Tuesday 19 June 2012

VIX - still trending lower

VIX closed broadly flat today, but the underlying near term trend is still lower. Today may have seen the floor though in the mid 17s. The next move in the VIX will indeed be highly dependent upon the FOMC tomorrow.

Bears should look for a blue/green candle on the VIX daily 'rainbow' chart tomorrow at the close.

VIX, daily, rainbow (elder impulse)


VIX, weekly


We've seen a VERY significant pull back in the VIX from the 27s to the 17s. That certainly merits a very good wave'2 retracement.

Wave'3 should take VIX into the upper 30s...or 40s. The ultimate question remains whether VIX can break the 2010/11 spike highs of 49.

If we see VIX 50 at ANY point this summer, then the secondary doomster outlooks come into play.

More later..looking at the index daily cycles.

Closing Brief

Market closed with very reasonable gains, on what is day'12 of this up cycle. We have closed comfortably in my original target zone of sp'1350/60. The secondary zone is 1380/90. That remains possible if the FOMC at least temporarily please the market tomorrow.

I think its very possible we've now put in the high of wave'2, now its just a matter of waiting for the FOMC tomorrow lunchtime (12.30pm, with Bernanke press conf at 2.15pm).

Lets look at those closing hourly index cycles





We've seen enough of an up trend in both price and time for this wave'2. Twelve trading days is long enough....tomorrow will be unlucky 13..for those bull maniacs..perhaps.

As ever..so much depends on the actions (or inaction) of those printing maniacs at the Fed.
More across the evening...I've a battle plan for tomorrow to note down!

3pm update - looking forward to Fed day

The 15 and 60min cycles are over-stretched on any basis. A little weakness in the closing hour is understandable, yet a close anywhere in the 1350s would still make for another victory for the bulls.


*initial support at the hourly 10MA of sp'1353.


Bulls should be content about today, they have a falling dollar/rising Euro, reasonable gains across all sectors/indexes. Even the VIX is largely flat, despite the uncertainty of the FOMC decision tomorrow.

Trading will be VERY much simpler in less than 24 hours.

...time for England vs Ukraine !

More after the close...

2pm update - hello to Fibonacci

Market is now hovering around the key fib' retracement level of 61.8% - sp'1363. Considering the underlying momentum...further upside is still possible. However, this could be the top of this 12 day wave'2.

It'd take a brave, and arguably reckless bear to be shorting at this level. Although in price terms...1363 is a long way up from 1266 !

sp' daily, fib levels

sp' daily, 4mth


Those bears who have been short since last Friday will understandably be pretty disgusted at todays action. I can't blame them for shorting, but they were fighting against the short term up trend. We remain in what is surely a wave'2. The good thing...'3 should be starting in the next few days. So, those bears already underwater, should have a good chance at seeing things turnaround reasonably soon.

I..remain awaiting the FOMC decision...as should the rest of the doomsters out there.

More later!

1pm update - afternoon doldrums

I can't imagine any reason why the market would slip back into the 1340s by the close. It really looks like there is a fair chance we'll even close in the low 1360s.

sp, daily, 4mth

VEU, daily

We're around the target zone on VEU. Bears should look for a fail, and the first sign of a turn by the end of the week.


This time tomorrow we'll know the decision of the FOMC, it will certainly be a VERY rampant trading Wednesday afternoon.

*note, the Bernanke will do a press conference at tomorrow 2.15pm I believe. If the FOMC do not do enough to please Mr market...then the Bernanke press conference could be a real motivator for late day sell-off.

Stay tuned!

12pm update - lunch time chop

Market appears very content to stay in the upper 1350s. Clearly, a move into the 1360s is very viable either late today or early tomorrow.

The only question is whether the next target of 1380/90 can occur. If there is QE-twist extension, a brief jump into that zone on what will arguably be 'mass hysteria'. I would short there, if that's the situation.




It is amusing to see ever more increasing bullish talk out there - even from the normally bearish posters. I guess they aren't looking at those monthly cycle charts! A lot of contrary indicators maybe  ?

From a cycle point of view, the hourly index cycles are very high. Yet, this is still no time to be shorting, with the FOMC tomorrow.

Key support for the bulls..daily 10MA @ 1328 - which is indeed some 30pts lower! So..bulls have a lot of leeway, even if we do fall late Wed/early Thursday.

Notable stock of the day...

JCP, daily

Clearly, the guy they just let go deserved more money for his superb performance in the last 9 months.

*VEU (world indexes) is at the target zone area too, I'll maybe cover that in the next hour.

Time for lunch!

11am update - quietly patient

Market having what might be its last decent up day of this 12 day cycle. We're right in the target zone!

sp' daily 4mth

transports, daily

*a break over 5400...and the bearish case gets thrown out (unless its a mere intra-day spike)


Everything is on track.

Can you imagine, the Bernanke is sitting at the table right now, with all his printing friends (including Yellen..aka..Queen of Print). However, the Bernanke is not stupid, I believe he can convince them to wait until early August. The Bernanke knows he should let this next down cycle first play out before he launches any QE3 bullet.

The good bears should have faith in the Bernanke ;)  I sure don't agree with his academic assessment of the economy, but he IS a good tactician.
*I will post up my attack plan for tomorrows trading, after the close today.

10am update - in the zone

Well, after two weeks of waiting, we're finally in my sp'1350/60 zone. That's 87pts in this wave'2 in just 12 trading days. Pretty impressive bulls!

The VIX is lower, but we're now very low in price - you can see a red hollow reversal candle appearing already. I find 14s impossible to envision - baring a trillion dollar QE program. So..the VIX target is 17/16..tomorrow..briefly..and 16s only if the Fed' announce QE-twist extension. Lets be clear, I'm not concerned with Qe-twist, it is NOT new money.




I have to say it is tempting to short at these levels, yet there IS the real risk that the FOMC will decide to initiate a major QE3. Whatever they might call it, if its more than 300/500bn, I'd think the bearish case could be thrown out for the summer.

So, tomorrows decision will be VERY important in how the next few months..and indeed rest of the year proceed.

For the moment...I remain watching..and waiting.

Pre-Market Brief

Good morning.  Futures are showing sp+5 or so, so we'll open around 1350 - the first break into my original target zone of 1350/60. We're about there!

Yet...we are still to wait for the FOMC tomorrow. Shorting ahead of that...highly risky, and I'm inclined to wait.

Sp' daily 4month


Today will be day'12 of wave'2, that's a pretty good time for this correction.

*there remain many out there who are dismissive of the idea that what we recently saw was even a wave'1 lower. Well, if the Bernanke does announce QE3 this Wednesday, then yes..we'll break new highs...but I just can't see QE3 at these levels.

Anyway...today should be about trading into the 1350s. I'd be a little surprised if we can break into the 1360s. Any 'rumour' about leaked Fed QE might do it though!

Good wishes for Tuesday

SP' bigger picture - still on track

The US market remains - contrary to what the bull maniacs are touting, still on track for major summer declines. The only issue in my view is whether we break sp'1100 in the next push lower, or will the Bernanke make use of QE3 to lift the market away from what is a very dangerous area.

On any basis, most should see what is a very clear giant H/S formation on any of the index charts - both for the USA, and most other world indexes.

Sp, monthly'2


As a permabear, I would remain confident about the current bearish outlook if we see June close sp'1305 or lower. Anything over 1350 would be a VERY serious problem for the bears, however, we will have 7 full trading days after the FOMC decision, and that is plenty of time for the market to close net-lower for June.

sp', monthly, scenarios

Considering the current wave'2 (or 'B'), scenario 'B' remains my best guess. Scenario E is arguably now already invalidated.

If you look at the general cycle indicators on the monthly charts, you can see a very clear rollover, and that has NOT yet been reversed despite the rally from sp'1266.

I remain holding to primary target of 1350/60 - in the next few days, and then sp'1150/00 in July.

Goodnight from London

Daily Cycle Index Update - wave'2 continues

Wave'2 appears to remain on track, both in terms of price and time. A peak in this wave looks set for Wednesday. If the Fed announce the minor extension of QE-twist, that might give enough kick for a brief spike into the sp'1360s..before a VERY fast and hard reversal to the downside.

I look for June to close at sp'1305 or lower. So, if we're sp'1365 by Wednesday afternoon, that gives the market 7 trading days to drop 60pts..or more. That is plenty of time.

IWM, bearish outlook


Sp' daily, 4mth



I've been noting the important of the transports for weeks...today was a VERY strong day for transport stocks. A move over 5400 would obviously be massively bullish for the rest of the summer and indeed the year for main market.

If the Bernanke does QE3 (increasing the balance sheet by 500bn or more) this Wednesday, then the Transports would break 5400..and it would be the ultimate 'buy' signal.

However, I can't see QE3 yet, for a very long list of reasons. Regardless, the tranny will be something to watch across the rest of this week.

As for the other indexes today, most were broadly flat or showed only marginal gains. Bulls should be looking for further gains late tomorrow/early Wednesday.

Primary target zone of 1350/60 is due to be hit imminently. Whether secondary zone 1380/90 is hit..entirely dependent on the actions of the Fed.

I continue to hold to the master outlook - this is wave'2, with a destructive wave'3 lower to sp'1150/00 still on schedule for July.

A little more later.