Tuesday 26 February 2013

Now it gets tricky

A superb and exciting reversal in the equity indexes to begin the week. Yet..we're now a mere 7pts from the primary target of sp'1480.The next day or two is where it really gets tricky. What is clear, any move into the 1460s..and things could get flashy-crashy real quick.


sp'daily7 - fib levels


sp'weekly2, rainbow



VIX, weekly2 , rainbow (4yr)


Summary

*Special note - the rising channel/support for Tue/Wed will be around 1475..but by Friday it will be 1480

So we've just seen our first really strong down day of 2013, and there could easily be at least some moderate follow through tomorrow to 1480/75.

The big weekly charts are ALL rolling over, and the rainbow chart clearly shows a multi blue candle topping pattern that looks very much like both March and October of last year.

The rising channel/support on the weekly chart is around sp'1415, so there is plenty of downside, for those who are now getting seriously bearish.


The ES/SPY gap

As many noticed in early January, the two day hyper-ramp that began the year left a rather rare unfilled gap. Its around sp'1425, and is best seen via a SPY or ES chart.

I would have to note, if we break into the 1460s, we'll likely see a fast and furious drop to fill that gap @ 1425.


VIX - how much higher?

First target would be the key 20 threshold, and then the Dec'28 high of 23.23. Any move into the 24s..and I'd have to believe 30/35 is viable on some kind of major snap lower. As it is, I am still doubtful on 20s until April/May.- unless we see sp <1480.


What is my Tuesday plan?

I bailed on short positions in the closing 15mins. Its been a difficult past few trading days, and I want to start Tuesday afresh.

-If the indexes open up sp' 5-7pts or so..and get stuck for a few hours, I'll be real tempted for a 'minor' re-short  from 1495/1500, with a target of 1480 for Wed/Thursday.

-If the indexes open UNDER sp'1480...I will not chase lower. I'd actually rather be more content to try to pin a low and go long.

-if the indexes get stuck around sp'1480 for a few hours, and/or there is an opening black candle on the VIX hourly chart..I'll consider taking an initial (minor) long position.


Finally, a reminder on the one really bearish chart I am keeping in mind

sp'daily4 - bearish scenario


The 50 MA will be a critical area for the bulls to hold this week. Any daily close under that, and the 1425 gap will become the prime target zone. Although if we get down to that level, it would mess up the near term count.

--
Updated sp' 60min chart, with micro (black) count.


Today's afternoon wave lower certainly is the style of a fierce wave'3. The key issue is what sort of bounce for a '4..before a final moderate drop, which might (but doesn't have to) break the low of wave'3. Arguably, a better place to go long, will be Wed/Thursday.


Looking ahead

Bernanke speaks both tomorrow and Wednesday morning - starting 10am, probably lasting until around 1pm. There will be blanket coverage on all clown finance TV networks.

Mr Market will be intently listening, especially for signs that the Chairman will do 'all that is necessary..to keep the Rus'2000 small cap index higher'.

Lets see what Tuesday brings!

Goodnight from London