Friday, May 8, 2020

STOCK MARKET BULLISH -- LONG

Keybot the Quant flips to the long side after yesterday's opening bell at SPX 2887. The lower volatility sealed the deal for the bulls. The VIX collapses below 31.74 and has not looked back, currently trading at the 30.03 palindrome, sending the stock market higher. S&P futures are up +29 points about 3 hours before the US Monthly Jobs Report and 4 hours in front of the Friday opening bell.

The rally the last few days is fueled by stronger tech (chips) and copper and lower volatility; a triple-whammy of bullish joy. The bulls will need stronger banks and commodities to continue the fun. Financials are uninspiring so the bulls may try to push oil, wheat, corn, gold, etc.., higher to create further stock market lift.

The bears need to weaken the chips and copper while boosting volatility. Bears need SOX below 1640, CPER below 14.83 (a -0.6% drop in copper futures which are currently trading up +1.6% slapping the bears in the face) and/or VIX above 31.74. Chips and copper are tough targets for the bears to reach quickly so it appears that the whole shooting match rides on volatility. Bulls win big with the VIX sub 31.74, and win huge with a 30 handle, and will display an upside market orgy so obscene that it would make Caligula blush if the VIX prints in the 20's. The stock market will fall apart if the VIX moves above 31.74.

The bears likely need 2 of the 3 parameters to flip bearish for the quant to flip short. Thus, watch to see if copper or the semiconductors perform an about-face today which will tell you the internals of the market are likely deteriorating. If the chips and copper remains happy and in the bull camp, the bears got nothing, and the bulls will be partying like its 1999, as Prince would sing.

On the last trade that ran only 5 trading days, the algo program loses a percent but the actual trading loses -3% due to the PSQ ETF which is tech-heavy (and it is a 1x non-leveraged ETF). Keybot exits PSQ and enters DIA. The benchmark S&P 500, which is the United States stock market, is down -11% on the year. The Keybot the Quant actual trading is down about -5% on the year. The choppy sideways whipsaw price action continues. Chop, chop, chop. Chop-suey.

The US Monthly Jobs Report is imminent with the largest job loss in history expected at least since WW II or the Great Depression. Bad news is expected so perceptions are all that matters. Simply watch VIX 31.74 since it tells you everything you need to know about stock market direction today. If VIX turns bearish, the caution flag will be out and if copper or the chips turn bearish, the imminent turn to the short side will be in play. Also watch the behavior of volatility. If the VIX overtakes 31.74, then after a bit drops back below, then after a bit back above, etc..., that will tell you that the bears are setting up things behind the scenes to flip the model short again.

5/10/20; 7:00 PM EST =
5/8/20; 9:00 AM EST =
5/7/20; 9:30 AM EST = -23; signal line is -43; go long 2887; (Benchmark SPX for 2020 = -10.7%)(Keybot algo this trade = -1.1%; Keybot algo for 2020 = +2.8%)(Actual trading results this trade = -3.0%; Actual trading results for 2020 = -4.7%)
5/7/20; 5:38 AM EST = -23; signal line is -43 but algorithm remains short
5/6/20; 9:36 AM EST = -37; signal line is -45 but algorithm remains short
5/4/20; 3:12 PM EST = -53; signal line is -46
5/4/20; 12:38 PM EST = -69; signal line is -45
5/4/20; 9:53 AM EST = -53; signal line is -44
5/4/20; 9:36 AM EST = -69; signal line is -45
5/3/20; 7:00 PM EST = -53; signal line is -44
5/1/20; 9:41 AM EST = -53; signal line is -44; go short 2855; (Benchmark SPX for 2020 = -11.6%)(Keybot algo this trade = +2.0%; Keybot algo for 2020 = +3.9%)(Actual trading results this trade = +2.2%; Actual trading results for 2020 = -1.7%)

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