Sunday, June 28, 2020

STOCK MARKET BEARISH -- SHORT -- CAUTION

Keybot the Quant remains short. The banks collapsed out of the gate on Friday so the fix was in for the bears. The central banks, however, maintain their jackboots on the throat of volatility to prevent things from spinning out of control. The bears are in charge but the algo number is only 7 points below the signal line.

The bears can create stock market carnage if they want to; it is sitting on a silver platter. The SPX begins the new week at 3009. If 3002 fails, it is lights out for the stock market. The negativity will be palpable and here to stay for a while. If the VIX then moves above 37.42 (starting the week at 34.73 at 3 AM EST), equities may go into an all-out crash profile. As long as the VIX does not move above 37.42, the bulls should be fine. If VIX takes out 37.42, the bulls have zero hope and will be taken to the shed out back and beaten mercilessly.

Bulls suffered a big hit on Friday with the weaker banks. The bulls have bloody noses and are dizzy, but still standing, ready to fight some more. Since banks may be a lost cause for a few days and weeks, the bulls will focus on utilities and commodities. Bulls will automatically receive a boost on Monday since UTIL begins at 749 and 646 is the bull-bear line in the sand this week. This will help steady markets but bears can create trouble as described above. Bulls will also benefit if GTX moves above 1680 (now at 1613).

The caution flag is out. If UTIL or GTX flip into the bull camp, consider the imminent turn to the long side to be in play. If either parameter flips bullish (which utes will at the opening bell), and the SPX moves above 3074, which seems way out of reach, Keybot the Quant will likely flip long. Although this outcome seems unlikely you never know in these current erratic markets and if volatility rises, price will be swinging wildly all over the place intraday and day to day. Bulls need 65 S&P points on Monday to dig out of the hole.

The US Independence Day holiday is Saturday and markets are closed on Friday, 7/3/20, so it is a holiday-shortened week. Bulls typically have the upper hand the day or two in front of a holiday weekend. The US Monthly Jobs Report is released on Thursday morning since markets are closed on Friday so 7/2/20 may be a wild day. The EOM, EOQ2 and EOH1 occurs on Tuesday, 6/30/20, and July trading begins on Wednesday. The bulls may try to attract new money into funds to float markets higher into the barbecue weekend. 

Keybot prints three pre-scheduled numbers this week two on Tuesday and one on Thursday morning. Four trading days are ahead two in June and two in July; then it is party time, or, perhaps for some, time to cry in their beerski's.

Bears need SPX sub 3002 and it is over for stocks. VIX above 37.42 will wildly accelerate the stock market selloff and the blood will flow on Wall Street. Bulls will benefit as long as UTIL remains above 646 this week. Bulls must keep the SPX elevated, volatility depressed and try to rally commodities (would need a weaker dollar). Watch to see if the bears can find 7 negative S&P points in the futures overnight; if so, that tells you that big trouble is ahead.

7/5/20; 7:00 PM EST =
7/2/20; 9:00 AM EST =
6/30/20; 7:00 PM EST EOM EOQ2 EOH1 =
6/30/20; 10:00 AM EST =
6/28/20; 7:00 PM EST = -9; signal line is -2
6/26/20; 10:26 AM EST = -9; signal line is -2
6/26/20; 10:06 AM EST = +7; signal line is -2 but algorithm remains short
6/26/20; 10:00 AM EST = -9; signal line is -3
6/26/20; 9:36 AM EST = -9; signal line is -4
6/25/20; 2:52 PM EST = +7; signal line is -4 but algorithm remains short

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