Saturday 30 June 2012

Weekend Update'1 - Monthly Index Cycles

Since it is the end of the month, its time for a review of where we stand on the most important index cycle of all - the monthly cycle.

Lets look at the usual six indexes I regularly highlight...

IWM (representing Rus'2000 small cap)

The Rus'2000 index had a very strong close to the week, but you can see it still put in a lower low for June..and even a lower high.

Only with a push over 82.50, and then 85.0 could I get bullish on the Rus'2000 this year. The 85.0 level has now been solid resistance since April 2011. It will be really difficult to break above there, not least since the underlying trend indicators are still showing clear weakness since the March peak.

Nasdaq Composite

Only with a move above the March peak of 3134 could I get bullish for the tech sector, and indeed the wider market. It is entirely possible we'll see a 2-3% upside in the early part of July, and then a major move lower - taking out the earlier June low.

From a cycle perspective, you can clearly see we are still very much declining, since the main market rolled over in April


With the very bullish close to the week and month, the Dow looks set for another move to 13k, and an attempt to take out the May'1st high of 13338.

Only with a break under 12k, can the bears start to get confident again. Until that level is taken out, there is the real threat of a renewed summer push to new highs.

NYSE Composite

The master index is still some 7% below its March peak. June certainly closed strongly, and there is at least some likely upside in early July. The monthly cycle trend indicators though are all bearish.

Only with a break over the 2011 high of 8700 could I get confident a major new uptrend is underway.


The Sp' chart really highlights the difficult market conditions we've seen. Not only did we put in a lower low, but we closed with a bullish candle - closing at the top of the range...yet at the same time, we still closed with a lower high!

Bulls will need to take out the previous 1400 candle..and preferably >1422 for me to get bullish on the overall market.


The tranny has remained stuck in a tight range since the start of the year. However, one bearish aspect is that it did break below the range earlier this month. Yet again though, it closed right back in the centre of the range.

Only with a break over 5400, and preferably 5500 could I get bullish on the transports..and indeed the broader market.

A few key issues...

1. We put in new lows since the Spring peak
2. We put in a lower high, compared to May
3. We closed at the top of the candle for June, that is likely bullish at least for the opening week of July
4. All trend/momentum indicators are still showing weakness, since the Spring peaks
5. Buying volumn remains weaker than selling, although thats largely been the case since the 2009 lows!


Next week will be very important. However, it is complicated by the fact that its a holiday week. The US market will be closed Wednesday, and its likely many traders will take a few days either side of July'4th off, some even the whole week.

Yet, we have the monthly jobs data released Friday July'6. I believe that will probably show even fewer gains, and Mr Market will again have to wonder if the US can avoid recession* by the end of the year.

*Of course, even if the US economy slips into recession by Q4, we're not going to get official confirmation of that until GDP Q4 data is reported in late April 2013!

Looking into July

It would appear likely we'll see further upside this holiday week, at least until Thursday, where SP'1390/1400 seems very much within range (see daily charts).

If the market stalls at that level, and the econ-data does upset the market, what will then be paramount for the bears is to quickly take out the previous low of sp'1266. Only with a break below that level can the 'serious money' bears have confidence that the broader monthly cycle is still in a broad decline.

My original target of sp'1150/00 by end July is of course now looking seriously doubtful. If we are indeed around sp'1400 by the end of next week, then 1150 is 250pts lower. Yet we did see a near 250pt fall in the 12 day decline in July/August it IS possible, if very unlikely.

The July/August 2011 collapse wave

Chasing it higher..or lower?

What is clear, is that if we break sp>1422, that would be a VERY major bullish sign, and traders could chase it higher. The contrary trade would be to merely wait for a break <1266, and then chase it lower. Of course, that is almost 100pts lower from where we are right now.

Arguably, the 'big money' bears, those playing non-leveraged short-ETFs can short all they like, with a simple stop no higher than 1423.
Thats all for today, more on Sunday

VIX - marginally lower on the week

Despite the indexes closing around the FOMC peaks of June'19/20, the VIX only declined around 6% this week.

Volatility is now back in the mid teens, Mr Market would have us believe that 'everything is alright again'. For those who have been following the econ-data lately (not just in the USA), a VIX of 17 is simply bizarrely low.


VIX, daily, rainbow

VIX, weekly


Eventually, VIX will explode into the 30s, 40s, but my original outlook that this will occur sometime in July is now seriously in doubt after the indexes closed the week so strongly.

Things will be a lot clearer by next Friday when the next major jobs data is released. If the market deems such numbers as even 'reasonable', then hopes of a July (or even August) VIX surge can be written off.

Arguably, the bears will need to see sp'1310s..with a VIX of 22/24 to know that the 'nonsense' is over..and that much higher levels are possible. Until then, its probably best for most bears to just sit it out, and see how high the algo-bots want to drive the indexes during the holiday week.

Goodnight from London

Friday 29 June 2012

WTIC Oil - biggest daily gain in over a year

Whilst the main indexes rose around 2.25% today, Oil prices surged by 8%. This is a pretty astounding increase under any 'normal' conditions. Its not like Bernanke just announced QE3, or that Israel is flying nuclear armed bombers over Iran.

An 8% increase in a day makes for one massive move. It will be interesting to see what sort of follow through happens on Monday.

WTIC, daily

WTIC, weekly


The next key level is arguably the 50day MA around the $90 level, so..there is still a futher $6 to go in this up cycle. Thats another 7% or so.

The weekly cycle though remains a problem for the Oil bulls. We do have an obvious bear flag, and we did see a break below the critical $80 level.

So, the oil bulls need to see $91 hit..a little consolidation..and then a push back over the big $100 level.

Closing Brief - Urghh

A disturbing day for the bears...and a clear victory for the bulls to end Q2.

The closing hourly index charts hold no real promise that next week will start off well for the bears, not least when you consider the daily and the weekly charts which are now turning outright bullish.

IWM, 60min

dow, 60min



What else to say, other than it was a bad day. Who was going long before 3pm yesterday? It remains scary how quickly things can turn in this market.

Maybe some bits and pieces across the evening, but there will be the usual bigger updates over the weekend.

3pm update - one hour left of 2012 part'1

Its time for the last trading hour of the first half of the year. Yeah, the disturbing thing is we're already about half way done with this year. The second half can't be any worse...?


IWM, daily

*on any basis, IWM is starting to push its way through even the most lenient descending trend line.


The hourly 10MA - now at sp'1340 is first soft support. So, the bulls could easily tolerate a fall to 1345 Monday - not that I expect it anyway.

Its looking like a break/gap over 1363 will occur Monday. IWM/Rus'2000 already is above the FOMC highs..and that has to be a major warning that the sp/dow. etc, will follow.

A little more after the close.

2pm update - pass me another tranquiliser

This is old school ramp. The kind of stuff the bear doomsters have nightmares about. The amazing thing is that from 3pm yesterday, to 2pm today...we've gone from 1313 to 1356. Based on...nothing of any real substance.

It feels like August 2010 all over again..except without the Bernanke.

sp' daily, 4mth


From what was a bearish weekly candle yesterday what is now a bullish candle. Its one hell of a turn around in what was primarily a two hour trading hyper-ramp.


Next target is a break/close over 1363..that would probably open up 1380/90 next week, even 1400 if the market decides next weeks lousy jobs numbers means 'QE3 coming in August'.

Whatever 'this' sure is not suggesting we'll be trading lower next week.

The monthly charts will close June now looking only marginal bearish (we do still have a clear rollover since April). Yet..the mid-term outlook in the weekly charts are now starting to look....bullish.

This is not how I had anticipated we'd close June...

..ohh the humanity!

1pm update - are we closed yet?

Many will probably be calling it a day, and turning off their screens. With July'4th next week, what little volumn there usually is, will likely be even less next week. Back to the days of low volumn melt up?

The hourly cycles on the indexes are obviously way over stretched - along with the VIX hourly being very low. Yet even a close in the low sp'1340s should NOT be seen as anything other than an intra-day pullback.

Bulls are back in control, only a daily close next week in the 1320s would get me back into a bearish mindset.




Probably a quiet afternoon ahead. There are some out there suggesting a big afternoon reversal, noted, even a 15pt fall in the sp' to 1340 would still mean the bulls have a strong close for the day.

Stay tuned.

12pm update - where will it stop?

So just keeps going. Pure 100% nastiness for the bears to end the week, month, and second quarter.

Sp'1363 is clearly the next big line for the bulls to break, and as noted earlier, they sure don't need to do it today. Even a close in the low 1340s would still be a significant close for the week..and month.


sp, daily 4mth


Not much to add here. The underlying econ-data continues to worsen..not that it matters in market land, since everything is now perceived as back on track in the EU. The 'growth package' as announced.. how is that going to be funded? Ohh, and never mind that its 140bn..spread across a vast EU.

With next week being a holiday week..maybe its best for most bears to take a week off.

11am update - Friday Bear Massacre

Whether you call it 'end Q2 window dressing' or hyper-bullish EU summit news, this move into the sp'1350s is a real problem for the orignal bearish outlook. Arguably though, the 'serious money' bears would have already bailed during yesterdays closing hour - which now pales into insignificance compared to this mornings action..

The daily charts are still holding under the FOMC peaks...except for the Russell 2000 small cap, which now has a clear break over the equivilent of sp'1363. Similarly, VIX is still holding over the FOMC low of 16.77

So..the bulls out there should merely be seeking VIX to break into the low 16s..and sp'>1363.Considering the gains they already have today, they need not be in a hurry to break 1363 today..or even next Mon/Tuesday.




A lousy way to the end the week, month..and quarter. I should probably hibernate until next Fridays jobs data.

Ohh, but even if next weeks monthly job data is a REALLY bad number (even net losses), that means QE3 hopes are back continued summer rally to sp'1550 ? Right?

I'm really not sure which is sicker..the US economy..or the NYSE.

10am update - farewell to Q2 trading

This is one lousy end to both the month and the quarter, for those currently trading to the downside. With the market gapping up strongly at the open, hitting the big 1350 level, all the 'big money' bears will have been stopped out by now.

Chicago PMI:  52.9 vs 53.1 expected  -lowest since Sept'2009. Yeah, we're back to those 'green shoots of summer 2009'.

Consumer sentiment:  73.2  vs  74.1 exp

sp'60min - count'1



*VIX showing a hollow red candle on the hourly...could be hinting at a reversal, but still, thats one major drop. Would really need to see a few black candles on the indexes to confirm that. is one...



The H/S formation is clearly we're in twilight zone territory for the bears. A move over 1363 will ruin even the most conservative bearish outlook.

Arguably, even a close over 1340 today would seriously wreck things, and would be a really lousy way to close the month.

Bears desperately need a reversal, preferably to close under 1335. That looks a disturbingly long way down right now.

Pre-Market Brief - Bears nuked

Good morning..or perhaps that should be 'don't kill yourself yet'. With the EU summit headlines flooding the newswires overnight, the market is set to gap up big.

Futures are showing sp+20pts..that would be an open around sp'1349 - a very clear break over the 1335/40 resistance zone.

We have some key econ-data this morning, Chicago PMI 9.45am, and Consumer Sentiment 9.55am. Both could help to halt this madness.

I am looking for a reversal...but with the gap up as big as it is, it is going to need to be an extreme one, the sort of thing we only see once or twice in a typical year.

sp'15min scenario

sp'60min H/S


For those holding short overnight (myself included) this is something of a horror story. As Zerohedge noted though, the key news last night...'no new bailout funds'. NOTHING has improved. NOTHING can be improved in the EU.

Of course, as traders, such 'facts' don't matter in the day to day nonsense. How we close today will be as important as ever, not least for the June monthly candle. A close even in the 1330s (requiring almost a breakeven close!) would still be a real problem for the monthly outlook.

As noted, I'm looking for a reversal today...a big one.

Sincerely...good wishes for Friday.....this is one hell of a way to end June.

Eyes on the Bigger Picture

Today was indeed somewhat crazy, annoying, and a stark reminder of the twisted nature of this market. To close today, here are a few different things, but together, they should be useful for tomorrow and for consideration into next week.

sp'15min - Friday scenarios

I never normally do scenario outlooks for such a small time frame..but after todays closing hour...I think it might be useful.

What is important I think is that if minor wave'2 (see hourly cycles) is not yet done, then we've still to put in one final high. Now, frankly, this is beyond annoying...but even if we open hgiher, it might not be too bad tomorrow for the bears

There is the slight possibility that even if we open up sp+6pts (1335 - which would be a new high)...we could still see a swift reversal..and even close significantly red.

After all, who wants to hold across the weekend? Only with a daily close 1335/40+, would I get concerned about potencial further index gains.

Now...reflect on the weekly chart...

sp, weekly

There is NOTHING bullish about the weekly cycle. Only a break above sp'1363 would make me re-consider my broad outlook..and even then...we have this...

sp' monthly., HS

Now, as I've said before, bears would REALLY prefer a June candle closing at least moderately red. Right now, that would indeed require at least a Friday close of sp-19pts...preferably -20/25.

The weekly 10MA at 1301 will be an important level to break in the days ahead. The 'big money' will probably pile into short positions once we break <1300 again.

Holiday week

Next week the market is closed Wednesday for July'4.. and arguably it will be even lower volumn than normal. the end of this weekend, EU summit no'20 (or is 19?) will be complete..and we'll surely see no progress (as usual). How will Mr Market cope with that?

I suppose after today, some would say 'ohh, we'll rally anyway', but I would refer them to FOMC week. Unless we break 1363..I can't presently take any bullish talk seriously.

...and finally

VEU, weekly

In FOMC week we saw a brief break above the 10MA..but it failed. Unless we close over 40.07 tomorrow, the VEU chart remains a stern warning to the bulls of.trouble ahead.

Clearly, bears need to see a break of 35.0 in July to support any notion of sp'1100s. never mind anything under 1000 in late Autumn.

So..keep in mind how we open tomorrow. Amongst at least 3 pieces of econ-data, we have the Chicago PMI data at 9.45am. That number has been dire across most countries lately, and I don't expect the latest USA number will be any better.

Best guess, an opening gap higher (to the understandable horror of some bears)...and then a hard reversal...closing lower..perhaps even below todays low.

One thing is for sure...this market sure is ill. Is there a doctor at the NYSE ?

Goodnight from London

Daily Index Cycle update

A really bearish day, but tainted by an ugly closing hour. From the early morning gap lower, we saw a little bounce, then further declines to 1313, and then the 'Merkel cancellation', leading to a hyper ramp in the closing hour.

Many bearish traders can indeed justifiably feel sickened and disgusted at this latest madness. However, one hour of ramp can not dismiss the bigger cycles.






A rough day for the bears, although I think I said the same yesterday! Despite the indexes closing fractionally red, this was a really annoying day. We closed with a hanging man candle on the SP. That is bearish, but bears will need to see a new low.. <1313 either Friday or Monday to confirm it.

Dashed hopes for Friday?

The bears could REALLY do with a close tomorrow in the low 1310s..or better. My much-noted wish to see a monthly close <1305 now looks almost out of range.

However, we do have 3 pieces of econ-data tomorrow morning - including Chicago PMI, so..if the data is just might be enough to kick this market lower...

...unless Merkel cancels another press conference.

A little more later...

Thursday 28 June 2012

VIX - whacked lower in the closing hour

With the 'great news' that Merkel cancels a press conference, the indexes snapped higher, and the VIX got whacked lower.

This kind of last hour nonsense is arguably one of the most annoying things about this nasty market. To think, that the cheerleaders on clown channel still ask the question 'why is the retail investor not returning?'.

VIX, 60min

VIX, daily, rainbow

VIX, weekly


Despite todays last hour nonsense, VIX is still in a broad uptrend.

From a weekly cycle perspective, the bears would really prefer a close tomorrow of 21+.

July targets remain unchanged, VIX 30s..and probably 40s - equating to sp' in the lower 1100s.

Closing Brief - hyper last hour ramp

Urghh..a nasty and twisted closing hour. It would appear that Merkel 'cancelling press conference' is now the best news ever!  Clearly, we've seen a hyper reverse cascade UP, as the bears cover..and even some panic buying by the bull lunatics.

This nonsense changes nothing, although it IS a problem for the monthly cycle, where I would still want to see <1305 by the Friday close.

The closing hourly cycles....



Sp, 60min, H/S chart


Nothing has changed. This latest closing hour madness is just a symptom of the idiocy..and sickness inherent in the mindset of the bulls. The cancellation of a press conference, and thats now touted as 'good news'.


Those buying into this rally will get nuked in the days ahead.
Ohh..and Germany is now probably less likely to want to bail out Italy.

3pm update - a close below the H/S neckline?

Bears are having a good day. Looks like micro-wave'2 was confirmed earlier with the break into the're soon going to get our first challenge of the 1310/09 area. Its really not necessary today, it would be a real bonus though if we can close 1308..or lower.

Bears have a superb July to look forward to, a likely move down to at least sp'1150.

Sp' daily 4mth

sp'60min, count


Bearish.  ;)

...more after the close (and the game)

2pm update - Germany verses one of the PIIGS

Once again its that time of day again, its time for another Euro 2012 match. Tonights battle is between the mighty Germany and the insolvent Italians.

I will again recommend...(within SEC regulations I believe)...long... Germany!

Meanwhile...back at the casino...

sp'60min, count

*micro-wave'2 (black count) might already be done, a baby bear flag...if you see 1313s before the close, then we're probably in micro-wave'3.


A close under 1320 would certainly be preferred right now, anything in the low 1310s would be more than good enough, and open the door to a nice gap lower tomorrow morning in the 1300/1290 area.

The VIX remains somewhat quiet, I'd like a close at least in the low 21s.

*a few other notable issues today..

-FB breaks $31.....initiating a sell signal in my view
-Silver breaks a new low (back to November 2010 levels), with probably at least another $4 to go..maybe a lot more if sp can break 1100 later this year.

More later..but I do have a match to focus on too ;)

1pm update - Friday target remains 1300/1290

The trend continues to look mighty fine for the bears. Those bears who somewhat boldly went short in the sp'1330s yesterday should be very pleased with themselves today, and should feel confident of further declines to come tomorrow.

The bigger cycles are currently almost fully back on track, I still would prefer a June monthly close of sp<1305.

sp'60min H/S



Quietly confident. I'm in no rush to exit at these levels.

A Friday exit at 1290 would make for an especially nice third post-FOMC short trade.Thanks for no QE3 Benny, you sure made things easier!