Thursday 17 May 2012

VIX - primary target achieved...where next?

The recent break of 21 lead me to believe 24 was the next target level. Well, the VIX closed in the mid 24s today, and it was a strong close. There is nothing yet suggesting the VIX has topped out. Lets look at those cycles, and especially a look at the weekly whose momentum could rise for some months to come.


VIX' daily - bullish outlook

VIX, weekly


The hourly cycle on the VIX is a little high on the RSI, but could conceivably keep going up if the market is upset tomorrow. The daily is similarly very high on the MACD cycle, but its feasible for further moves into the high 20s - even low 30s on a panic day (sp'1270 ?).

The important weekly cycle is now at key resistance of 24..the next level is 31 - which traces back to the quake low of March 2011.

It would appear that if VIX can break into the 26/27 area tomorrow, a brief move into the low 30s is possible at any moment.  It would be ironic if Facebook debuts with a market dow -300 and VIX +30%. 

Closing Brief

Another dire day for this sick nasty market. All micro and larger cycles remain bearish. At some point this market will snap up for a multi-day rally. The problem is what level does that occur? 1300, 1290, 1270? One important aspect is that we've not seen a single day yet where there has been any significant selling, or where the VIX has spiked.

This was day'12 in the current down cycle, and makes it of equal length with the July/August collapse wave of 2011.






Just another bad day for the bulls, and once again...a very weak close.

Big dumb Bear

My expertise lies with the large multi-month, even decadal cycles, along with a good background in macro-economics. However, yet again, it is absolutely clear, as a trader...I suck. I've pre-empted the current down cycle, and have gone long before the market displayed a clear snap/break higher with a close above the 10MA, a truly stupid decision  I can only hope a bounce begins soon, at least to 1350, or my hopes for a good summer are over.

Yeah, its come to down 'hope'..which is never a good sign. I am sure most of you out there are doing better than yours truly.


3pm update - still no buyers

Another lousy afternoon for those on the bullish side, absolutely zero sign of a turn. With a number of monthly sell signals triggering today, and the VIX still rising, its looking pretty bad. The weekly chart is clear, a move to 1280 is easily possible within the next 1-3 days. The monthly chart now suggest a move to 1150 as early as mid June.

SP'60min, chart'1



I scrubbed the 60min chart count, its a mess. The trend IS down, ALL cycles are bearish, even a move to mid 1330s tomorrow would not change anything, and despite it being 'Facebook Friday, even a 1% up move up seems a stretch.


2pm update - Could the IMF stop this fall ?

Its not looking like a great summer ahead is it? We are seeing further signs that the overall bigger picture is indeed correct, with eventual targets of sp'1100, at which point the Bernanke is sure to put in a guest appearance. There will of course be some strong up cycles along the way, but those still looking for sp'1400s+ in the coming months, that is probably a task even the IMF will find too difficult too achieve*

*Impossible Mission Force......not the International Monetary Fund. The latter seem to be in hibernation mode, does anyone know where those guys even reside these days? Are they aware the EU nation states of Greece and Spain are imploding?




The VIX appears to keep getting support on the hourly 10MA, the indexes just can't even get back to break even. No buyers...with few sellers. Market appears content to just slowly melt away, and I'm guessing waiting for some news to use as an excuse to begin a recovery wave.

This posting...will remain after 5 seconds.

1pm update - is it Facebook Friday yet?

Clearly, this market needs one of those crazy overnight/weekend announcements from the EU - or 'somewhere' about some possible/planned scheme to protect the Spanish banking system. Until that happens, this low volume melt lower is continuing. Many out there agree that the next main level is 1300/1290.




Transports failed to hold the big 5000 level, that's a huge bearish signal on both the daily and monthly cycles. Regardless of when/at what level the next bounce/up wave is at, the transports breaking this level is a key pointer for the months ahead.

The manner is which the VIX closes today - along with the Dollar, Transports, will be important. Those still looking for things to spiral out of control (even though we are already at day'12 down), will be wanting to see VIX hold 23..and push onto that primary target of 24.

...stay tuned.

12pm update - Transports index - on the edge

With the disappointing econ-data this morning, the market just can't sustain even a moderate rally. This sure is one weak market. Meanwhile, the VIX is again attempting another break upward.



Transports, daily


I was reading some more bizarre outlooks earlier, targets of mid sp'1400s, even higher across this summer. I find that almost impossible to see as viable considering the bigger macro-economic picture. Even the cheerleading maniacs on clown channel appear to have conceded that there are issues out there right now, not least in the EU.

*The Tranny is imminently due to break the 5000 level... a reminder on the bigger picture...

Transports, monthly (bullish chart)

The big 5000 level is critical, with the 10MA just a little lower. A monthly close under around 4975 would be very strong evidence for very large falls across the summer.

11am update - VIX maxed out?

I'm keeping a close eye on the VIX this morning, both from the 60min and daily cycle perspective. At the same time, I'm watching the Transports index, which is dangerously close to breaking the floor - that has held for three months.

One thing - despite being Long, I will admit, there is NO sign of any capitulation day yet. It could mean we are still to have another 3-5 days lower. That would make for one hell of a lengthy down cycle - the longest ever maybe?

If the VIX fails to go any higher today, the dollar can stop rising, and the indexes can at least close flat, then there will be some initial hope that the move from 1415 has concluded at 1315 - a full 100 points lower for the sp' in just 12 trading days.


VIX, daily, bullish outlook

Transports, daily

UUP (long Dollar), daily, Rainbow


I'm also watching the Dollar/Euro, there are minor signs of a turn on the daily cycles. The metals also appear to be putting in a floor with a confirmed break higher. So, there ARE some signs of a turn, but how we close today will be even more important than whats going on right now.

More later!

10am update - still slipping, urghh!

Those overnight futures gains of 60pts, again failed to materialise in normal trading. Early moderate falls of dow -30 are not exactly reassuring me right now of any bounce starting between now and tomorrow afternoon.

*lousy 10am econ-data/surveys is not helping




Not much to add right now, even clown channel appears struggling to get bullish this morning, does that make for a contrarian buy signal? The Cramer seems dispondent about the rest of the world, maybe I should turn these clowns off today, yet I find it useful to see what the cheerleaders mood is.

Note the VIX is not making new highs yet, maybe it'll do it in the next hour, but for the moment at least, its stuck.

Holding long into Friday.

More across the day

Pre-Market Brief

Good morning. Futures were dow+60pts overnight, but we are now -20pts.
Jobs data came in at 370k vs 365k expected. There are two more pieces of econ-data at 10am, so that is sure to help shape the rest of the market day.



We've seen 11 days down, and justifiably many (myself included), are looking for at least a 3-5 day bounce. Some are even predicting new highs sp>1422 directly from current levels. I'm still guessing the broader picture holds, we put in another lower high..and then rollover again for a wave'3.

Bulls should again seek a close above the hourly 10MA, which on the dow is 12661 -  a mere 63pts higher than current levels.  On the dow chart you can see that such a close would be outside of what may be a wedge, one that 'should' lead to the market snapping higher either later today or tomorrow.

If the market is not at least 1% higher than where where we are now by the Friday close, I'd be concerned about Monday. Yet, Monday would be day'14 of a down cycle, I find that hard to imagine.

I plan to hold index-longs into Friday, although I'm looking for an exit around sp'1340/45, and maybe sit it out across the weekend.

Good wishes for Thursday

The Big Picture - the Giant H/S theory

Yesterday I closed with the SP' monthly chart, but it was just the simple version. Lets end today with something a bit more bold, a grand theory of mine, although I'm sure others out there have considered it as well.

SP'monthly - The Giant H/S theory


The basis of this chart is simply that the entire rally since the March' 2009 lows is part of a giant H/S formation. I'm not sure whether some might like to call this P2, I really don't think it matters anyway. What is clear is that there is an apparent H/S formation across the last 3 years.

One key aspect of this theory is that if it is a H/S formation, would not the RS - which we might presently be in, act in the same style as the LS of 2010 ? If so, we should look for a move to sp'1100 within 2-3 months. Right now, if we assume May is the starting month, then that would mean a conclusion of an ABC fast wave down, no later than end July.

So, one good aspect of this theory is that we'll know real soon whether I was correct.
For confirmation of the overall 'Giant H/S' theory, we will need a break below the lower channel line of 1100 (1125 by end 2012). Arguably a break under 1000 would absolutely dismiss any further doubt.

Goodnight from London City.

Daily Cycle Update

The bearish trend continues, we are day'11 down and this is now the longest down cycle since the July/August collapse wave of 2011.

Lets look at the daily cycles, but from the simpler view, via the Elder Impulse system, which is especially useful when considering the overall trend.


Nasdaq Comp





Only the transports index today gave the slightest hint of a possible trend change. All other indexes remain on what has been a relentlessly slow..but steady decline of around sp'100 pts - a pretty strong decline on any basis.

Clearly, there is no trend change yet, bulls will need to see at least a close in the low sp'1350s to confirm a bounce is underway, and even then, upside is likely limited to 1370/80 sometime next week.