Thursday 24 May 2012

VIX, a weak close..but still bullish overall

Despite a last hour rally in the market (but still closing below the key sp'1330 level), the VIX closed a little lower, but the broader cycles are still bullish VIX.



VIX' weekly


So long as VIX holds above 21.00 tomorrow morning then the overall increase in market volatility can be said to be continuing.

Arguably, the index-short Bears will really need to see VIX break a new high next Tues/Wednesday (remember, Monday - US markets are closed!). VIX'27/28 remains the next top/channel target - which would equate to sp'1280.

More later, with a look at the index daily cycles - which (so far) appear to be putting in classic bear flags.

Closing Brief

Looks like the bots decided to buy at the hourly 10MA. A bullish closing hour, setting up a close of  sp'>1330 tomorrow.





I suppose the bears can still claim we've not decisively broken above the recent high, with a close of >1330. So the bears still have that going for them. Yet, it would have been day'17 today in the down cycle, and we've now been trending largely sideways since Monday.

The stop levels are clear...bulls, sp'1291 lose, 1299/1301 tight.....and bears...1330 lose, or 1325 tight.

*With a 3 day weekend ahead, most likely we have a quiet Friday ahead. The only econ-data is Consumer Sentiment at 9.55am.

More later in the evening

3pm update - more closing hour uncertainty

Well, the algo-bots are battling it out at the hourly 10MA. Considering the MACD cycle...its not looking so great for the bulls, yet we saw what happened yesterday afternoon. If we can break under sp'1310..things could fall away pretty strongly into the close.


As noted earlier, bears will want a close under the hourly 10MA @ sp'1312 , with VIX in the mid 23s.

Oh yeah, there is plenty more where this came from, ha.

More after the close

2pm update - a fine example of why the EU is doomed

Market still showing some moderate weakness.



*Bears should be seeking a close under the hourly 10MA @ 1311. That is certainly within range, with still 2 trading hours to go.

I've added a little target box (yellow) for Friday. We have a possible ascending line (purple), and the bounce or break box at the 1300 level. So, if we see 1298 or lower tomorrow, that would be pretty exciting, since it opens up possible new lows of 1280/60 early next week.

Whilst watching this nonsense market, a little background music can often help...oh yes, its that time of year in the EU, its 'Eurovision' time (the final is this Saturday). I think the following song sums up all we need to know about the EU.

A little afternoon entertainment....Euro-style ;) Enjoy

*I think the Montenegrian 'Rambo Amadeus' is referencing some kind of objection to certain ECB monetary policy objectives (does he not like the LTRO 1, 2.?),...but as ever..its just my 'best guess' ;)

More later.

1pm update - rolling over

Bulls had the whole morning to drive through sp' far they have failed. The MACD cycle would suggest they've had their 'best chance', and the bears now have a chance at pushing this market lower. First target would be a close under the hourly 10MA of 1310.




This could still go either way, but as noted earlier, the longer the bulls take..their chances weaken. Bears will want to see VIX close in the mid 23s today. Again a close over the 10MA will be an important signal to look for.

So, best bearish case for today's close is sp'1307/09, and VIX 23.50/75.

Bullish case...sp'1328/32, VIX 21.50/00.

Considering the cycles for both...I'm inclined to believe the former is more likely.

12pm update - bulls...tired

Yesterdays little hyper-ramp into the close was certainly nothing we've not seen more than a few hundred times since the collapse wave lows of March'2009. The market feels like its getting real tired again. Bulls probably got one more chance to ramp it to 1330 today. The longer they are stuck at this level...they are giving those bears another chance to renew the down cycle.

Bears can go short, with a simple stop at the morning high of sp'1324/25. Considering the MACD one should be adding new long positions until we are at least testing the hourly 10MA @ 1309.




Look at the MACD cycle, its just about levelled out. Bulls had their chance this morning to gap it through or crawl across sp'1330....they failed.

We have an interesting few hours ahead. Might we yet have some further big downside action into Friday, before the long holiday weekend?

Stay tuned!

11am update - in the phantom zone

The Sp' is in a very important zone. A break over 1330...bullish...a move under 1310...bearish. From a MACD cycle perspective we 'could' rollover later in the day - much like Tuesday.  Where are the crazy rumours when the bears really need one?


In general though, it does look like its slipping away from the bears. The longer we stay over 1320, the more secure the floor. A close over 1330 would be pretty conclusive.

10am update - borderline

We're on the edge, might break higher..might break lower.  Sounds obvious to say, but that IS how it is right now. A close over 1330..bulls in control...a close under 1310..bears are back at the wheel.

For the serious money players...bull stops sp'1310/15.....Bears (those few still remaining)...sp'1325/30.




Bears are desperate to get below the hourly 10MA again, around sp'1310. Right now that is a fair way away. Its possible though, and if we do close under 1310 today, then 1280 is back on the table - but that's unlikely tomorrow, since its the lead in for a 3 day holiday weekend.

I'm really not sure what to make of today, I suppose its arguable that this confusion is a sign of a market turn to the upside. We are certainly due one, but...we've still not seen any capitulation day or a spiky VIX top.

More later.

Pre-Market Brief

Good morning. Futures are sp+3pts, that would take us to around 1322. That is marginally above the down channel, and will be around the daily 10MA. Its not looking so good for those short.



The down channel has endured for 16 days across all indexes (except the Dow*). The futures are suggesting a little gap outside at the open, what will matter is how we close.

Key levels today would be a close over 1325. Certainly, a close over 1330 would be outright bullish into the long holiday weekend. Many posters have noted the historical trend that the market will rally into Memorial day, and keep going for a week or two into early June.

*The Dow'30 index faked out many on Tuesday with the break outside the down channel, and did a fake out yesterday also - making a slightly lower low intra-day. Again, its a good reminder that this 30 stock index is largely to be ignored when trying to figure out if 'something' is occurring.

Good wishes for Thursday trading

More across the day

Euro - slipping to 1.24, and eventually 1.20

The Euro/Dollar closed at 1.2592. The next key level on the weekly cycle is 1.2400

Euro, daily

Euro, weekly


I would assume Euro 1.24 could be equating to sp'1280 - which remains the main bearish target, assuming the down channel 'holds' and continues tomorrow.

Euro/$ 1.20 - the primary target for early summer, would probably equate to sp'1200/1150. That would match up with the weekly and monthly index cycle charts.
It was a rough Wednesday for me..Thursday can't be any worse.


Daily Cycle Update

The daily cycles remain in a broad decline. Only index closes above the 10MA would give some initial suggestion that the current 16 day down cycle -forming minor wave'1, has completed.


Nasdaq Comp





For the SP', the daily 10MA is 1325..that will probably be down to 1323 tomorrow. Note that the 60min cycle down channel has a ceiling of around 1320.

So..more than anything right now, if we close Thursday over sp' is VERY likely that minor wave'1 has completed. Since we have a long 3 day weekend ahead, Friday trading will probably be quiet, so how we close tomorrow will be the more important day.

From a MACD (blue bar histogram) cycle perspective you can see the underlying down momentum is reducing, and we are clawing back upward. We are STILL in a negative cycle though, but if we remain just 1 or 2 days in this 1315/25 zone, that would probably be enough time to secure a floor.

Difficult trading times

Clearly, today was a rough one for many bears..and even the bulls, who have been chopped around since the Mon/Tuesday rally.  I'd guess the days ahead won't be any easier.  Urghhhh

My one solace right now - after what has been a pretty horrible trading day, is that there will likely be a huge wave'3 down this summer. For those that missed this initial wave'1 down, the bigger..and most profitable bearish action is yet to come.