Thursday 14 June 2012

Volatility update - VIX smashed lower in last hour

What had seemed an ordinary Thursday turned into a real crazy turbulent mess for many day-traders. For those playing volatility, we saw some pretty severe moves lower in the space of an hour.

VIX, 1min

VIX, 60min

VIX, daily,  rainbow (Elder Impulse)


The 1min chart shows the truly insanity that was todays closing hour. The hourly VIX which was holding up very well considering the index gains, received a 10% smack down after those rumours occured.

Special note on the rainbow can REALLY see the H/S formation on this chart almost better than anything out there. Very bearish..for the VIX - and thus Bullish indexes...

First target 20
Secondary 19/18.

I'd guess sp'1350/60 would equate to VIX 18s

More later....

Closing Brief - closing hour madness

If there is one thing that really annoys me about these sick and nasty western equity markets, its those late afternoon rumours that appear out of nowhere. Todays was a Reuters super special..suggesting that central banks will do what is necessary to increase liqudity after the Greek elections this weekend.

*I normally refrain from posting super minute cycles, but to start this summary, consider the 1min charts for both the sp' and the VIX. Madness!

sp, 1min

VIX, 1min

Now to the hourly cycles





Crazy crazy nonsense, thats what it is. I am glad I was again merely watching today, this market is sick, and it will likely be a real trading nightmare until after the FOMC next Wednesday.

More later...

3pm update - the weakness returneth

As expected we're starting to see a little weakness this afternoon. The VIX is however not yet showing any sign of a late day ramp though.



Despite the weakness, and concerns over the weekend ahead, I can't see any chance of breaking under the bull flag. This is just minor chop in the scheme of things.

Bulls should be okay for sp'1350/60 sometime next week.

More after the close

Update 3.07pm

Did the Bernanke just hit the big 'BUY 1000 ES mini contracts' button on his desk?
update ' seems Reuters starting a rumour that 'central banks will do things to improve liquidity AFTER the Greek election'.

update - look at this lunacy!

2pm update - afternoon weakness?

The 15min cycle would suggest we're going to see some weakness in the remaining two trading hours of today. The 60min cycle is similarly showing signs of being stuck - although its not very high on its cycle. Any day-traders who went long this morning should be looking to get stopped out real soon. The VIX back over 24 is also a moderate warning sign.





Two hours to go, it might get moderately interesting, but I see no chance of bears breaking this market below the below bull flag of 1305/00.

Primary target remains 1350/60 by the middle of next week..and then a rather nice 200pt fall across the subsequent 3-5 weeks.

1pm update - market holding up well

Considering the great uncertainty out there, this market is holding up very well. Partly its technical, we were certainly due to cycle higher on the smaller cycles, but clearly the renewed talk of Fed easing next Wednesday is helping to entice some buyers.




VIX battling to get back over 24, but if you look at the cycle, its highly unlikely to hold, and a close of 23.50/25 would be the best guess right now.

A close of 1330 would be surprisingly strong..and thats just 20pts away from my primary target zone. From a Permabearish traders point of view, it seems a 'WAIT until after FOMC Wednesday' is now the only position to take.

Oil is catching a bid right now...more on that later though.

12pm update - more bullish news from the middle east

Even Art Cashin on clown channel this morning noted that one of the more important issues in the coming days will be the Egyptian elections..yet now there are reports the military is claiming control, in which case there won't even be elections! much for the 'Arab Spring' of new freedom from dictators. War in the middle east between old foes Israel and Egypt, that has to be bullish right? Dow keep buying!

Meanwhile, back at the casino in New York...the market is trying to hold onto moderate gains, currently at the top of the bullish flag - on both the daily and hourly charts.

sp, daily, 4mth


Considering its opex tomorrow...and the greater uncertainty out there, a new high of 1336..just seems a little unlikely.

As for me, I see it all as too risky to be long..and too much risk of upside on renewed hope of monetary easing next week to be short. Things will be much simpler after next Wednesday.

Time for lunch!

11am update - an attempt to break over the flag

Market is due to go positive cycle in this next hour. A move above 1327/28 would probably offer a chance to test the recent 1335 high. Considering the chop-fest that we are in, I'd be surprised if we can break and hold over 1335.

Its quadruple witching tomorrow, so the chop is likely to continue into the weekend. Everyone is waiting to see how the Greek elections go..and how the market reacts to it. Clearly, a move over 1335 early Monday would be a buy signal - at least for a few days.




Holding to primary target of 1350/60 for wave'2, ...and primary target for wave'3 of 1150/00 by late July.

The latter target being based on the grander monthly cycles of the indexes, VIX, Oil, precious metals, and currencies. ALL of them suggest a major smack down in July.

A somewhat quiet day so far.

10am update - morning chop

Market is trying to rally on the new 'hope' that 'hey, Greece will form a progressive coalition that will soften the austerity terms!', and the Fed will both extend QE-twist and overtly hint at QE3. Yep..its all looking like sp'1500 by year end.

Those maniac cheerleaders on the clown networks are really going for it so far today! Most of all, I look forward to viewing them when they are once again all on suicide watch when the sp hits 1100 within the next month or two.




VIX is holding up - but starting to look a little spiky-toppy, we have a busy options market with high demand, doubtless due to both those Greeks and the Fed next week.

I am probably going to remain sitting on the sidelines to re-short until AFTER the Fed' next Wednesday. There is too much risk to go long across the weekend - even though I believe market still has a very high likelihood of snapping higher to my sp'1350/60 target.

Pre-Market Brief

Good morning. This week is moving along pretty fast, we're getting real close to the big Greek election weekend, with the FOMC next Wednesday.

*Greek market is up almost 8% today, on rumours that Syriza (leader of one of the main parties) will hold to the current bailout plan. Although 8% up sounds great, its not so great when your market is down 91% since 2007.

Weekly jobs data: 386k vs 375k expected. That number still sucks, CPI up slightly, current account deficit lousy.

Futures are indicating a flat open.



We have a clear bull flag still on the indexes, along with what is arguably a giant inverse H/S formation. Primary target remains 1350/60, which is now not likely until at least next Wednesday.

Who dares go long across the weekend? I'm tempted - considering the giant bull flag I am seeing, but...I think I'll sit this out. I'd rather keep it simple and just short at the top of wave'2 later next week...after the Fed have done something...or nothing.

More across the day.!

Dr Copper - the deflationary outlook

Copper is something I forget to keep an eye on (I'm usually more focused on what Gold or Silver are doing!), but I was reminded of it just last evening.

The big question out remains whether a secondary deflationary wave will hit the world economy this year and into 2013. I sure can't guess yet, but we'll likely find out in the few months.

For the deflationists out there...this would be the outlook...

Copper, weekly, 8yr


A move down to the primary target zone would probably equate to sp'1100. The secondary level would probably mean at least sp'800...possibly an all out test of sp'666 - but not until 2013.

Its something to at least briefly ponder over.

Good wishes for Thursday trading.

Mid term outlook - Sp'1100

To close today, lets take a look at the weekly cycle chart of the sp'500 index.

sp', weekly, 2yr


The last 4 trading weeks have been a real choppy mess. We've seen what was probably wave'1 conclude - as discerned via the daily chart, and we're now in the middle of what is surely the corrective wave'2 UP.

The levels are clear, a break under the recent 1266 low will open up a fast move to the 1150 area. That might actually be the floor for wave'3 - with a minor '4 bounce, and then 5' finally hitting 1125/00 in August.

Anyway, first things first....first we need to complete this wave'2...rollover..and break 1266. Things get easier once that is achieved.

One final issue for the bears...will the market break 1100..and take out the 2011 low of 1074? If we do, then a secondary deflationary collapse wave really will be the scenario we face.

A closing thought for the bulls

For those of the bullish sure do have a real challenge ahead this summer. I can't imagine this market breaking above 1400 - even if the Fed announces QE-twist to be extended. Only a full blown QE3 would ramp the market up for consecutive weeks, and hell, NO WAY can the Bernanke initiate QE3 whilst the markets are at these lofty levels.

No...this market is heading down. The only issue for next week will be trying to get the best possible short-entry.

Goodnight from London

Daily Index Cycles - bull flag (probably)

With Wednesday showing some choppy and bearish closing action, things are a little more uncertain. However the key levels are clear.

First resistance is the recent low of 1306. The daily 10MA of 1305 will also be strong support on any early Thursday declines - if we get them. In contrast, the bulls need to see a break over 1335 to confirm wave'C is underway - and break/close above the bull flag.

However, lets be clear, if we do somehow slip into the 1280s..this could get fast and dirty real quick - not least due to the Greek elections this weekend.

IWM, bearish outlook

SP' daily, 4month


Both the hourly and daily charts do display possible inverse H/S formations (not labelled), as well as a bullish flag - as comprised of the last 5 trading days.

From a MACD (blue bar histogram) cycle perspective, we are VERY high on the cycle, so the bears can claim we are due for a pullback. Although I'd consider these past few days of sideways chop, the pullback/consolidation that they have been looking for.

Primary target remains sp'1350/60 for the peak of wave'2.

With the market facing more choppy action due to Quadruple witching this Friday, it now appears that wave'C of 2' - if that's what we have, will not be complete until the middle of next week - when the Federal Reserve is due to announce its latest action (or lack of).

So, an interesting day, I remain on the sidelines, waiting for wave'C to complete before shorting this nasty market.

A little more later...