Tuesday, 16 October 2012

Volatility rallies late in the day

Despite the indexes closing broadly higher, and holding those gains into the close, the VIX rallied in the latter part of the day, closing just fractionally lower to close @ 15.22




Clearly, the last few months have seen the VIX stuck in the very low teens. There remains a complete lack of fear in the market, and there is no sign of

Until the VIX breaks back over 20 - with a weekly close >20 (as is my third red flag criteria), bears are facing a real problem.

Despite the late day rally, what also remains the case, is that a VIX <20 is not reliable. With the indexes closing as they did, the continuing minor VIX movement is nothing less than static.

More later

Closing Brief

The market closed higher for a second day, and the close was a pretty strong one. The sp' closed 1% higher @ 1454. This is a mere 1.5% away from breaking the QE spike highs.




So, a major victory for the bulls. The close is even more decisive when seen on the daily cycle.

Next target for the bulls is an obvious 1475, a new index high from the 2009 lows, and that would open up an attempt on the big 1500 level.

*VIX closed flat, but the indexes sure did not show any real weakness today.

More later

12pm update - on the way up

Market is comfortably holding onto those opening gains, and is even picking up a few more points as we approach lunch time. VIX is lower by over 4%. Today is clearly day'2 of this new up cycle, the issue is naturally, how many days to go?





Its getting pretty conclusive, we're well into the 1450s, and now a mere 1.5% from the recent QE spike highs.

As we move into opex, it now looks like the bears have entirely lost all downside momentum. Last week was important, with the break of the June rising support trend, but it all seems for nothing.

It will be interesting to see if the bulls can keep this new round of madness going into next week..and beyond. Right now, that appears disturbingly likely.

back at 3pm

10am update - danger zone for the bears

Good morning. Market is gapping right into a difficult zone for the bears. A close over sp'1450 would be pretty much a clear break higher, and be very suggestive of new index highs.

VIX is moderately lower by 3%, which is a little less than expected, considering the indexes.





Its not looking good at all  If we do close in the 1450s, there seems very little to stop this new push higher.

As ever, how we close will be far more important than how we have opened.

back at 12pm

Backtest of the broken weekly?

With the indexes closing higher today, the bears are rattled (yet again). The very brief decline to sp'1427 was just too weak a push lower, and Mr Market probably stopped out most of the weaker bears today.  A close over 1450 later this week would be a major threat to the autumnal bearish outlook.

sp' weekly, 2yr


Often is the case, any 'stupid bounce' will retrace back up to 50% of the previous candle (regardless of what time cycle you are looking at). Last weeks mid-point is around sp'1442/44. Clearly, a daily close in the 1450s would be decisive enough to award the bulls another victory.

The underlying MACD (blue bar histogram) cycle IS still rolling over though, and is still set to go negative cycle either later this week or early next. There is potential for a major down move this week.

Let us not forget that the rising trend/channel from the June sp'1266 low has been broken pretty much on all indexes now.

Tuesday does admittedly seem more likely to open higher than lower, but if we could at least close lower, back <1435, then bears still have a shot at pushing down to at least the 1415/00 zone before opex.

Goodnight from a rainy London

Daily Index Cycle update

The broader market opened mixed, and even broke briefly lower to sp'1427, but as the day progressed the bears got squeezed out, and some chasing buyers doubtless came in. The closing hour was particularly strong for the bulls, and the Tuesday open looks likely to continue higher.

IWM, daily




A very disappointing start to the third week of October (yes, we've halfway through the month already!). With the close of sp'1440 -and the VIX in the lowly 15s, its not looking good in bear land.

I realise we could merely be putting in what might be a perfect back test of the recently broken rising support, but if we break above, and close in the 1450s, it might be signifying its 'game over' for the bears this year.

Tuesday will be important, and right now, it sure isn't looking good. If the bulls can gap straight into the 1450s (good earnings news?), then its probably time for the autumn bears to wave the white flag, go to the cave, and come back in spring 2013.

If I sound despondent..its because I am.

A little more later