Thursday, 27 September 2012

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


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