue through year-end. The +100 numbers indicate that a potential epic multi-year top for stocks may coincide with the ECB tapering its monthly purchases. The central bankers are running out of bullets to fight any future economic problems as the months play out. 

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