Friday, 13 July 2012

Volatility whacked lower

With the main indexes rising over 1.5%, the VIX was knocked lower by almost 9%, back into the 16s. Considering all the economic issues out there, and the endless black swans, VIX in the mid teens is truly bizarre.


VIX, daily

VIX, weekly.


Today's index ramp - as expected, does nothing to damage the outlook for VIX 35/40s in the coming 3-5 weeks.

The only issue is where will the VIX floor next week. 15s seem possible, if briefly.
What is clear...VIX calls..for Aug/Sept are unbelievable cheap right now. 

Closing Brief

Welcome to the weekend...just a closing update on those hourly cycles





Pretty surprising size of rally, but not..too unexpected. I am glad to be on the sidelines.
Have a good weekend

3pm update - wave'3 maybe

The hourly cycle looks pretty toppy, and very vulnerable to a minor last hour sell off, although the 15min cycle is now floored, and ready to go up.

Its all irrelevant though in the bigger picture. Its mere noise..and for most of those looking to capture the next big wave is not the time to start hitting buttons.



A little more after the close. I'm not sure what I'll post over the weekend, maybe something on the weekly cycles. end the week...

Wave'3 is coming...........maybe ;)

2pm update - sleepy Friday

Its starting to get somewhat tiresome this afternoon, can we close now? The VIX seems to be content to close -7% @ 17.00. That's pretty low, but a brief move to the 15s seems very viable sometime next week.




The hourly cycle would be suggestive of some sort of B' wave pullback, right now that would be likely Mon/Tue, which would also suggest a final C' wave up either late Tue or Wednesday.

We'll see. What is clear, the daily cycle MACD is turning back upward, and will probably put in 3 or 4 positive blocks, forming a third little tower...and then...we can collapse.

Its actually kinda exciting, if you think about the fun that might lay ahead in the latter half of July  ;)

1pm update - Friday afternoon churn

With JPM soaring around 6% higher, Mr Market is in a good mood today. Sp'1325 sure seems like a long time ago now! With the VIX being smashed lower by around 8%, its good to know everything is fixed again in the economy, and that new index highs are coming.

Ohh..if only. In around 3 weeks time, I expect the currently gleeful cheer leading maniacs on the clown network finance TV to be begging for QE3, with so many tears for the 'Bernanke to save the world'.


JPM daily

A big ramp, but I don't expect it to last. There remains JPM will eventually be the mother of all black swans later this year.


Its hard to say where the top will be, or when. Best guess is 1365/70, by next Tue/Wed, I'd certainly prefer a lower high <1374.

Yet, the Bernanke is speaking both Tuesday and Wednesday morning. Might the mood start to change as early as then ?

Hmm..anyway, that's for the weekend to consider.

12pm update - the ramp accelerates

We're almost at sp'1354 as I type, this ramp is clearly going to rattle almost every one of the bears out there. I can't blame was looking kinda good yesterday morning...but no. The micro-cycles were floored, and that's why I fled back to the sidelines..and will remain until next week.


A rather scary Friday ramp!

VIX, daily


VIX is confirming the ramp, and is probably going to fall for a few more days. Hard to say where it will floor, but 15s are viable..briefly.

Time for lunch!

11am update - the smarter bears are waiting

Just a quick update...the ramp is stronger than expected, clearly, no one should be short right now. Let those bull maniacs ramp it up! It will merely make for superb short-entry levels next week.



Check the MACD (blue bar histogram), I'm looking for a little tower to appear by the middle of next week, at that point, I'll start hitting buttons again.

More later

10am update - morning ramp

For the bears who are still short, this is not the best of starts to Friday the thirteenth. We'll soon be 25pts above yesterdays low, urghh

..but..its to be expected. I remember the same thing happened last July. Such a ramp short-stopped me out of a PCX short position (it was $24 at the time). Around 15 days later PCX was $12 (current price is 20 cents or so).

So..nothing has changed..and as expected. The smarter bears will be quietly waiting until next week to re-short.




I'm a little surprised at the size of the early morning ramp, but regardless, it makes for a good start to micro-wave'2..of the big'3.

This up wave should probably last until Tuesday, somewhere around 1355/65. No higher!

More later

Pre-Market Brief

Good morning. Futures are a little higher, sp+3pts, so we're set to open around 1337.

*JPM results are out, nothing 'surprising' from what I have read, not least with the $800 million accounting shuffle to make things look better than they are. JPM stock is largely flat.




I'm not expecting much today. Upside target? I suppose we could close around 1340, that might be where the market makers want to close the week. I don't expect 1350 until Monday though.

As seen on the hourly chart, I'm looking for a 3-5 day little rally, micro-wave'2 of big wave'3. It remains a concern that 'what exactly will be the catalyst' to get this market moving hugely lower..and for the VIX to explode into the mid 30s?

I don't know, but we'll soon see by the end of next week whether my outlook is right or not.

Good wishes for Friday trading.

Bigger picture...remains on schedule

Despite the smaller twist and turns since the market rolled over in April, the bigger picture remains broadly right on schedule.

sp, monthly


There is nothing bullish about the market from the broadest of perspectives. I find it almost impossible to conceive of new index highs without the Bernanke first appearing with a giant 750bn+ QE3. As I've noted many times before, I don't believe QE3 is viable until the main markets are considerably lower.

The next FOMC decision is Wed' Aug'1st, and I'm guessing that Benny won't be doing QE then either. That view has been reinforced after the last Fed' minutes were released, and it sure doesn't sound like QE is on the table for August at all.

Behold..the right shoulder

We very possibly do indeed have a giant right shoulder forming - as comprised of 3 waves. If sp'1374 is the peak of wave'b, then we are set for a very strong - and to many, unexpected drop into the sp'1100s within the next month or so. I would be a little surprised if such a target was hit, but if it was done over 3-4 months.

As for tomorrow, its 'Friday the thirteenth', maybe some of you will get lucky out there ;) 

Goodnight from London

Daily Index Cycle update - primary up trend busted

A very mixed day for both bulls and bears, both camps can take away something positive from today's action. Bulls saw a reasonable recovery from the sp'1325 lows, whilst bears did break the primary up trend and also broke under 1330..briefly.

IWM, daily

NYSE, composite




All the indexes punctured through the broad up trend today. The exception was the Rus'2000 (often the weird exception!), which did see a bounce off the lower channel.

As seen most clearly on the sp'500 chart, I'm now seeking a micro-wave'2 - that forms part of bigger wave'3. This could take us to 1350/60 by next Tuesday.

To be clear, I do not expect the recent high of sp'1374 to be exceeded. My best guess is that was the top of wave'2, and bears should merely look for a lower high next week - via the daily charts.

I currently remain on the sidelines..and look to re-short next Tuesday, ahead of the Bernanke who speaks next Wednesday morning.

A little more later.