Monday 18 June 2012

Volatility - smashed lower...again

With the Greek election out of the way, the option writers are happier to sell calls/puts for much lower prices. Insurance for a major market decline just got a lot cheaper today, VIX slipped over 13% !

On the VIX daily chart you can especially see clearly the break into the 18s today confirmed the H/S formation. There are probably at least 2 more down days for the VIX, possibly 4 if we somehow keep rallying on the indexes to 1380/90 by Friday.

VIX, 60min

VIX, daily, rainbow

VIX, weekly


I did not think we'd hit 18s today, so my new target low for this cycle will be 16/15 - on an index spike high of 1360/70 this Wednesday.

The weekly cycle looks exactly like July'2011, and most should remember what happened to the VIX across the following 3-4 weeks.

Lets be clear, VIX 40s...are still very possible this coming July.

Closing Brief

Market closed mixed across the various indexes. Tech was strongest, closingg up 0.75% or so, dow marginally red, but both IWM and SP' closed marginally higher.

Considering the opening losses of around 0.5%, today was most certainly another reasonable day for the bulls. Lets check those hourly cycles...





Today was day'11 of this up cycle, and everything remains on track for sp'1350/60 by the Wednesday FOMC decision.

More later...looking at the VIX, daily cycles, and the bigger monthly outlook

3pm update - holding up into the close?

Those bears who did not take the opportunity to close out at the open will be getting real mad about now.

Its still kinda quiet trading though, so I'll take the opportunity to highlight this....

sp' daily, fib levels


I think the above chart is one of the clearest there is that summarises whats going on right now. Whether you subscribe to the idea that Fibonacci levels are important or not, you can still see that we remain in what is a strong wave'2.

A wave'2 that by definition should soon put in a lower high <1422, rollover, and then break below the recent 1266 low.

Target remains 1350/60....and then 1150/00   ;)

More after the close!

2pm update - the patient the good bear

The hourly cycle looks a bit toppy, and we certainly could close marginally red. Yet, sp'1350/60 target zone looks still very much on track.

Whilst the market is relatively quiet...a reminder on my primary near term outlook into July/August. Both the weekly and monthly cycles support this.

sp' daily'9, bearish July outlook



The hourly cycle shows a near perfect standard ABC wave'2. Everything is on track. The next key fib' level is that is one target to keep in mind this Wednesday - as a 'spike high' after the FOMC announce their latest meddling in our supposedly 'free capitalist market'

*not sure if there is a problem with Disque today. To the person who posted via google, it only appeared to me via email, but thanks for your kind comment anyway.

1pm update - sleepy afternoon

A quiet and sleepy afternoon likely lies ahead for this nasty algo-bot ridden market - baring some crazy Reuters rumour/s of course!



Bears can NOT expect any serious downside until AFTER the FOMC on Wednesday. Shorting at these level...and at this time, is probably not the best of ideas. Patience.

Notable stock of the far...

FB, daily

The bull maniacs are chasing it higher, I'd guess it will get stuck around 33/35. Max' upside would be a complete backtest of the original IPO $38 level. Mid-term target remains the teens.

Stay tuned!

12pm update - lunch time chop

Early losses, then minute gains, and now back to moderate losses. Considering the great concern over the weekend this chop-fest is to be expected.

This small scale battle between bulls/bears seems likely to continue for some hours. However, the underlying bias remains UP. So...the wise and patient bears will be staying away from this skirmish.




Nothing much else to add....I'd still guess we close moderately green. That sets up for a move into the 1350s either tomorrow or early Wednesday.

Whether we can break to the secondary target zone of 1380/90 by this Friday, that is arguably entirely dependent upon the action of the FOMC.

The monthly cycle 'bigger picture' target remains sp'1150/00 by end July.

Time for lunch!

11am update - the rally continues

I have little sympathy for those bears not covering at the open. They had the opportunity to close out at sp'1335. It is now seemingly very likely we'll be around 1355/65 within the next few days.

VIX is very weak, and highly suggestive of higher indexes into Wednesday. 'Fed day'.


sp' daily 4mth


Everything going as expected. I see the only issue as 'how good a short entry can I get?'.

The good bears.....are going to need to be patient for just another day or two.

10am update - Monday morning chop

Moderate opening losses are already starting to lessen. Those bears who were shorting at the Friday close - in anticipation of a Monday collapse..would have been wise to have hit the exit button about at the open.




Looks like the indexes are getting support at the important hourly 10MA - 1334 (and rising)

VIX is red - another sign this market still has underlying upside.

I will remain a watcher on the sidelines until sp'1355/65, preferably AFTER the FOMC announce Wed'12.30pm.

Interesting stocks to note... Ebay up... FCX weak, BKS.. was up 8%, but now -2% (rumour...false).

Oil weak...metals..moderately weak.

More across the ever.

Pre-Market Brief

Good morning. Futures are showing dow-25, sp-2/3. That is certainly a fairly significant turn around from last nights sp +9.

I would assume its just a little tease to the bears though, and that we can still easily close moderately green - with further upside Tue/Wed to the top of my original target zone (also key fib level area) of 1360/65.



A long and busy week ahead. It will doubtless be filled with conflicting news and rumour about Greece/EU. So expect more crazy intra-day swings. The FOMC decision on Wednesday (12.30pm EST) will be central, and could shape the next few weeks/months of trading. I only expect QE-twist extension at the most.

There really isn't much econ-data this week, only housing.

My current plan is to re-short this market around 1355/65 this Wednesday afternoon.

Good wishes for Monday trading!