Tuesday 15 May 2012

VIX - Volatility increasing (but slowly)

A brief update on the VIX. Today was an odd one for the VIX, which opened moderately lower - despite a weak market mood. VIX managed to recover from -5% declines to break +3% in the closing hour...but still closing almost flat.


VIX, daily, bullish outlook

VIX, weekly


VIX managed to just close green..which considering the last hour sell off - and overall market weakness, is not exactly impressive. I'd have normally expected +5% at least, so we have to acknowledge there is still no significant panic in this market.

VIX weekly cycle inexorably cycling higher, and we are now at the upper bollinger band, next target remains 24. The ultimate question remains whether we can exceed last years high of 49. That seems possible if Greece exits the Euro - leading to bank 'issues' across the Euro-zone.

Closing Brief

Another weak end to a trading day - the bulls sure don't fare well after 2pm lately! The VIX was something of an oddity all day, it opened moderately lower despite a weak market, and only in the last hour did it go marginally green. Lets look at those closing hourly cycles.






The down trend continues. Those weekly and monthly cycles were indeed correct, and warn of a major 2-5 month down cycle to at least sp'1100. When will the next bounce be, and how much? Right now thats annoyingly hard to answer. Today was yet another failed attempt to rally, both in pre-market, and two intra-day rallies. This market is WEAK, sp'1300 is now well within striking distance..and the 200 day MA is no long that far away.

Selling volumn remains weak, that should be a concern for the bulls. What if we actually see some major selling in this algo-bot lead market? I see the crash-chatter out there, for the moment that remains in the realm of crazy-talk, but...VIX'22...is suggesting such talk is less crazy today than it was yesterday.

*Special stock mention for JCP, earnings 'miss', cancels dividend   JCP, 15min cycle

More across the evening

3pm update - tempted...to the dark side

Watching the 15 and 60min index cycles - along with the VIX, it sure is tempting to go long right now. Its opex week, we still have the Facebook hysteria, and even the most ardent Permabear has to admit, we are due some kind of significant (2-3%) bounce that last longer than an hour.




We have some clear bear flags on the index charts, and a bull flag on the VIX (which is breaking above as I type). However, the daily MACD cycles are actually turning up on a few charts. The Transports is one of the most bullish indexes I can see right now.

So yeah..it sure is tempting, but it'd mean I'd be holding overnight....hmm...to be decided.
For the moment...I remain watching.

UPDATE 3.15pm

VIX broke out....can't be going long now!  More Greece news...something about 'bank deposits being withdrawn..time period unknown - source : clown channel (cnbc)

2pm update - is it opex Friday yet?

I'm getting real tired of todays nonsense. I look forward to getting past this opex-Friday, along with the facebook hysteria. Things sure will be a lot simpler next week.



Urghh..what an ugly day its been. I'm at least glad I had the sense to stay out of it. How are we going to close today? Well, the 60min cycle is STILL suggesting upside, but I sure don't have high confidence in things to the upside. Were it not for opex, I'd be short, and would just sit back and not be concerned about these intra-day swings.

*I noticed PCX just now, its -16%. I don't know why, maybe its something to do with the fact that it doesn't make any money in its coal mining business. For some, 'trading on fundamentals' is a bizarre concept, but..if a stock is loss making, its bizarre that any ordinary retail trader would ever buy it.

More later, unless I die of frustration watching this chop-fest

1pm update - weak bounce..so far

The bounce after the second morning low is still holding, but its weak. I suppose at least the issue of  whether there will be greek elections in June or not is now clarified. As I type, the 15min cycle is again rolling over, urghh. What a mess today is!


Sp'60min H/S formation


The bulls will be desperate for a closing over the hourly 10MA of 1341

As noted earlier, I'm not pleased with the action today, its just too messy. I remain hoping for a moderate rally into opex-Friday, at which point it might be the right time to re-short.

More across the afternoon!

12pm update - time for another bounce

The 15min down cycle only lasted 45 minutes, and again we've seen a bounce. A break over 1345 opens up the mid 1350s. The H/S formation target of 1370/75 still looks a long way up

Sp'60min, count'1


Note the MACD cycle, which is showing underlying uptrend - a real threat to those holding short. We are due to go +cycle this hour or no later than 2pm. Further upside looks VERY likely right now.

I'm tired of this mess today. Right now, the only trade I would consider is a re-short around 1365/75 this Friday..or early next week.

11am update - its a mess out there

A real mess so far this morning. The various micro-cycles are very conflicting, and to top it off, the VIX opened lower despite the Greek news.

The following 15 minute cycle charts highlight just how much of a mess this first 90mins of the trading day has been.



sp'60min, H/S formation


The hourly cycle on the various indexes is still suggestive of a move higher, the H/S chart highlights this possible move into opex Friday. However, both the index and VIX 15min charts are bearish.

I'm staying out of this mess, at least until late afternoon. Its possible all the cycles will re-sync by 3pm, and if the indexes are maxed out, it'd be a tempting short.

10am update - Greece causing more trouble

Pre-market Futures swung from dow +70 to -20 in a matter of minutes, after it appears confirmed Greece will hold elections (again) in June. It would seem the anti-bailout vote will increase, and thus an exit from the EU/Euro just became more likely. This will only add to the bearish uncertainty into the summer - and is supportive of the broadly bearish monthly outlook. Once Greece goes...attention will naturally switch to Spain, and it is Spain which remains the societal tinderbox of Europe.

We've a messy open, dow -20, then +20, best to stay out of the way of this.

Sp'60min, count'2



Considering the latest Greek news, the VIX is surprisingly weak. I had expected at least a 5% gap up..and instead we're -4%. Not sure what to make of that.

I'm tempted to go long, but urghh, I think I'll sit on the sidelines today.

*We do have some more econ-data both tomorrow and Thursday (there is nothing this opex/Facebook Friday).
More later....

Pre-Market Brief

Good morning. Futures are suggesting sp+7 to 1346. Retail Sales data were in line with expectations of +0.1% There is more econ-data at 10am.

The bearish outlook - with a primary target of the 200day MA at 1277 still looks viable. The H/S formation was arguably confirmed yesterday with the break of 1340. However, there is still the threat of a move to 1370/80 in the coming few days. Its opex week, we've the Facebook IPO, and the smaller cycles remain oversold.

Sp'daily - bearish outlook

Sp'60min - H/S formation


Its starting to get real tricky at the moment. Bears have a real problem, the daily MACD cycle is now VERY low. Despite the doom chatter out there (mostly about an imminent Greek exit), this is not a great place in the cycle to be adding new short positions.

60min cycle, daily.. say UP
weekly, monthly.... DOWN

I'm not sure what I'm doing today. Going long after the market gaps up 50/75 dow, that doesn't sound great when you realise we could be red later in the day. Going short - knowing that 1370/80 remains a VERY natural target by Facebook opex-Friday, that's also a disturbing thought.

Probably best to do nothing..or just trade intra-day, a short when the 15min cycle peaks - which currently would be likely around 12-1pm.

More across the day....as usual.

The End of Modern Greece - ZDF documentary

Zerohedge highlighted a very tragic, but important documentary telling the story of Greece since they joined the Euro in 2001. Its in German, but the video is pretty self-explanatory for much of the time.

The Terminal Decline of an EU state

*a poster 'Day of the Tentacle' in the original ZH posting did a translation - scroll down the comments, you'll see a thread of posts summing up what is said.
This direct link should work for most of you

ZDF video link

Where Greece goes, the rest of the EU is also headed

I rarely talk about macro-economics here - despite it being listed in my main site title, hey, I'm more of an economist than a trader anyway. Yet, I'll try to keep this short.

Greece - like much of the EU, Japan, and even much of the USA, entered a severe recession in late 2007...and contrary to the mainstream view, we never actually left. Sure, the GDP numbers appeared to show a recovery, but underlying the 'headline numbers' on the various clown channels, the economy of much of the western nations never recovered. Jobless numbers never really fell, and are still rising across many nations. Youth unemployment in Spain is over 50%, how is that not already an 'end of the world financial depression'?

Worse of all, due to the sheer idiocy and still near complete denial of the western cultures, they are unable to face the reality, make severe life style changes, and start to re-build for what will be some difficult decades ahead. Instead, we've seen endless short term political gimmicks since the 2008 collapse wave, property subsidies, 'cash for clunkers'...etc etc. I almost don't blame the politicians though, they are merely doing (well, most of them) what the ignorant masses continue to requests.

Spend..spend...and keep spending.

So, we have the ECB, Japan, and the Federal Reserve all printing in periodic bouts of QE, to fund the Govt' deficits to support the excessive spending. I suppose its possible it'll end in complete hyperinflation - despite the underlying deflation in some asset classes, but..regardless of whether that happens, the real problem is that of the gross societal denial. How many are we talking about here? 50% ? 90? Considering the voting in elections, I'd guess barely 2 or 3% of the culture are have even a childlike understanding of what has happened since the property bubble blew up in 2006, and most important of all, the 'why'.

Yet, many - even those on Zerohedge, talk of 'an awakening' in the population, err, no. A few percent awake is not going to be enough. Anyway, history never ends with Disney-style endings. Almost always, the end is bloody, revolutionary...and can take many decades to eventually get back to some semblance of normalcy.

Its this denial across mainstream society that makes any 'real economic growth' impossible now. The Bernanke could issue a 1000 trillion of QE, it won't make any difference to the productivity of 'real' goods. The only thing that changes would be the numbers in the periodic econ-data reports.

Who is next to fall after Greece?

How long until other EU nations start to implode like Greece? Spain is not far behind, that's absolutely clear. Italy is also chronically overspending. The other PIIG nations of Ireland and Portugal, they are also suffering badly. I suppose Ireland might be able to cope - they sure are battle-hardened after centuries of problems, yet...even they remain largely in denial.

What remains especially tragic is that Greece is seemingly going to be 'let go', and then the remaining nations will likely being to play a new game - trying to never speak of 'that ex' member' again. It will become almost a taboo amongst the political leaderships of the various EU member states.

Eventually, a majority of the society will wake up, but based on many past instances, that will probably take decades.

Anyway, watch the video at some point this week. I highly recommend the video, its 43 minutes, and despite being in German, with the ZH translation summary, it is still very much worth watching.

Euro - on the slide

The Euro is slipping away from the big 1.30 support (now resistance) level. Mid term outlook is very weak.

Euro, daily

Euro, weekly


Any bounce will probably be now restricted to the 10MA (falling fast, at 1.3032) and/or a back test of the broken/failed 1.30 level. First target remains 1.25/24...then 1.20/19.

If any 'Greek' implosion occurs, a move to 1.20 could come VERY fast..even in a single overnight session.

I would think the most crazy traders right now, are those futures traders who are super leveraged and long the Euro, and are running without stops. A few are very likely going to see their accounts blow up...along with their houses being seized!

Goodnight from London city.

Daily Cycle Update

With today ending weak, the daily cycles are off to a very bearish start this week. The Dow, SP', Rus'2000 all broke their key March low support levels. With the VIX closing almost 10% higher, the near term outlook for both commodities and equities remains bearish.

IWM, daily, bearish outlook

Nasdaq, daily

Dow, daily

Sp, daily, bearish



The H/S formation as seen on the daily cycles was arguably confirmed today with the break below sp'1340. I think today was very important for the bears. Even though we may still have a few days of upside - due to oversold conditions, Facebook hysteria, and Friday opex, the rest of May looks very bearish. The next target is the big sp'1300, and then the 200 day MA of 1277. That is viable before the month ends.

Taking into account both the weekly and monthly cycles, I am holding to my overall summer 2012 outlook for a 3-6month trend to around sp'1100 - at which point the Bernanke will almost certainly appear...from his little Jackson Hole in August.

A little more later...still to come.