Lets start with this thought... remember the situation as of the Monday close? Many were touting 'new highs are due', after what was a powerful day of equity gains.
Yet.. we've just seen two consecutive days where the market really did start to unravel. Despite today's close, there is more technical damage being done every day.
I would refer anyone to individual stocks like AAPL or DIS, both are arguably key indirect warnings of trouble in the broader market. Both were once invincible stocks... relentlessly bullish.. but have decisively broken trend/support, and are headed much... much lower.
Its getting volatile
Even though the VIX settled the day essentially flat, there was a key break above resistance (mid 14s), and the bigger daily/weekly cycles remain bullish VIX in the near/mid term.
Many are now agreed the VIX is headed into the 20s.. the only issue is whether it will occur in the near term... or not until late Aug/September.
Update from a bearish Oscar
Thursday will see the PBOC issue a press release (10am Beijing time, I believe) with more details on what they want to do in the currency markets.
In terms of data: weekly jobs, retail sales, import/export prices, business invent'.
Retail sales have been a major disappointment this year - not least after energy/oil prices have remained broadly low. Market is expecting a m/m gain of 0.5%. If that number comes in negative - as it did in July, then the equity bulls are going to face renewed problems tomorrow.
For yours truly, it was a tough.. but good day. I managed an essentially perfect VIX exit (from 16.20).. and with that exit, I also dropped an INTC-short. Intel has been surprisingly stronger than expected, and even though I still anticipate much lower levels into September.. I am glad to be rid of that one.
Arguably, we have a bear flag forming on the bigger weekly cycle. First downside remains the 26/25s. If H/S scenario is correct, then INTC is headed for the $22s... which would be suggestive of sp'1800s. I do like the company in the longer term.. and I'll probably look to go long in another 6-7 weeks.
VIX is where the big money will likely be made across the next few months. I'm anticipating the sp'500 will lose the key 2000 threshold, and that should lead to a strong (if brief) VIX spike into the mid/upper 20s. Whether we'll see the 30s.. very hard to say.
My broader outlook is for renewed market upside in Q4, but a year end close much above the recent high of sp'2134 looks really difficult.... even if the Fed start threatening QE.... and you know they have Bullard on standby with a pre-drafted press release, right?
Goodnight from London