Volatility...bizarrely low

Just consider for a moment the greater 'issues' out there right now. The indebted EU (ohh, and USA too), the looming 'US might slip into a recession by Q4', and the next earnings season which many recognise will probably showed distinct weakness in most sectors of the economy.

Then there was the crazy issue that the mere news wire headline of Merkel cancelling a Thursday evening press conference, started a hyper ramp from sp'1313 to 1362 in just 7 trading hours. This is one crazy market, and yet volatility as such remains very low.

The daily 'rainbow' - (Elder impulse) chart shows no sign of a turn even starting yet.  Volatility looks set to remain flat until at least Friday.


VIX, daily, rainbow

VIX, weekly

Summary

Unless the market can break to new index highs of sp>1422 in the weeks and months ahead, I will continue to seek a VIX exploding into the 30s..and 40s.

From an options trader perspective, so long as the VIX calls have at least a few months on the detonator clock, a long VIX trade should be pretty good from these levels.

Although from a weekly cycle, there is as yet... NO sign of a turn higher..and the more conservative bears will be waiting until at least next week.

Closing Brief

A quiet Monday..and an even quieter - and short Tuesday trading (we close at 1pm) is ahead.

The closing hourly index charts...


IWM

Dow

Sp

Summary

Mr Market managed a last hour micro-rally, with a marginal close over the FOMC sp'1363 peaks. So, all those earlier counts many were touting (myself included)..are invalidated.

It will remain a threat to the bears that we will see some further gains. The daily chart allows 1370/80 easily, and by the end of the week..1390/1400 is viable.
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What was important today, was the ISM manufacturing number. It was a clear warning of economic contraction (at least for the manufacturing sector) for Q3.
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Minor bits and pieces across the evening.

3pm update - closing hour doldrums

A little micro-rally, market wants to close over the FOMC weekly peaks of sp'1363. From a chart perspective, its important, although I don't much care a few pts either way.

What is clear, bears can't be confident until much lower levels achieved, whilst bulls will merely be content with low melt-up towards the big 1400 level.


sp'60min

sp'daily5, 4mth

Summary

It is a quiet day, most traders should probably just turn off their screens and come back on Thursday morning - when the ADP jobs number is released.

More after the close

2pm update - wake me up at the close

An almost painfully slow Monday afternoon.


sp' daily (8mth)

*I've added a blue count on the Sp' chart, it would become officially invalid if a new high of >1422 is hit. Right now, I still find that hard to believe as viable.


Summary

The daily 10MA is trying to cross back above the 50day MA It might manage to hold over for a few days until Friday.

Key issue. If the market falls back below 1300 within the next week or so, there is the very real likelihood of the infamous 'death cross' occurring - where the 50MA crosses below the big 200MA.

Naturally, the cheer leaders on clown network TV won't be mentioning this until the latter half of July, but as ever, I'm trying to keep ahead of them..although thats really not difficult most of the time.
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Good reading over on Market Ticker today.
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Get some tea/coffee...for the latest Schiff interview...

1pm update - market churn

Whilst the market churns today...I'll keep on throwing out those more important bigger picture charts....


NYSE Composite, daily

I really like this chart. You can see the H/S formation..which broke lower, then a bear flag..and finally flooring (with sp'1266) in early June.

We are still arguably very much within the tolerable range of a wave'2. A wave'3 by definition should at least take the market down to around sp'1225/00.

If this lunacy (since Thursday 3pm) can indeed level out at current levels, that outlook is still viable later this month.


meanwhile...

Sp'60min

Summary

A close under 1363 would be useful for the bears today, but I'm really not expecting anything moderately bearish until at least Thursday.

I suppose we could be putting in a double top - although Rus'2000 was well above equivilent levels on Friday, we'll probably know for sure by Friday.
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*Special note.
The NYSE will close early tomorrow at 1pm.

A link some of you might like to bookmark.
NYSE holidays

More later..on this rainy afternoon in London (at least Wimbledon has a roof now)

12pm update - eyes on the weekly

Whilst the market trundles sideways for probably the next few days, I might as well take a look at the weekly index cycles...


sp', weekly, 2yr

Dow, weekly

Summary

All indexes have the same bear flag formation. So long as we don't break new highs sp>1422, bears can still tout a wave'1 down..then wave'2..and awaiting a 3.

Arguably, bears need to see sp'1305 to confirm the original bearish outlook, that looks highly unlikely this week, not least if we start crawling higher again.

At least for the big money bears, stop levels are clear - loose 1423, tight..1390/1400, day-traders 1360/65

Time for lunch!

11am update - lousy econ-data

With the latest ISM manufacturing data posting a sub 50 number (aka, contraction), the market is again getting a reminder that the US economy is slipping back towards a recession. As I noted at the weekend, its likely than a recession won't be officially recognised until the GDP Q4'2012 data is released in April'2013. Even then, the rule is 'two quarters of negative growth', so, that'd make no official 'US recession' until late July 2013 !

So, we're probably still at least ten months until the 'mainstream' will begin to accept the reality.

Meanwhile, Japan, the UK, and the wider EU are already in recession. The USA will not be immune.


sp'60min

sp' daily5, 4mth

Summary

First target for the bears is the hourly 10MA of sp'1354. A close under the 10MA is probably the best the bears can hope for today, considering the daily cycle is still strongly positive.

As ever, good reading on the ISM data at Zerohedge.

Over the weekend there were quite a few touting a double top on the daily index cycle. That is still one viable outcome since the nonsense started last Thursday afternoon.

As it is, most 'bears' would probably do better to just wait until after the holiday.

More later...

10am update - Is it Friday yet?

We're only thirty minutes in, and I'm somewhat tired of this nonsense already. I'd rather just jump ahead to Friday morning, when the main action will begin with the monthly jobs data.

ISM manufacturing: 49.7  vs previous 53.5      ...VERY BAD.  


sp'60min

vix'60min

Summary

We have broken the FOMC peak - equivilent to sp'1363 on all the indexes now, so that invalidates the original count that many (myself included) were looking for.
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Q3 begins.....quietly.

More across the day, not that I'm expecting anything other than low vol' melt up.

Upside target of 1375/80 looks easy to hit. 1390/1400 looks viable as early as Thursday - via the daily chart.

Pre-Market Brief

Good morning. Futures are showing marginal gains, so we are set to break the FOMC highs of sp'1363 - although the Rus'2000 index is already well above those equivilent levels.

We have ISM manufacturing and construction spending data at 10am, so even if we do open flat, it probably won't stay that way for long..


sp'60min

Sp, daily5, 4mth

Summary

With it being a holiday week (Wednesday US markets closed), we are surely going to be even quieter than usual. It is very plausible we break upward to 1390/1400, even AFTER the jobs data - which I'm guessing will be lousy 

Only with a break back below 1305 can the bears get confident that a major move lower - (as originally expected), is possible. Right now, a 60pt fall this week..would appear very much out of range. Besides the daily chart would suggest at least a few more days upside anyway.

Good wishes for Monday!

Dollar...bull flag on the weekly

Another week looms, a holiday week for the US (market is closed Wednesday), but that probably won't mean any fewer EU rumours/news across the wires.

What will be interesting is where we end the week. We have the monthly jobs data, and I'd expect that to show yet further weakness in the underlying US economy. Market is looking for 90k gains, my best guess, 25/30k. That would probably be enough to give everyone a scare, but then the 'ohh, that means QE3 is coming' crowd will doubtless start their nonsense talk again.

What IS clear to me..the Bernanke can't be doing QE3 whilst Mr Market is at these lofty levels.

Anyway, lets take a quick look at the Dollar...


Dollar, weekly

Dollar, monthly

Summary

Across the next two trading weeks it will be vital for the Dollar to hold the DXY 80.00 level. Not only will it be the lower channel of the bull flag, but it is obviously a huge psychological level.

So, if $ holds 80.0 - despite any further index gains to sp1390/1400, then bears are still in with a hope that this nonsense market will fail to break new highs.

The contrary outlook of course, if SP>1422, then bulls should be looking for dollar weakness. It is not essential to a market rally, but it is usually the case.


Long term 'break' levels

Across the grander scale, you can see the ultimate level to break above would be 87.50 or so, or conversely 71.33 to the downside. Naturally, the 'fate' of the EU will probably be the determining factor in that. If the EU can agree to Euro-bonds before the end of this year, then I'd expect the dollar to level out from its current 15% rally since spring 2011.

If on the other hand the EU splinters, I'd expect dollar to soar. Worse case...Germany pre-emptively quits the Euro, leaving the PIIGS to pay their own bills! That would make for one scary time in the world capital markets, and huge economic shockwaves would occur.


Looking ahead

Futures are marginally lower, dow -15, as I post this, its all 'noise' so far, I'd dare say again.

As noted earlier, we do have econ-data every trading day this week, so there will be more data for the economists and longer term traders to be mindful of.

Good wishes for the week ahead!

Goodnight from London