Thursday, August 15, 2019


Keybot the Quant is on the short side from yesterday morning at SPX 2879. Craziness. That sums up the stock market nowadays. It's no surprise since the price action has been erratic and unstable. What is a surprise are the whipsaws. Keybot flipped long on 8/8/19 but then whipsawed back to the short side on 8/12/19 then whipsawed back to the long side on 8/13/19 then whipsawed back to the short side yesterday. The price action is historic.

To put it in perspective, after operating for over one decade, the Keybot the Quant algorithm may print a whipsaw a couple times on average each year. The three whipsaw moves below can be deemed whipsaws when discussing them at the water cooler but the quant technically defines a whipsaw if the reversal occurs within about 10 hours time. So Keybot did not consider the move from 8/8 to 8/12 or the move from 8/12 to 8/13 as a whipsaw but the move from 8/13 to 8/14 is a whipsaw, by the quant's definition. This automatically sends Keybot the Quant into single 1x ETF's for the next 35 days. Choppy sideways markets chew up both bulls and bears and especially positions in leveraged ETF's. This activity shows you why you do not want to be in those dangerous and flawed 3x ETF and ETN instruments.

The Keybot moves are self explanatory below. Keybot was in SSO on 8/8 then flipped into SDS on 8/12 then to SPY (1x ETF) on 8/13 and then into SH (1x ETF) on 8/14. Keybot will remain in single ETF's until 9/16/19 as long as no other whipsaws occur.

But continuing the point from above, Keybot may have 2 or 3 whipsaws a year and this is just a simple reversal after it flips in one of the directions. The moves this week are unprecedented flipping from long to short, back to long then back to short in only 3 days; a unique and rare triple-whipsaw. Keybot has never printed anything even close to this in all its history. Interestingly, the quant was printing maximum +100 numbers (representing maximum market euphoria) in mid-July only one month ago.

For the year, the benchmark S&P 500 is up +14.8%. The Keybot algorthm program is up +11.3%. The actual trading generated by Keybot is up +23.1% taking a haircut from the 30%+ levels because of the choppy, whippy markets. Any losses from further whipsaws are minimized by the quant now being in the 1x non-leveraged ETF's.

Now that the market mayhem is caught up to the present time, the VIX is at 23.14 and S&P futures are -5 three hours before the opening bell for the regular Thursday trading session in the States. S&P futures have dropped almost 30 handles over the last hour after the US-China trade war is escalated by the communists saying they will retaliate against President Trump's tariffs.

The NYA failed yesterday at 12528 which ushers in a cyclical (weeks and many months ahead) bear market. Watch this closely. Bulls must move NYA above 12528 as soon as possible to stop the market carnage. If stocks perform a rebound rally today, watch the NYA since it will tell you if the rally is real, or not.

The bears need weakness in utilities and the SPX index to prove they can crash the markets. Watch SPX 2806 very closely. The S&P 500 dropped to 2835 yesterday and 2822 last week only 16 points from this Armageddon line in the sand. If the SPX loses 2806, all hope for bulls is lost and the stock market is guaranteed to be in a cyclical bear market pattern for weeks and months ahead. If stocks sell off, as futures indicate, and weakness in equities is persistent, but the SPX does not lose the 2806 level, the bulls will recover going forward.

If utilities develop a downward trend from here, it will mean serious trouble for equities. If utilities bounce over the coming days, the bulls likely have a chance at steadying the stock market ship.

Bulls need NYA above 12528. Bears need SPX below 2806. One of them will flinch going forward and tell you the stock market direction ahead. If stocks keep chopping along and the NYA remains bearish and the SPX in the bull camp, equities will maintain in a sideways to sideways lower bias.

Keybot prints two pre-scheduled numbers tomorrow morning. Anything can happen in these erratic and unstable markets controlled by President Tweet and central banker largess. The bears are in control with the algo number 17 points below the signal line. The beat goes on.

9/6/19; 9:00 AM EST =
9/1/19; 7:00 PM EST EOM =
8/30/19; 10:00 AM EST =
8/27/19; 10:00 AM EST =
8/25/19; 7:00 PM EST =
8/18/19; 7:00 PM EST =
8/16/19; 10:00 AM EST =
8/16/19; 9:00 AM EST =
8/14/19; 9:48 AM EST = -18; signal line is -1; go short 2879; (Benchmark SPX for 2019 = +14.8%)(Keybot algorithm program this trade = -2.2%; Keybot algo for 2019 = +11.3%)(Actual results this trade = -2.2%; Actual trading results for 2019 = +23.1%)
8/14/19; 9:36 AM EST = -4; signal line is 0 but algorithm remains long
8/13/19; 12:15 PM EST = +12; signal line is +1
8/13/19; 10:05 AM EST = +28; signal line is +3 but algorithm remains short
8/13/19; 9:54 AM EST = +12; signal line is +4 but algorithm remains short
8/12/19; 11:14 AM EST = -4; signal line is +5; go short 2889; (Benchmark SPX for 2019 = +15.2%)(Keybot algorithm program this trade = -1.2%; Keybot algo for 2019 = +15.4%)(Actual results this trade = -2.4%; Actual trading results for 2019 = +28.4%)
8/11/19; 7:00 PM EST = -4; signal line is +8 but algorithm remains long
8/9/19; 9:47 AM EST = -4; signal line is +9 but algorithm remains long
8/8/19; 11:40 AM EST = +12; signal line is +11; go long 2924; (Benchmark SPX for 2019 = +16.6%)(Keybot algorithm program this trade = +1.8%; Keybot algo for 2019 = +16.6%)(Actual results this trade = +3.4%; Actual trading results for 2019 = +30.8%)

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