Volatility...nuked

The VIX opened 2% lower..and just kept falling across the day. The closing decline of 20.7% is the largest decline since March, with the VIX settling the year @ 18.02. This was the first year since 2006 that the VIX never traded in the 30s.


VIX'60min

VIX'daily

VIX'weekly

Summary

In terms of the near term situation, I think we could be seeing a simple ABC wave'2 retracement. The closing action though shows no sign of the VIX decline stopping though, and the 17s are now imminent.

Despite todays massive drop, the doomer bears need to keep things in perspective.

We've now seen three days where VIX was trading in the 20s, and this is a significant event that many have been seeking since the indexes peaked at the mid-September FOMC.
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The bigger weekly VIX chart looks a real mess right now, but then...it did in mid July 2011..and we saw what came next.
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There should be strong support at the weekly 10MA @ 17.51, although as can be seen, even in summer 2011, we briefly broke below that.

On any basis though, going long VIX at these levels seems like an easy trade, and I will be seeking to pick up another VIX call option block within 2-3 days.

Closing Brief

The market closed the year with a significant bullish reversal from the key 1398 low. With the VIX back <20, the bulls are now rife with hysteria and revelling in delusion. They will be awoken soon enough.


The closing hourly charts...


Dow

SP

Trans

Summary

Well, thats it for the 2012 trading year.
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Sincerely..the very best New Years wishes to all of you!
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*the usual bits and pieces to wrap up the trading day across the evening.

3pm update - bulls on a mini rampage

The most notable aspect of the day so far, are the bullish engulfing candles on many of the daily index charts. We're seeing gains of 1.5% on a number of indexes, and with the VIX -16%..the bulls are on something of a rampage.


sp'60min

vix'daily

Summary

In many ways, its turning out to be something of a bear massacre today.

Yet, even I saw this bounce coming, and I'm far from being much above 'amateur'.
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With the VIX already in the low 19s..it now looks like the18s will be the eventual flooring level. The daily/weekly charts will offer good support on their rising respective 10MAs.
--

back after the close
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UPDATE 3.03pm... woah, this is surprising even me now... 1424, really?

frankly, who knows where this madness will stop. What is clear,...can't be shorting here..the momentum is so strong, probably will see follow through into Wednesday.

UPDATE 3.33pm I gotta say, seeing my revised best guess of 1422/24 being hit today, a real surprise.

It looks like VIX has a chance of breaking (briefly) into the 17s on Thursday, assuming the market holds together until then. On any basis, going long VIX in the teens seems like an obvious trade, not least when we've had a number of key warnings triggered in the past week.

Eyes on the bigger charts !

2pm update - the patient bear

The market is doing all it can to battle back after its 50pt decline from 1448 to 1398. Many charts are all suggesting broadly the same outlook... sp'1422/24..with VIX in the low 19s. That would make for a perfect wave'2 bounce..before 'something' upsets the cart.


sp'60min

vix'daily

Summary

I sure am glad I exited at the open, the VIX is massively lower, and the market looks set for the low 1420s...late today, or Wednesday.

This lunacy is exactly the sort of thing that can understandably drive many traders - not least on the short side, to utter despair.

Given a few days, this will very likely be seen as just another 'stupid bounce'.

Eyes on the bigger charts..weekly/monthly.
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*some crazy spiky action whilst the President is talking...to sp'1418..then to 1410 within seconds.

12pm update - letting the bounce play out

The market is choppy, but it does look like 1398 was again a key flooring level. A bounce is now well underway, although it will probably be limited to 1415/20. Its difficult to estimate whether we'll see that early Wednesday or late Thursday. What still seems clear, the bigger downside targets.


sp'60min

vix'daily - a bounce off the rising 10MA @ 19s?

Summary

So..a bounce, and even if it lasts 2-3 days, it might amount to no more than 1.5%. A brief flirtation into the 1420s seems viable, but it won't be easy.

The bigger weekly charts are firmly pressing lower, and so any bounces are going to be greatly restrained.
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I remain patiently on the sidelines, after my exit at the open. Considering Tuesday is closed, I'm increasingly content to sit this nonsense out until we resume on Wednesday.

I need a break, back at 2pm
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UPDATE 1pm ..looks like market spiking..and may have just completed an A' wave.

B' wave , after Obama speaks... with C' early Wednesday @ 1422/24 ?

I think so..and I'm starting to quite enjoy today.

11am update - a choppy few days?

Mr Market is trying to put in a floor at 1398 - which is also the level from Dec'5. It looks like we have a reasonable chance of bouncing across the Tuesday holiday, perhaps even into Thursday. A fierce wave into the sp'1200s looks likely to begin within 3-4 trading days.


sp'60min

Summary

I've added a count to the hourly chart, and I think it might be a good one.

Upside to 1415/20 seems very possible, especially if this is a (black) wave'2 bounce.


So...as things are...I'm sitting back..and trying to be patient - which remains a difficult task.
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If we somehow snap higher on pure nonsense late today, 1416 or higher, I'll be sorely tempted to do that re-short.

On any outlook though, this market has got major problems ahead.

Bears shorting across the next 2-3 weeks should in theory see spectacular gains.

10am update - bounce underway

Mr Market is seeing a natural bounce, that could take us all the way into the close. VIX could even break back below 20. Bigger targets remain unchanged, low sp'1200s...within a few weeks.


sp'15min

vix'15min

Summary

So, its bounce time, and it will only take a small rumour for the bulls to go crazy and have us trading around sp'1415.

I would be somewhat surprised if we break back into the 1420s.

Just who is going to be buying at those levels?
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*I am back to cash, but will look for a full re-short, later today.

Pre-Market Brief

Good morning, and welcome to the last day of 2012, although I should already say happy new year to all my Asia readers ! Futures are as expected, we're opening around the levels seen from last Fridays after hours session. The sp' is -10pts, and we're set to open around sp'1392/90..somewhere just over the 200 day MA.


sp'60min

sp'daily5

Summary

So, it looks like we're going to open in the low sp'1390s. This is good, and is our first break below 1400 since Dec'5th.


What am I doing today ?

I need to rollover some option positions, so I'll exit at the open, and look to re-short later in the day, but in a further out month.

Be absolutely clear, I will now be shorting all the way to the low sp'1200s. However, I will try to 'dance' in/out of a few positions if the smaller 15/60min cycles look oversold at various times.

*I have my backup mobile internet now working, so I will be able to post as necessary, intra-hour updates..if price action is 'dynamic'.

Good wishes for Monday, and.the very best of bearish hopes for 2013 !
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UPDATE 8.50am ... I'm not sure why but the market is jumping higher... sp now -2pts..set to open around 1400.

hmm, well, if we open @ 1400, I'll sit back and wait for lower levels. I am not exiting @ 1400. 

UPDATE 9.35am  CLOSED spy puts and VIX calls

I'll re-short later in the day...probably.
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Bounce potential..probably sp'1410/15...but I can't see 1420s again.

Sunday Night Futures update

The Futures have opened roughly where we closed in the Friday after hours trading session.

As at 6.15pm, we're set to open sp -4pts, @ 1398.


sp'daily5

vix'daily

Special note

Futures closed in Friday after hours trading  sp -25pts, and that was 10pts lower than the actual 'real market' close.

So..even though sites like forexpros are currently saying sp+6pts... actually, we're still -4 net.

*even sp+10pts.. would thus mean we're still flat from the actual Friday close.

updates..as necessary...
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UPDATE 7.05pm futures holding -5pts...we're set to open around sp'1397/98.. - which is that key low from some weeks back.

Bears really need a move <1390, for that we need to see -12pts..from the Friday close.

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UPDATE 8.55pm futures holding -6pts...we're set to open 1396.

The hourly charts are very low on the MACD cycle, so I'm very much concerned we'll only decline to around 1390 in early Monday trading..and then bounce.

How high an intra-day bounce?

I'd guess 1400 is certainly possible, but considering 'everything' a red close still seems likely.

Lets be clear, unless you think we're going to new index highs...then I can only suggest stare at the weekly charts I posted this weekend..and what do most of them suggest?

I remain heavy short... indexes.. long VIX, but I'll look to exit at the open.

UPDATE 10.10pm..well, its all flat..futures are +5pts....but take off the 10' from the Friday close...and we're still a net -5.

So, we are set to open <1400, first level is the 200 day @ 1390. I'm guessing that will hold, at least in front of an intra-day bounce.

goodnight from London

Weekend Update - Weekly Index Cycles

The market saw its first weekly decline in six weeks, with most indexes declining around 2%. Certainly, its nothing dramatic yet, but if what we saw from the November low was a wave'2, then we're now seeing the first phase of a collapse wave. Primary target remains the low sp'1200s.


IWM (representing Rus'2000 small cap)

The R2K lost almost 2%, but is still very close to taking out the September highs. The underlying momentum is still to the upside, and there is nothing bearish yet.

Bears will need to see a break <80 for confirmation that the 5 week up wave really is over. A break of 80 will open up the 76/75 zone, and I don't expect that to hold.

Primary downside target for IWM is 70/69.


Nasdaq Comp

The tech sector has been especially weak, and has essentially traded sideways for the last 5 weeks - despite the main market rallying. It appears underlying momentum is rolling over again, and first target will be the November low in the 2800s.

Primary downside target for the Nas' Comp' is 2550/500.


Dow

The Dow is showing the weakness clearer than any index. This weeks loss of almost 2% confirms the two previous spiky candles. The weekly close <13k is especially significant - as many recognise.

The November low of 12471 should quickly fail, and then a test of the June low of 12k.

I believe there is a VERY high chance the June low will eventually be broken after a number of attempts, and that will open up the primary target zone of 11400/300.


NYSE Comp

The master index declined by 1.5% across the week, but - like the R2K, is awfully close to those September highs. There is the first sign of a rollover on the underlying momentum MACD (blue bar histogram), but we're still slightly positive.

First downside target will be the low 7800s. A break into the 7700s will open up the primary target of 7400. It will be especially difficult for the June low of 7200 to be taken out.


SP'500

The sp' also lost almost 2% this week, but managed to just hold over the big 1400 level. Yet, we do have a close below the important 10MA of 1405. The next soft target will be the lower bollinger of 1370 - which seems very reasonable this coming week.

The underlying MACD (blue bar histogram) momentum is rolling over, and we avoided a bullish cross (black line crossing above red).

First target is the Nov' 1343 low, we might see a small bounce off that level, but it surely won't hold for very long. A break of 1343 will open up a very fast and scary fall to test the June 1266 low.

If the market really does get in a mood, it is very possible we'll see at least some level of break under the 1266 low, the monthly charts highly suggest somewhere around 1225.

A full retrace back to the Oct'2011 low of 1074 is possible, but right now, that is not something I am expecting.


Transports

The tranny was the weakest index this week, losing 2.24%. However, it remains very close to the critical 5400 level. Bears need a 4% drop just to get down to the 5k level.

First target is 4800, if that fails, it will be the key signal I've been talking about all year. It would be the first decisive break outside of an exceptionally tight trading range that now spans (incredibly) a full year.

A break <4800 will open up the primary target - as suggested by the monthly charts, of 4500.


Summary

A 2% weekly decline for the US market is indeed nothing for the bears to get rampantly excited about, but its a good start.

Lets consider the original bearish outlook...


sp'daily4

1. QE3 marked the high @ sp'1474

First target was a wave down to the lower bollinger on the weekly chart @ 1345.

We floored @ 1343.

2. A significant bounce to around 1400/25.

*I did note at the time that due to the seasonal 'Santa' factor, the third wave might be delayed by some weeks, and that we might even go briefly higher.

As it was, we have seen 5 weeks up, and briefly moved into the 1440s, peaking @ 1448.

3. Primary down wave..with a target of 1225 - as based on the monthly charts. This is projected to take anywhere from 2-6 weeks.
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All things considered, I'm very pleased with how its turned out so far. Although I'll be a hell of a lot more pleased if we do decline into the low sp'1200s in Jan/Feb.


Increased printing in spring 2013

-I'm expecting Bernanke to increase monthly purchases from 85bn (as at January 2013).. to around 125/150bn in March/April. I expect this will be done on the basis of what could easily be a US recession.

If I am right, I'd guess the market will rally from the low 1200s to at least 1350/75 across the subsequent 2-4 months.

First things first though...lets see if we can get down to the 1200s.


Sunday night futures

I will post updates (as necessary) this Sunday from 6pm EST onward, if there is any serious action in the overnight futures session.

With the SPY falling almost 1% in Fridays AH trading, we are set to open Monday around sp'1390 - where the important 200 day MA is lurking.

*I should be able to post full updates on Monday, with my new backup mobile Internet.
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Have a good weekend

Awaiting confirmation under SP'1398

The market closed in a particularly bearish manner. This was added to in the first hour of after-hours trading where the market was trading at the equivalent of sp'1390 – where the 200 day MA is lurking. Bears should be seeking a clear break under the recent 1398 low, and to be trading Monday somewhere in the 1380s..if not considerably lower.

sp'daily4 – original bearish outlook

sp'daily7 – fib levels

Summary

Just a brief final update to close the day...and week.

It would appear the original outlook is back on track, after that little disturbing foray into the sp'1440s. We have what appears to be a classic back test of the broken October 2011 rising support.

Two key levels to keep in mind for early January 2013!

First warning – a break/daily close <1398

Last warning – take out the November 1343 low

There is arguably nothing but empty air from 1343 down to the June low of 1266. In many ways its the 'free money for the bears' price zone.

Have a good weekend

*there will be a posting late Saturday, probably on the weekly index charts.

Daily Index Cycle update

The week closed badly for Mr Market. There was distinct weakness across the day, and unlike Thursday, no ramp..and instead...a mini-cascade, almost taking out the big sp'1400 level. The VIX strongly confirmed the significant index declines.

*as at 5pm EST, in AH action, the ES indicates the sp -11pts from the closing level, we are trading just a touch over the critical 200 day MA @ sp'1390.

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Lets take a look at those daily charts...

IWM, daily

Dow

Sp'daily5

Trans

Summary

So...we closed in what some are calling a bloodbath. Well, I'd not use that word quite yet..I'll save it for Monday/early 2013.

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The close of sp'1402 was a bonus, and we're just 12pts away from breaking the big 200 day MA @ sp'1390. The loss of dow 13k was certainly decisive, and there is now open air of a further 5-6% decline next week.

What about Monday?

As I type, the ES is still -8pts from the closing level, so the bears are already seeing some further significant damage in the Friday AH session.

All things considered, the week closed very well, and the bears have a massive opportunity next week to test the November low of sp'1343. Even if we see a strong bounce off that level, I don't believe it will hold on a multi-week basis.

Primary downside target remains sp'1225, with VIX 35/45....by mid-January.

A little more later....

Volatility Soars

With the indexes falling to pieces in the closing hour, the VIX closed for the second consecutive day above 20. In the brief AH trade, the VIX closed +16.69% @ 22.72. There was a notable spike of 23.23. The weekly close of VIX >20 is very significant, and a major warning of an index collapse wave.

VIX'60min

VIX'daily

VIX'weekly

Summary

A great deal of technical damage was achieved by the bears this week.

First, the two daily closes >20.

The weekly close >20.

The fact we closed in the 22s is a massive bonus to the bearish outlook into January.

Do not be surprised if we see a VIX (briefly) in the 30s next week, along with sp'1350/40s

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More later, on the those busted up indexes

Closing Brief

Significant weakness in the closing hour, and if no adequate agreement is reached on Sunday, the market is going to implode. Primary target remain sp'1225..within 2-3 weeks, with VIX 35/45.

Dow'60min

sp'60min

Trans'60min

Summary

A very bearish end to the week, and it sets up a massive gap lower on Monday.

Congrats bears !

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Bits and pieces across the evening..internet connection permitting!

3pm update - closing hour mini-cascade?

There remains significant weakness out there in market land. The VIX is comfortably holding the 20s, and is looking to make its first spike to the upside...first target zone would be somewhere around 24-26.

vix'60min

Summary

For the bears, a close <sp'1406 would be useful, especially in terms of the weekly index charts.

Sub 1400/1398 would be a real bonus, but that is probably overly hopeful.

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Who wants to go long into the weekend?

*back after the close, although my net is so lousy this afternoon, it might be some hours until I get to post the closing updates.

2pm update - selling into the weekend?

 Mr Market is continuing to show weakness, despite repeated micro-rallies from the deluded bullish maniacs. There remains great uncertainty about where we'll be Sunday night in terms of the infamous cliff. What is clear, the weekly/monthly charts warn of...trouble.

vix'60min

sp'weekly2, rainbow

Summary

VIX showing renewed strength.

Red candle on the weekly index charts.

Holding to all original targets.

back at 3pm....(probably)

12pm update – edgy Friday

The main market is holding just above dow 13k, and sp'1410. The VIX is holding the 20s for the second day..and that in itself is good confirmation of yesterdays break through.

Sp'daily5

vix'daily

Summary

All things considered, bears should be content with the action so far today. Certainly, its nothing particularly interesting, but we sure ain't trading in the 1420s.

I'm admittedly concerned about some delusional hyper-ramp late in the day..or early Monday.

Yet, the weekly/monthly charts are clear, and so I'll stick with them.

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A provisional short exit at the first VIX spike in the 24/26 range seems reasonable, that would probably equate to sp'1380/70.

The sp'weekly rainbow chart is particularly bearish...

If we can close the week with a red candle, that'd be a major warning of trouble for next week. First target would be the November low of 1343.

There remains nothing but empty air from 1343 down to 1266.

10am update – morning weakness

The sp' is back below the broken low of sp'1413, and the next key level remains sp'1398. The VIX is moderately higher, but more importantly, its again above the 20 threshold. Mr $ has lost most of its earlier gains.

Sp'daily5

vix'daily

Summary

*Chicago PMI, in line with expectations @ 51.6

Today and Monday are going to be a minefield for traders. We could easily see another massive ramp later today if the political maniacs decide to go for a last minute deal.

–

Regardless of news, the weekly..and monthly charts continue to suggest downside to the low sp'1200s..within a few weeks.

I remain short, it will be tempting to make a temporary exit, if we can hit 1395/90 

Pre-Market Brief

Good morning. Futures are moderately lower, sp -7pts, we're set to open around 1411. Most notable so far this morning is the move in the dollar, USD +0.3% @ 79.85. If this trend continues, we will indeed close the year in the 80s.

sp'60min

sp'daily5

Summary

*special note... Intra-day updates will remain sporadic today. I might be back up to full speed for Monday trading.

–

So, futures are lower, and those bull maniacs getting excited about yesterdays ramp are buying at bizarrely high levels. I could almost understand if they were buying @ 1390/80s..but 1420, really?

-

Bears should be seeking...

VIX weekly close >20. That would be a massive confirmation of yesterdays break through.

A close <1413 would be important to see, preferably...<1405/00.

On the flip side, a close >1420 would be a victory for the bulls.

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re: Sunday. I'm not sure anyone yet knows what the US Govt' has in mind for Sunday. Is there a vote, or ?

What is clear, overnight futures trading on Sunday will be crazy wild. We could (again) be lock limit down on the ES, or see some insane (even if brief) hyper ramp 2-3%.

Regardless of 'news', I will hold to my original targets.

Good wishes for Friday!