Weekend update'2 - monthly index cycles

September saw the broader market climb a further 2-3%. The anomaly was the 'old leader', the transports slipped a little over 2% lower, closing below the big 5000 level.

Lets take a grand overview of the six main US indexes...


IWM (representing the Rus'2000 small cap)

A brief spike to new all time highs for the Rus'2000 small cap.. truly incredible. However, we have some real messy divergences on the underlying MACD (blue bar histogram) cycle. It is very difficult to make any assertions about what remains the most volatile index.

The doomer bears should be seeking a break of the big 80.0 on IWM, and an eventual monthly close <70. Right now, the latter seems extraordinarily unlikely any time soon.


Nasdaq Comp

The tech' sector is largely continuing its relentless climb. The big 3000 level is now a key support level, and it sure won't be easy to get a monthly close under it. So long as AAPL can post 'in-line' earnings this October, the Nasdaq should be able to comfortably hold over 3k.


Dow

The break to new post 2009 highs, is clearly yet more pain for the bears. Just getting a close below the monthly 10MA of 13k is going to be a real tough task for the bears in October.

Bears really need a break under Dow 12500, until then, the trend remains very much upward. The 'crash' floor would be a very natural 11000, which is around 17% lower from current levels.


NYSE Comp

The master index - despite a mid-September surge higher, is still failing to break the May'2011 highs. This should still be one concern for the bull maniacs out there. Yet, only with a break below 7500 could the bears get justifiably excited about a major trend change.


Sp'500

The announcement of QE3 sent the SP' briefly spiking to 1474, but after two trading weeks, the bulls are so far unable to break higher. There is huge support though at the recent cycle low of 1397, and even if that failed, there is massive support around the 1350/1300 zone.

The 'doomer crash floor' would be a very natural 1200/1150. Such lowly levels seem very distant though, and it will take some major market upset just to break back into the lower 1300s.


Transports

For the first time since Dec'2011, the transports closed the month <5000. That is now a confirmed red warning flag in my opinion. In a way, it is very logical for the first index warning to come from the 'old leader'.

Next downside target for the tranny is in the 4500/4300 zone. That is a good 10% or so lower, and might equate to the sp'500 @ 1350 - which as noted earlier, is a key support zone.


Summary

With September being yet another upward month, the bears are without question still fighting against a steam train. However, of the six indexes I regularly cover, we do have one train carriage that has broken away, and is now slipping lower. The transports is warning of underlying macro-economic trouble. Whether you hold to a primarily bullish or bearish outlook, the weakness in the transports index is not to be dismissed lightly.

Clearly, the primary trend for the broader market remains UP.

The bears should look for further declines in the transports this October, with a lower low, and they should also look for weakness to start appearing in at least a few of the other indexes. 

Back on Monday :)

Weekend update'1 - upcoming news/events

With September now almost over, its time to reflect on what is ahead in the remaining 3 months of 2012.


sp'daily3

Summary

The Oct'2011/June 2012 up trend is still holding together very well.

Only with a break below sp'1400 - as at end October, would an initial sign of trouble be apparent.
--

With both GDP and the Chicago PMI both warning of a serious risk of a US recession for the now elapsing Q3, and most definitely for Q4, I am going to keep highlighting these two data points in the months to come.

The good thing, and it IS a good thing - even for the doomer bears out there, with QE3 announced, that great unknown is no longer part of the puzzle. We can focus much more on underlying fundamentals and market price action.


Its almost earnings time again

Earnings season is just over a week away, and once again Mr Market is going to have to cope with many companies probably reducing their outlooks for 2013, and highlight their 'serious concerns' about what happens to consumer demand if the US congress does not delay the tax rises/spending cuts.

Right now, I'm assuming his highness, Obama wins a second term. In which case, the republicans - (understandably) sore losers, will refuse to compromise. We only have a post-election 4 week window in which to agree something, and I'm guessing they won't be able to.

The one wild card is if the capital markets get upset at this 'fiscal cliff' terror, and we see a brief - but sharp 15/20% drop late November/early December, and then the US congress quickly rush through an agreement to delay the changes until 2014/15 - much in the style of TARP, September 2008

The market is never one for embracing uncertainty, and we are fast approaching a cliff, which was designed by congress itself. So, its rather ironic that both democrats and republicans are seemingly terrified of what they themselves crafted.
--
Later today, the monthly index cycle update!

European 'Sunday night surprise'

One Sunday in the future we're going to get a real big surprise from the European side of the Atlantic. Whether its a Greek exit, one of the other PIIGS, or even the more exciting Germany 'we're leaving', its just a matter of when. Regardless, we're currently seeing a moderate pullback in the Euro.


Euro, daily

Euro, weekly

Summary

With the break above 1.26 a few weeks ago, the Euro has broken the long standing upper descending channel, that goes all the way back to spring 2011, when the Euro was 1.47

We have a few obvious gaps to the downside in the coming days, 1.27 and 1.24. The latter seems unlikely to be hit in the very near term.

What seems clear is that the Euro is a much dirtier piece of paper compared to the Dollar, which is without question still King in fiat land.

Long term Euro trend still appears likely downward, one Sunday night though, it could all change literally overnight. If one of the PIIGS leaves, the Euro would probably be stronger. What is probably one of the ultimate black swans....a German exit. Right now that seems impossible whilst Merkel is in command, but she won't be there forever.
--

*across the weekend, the important monthly cycle update. Have a good weekend

Goodnight from London

Daily Index Cycle update

After yesterdays madness, the broader market closed moderately lower today by around 0.5%. Certainly, only part of Thursdays gains were taken back by the bears, and there remain what could still are probably bull flags on many of the indexes.


Dow

NYSE comp

Sp'daily5

Transports

Summary

Today's moderate declines offer some renewed hope that the original 1420 target can still be hit.

Considering the MACD (blue bar histogram) cycle, we are now very low, and 1420 looks a very likely near term floor. It would be surprising if somehow we can punch through the recent important 1397 low, before at least one further up cycle.

The doomer bears need to see an overnight gap through the 1420 level, otherwise, I just can't see it in this cycle.

The one particularly bearish aspect to close the week and month was the transports, with a monthly close below the key 5000 level for the first time since December 2011. The 'old leader' is warning of trouble for October, and this warning is not to be dismissed lightly.

A little more later

Volatility battling higher

With the indexes swinging back lower, the VIX managed to close the week, month, and quarter, higher by 6% to 15.73. This remains a bizarrely low level of course, and still infers near complete market complacency.


VIX'60min

VIX' daily

VIX,weekly

Summary

Looking ahead to next week, there is potential for VIX upside all the way to 19 by the Monday close. So, the bear can dream of that possibility across the weekend ;)

The underlying - and hugely important, weekly cycle, is still a touch negative on the MACD (blue bar histogram) cycle. There is certainly big potential for a move into the 24/26 traditional resistance zone.

At some point, the VIX will explode higher, the only issue is when. Are we going to have to wait until next year, or.. are the doomer bears going to get at least a little fun before Santa arrives?

With the tranny closing <5000 for the first time since Dec'2011, I'm somewhat inclined to still have hope for an 'entertaining' Autumn.

More later...

Closing Brief

A bit of a choppy closing hour, and with the VIX closing near the high of the day, its moderately suggestive of a bearish Monday and start to Q4.

The closing hourly index charts...


IWM

Sp

Trans

Summary

I really quite like the idea of a small H/S within what 'might' be a larger H/S formation. If correct, it actually suggest 1410/00 is possible before the current down cycle completes.

I've seen others out there seeking 1375/60 next week. I find that pretty optimistic, although the VIX weekly chart offers good upside into the mid 20s.

With the tranny closing <5000 for the first time since Dec'2011, my primary red flag for October has been achieved. Much more on that issue later.

3pm update - closing hour weakness

The early afternoon rally appears to be loosing steam, and we are now slipping lower again. The sp'1440 level is certainly an important level, and whichever side we close on it, will be a good indicator for how we trade early next week.


sp'60min - H/S formation

VIX'60min

Summary

Targets for the bears...MUST close <1450.

A good close would break the lower rising channel of 1437. Anything <1435 would really confirm it.

VIX is starting to pick up, and is battling back higher on the hourly cycle. Target remains 18/19.

I remain short, and added to SPY puts in the previous hour @ sp'1442 (gods help me!)

More after the close

2pm update - Harvest moon ramp

As the harvest moon rises over the treetops, the market continues to ramp higher, the algo-bots seem to be battling for a green close to end the week, month, and economic quarter..

The VIX remains only fractionally higher.


sp'60min - H/S theory

sp'15min, rainbow

Summary

Once again, the opening declines of sp'10pts are just not enough to counteract each subsequent rally..as has been the case since early June.

The above 60min H/S theory is just something I am keeping in mind. Bears need a simple close <1437 - which seems implausible today.  A close over 1450..and that chart that gets wiped.

The 15min' cycle is due to probably level out in the next hour, around 1446/50. A close over 1450 would be a major victory for the bulls.

back at 3pm

1pm update - spiky hour

With the Spanish bank stress tests suggesting they 'only need 60bn Euro', the market spiked higher, doubtless stopping out a fair few of the bears.


sp'60min

Summary

Clearly, we have a lower channel/trend to break, which by the close of today will be 1437. Anything under 1435 would be arguably a clear break, and again..open the 1420s up for Monday morning.
--

Q. Any one know why the FB trash is up 7% today? Other than a short-cascade up, its laughable, and just looks an easy short for late Oct/November. Target remains $15, then 12/10

FB, daily

back at 2pm

12pm update - waiting for Q3 to end

This mornings Chicago <50' PMI figure was yet another signal that the US is probably now in recession. As ever though, it won't be until late next April or even July 2013 that the mainstream will officially recognise it as such. By that time, a lot will have happened to the western world.

As for the crazy market, today is an interesting reversal from yesterdays utter madness. The bears really need a close below the Wednesday 1430 low. That would certainly help start October in the right manner.


sp'60min

sp'daily5

VIX, daily, rainbow

Summary

The hourly cycle is a little concerning, after all, we appear to be putting in a higher low in price terms. The one thing bears have going for them is the MACD which still offers downside into the 1420s.

The VIX daily rainbow chart, a green candle - an inside day so far, its certainly not super bearish for Monday, but its something for those who plan to hold short across the weekend. VIX target remains a brief higher spike to 18/19.

As things are, I see zero chance of a break below the important 1397 low, that is still probably some weeks away - and that's even if we assume 1474 was the peak, which for now, is the great unknown.

I remain short, and still seeking what seems a logical exit around 1425/20.

back at 2pm

A rainy Friday morning

This sums it up...




back at 12pm, when maybe I'll have something semi-coherent to say.

3pm update - waste of time

Well, despite just about the worse economic data we've had in a few years, and with European unrest growing again, we're seeing another massive rally day.

It is without question, a waste of time from the bearish perspective.


sp60min

sp'daily5

Summary

The daily cycle on all indexes is now levelling out, and we're all set for new highs, sp'1500s in the next few weeks. Great huh ?




What is pathetically laughable is that we declined from 1474 to 1430 , 44pts, a decline of barely 2.5%, and everyone gets hysterical again, only for today's move to revoke the previous two day decline in almost one session.

With the daily cycle turning back upward, that is probably it for the bears, for some weeks. Baring some 'upset' tomorrow, which frankly looks so unlikely, we're back to UP UP..and UP.
--
back later...much later.

12pm update - still seeking sp'1420s

We remain in a bear flag on the indexes, downside is still pointing towards the next soft support level of 1425/20. That probably equates to a Friday VIX of around 18/19


sp'60min

vix'60min

Summary

So long as we don't spike higher, and close over 1445, I'm still pretty confident 1420s can be hit in the near term. Its still possible we could even close in the 1420s, but that now seems more likely tomorrow.

The hourly cycles on both the indexes and the VIX are around 50% reset now, its just about enough to justify a latter day rollover.

VIX doing a gap-fill at 16.75 this afternoon, before the next jump to 18/19 ?

back at 2pm

10am update - still a bear flag

Despite the opening gains, we still have a bear flag holding on the sp'500. The VIX is -3%, but is holding up okay in the 16s.


sp'60min

sp'daily5

VIX, daily, rainbow

Summary

Hmm, so, opening gains, but certainly nothing dramatic. Considering the daily and weekly index cycles, it is arguably a shorting opportunity, at least for a day-trade.

*The earlier GDP Q2 (revised) of 1.25%, and Durable Goods Orders of -13.2%...truly beyond dire. Clearly, the Fed believes the US is now in recession in Q3, and thats why it initiated QE3.
--

VIX rainbow chart, still a green candle despite the opening declines, trend remains UP. I am most certainly looking for a brief spike to 18/19 either late today, or tomorrow. 

I hold to my original target of 1420 by the Friday close, and look to exit there.

back at 12pm

Two red flags for October

Both equities and commodities are continuing to soften. Right now, my primary red warning flag is most definitely still red. Today, my secondary flag is now also starting to fly, WTIC Oil closed under $90 for the first time since late July.

With just 2 trading days left of the week, month, and quarter, lets see if the warnings hold into the weekend.


Trans, monthly, rainbow

WTIC Oil, weekly

Summary

Its actually looking pretty good for October. The trans closing <5k, looks pretty likely right now, and with WTIC oil back <90, there is a chance we'll close the month with two major red flags, both warning of trouble for October.

Oil in particular looks very weak, and from a MACD cycle perspective, its due to go negative cycle within the next 2 weeks - where a much sharper move to the downside should occur.


A third red flag?

With two red flags starting to wave, I was thinking about adding a third. What might that be? I'd guess a closing weekly VIX >20 would be a good bearish sign. The underlying VIX weekly MACD cycle actually went positive cycle today, and if we can somehow get a weekly close over 20, that would open the door to the much awaited jump into the 30/40s - that so many of the doomer bears have been seeking since the spring.


VIX, weekly

So, lets see how high they can kick the VIX tomorrow - and possibly into Friday too. We have a full moon on Saturday (I think), so maybe the week will end with a bit of 'moon madness' in the markets?

Goodnight from London

Daily Index Cycle update

Another day of declines for the broader market, although the losses were only moderate. The VIX increase of almost 9% did confirm the underlying weakness that currently shows no sign of ending.


IWM, daily

Sp'daily5

Transports

Summary

So, we're at sp'1433, that's just 13pts shy of my secondary target of 1420. I certainly think 1420 is very much viable for tomorrow morning, with the VIX spiking in the 18/19 range.

Considering the MACD (blue bar histogram) cycle, I just can't see a break below 1420, certainly not under 1400. The only way we can do that is if a major European scare occurs tomorrow.

If the sp'1420s are the floor, then the ONLY issue is whether we push to a new high, or put in a lower high.

With a lower high, the bears can start to ramp up their position sizes, and prepare for a challenge of 1350 in late October. A break of 1350 would make things....very interesting indeed.

A little more later.

Volatility jumps again

With the indexes showing some further moderate weakness, the VIX confirmed the market concerns and closed higher by around 9%, to close in the high 16s.


VIX'60min

VIX, daily

Summary

It looks like 18.50/19.00 is a valid target for Thursday, along with sp'1420.

However, that could easily be it for this down cycle from sp'1474, and my best guess is that it will be.
--

Seeking an exit at sp'1420, with VIX 18/19, early Thursday

Closing Brief

A somewhat bearish end to the day, we closed within what is probably a bear flag on the sp'500. The VIX climbing 9%, again confirming the overall trend.


IWM, 60min

SP'60min

Trans'60min

Summary

An hour of churn to close the day, not exactly exciting, but its fine.

Seeking 1420 tomorrow..and an exit.

More later (as ever)

3pm update - closing hour churn, or snap lower?

Everything is looking good for the bears, at least into tomorrow.

It looks like we have a clear bear flag on the hourly cycle, a close <1430 would be a bonus closing level, its certainly not necessary.


sp'60min

sp'daily5

Summary

Its looking okay, a little bounce, some churn, and now the only issue is when do we break lower again.

From a bigger perspective, these moves are mere noise. Primary monthly trend remains UP, but the weekly is rolling over, the only issue is where it floors - 1420/00, or does it keep on going. Right now, I'm guessing we do indeed floor around the low 1420s tomorrow.

I remain short, seeking an exit @ 1420.

More after the close

2pm update - rainbow trends still bearish

The intra-day bounce is probably largely complete, with a move from 1430 to 1439.

The rainbow trends remain unchanged, with the.VIX higher and indexes lower.

Target remains sp'1420, with VIX 18.50/19.00


sp'60min

sp'daily, rainbow

vix'daily, rainbow.

Summary

The bounce will have spooked the weaker bears, but thats okay. Volatility remains very low, and even a move to the 18/19 range really doesn't get me overly excited for next week.

I find it very unlikely we can break 1420 this cycle.

As I keep saying, rather than look for a break of the recent low, bears should look for a lower high in the next up cycle - and that may take until mid-October to max out.

*special note, my second 'October red flag' Oil <90..is currently achieved. Along with the transports, thats two major red flags. However, how we close the week/month is what matters.

back at 3pm