Tuesday 10 July 2012

Volatility...starting to increase

With the indexes having a nice reversal from the opening gains, the VIX closed a moderately 4% higher to 18.72. In the scheme of things, volatility remains low. Only with a VIX over 20 can anything 'exciting' be expected to happen.

VIX, 60min

VIX, daily, rainbow

VIX, weekly


We have the first green candle on the rainbow chart, and that is arguably the most bearish aspect of the market action seen today.

First target remains 20, then 21.50//22.00. VIX'22 is viable by late Friday.

The bigger cycles still suggest VIX 30s..even 40s within 3-5 weeks.

Closing Brief

A very difficult day for many, not least yours truly. The opening gap broke above the bear flag..and all seemed lost by 10am. Yet..it failed...and the rest of the day saw a very impressive reversal that even took out the first line of 1340.

What is paramount to keep in mind right now, bears need to see a break of the lower channel line (see daily charts) around the 1330/35 level.

The closing hourly index cycles...





Bear victory..but need further declines <1330 to clarify things..along with VIX'20

More across the evening, on what has been an important day.

3pm update - ...clear as crystal

A short message to those bull maniacs chasing the open higher, and especially for those day-traders not using good stops...


Bears need a break under the lower channel line of 1330. I suppose a move to 1334 tomorrow might just about qualify as a break, but frankly, I really want to see <1330s to have any confidence of the door opening for much lower levels across the next few weeks.

VIX, daily, rainbow

A green candle on the rainbow chart, bears have something here to be pleased about!


A difficult day for many, even though we're still only talking about a swing of 1.5% or so.

VIX is starting to show a little hint of more interesting things to come, a break into the 20s tomorrow would be the first sign for the bears that 1374 'may' have been the top.

As I kept saying last week though, until we see sp<1305, the bears can not get confident that wave'2 (if that's what it is) is complete.

More after the close :)

ps. I think Mr Wonka would have been buying some of those VIX calls this morning

2pm update - moody bulls

Those bulls who bought the open..and who aren't using stops will be getting real moody about now. We're around 15pts lower from the sp'1361 first hour peak.




VIX is marginally green, but we're still only in the low 18s. Bears must see VIX 20' just to get 'something' started.

I'm still not expecting anything dramatic today, not least whilst the VIX is so low. First downside target is sp'1340, then 1335/30.

At the current rate of downtrend, the daily MACD cycle will go negative no later than Thursday morning. So if we're going to have a chance to punch through the key 1330 level, Thursday morning would be prime time.
More later.

1pm update - which way?

So.......which way we going? Are we really stuck at 1350..and headed one last high around 1375/90, or..is this nonsense going to break 1330...and flash lower under 1300 as the algo-bots get spooked?

Bears really need a close under the daily 10MA, currently 1350. A close of 1345 or lower, would be very useful.

sp' daily5


Most indexes remain in what are pretty clear bear flags. The spike over the flag this morning was indeed a nasty fake out.


Bears should also seek a VIX green close to confirm any closing index declines. With 3 hours to go..this one is too hard to call.

As it is, I remain short, looking for an exit around 1330/35, and would then reassess any intra-day bounce.

Recommended viewing...from Bloomberg, ECRI chat, with Tom Keene.

*and I would agree..we are probably already now in a recession...as is of course Japan, UK, and the broader EU.

12pm update - mixed cycles

Waiting for a decisive turn in the 'bigger picture' can be a real pain, today is a good example. Opening moderate gap higher...bears get kicked...bulls sucked in....then...reversal. Everyone annoyed..well, aside from those few who shorted the opening move higher.

Daily cycle - today is day'4 down, still suggesting at least a touch of the lower channel of sp'1330 or so, but the hourly cycle is a mess, and the weekly is still inconclusive.

We remain in a broad up trend..but currently in a down cycle, which may..or may not break the lower channel. There is NO clarity yet.

Sp' daily5


A real mess of a morning, it still seems like there is still a high probability we'll at least test the lower channel line this week, whether we break it..that's the ultimate issue right now.

VIX is red again, so thats another problem for the bears.
One notable issue ..again, IWM, black candle, warning of the opening fail. I wasn't watching closely enough.

Time for lunch!

11am update - urghh.. what now?

This market is messing with everyone today. Was it just an opening fake out? I am getting really tired of this latest nonsense!

sp' daily5

A break of the daily 10MA - now @ 1350, would be 'useful' for the bears.


*ignore the count, things are completely unreliable today. The only sure 'known' is that 1335/30 zone is key breakthrough territory for the bears.


A confusing mess, if we can 'somehow' magically hit 1335 at any point, I'm bailing out of this madness. At least for a little

The daily cycle suggest downside.
The hourly cycle is a real mess, we could still close higher than the open, and yet still close much lower.

I'm sure the day-traders are having fun with today though..........I am not. 

10am update - another waste of time

The opening move higher looks like its more than mere noise. A move over last weeks peak of 1374 now seems very viable. So it would seem, all the bears got was a 30pt move lower.

Upside targets 1375/90, within 3-7 trading days.

sp' daily5

VIX, daily, rainbow


The bigger picture still seems clear, but once again, it looks like those seeking some dynamic down side action are going to have to wait

Most annoying though, this could mean no major down moves for a few weeks. This latest bounce could easily last 5-7 days, then flat top for a week, before a move lower.

The only marginally bearish aspect right now, the VIX is holding up relatively well.
Regardless, with no econ-data due, it really isn't looking any good now for the immediate term. 

Pre-Market Brief

Good morning. Those bears who went to bed with hopes of a significant gap lower will be understandably annoyed as they check the futures wheel this morning. From sp-7..to +6pts, we're now due to open around sp'1358/60, this is not exactly a great start.

It seems the flip higher was due to better than expected UK manufacturing data, although this market would use almost any excuse for an overnight mini ramp.

As things are, its still 'minor' gains, so lets see if the bulls can keep the market green this morning. There is no econ-data due today. There is some possible news later today about what the German constitutional court will decide on the EU bailout. I'd really not hold out any hope that will be a 'bearish' factor.




Bears need to put a lid on this overnight nonsense quickly. The bear flag on the hourly charts would suggest we must not go above 1360. The crazy thing is that's just 14pts shy of the high a week ago. We've really seen no down move yet of ANY significance.

So....lets see if the early minor gains can be erased, and if we can still close red..for the fourth day running.

The crucial line in the sand remains sp'1330. Only a break/close in the 1320s can the bears start to get excited that a major down cycle is underway.

More across the day.

Waiting for the big bear flag to break

To close today, lets look at a couple of the weekly index cycle charts.

NYSE Composite, weekly, 2yr

Sp'500, weekly, 2yr


The weekly charts are still looking bearish (but then, I'm inclined to 'see' that), ha.

Since the April rollover (as seen even more clear via the monthly charts), we've had a wave'1 lower from 1422 to 1266, and now a wave'2 higher from 1266 to 1374 (last Tuesday peak)- that has lasted around six weeks.

...so, a wave'3 awaits? I'd certainly say..YES!, but...its still viable the market may well wish to mess with the minds of the bears. Unless we break sp'1330 in the next few days, there is still a very high chance of a further move higher. It doesn't have to be a higher high in the 1375/90 range, but it could still be a a bounce that stops out a fair few of those bears currently short.

I await a break below sp'1330 in the next 2-3 days. If VIX can break over 20, then the door is open to the first proper spike in volatility to around 24/25.

Goodnight from London

Daily Index Cycle update - slightly bearish

The indexes fell very moderately, on what was a very quiet Monday. Tuesday will surely be a little more dynamic! The slightly higher VIX does confirm the near term continuing downside since the sp'1374 peak last Tuesday. So far though, we're only 22pts lower from that peak, there is a lot of potencial downside from these levels.






All the main indexes declined today - so at least they are all in sync, with no 'weirdness' going on.

Sp' clearly remains in a broad up trend since the June sp'1266 low. Bears need to see a break under 1330 to confirm what could be a giant bear flag (the wave'2) as many out there also believe.

A break of 1330 should offer a quick move down to the big 1300, where we'd surely see a brief bounce. So, it is very possible we'll be trading around 1300 by this Friday. Its well within range, and we're only day'3 down from a MACD cycle perspective.
A little more later...