Friday, 2 November 2012

Volatility swings higher into the weekend

The opening index gains failed to hold for the fifth time in six days, and we saw the VIX battle higher across the day, closing 5% higher into the mid 17s.





An interesting day, especially when you look at the hourly chart. The opening candle was a classic hollow-red candle - often (but not always) a sign of a reversal in progress.

The reversal did indeed occur, and the VIX closed noticeably higher by the close, and continued to rally in the brief 15mins of AH trading.

The daily cycle is a bit of a mess, bears really need a daily close >20 early next week to have confidence of 'trouble ahead'.

The weekly cycle closed a touch lower on the week, having hit the declining upper bollinger. Again, it will be important to see a weekly VIX close >20. Maybe next Friday ?
More later, looking at the indexes.

Closing Brief

For the fifth time in six days, the opening gains failed to hold. It would appear the soft resistance zone of sp'1430/25 was indeed important. The VIX confirmed the index declines, closing a little higher (4/5%)





A good way to end a somewhat bizarre 3 day trading week.

The 1411 target was not hit, but that was always unlikely. So, no bearish engulfing candle on the sp'500, although there might be one on a few other indexe (I've not looked yet!)

Have a good weekend

*There is a lot to consider this weekend. I will post the usual 'monthly index cycle' update on Saturday.

3pm update - Permabear seeking 1411

The indexes are showing their weakness again, as backed up by the big weekly and monthly cycle charts. Even AAPL is participating in the decline, now in the low 580s. VIX remains largely unimpressed so far, and won't likely explode until we are sub'1400.




Seeking a close under the Wednesday close of 1412.

If that is the case, it would form a giant bearish engulfing candle, and suggest next Monday opens...'considerably lower'.

Back after the close.

2pm update - an important afternoon

With the election next Tuesday, 'they' won't let the market actually sell off into it..would they? The indexes are still only slightly lower though, and the VIX is flat, its certainly not a massive reversal, but we sure ain't up.



Gold, daily


Two exciting hours left of the week, lets see if we can battle lower <1420..with a target of 1411. The latter is unlikely today, but the index hourly cycles are all going negative cycle in the next hour.

The bears have everything set up..its time for them to charge back.

back at 3pm

1pm update - indexes trapped

The sp'500 is stuck between the daily 50 and 10MAs. A close above the morning high currently seems unlikely. What remains the big question for the rest of today is whether we can see a latter day sell off, and close below the Wednesday close of sp'1412.



I'm a bit tired, its been a long week..although that might seem strange to say, considering its been a 3 day trading week.

I suppose many would say a major fall on Monday is impossible, just prior to the big election. As ever..we'll see.

*the VIX remains flat, although it is oversold on the hourly cycle, and is due some upside into Monday morning.

back at 2pm

12pm update - bears seeking full reverse

The opening gains have again failed to hold. That is the fifth time out of six days. The main indexes are a little lower, with the VIX..a touch higher. Most interesting aspect so far today is the strength in the dollar, with a corresponding significant weakness in commodities.



Gold, daily


Bears should be seeking a close <1412..which would provide a VERY significant bearish engulfing candle, and that would open up yet another challenge of the 1397 level early next week.

With 4 hrs left of this short trading week, lets see if the bears can pull off a surprise reversal victory.

back at 1pm

11am update - market failure, or a cruel tease?

After opening gains, the market has gone into full reverse. The dollar is up, and commodities are starting to get hit bad, especially Gold and Oil.




Its interesting, but I sure don't trust this initial reversal.

I would only be somewhat 'curiously bearish' about next Monday if we close today <1412., which is still a long way down right now.

time for early lunch..back at 12pm


Bears need a 'bearish engulfing candle'.


We need a close <1412, which will be super difficult, since underlying momentum (see MACD) is starting to battle higher)

10am update - morning reversal ?

The bulls are seeing some follow through to yesterdays rally..until just a few minutes ago. The smaller 15/60min cycles are quite overbought, and we're seeing some signs of a reversal.

*factory orders: 4.8% vs 4.9% exp





Its a confusing open, we're now seeing black candles starting to appear on a few of the hourly indexes....hmm, a reversal?

Yet, the daily charts are still suggestive of general strength, it now looks like those 'provisional' bearish signals on both the weekly and monthly charts are going to be completed wiped away by early next week.

back at 11am..or earlier..if the reversal intensifies!

Pre-Market Brief

Good morning. Futures are flat, as the market awaits the monthly jobs data. It is pretty quiet out there.

UPDATE: Jobs data: 171k vs 125k expected..... market ramps sp 7pts on the news, we're set to open sp'1435




The only way I would be bearish about early next week is if we break below Wednesdays close sp'1412. Such a 'full reversal' would certainly be interesting, but I have to say, that seems unlikely today.

*factory orders data at 10am, still to come!

back at 10am

UPDATE 9.15am

Metals are especially weak this morning. Clown network says its due to 'deflationary fears', but I think they're just making that stuff up.

Indexes still look set to open higher by 0.5%..and thus confirming the baby bull flag.

If we're going to see the market not break new index highs, we need to see a strong reversal today..and at least a moderately red close. 

Primary trend...uncertain

Today saw the indexes rally for the first time in two weeks. Despite today's price action, the bigger monthly charts are still suggesting 'weakness', but we are within a very tricky trading level, one that both bulls and bears should be very cautious about.

sp'monthly3, rainbow

dow'monthly2, rainbow


With the new month, the important 10MA on the sp' is now up to the 1390s. That coincides with the important Sept'3 low of sp'1397.

The doomer bears out there MUST see a few consecutive daily closes <1397, in order to have any degree of confidence. Until that level is taken out, no one can get 'confidently bearish'. It is that simple.

The bulls merely need to push to new index highs, which are disturbingly only 3% away.

With the US election next week, it would be somewhat understandable if we rally for a few weeks. If that is the case, it would be surprising if we don't quickly make new index highs.

Trading stops..are useful.

Let me be clear, the big monthly charts - including WTIC Oil, and even the precious metals, are warning of 'some' weakness. Whether bullish or bearish though, the current index levels are a very treacherous zone to be trading.

Arguably the 'safer' bear trade is to chase lower with a break <1397, and the 'safer' bull trade is to chase higher once we see new index highs >1474. Until we see the market break outside this 1397-1474 range, I don't think anyone can be confident of where we are headed.

Goodnight from London

Daily Index Cycle update

The broader market saw its first major rally in over two weeks, closing around 1% higher on most indexes. With the VIX falling 10%, the bulls are back in control. Today was day'1 up, it will be important for the bulls to maintain these levels into the weekend.




The last 5 trading days have been a real mess. The bears tried to break the big 1400 level, but failed. It took the bulls five opening gaps higher to finally succeed.

The near term trend on all daily charts is now bullish. The underlying MACD (blue bar histogram) cycle is now indeed battling higher, and will go positive cycle in about 2-3 trading days - just in time for the election.

Are we looking at a major ramp to new index highs later next week?

The bigger picture charts...largely negated.

The weekly charts - which I have been droning on about recently are still suggestive of weakness, as are the monthly charts. Yet, the warnings were only 'mild' ones, and that has been the problem the bears have faced for so many months..and arguably for the past four years.

So, it would seem..on balance...we're going up. Clearly, the bulls will want to see sp>1474 this month, and that will open up the big 1500s, just in time for Santa.

A little more later.