Thursday, 7 August 2014

Volatility manages only minor gains

Whilst equities saw moderate declines, it was notable that the VIX remained relatively subdued, settling higher by just 1.8% @ 16.66. Despite a new cycle low of sp'1904, VIX remains below the Friday high of 17.57.




Suffice to say... there remains an increasing divergence between the weak equity market.. and a VIX that remains somewhat stuck in the 15/17 zone.

I do not expect VIX 20s in the current cycle...unless a really crazy news story (such as a Ukrainian invasion) occurs.

more later.. on the indexes

Closing Brief

US indexes closed moderately lower, sp -10pts @ 1909 (intra low 1904). The two leaders - Trans/R2K settled -0.2% and -0.5% respectively. Near term outlook remains for renewed upside.. at least to the sp'1960s.



*a somewhat vain attempt by the market to put in a spike floor hourly candle in the closing hour.

Equity bulls were teased at the open with moderate gains, but there just wasn't any follow through.. and with the 1911 low taken out.. the bears can claim another day in their favour.

Price action wasn't particularly weak though, as reflected in a VIX that had turned red a few times.

On any basis, a key floor is due... whether from 1904, or a touch lower.

more later... on the VIX

3pm update - weak chop into the close

US equities remain moderately weak, with a likely daily close in the sp'1915/05 zone. VIX looks set to close with minor gains.. but still under the Friday peak of the 17.50s. Metals continue to build gains, Gold +$6.



For those long from yesterday (not least yours truly).. today has been a bit of an annoying tease. Opening gains of around 0.5%..but no real sig' upside power.. and hence..another wave lower.

On the flip side..neither are bears displaying any particular power on the downside. Sure..we've broken a new low. but the VIX certainly is not indicative of any real trouble.

Many seem agreed.. we're close to a key low.

As things are... NO decisive turn upward on the hourly/daily charts, and even if tomorrow is net higher.. it offer any real clarity until next week.

3.18pm.. sp'1906..... hmmm  its starting to feel like max-pain....

VIX is starting to show some kick +4% in the 17.10s.

17.60s...would be an 'issue'.

3.31pm.. sp'1904... still ZERO sign of a turn.

No doubt... a truck load of long-stops around the 1900 threshold. Mr Market to wash them out early tomorrow?

Fractional break of the Dow 200 dma, although that is not surprising..happened in early Feb.

3.51pm... another day for the bears.... disturbingly close to breaking 1900. 

3.53pm.. a vain attempt to close the day with a spike floor on the smaller 5/15/60min cycles.

2pm update - another bounce attempt

US equities are attempting to turn green again, but equity bulls should be somewhat cautious until the earlier high of sp'1928 is broken. What is clear today, price action remains relatively muted, with a VIX that has again turned red.



*I realise a fair few out there are seeking much lower levels, not just <1900, but the mid..even low 1800s in the near term.

Price action.. at least to me, does not in any way support that.

Unless we see a truly scary story across the news wires - such as Putin ordering an invasion of Ukraine...the equity bears are facing a market that is due to cycle back upward.

Notable strength: NFLX, +4%... so..everything is fine...yes?

2.32pm... another nano wave lower.... looks like we'll probably take out the earlier 1908 low.

A pre-opex Thur/Friday low... once would seem.

1pm update - Dow at the 200 day

Equity bulls have failed to hold the sp'1911 low, and most indexes are now breaking new multi-week lows. Price action remains relatively muted though, not least reflected in the VIX, only +3% in the upper 16s.

Dow, daily



*I failed to notice it until just now.. but the VIX did get an opening (hollow red) reversal candle.

With the break of 1911... have to adjust the count... but regardless of that, price action remains relatively quiet. Certainly, we're not seeing any real sig' downside like last Thursday..or even Tuesday.

I would merely see this as another opportunity for those short to exit (or at least tighten short-stops)...and a chance to go long.

Clearly though...NO turn yet on the hourly cycles.

Notable weakness: FCX -2%
Strength: NFLX +3%

1.15pm.. A micro bounce.. but with the break <1911, I've little confidence in the rest of today.

Threat of 1905/00 before the first real kick higher.

*I could have bailed this morning... and merely bought back 20pts lower... urghhh

1.32pm..more chop...and indeed that is the issue now.

Until we break >1930...I'll be suspicious of viable downside to 1905/00.

VIX is back to red...and again.. it is NOT suggestive that the equity bears have any sig' downside power.

12pm update - increasingly weak

Equities are seeing some increasingly weak minor chop. The sp'1911 low is clearly the target for the bears to break, along with VIX into the upper 17s. Metals are starting to build gains.. Gold +$4.




*I'm well aware of the other outlooks, and maybe I'm just annoyingly a little early again.

If 1911 fails to hold, then we're probably in some C wave lower. There is a micro gap around 1900.. which is an obviously pretty big threshold.

Regardless, I just don't see the price action as particularly bearish.

VIX update from Mr R... and an intern.

time for tea.. or something

12.26pm.. so much for the 1911 low....

The break offers 1905/00 in the immediate term.

Despite the declines, VIX still only +2% in the 16s. 

12.40pm.. sp'1908....... its getting tedious.

11am update - the battle continues

US indexes are battling to hold minor gains. Underlying price momentum is swinging (if slowly) back to the bulls. A weekly close in the 1940s remains viable.. which would probably equate to VIX 14s.



A brief look at the bigger daily cycle.

Clearly we are OUT of the down channel.

Equity bears should be seeking a FAIL to break much above 1950/60.

Bulls need 1970s to clarify 'new highs are coming'.

time for an early lunch

11.20am.. sp -3pts @1916. Hmm....

Thing is.. .price action is'd be surprising if the bears can break a new low today.

I realise some out there are seeking another little wave lower. .to 1905/00.. even the 1890/80s.

Overall though, looks a lousy place to still be short.

11.33am.. chop chop... and no doubt the bearish chatter is increasing...

As things are... price action is relatively stable....another day of chop..before the first real up day..

Am I sounding overly bullish? Gods help the bull maniacs now huh?

10am update - breaking higher

US indexes are only moderately higher, but it is enough to break the down trend. Metals are a touch lower, Gold -$1, whilst Oil is -0.2%. VIX is very weak, already lower by around -5%.


R2K, daily


*back...somewhat earlier than expected.

So.... we're on the rise. For me, I'd sure like to see the R2K back in the 1140s, that would bode much more bullish for the broader market. That does seem viable tomorrow... if not early next week.

Barring some sporadic news story about Russia/Ukraine it does look like the bulls will at least get the opportunity to test the old broken support in the sp'1960s.

VIX is typically in melt mode.. in the 15.50s. A daily close in the 14s would be ...useful.

10.25am.. minor chop...

In terms of the Dow, first upside target 16600... 120pts away. ..

Frankly, equity bulls should be very content with any weekly close in the 16500s or higher.

Notable strength: momo stocks... FB, TWTR, both +2%

Pre-Market Brief

Good morning. Futures are slightly higher, sp +4pts, we're set to open at 1924. Metals and Oil are broadly flat. The equity market looks set to break the short term down trend, and push into the 1935/45 zone.



It won't take much to break the down trend this morning.

A break >1925 will open up the 1940s for late today/early Friday. That should at least lead to the low 1960s next week.

Whether the market can break new highs.. that remains the bigger issue.

8.31am  sp +9pts.... 1928....

*I will be back around 11am

Viable upside into September

There is a high probability that sp'1911 was the low of the down wave from 1991. Equity bulls just need to break back into the 1970s... which will open the door to the 2030/40s in September, which is offered by the bigger weekly/monthly cycles.


sp'daily3 - fib levels


So, a new cycle low of sp'1911, but there is a fairly high probability that this was a key multi-week low - from the 1991 high.

First target for the bulls should be the 1970s, if that is achieved, then new historic highs look likely in September.

In terms of viable upside, the sp'2000s remain a valid target, although I realise many will be dismissive of that, after last Thursdays decline of -2% . A simple fib' extrap' of 1.6x offers the 2040s.. which is currently the upper bol' on the monthly cycle.

6% higher across 6-8 weeks.... its not like we've haven't seen that kind of gain happen many times before.

Looking ahead

Thursday will see weekly jobless claims, and consumer credit (3pm).

* there is sig'QE of around $2bn... bears beware.

I hold long (sp'500, via SPY option calls), overnight, seeking an exit in the sp'1960s.

Goodnight from London

Daily Index Cycle update

US indexes closed somewhat mixed, sp' u/c @ 1920 (intra low 1911). The two leaders - Trans/R2K, settled -0.6% and +0.3% respectively. Near term outlook is for renewed upside, at least to the low 1960s by early next week.





Suffice to say, I think we have a pretty clear 5 waves down from 1991, and this mornings low of 1911 would seemingly be a key floor.

Things the bulls need to see...

A break of the hourly down trend.. anything above sp'1925 at the Thursday open
R2K in the 1140s.
VIX back in the low 15s

Perhaps most notable, the Transports, which remains within the broader channel. Yes, it lost the 8k threshold today, but overall... it remains the strongest of the main indexes.

Closing update from Riley

a little more later...