Thursday 26 April 2012

Daily Cycle Update

Some further good index gains for the bulls today, we had the third consecutive up day. Lets take a look at those daily charts!

IWM, daily (representing rus'2000 small cap)

NASDAQ Comp, daily

Dow, daily

Sp' bullish scenario


The Rus'2000 remains a real confusing mess. Yes, its had a good bounce from the Monday low, but it remains within a clear bear flag. Only a break over 83/84 would confirm a new trend higher. IWM went positive cycle on the MACD today, it will most likely have some follow through tomorrow.

Dow, Nasdaq Comp, and SP' all similarly showing a reasonable 3 day upside move. Both SP'500 and the Nasdaq are set to go positive cycle on the MACD Friday, so again, there is more likely to be follow through tomorrow than a move lower.

In terms of the SP' bullish scenario chart, - assuming we can break 1405/10 in the next day or two, first target would indeed be at least a moderately higher high, somewhere in the 1430/40 range. Arguably a few consecutive closes over 1450/60 in early May, and then the 'SP'1550 target' would come back into play as the prime target for the summer/2012 peak.

Looking ahead to Friday - GDP

Market consensus is expecting Q1 GDP of +2.5% (compared to Q4 +3.0%). I would guess only a figure under 2.2/2.0 would upset the market enough to threaten the current upward move. Considering Japan is -2.5%, and the EU is also officially in recession (and the UK too!), even a figure of +2% is arguably pretty good.

Yet, we know its primarily due to 'the printer'..aka..the Bernanke. Without all that free money circulating out there, we'd sure not have a positive number.

VIX - volatility update

With the indexes having a somewhat surprising up day (hey, even the clown channel hostess admitted it after  today's close), the VIX again fell further, closing at the lowest level in 3 weeks. Considering the bigger macro-economic picture, is it remarkable to see VIX in the mid teens. However, for the moment, there are no signs of any black swans, we are back in the 'everything is okay' market mindset.


VIX, daily

VIX,daily- rainbow (elder impulse)

VIX, weekly


First, the weekly chart - broke under the 10MA today. This is the first time in over 3 weeks, and if VIX closes tomorrow under 16.50, its a very poor sign for those looking for near term falls in the indexes.

The daily chart, it could be said is still offering a potential bull flag, but we have fallen from 21 into the low 16s. This is not exactly an inspiring bullish case for the VIX into early May.

There remains no sign of a bullish turn upward in the 60min cycle, and the VIX rainbow chart has NO confirmed 'go LONG' vix signal.

So...this Thursday, with just 2 trading days left of April, there is absolutely no sign of increasing volatility, in fact..quite the opposite. I guess those writing index/VIX puts are the smartest traders out there this month.

Closing Brief

I follow many chartists across the web, a fair few have been touting this latest nonsense as 'an extended fifth wave'. I suppose that's possible, but right now, it sure feels like a pretty horrific day, even thought we're up less than 1%.




Arguably, an ugly day for anyone of the bearish persuasion. The VIX did suggest it may have bounce from an oversold RSI, and there is a little divergence on the MACD cycle. Yet, there is nothing concrete for the bears to get excited about. Bulls are back in control, and they almost have taken back all the losses from the weekly and monthly cycles. With two trading days left of April, from a chart perspective, they are a very important two days.

*still awaiting the AMZN earnings.

More later, looking at those daily cycles - which are again, looking disturbingly a little bullish.

3pm update - urghh..the market horror!

Nasty, its a real nasty market today. The reverse stop-cascade up has caused untold havoc to the bears. Instead of a 10am fail around 1390, we managed to scrap slowly upward to 1392/93, and that has eventually taken out multiple stop layers all the way to the rather dizzy heights of sp'1401 Are we at max-capitulation yet?


Not much to add right now, obviously, today will be a very fortuitous victory for the bulls.

Another reminder...keep an eye on AMZN earnings at the close. Yes, its just one company of many, but it sure is one of the biggest retailers out there. It might offer a wider insight into the mood of the more savvy online consumers this past quarter.

More after the close.

2pm update - another set of bears kicked

With 1390/95 failing to hold, we're seeing a moderate bear covering event. We have a reverse stop-cascade upward, and these things sure can get nasty, even on a slow day like today. Where will this nonsense stop? The next set of stops will doubtless be around 1399/1402 or so. Best 'bull case'..would be the cascade keeps going, and the market closes around 1405.

Here is the problem..and its a huge problem for the bears.

Sp'monthly - simple version

What had been a reasonably bearish candle for April is now a mere 11pts from closing the positive. Lets be clear, if we close around this level..or higher, the bearish case is again put back on hold..

*brief update on the hourly cycle, which is now starting to turn into a real horror pic for those presently short this market.


With 1395 failing to hold, sp'1400 is right back on the agenda. Despite the less than inspiring jobs data, and other econ-news this week, we are just not seeing any decent follow through to the downside. Monday's significant gap lower is now a distant memory.

The one solace right now, the RSI is now 72, that is without question in the overbought zone, but we could stay in that area for some hours, even a few days.

This ain't looking good for those in bear land.

  in the bunker

1pm update - maxed out?

Looking at the 60min chart, and the broader daily cycle, we look pretty much maxed out for this wave. The 1390/95 zone continues to hold as resistance...just. Interestingly, the 10MA @ 1390 on the Sp'500 cycle appears to be slowly levelling out.


For the bears...patience...and good stops will be key into the rest of today.

*a reminder, look to AMZN earnings at the close. I'm expecting a 'surprise' miss. Their profit margins are lousy, it won't take much for them to go negative.

More later..on this sleepy Thursday afternoon.

12pm update - slowly crawling higher

The indexes are moderately higher, but we are still within the broader range of the RS - as defined by the daily chart (see earlier post). There doesn't seem likely to be anything to move this market until AH, when we have earnings from AMZN.


A move over 1395/97 would be real bad for the bears. A close of 1400 would arguably be decisive. From a MACD (blue bar histogram) cycle perspective we have been cycling lower for some 6 hours..and yet prices have still been trending a little higher. That has to be a concern, although Vix has been green at times this morning.

Holding to earlier targets, Bears need to see a break under the 10MA 1389.

Its turning out to be a really quiet day, I guess most traders are waiting for the GDP (and other bits) tomorrow morning.

11am update - the bots are still trying to kick

They sure are trying to kick out EVERY weak bear this morning. We've come close to blowing out the top of my often noted 1390/95 bearish-stop zone. Those algo-bots sure know their levels.


I have adjusted the count, and now it properly syncs with the daily chart (as noted below). Regardless of the minor waves within the greater wave'2/Bear flag, we should go no higher than where we presently are.

*Bears need a break under the 10MA, currently 1388/89

SP'daily - bearish scenario

As first presented yesterday, this is my current primary daily chart (bearish scenario). If it is a H/S formation, then we're at the top/end of wave'2..and a major drop is imminent.

Clearly, any 'serious money', will have short-stops, equivalent to no higher than around 1395/1405. If we go any higher than that level, then both the weekly/monthly cycles will have turned back bullish, and May could easily ramp - not least with the Facebook IPO due later that month.

Bears MUST see prices start to slip lower today, we have only 3 trading days left of the month, and we need closing levels on the bigger cycles somewhat lower than current levels.

More later

10am update - morning chop

A little lower, then a little higher...then lower again. Its a real mess this opening 30 minutes, but we remain in a tight trading range. I would still guess we are most probably at the top of the hourly cycle, with at least some moderate fall across the day. The big question is whether the buying is exhausted, have all the weak bearish hands been stopped out yet?

*The jobs data was arguably weak, and Pending home sales +12.8% yoy. Hmm, 12.8% though of a small number, is still a small number.




Bears MUST get this market back below the 10MA on the hourly cycle. Similarly, we need to see the VIX start to break back up into the mid 18/19s. If the market merely trades sideways for the rest of today, baring a bad GDP number tomorrow, bears are going to suffer.

Most important of all...look for a break below the 10MA..currently 1385. I believe we will see such a break by lunchtime, whether we close under it, that's another issue entirely.

More later!

Pre-Market Brief

Good morning. After the overnight futures were up around 0.25/0.4%, we are now looking to open moderately lower. As noted yesterday, even a small move up would bust key levels and likely kick out a lot of bears, which would really mess up both near and long term bearish outlooks.

We have weekly jobs data at 8.30am EST, and pending homes sales at 10am.. Both will most definitely help determine which way this market is swayed by late morning. Keep in mind that Friday we have the first estimate for Q1 GDP, and that will be a key data economic point for the weeks ahead.


For today, the bears will need...
1. No break above 1392/95
2. A good intra-day push back below the 10MA - currently 1383 (although that will rise at the open)
3. Preferably, a close in the 1370s
4. A positive close for the VIX

Bulls only need a brief break into the mid 1390s, and it would seem likely we'd push on through to 1400, and then 1410/15 again, and eventually challenge the 1422 high next week.

It remains a very edgy situation, as ever...stops would be essential for the 'serious money'.

Good wishes for Thursday trading....updates throughout the day!

SP'500 Monthly - a Doomster Chart

Here is something to end what has been a very long day - a new monthly SP'500 outlook, with a few ideas to be considered for the weeks and months ahead.

First, the simple version

SP'monthly, 6yr

SP' monthly, count'2

The big 'if'

If we have peaked at Sp'1422, then this chart - along with similar ones from across the web will be most important. The first question that comes to mind is something that many have wondered for at least a year now.

Q. Is the rally from the March 2009 lows a giant head and shoulders formation?

Yes, it is a very lopsided H/S, and it has become a giant broadening/ascending wedge, but it sure looks like it could be a H/S.

If it is a H/S, then would the RS - which we would presently be in, react the same way as the LS in April/July 2010. Yeah, the first thought would be a 'fast and crazy' decline to the lower channel of 1100 within 4-6 weeks. That seems crazy and highly improbable, but so long as we don't break above is one of the viable scenarios to consider.

Of course, the early summer 2010 decline was inspired by none other than the first Greek crisis. Arguably, anyone expecting massive declines in May/June 2012 are going to need a major catalyst. There are ENDLESS macro-economic problems building in the background, but for the market to fall fast and hard, we'll probably need at least a baby black swan. Right now, I can't see one appearing, but as ever we will need to keep our eyes open for such a visitor.

So, with the sp'1390, lets keep the monthly cycle in mind. We have just 3 trading days left of April. Bears will want to keep the market below current levels, so that we'll get at least a moderate sell signal initiated next Tuesday - May'1st.

Goodnight from London