Tuesday 29 May 2012

Volatility - holding up

Despite the indexes rising around 1% today, the VIX only closed marginally lower, and in fact was largely green for much of the day. The daily and weekly cycles continue to suggest much higher volatility levels in June.


VIX, daily, bullish

VIX, daily, bearish

VIX, weekly


More than anything, I like the VIX weekly chart. It was warning since March of downside in the indexes, and we did indeed see a move from sp'1422 to the daily cycle low of 1291 just last week. Yet VIX is still relatively low, we have seen no panic spikes yet. There have been no high volume selling days in the equity market.

Mr VIX near term target remains 27/29...that may well be enough for a 'spike high', but...I am still looking for high 30s/40s by late June.

Closing Brief

So..we had a mini-ramp to close the day, based on ultra-low volume of course. Mr VIX though - despite closing red, still held up very well considering the rise in the indexes.

Lets look at how those hourly cycles closed...





*first, ignore the counts on those hourly charts, I don't much like them!

A messy Tuesday overall  I'm sure a lot of bulls would have bailed earlier during that lunch time weakness. Doubtless, they'll be even more annoyed now to see the closing hour mini-ramp!

From the hourly perspective, it sure looks like a big bear flag right now. We'll only know if it is, if we break back below 1300, and then 1291 by the end of this week. We certainly have the possibility, if the latest jobs data sucks this Friday.
More later...looking at the VIX and those Daily Cycles - the latter of which are still suggesting further index gains to come.

3pm update - last hour sell off.. or mini ramp?

Market holding on tightly to gains of dow +70/75, but that's barely half of the earlier amount. VIX remains green..still! A lot of the mainstream media today understandably focused on the FB nonsense, although that remains ironic coming from such cheer leading maniacs.

Sp'15min cycle

Sp'60min cycle


I don't often mention the 15min cycle, but you can get a clearer picture of one thing that is the case so far these past few days. We have seen a series of higher lows and higher highs - including today. Only with a break of 1315 can the bears start to get curious again, and even then, they really need a break of the bigger 1300 level - as seen on the 60min cycle.

Bulls will merely want a close over sp'1330, that should at least offer a brief move into the 1350/60 zone later this week.

As I keep noting, in the bigger picture of things, whether we get stuck at 1340, 50...80..it really doesn't matter for the mid-term bearish trader. Its all mere noise...we're going lower across the summer.

More after the close.

2pm update - VIX holding up very well

Highlight of the day so far remains the strength of the VIX. There are really not that many occasions in a given trading year when both the indexes are +0.5% or more, and the VIX is green, maybe just 10 out of around 250 trading days.

The hourly index cycles are a real Bermuda triangle of problems right now. Is it a giant bear flag ? It sure looks like it on the sp'60min cycle. Yet with the break over 1330 this morning, urghh..its just tricky. Only with a break back under 1300 would I feel confident re-shorting.




We still have two important trading hours left of today. There remains a LOT of key econ-data this week to come - although ADP jobs data is out on Thursday - due to the holidays.Thur/Friday will be very dynamic market days.

*FB due to slip into the 28s,   $9 down..just another $25 to go until 'fair value'

FB, daily

More later....

1pm - a confusing mess...in the near term

A real mess of a market today. Sure the indexes are holding onto reasonable gains of 0.75%, but the VIX is green, +3% no less!




Today sure is a tricky one, intra-day moves have already probably annoyed bears and bulls alike. That last hour fall sure did catch a few by surprise.

As noted at the open, the VIX was due to go MACD +cycle on the hourly cycle, and indeed it has..and we have the rare situation of both green indexes and VIX. The bulls should be concerned about this.

So right now, we have slightly overbought indexes on the 60min cycle, but the daily and weekly cycles offer more upside.....all whilst the monthly cycle warns of 'downside to sp'1100...sometime this summer'.

*FB remains endless entertainment..more on that over-valued nonsense later.

12pm update - only the bigger perspective keeps me balanced

Whilst this latest Monday morning rally is still holding to some extent into this afternoon, I'm again trying to keep in mind of just what is happening in the grand picture...


If you look at the previous two major down cycles of summer 2010/11, you'll see that we often see a significant bounce in the first 1 or 2 down months.

So, as long as we close Thursday (the end of May, how can it be almost June already?), no higher than about 1355/60, the trend is still very much downward.

In the meantime of course, we've probably a few more days of nonsense to come, maybe even a week or two. Yet, its just noise in the bigger picture. I envy the bigger players, who can sit back with non-leveraged ETFs, or super long dated index Puts. They can merely sit back and relax across this summer - with a good stop, no higher than the peak of sp'1422, which should arguably be tightened to around 1395/80.

Quick update on the sp'60min cycle

*ignore the wave count on my hourly charts, I'm as confused as anyone else out there lately. What I am certain of, is the bigger monthly cycles.

IWM, daily - bearish outlook

*most interesting of all so far today, the Rus'2000 index, is putting in a black candle..warning of at least 'weakness after the opening gap UP' in this market. I can't fathom to guess whether this is the top of a 'wave'2 - considering the daily MACD, I'd say 'no, there is more upside to come'. But hey,...here we are..and black candles are NEVER to be dismissed lightly!

Time for lunch!

11am update - a major fail for the bears

The bears had a chance to hold this rally back, but they have clearly failed. The VIX which was initially holding up very well, is now red. The daily index cycles are similarly turning bullish - no matter how bad the news appears...we're back to risk-on mode.


Sp'weekly - 3 scenarios

Its looking like C' is now out the window. The only issue now is whether we put in a lower high around 1370/80..or just keep on going to break >1422. If the Greeks can magically form a new Govt' in mid-June, then this crazy market will take route A.


As noted last Friday, the last line in the sand for serious money bears, was sp'1330. We're now comfortably holding over that, and its looking like we'll break above the bear flags on most indexes - if the current gains can hold across the day.

The next issue is how high do we go? Obviously, 1340 - the old support line is major, but considering the momentum MACD cycle is now due to go +cycle late today/early tomorrow...it looks like it will keep on going. - the old resistance level is 1370/80.

*I'd guess the wave-counters will now call this wave'2, with a target somewhere between 1340-80.

If the market is pleased with the GDP/Jobs data later this week...this rally could really could just keep on going in June..and beyond - regardless of  how bad the reality is.

10am update - the rally not going to hold?

Despite the opening gains..there are very clear warnings right now. The VIX is holding up VERY strongly, when was the last time we saw the VIX green whilst the market was up almost 1% ?

*Consumer confidence: 64.9  vs 69.7 expected...hmm, much worse than expected!

IWM, 60min


VIX, 60min


This next hour is very important. If the bears are going to stop this market advancing, they need to do it this hour!

Note that the VIX'60min cycle is due to go +cycle in 2-4 hours. So, the opportunity does exist for the main indexes to turn red sometime in the late afternoon.

FB remains laughably weak, sub 30s' still likely by the close. Quite a few people buying FB option puts today, but the bid/ask spread is overly wide - but thats normal for first day/week trading.

FB, daily

More later!

Pre-Market Brief

Good morning. Futures held the overnight gains, looks like we'll open up around 0.5/0.75%, taking the sp' from 1317 to 1324 or so. That is just a touch below the recent highs, and its possible we might still turn red on the main indexes by late morning.

We have housing and consumer confidence data today, they are not exactly the most market moving things, but market will doubtless be swayed a little. I'd guess con'con will show just as stupidly high a number as the consumer sentiment number from last week. Just who are they asking those 'how bullish are you?' questions anyway?


Considering the cycles, we should be opening lower, but since we're not, I'd still look for black candles on the indexes (especially the Rus'2000) in the opening 9.30/10am period. Similarly, if the VIX opens down around 5%, look for a red reversal candle.

As ever, how we close today..will be even more important. Bears would really prefer a close under sp'1300, but that now looks way out of range. Something in the 1310/05 would be my target.

Bulls just need to break 1330..and that opens up 1340...if that is held over..then 1370/80.

*FB -1.6% in pre-market...sub $30 is possible today !

More across the day...

Monday Night Chatter

Its the midnight hour in London City, the futures wheel is indeed spinning, so far its showing a moderate gain of sp'+5/6pts or so. Nothing too significant, but neither is it a decline. The bears could understandably be a little concerned that there might yet be some crazy rumour causing a stupid large gap higher.

Regardless, the following remains my outlook....

..and relating to the 5 scenario chart...

My best guess remains scenario B, where the Bernanke will likely be under pressure from even the normally anti-printing groups to initiate a very large QE3 ($1 trillion MBS purchases?), sometime in late summer.

Zerohedge reporting that FB was down again 2-3% in European trading. A break under $30 this Tuesday probably opens up 26/24 by the end of this week. There is also the issue that options trading will begin at the Tuesday open, I'm sure many traders will be prepared to chase FB lower via Puts right from the open.

Hope you enjoyed the 3 day break, we have a busy 4 day week ahead.