Wednesday 18 July 2012

Volatility still slipping

With the indexes all closing higher, the VIX again showed moderate declines, but did somewhat recover in the brief 15/20 minutes of AH trading.

The bears need to see VIX back in the 17s to break the near term down trend, and to show any initial sign that the bigger trend is about to start a major move higher.


VIX, daily, rainbow


There is absolutely no initial turn yet in the VIX being indicated. Certainly, we are at bizarrely low levels, although it could conceivably continue for some days to come.

First target in any up move remains VIX 20, and then 24/25.

The mid-term target for 'sometime in August' remains 35/40.

Closing Brief

We certainly didn't get even a flat close, never mind marginal declines. Oh well, as they say, there is always tomorrow.

The hourly index cycles remain in a broad uptrend, although we only need a Friday close sp'<1370 to break the present up trend, so all the bears need to do is put a lid on the current up cycle.

Those closing hourly index cycles....





Clearly, there is no bearish turn lower yet, the bulls managed to knock the SP' back to the recent 1374 high, but neither Dow or Rus'2000 index confirmed the move.

I remain short, and seeking a first move to break below the recent 1350/45 bounce level

More later.

3pm update - can we close marginally red?

From an hourly cycle perspective, we've seen a 50pt ramp in the sp' since the low last Thursday morning. Whether its a truncated fifth wave of big wave'2..or whatever, we are due for at least some weakness into Thursday.

I'm sure not expecting anything dramatic in the immediate 1-2 days, but bears need to see the first sign of a floor in the VIX, and a close under the hourly 10MA - now @ 1367.


vix' daily


A little sign of a slow rollover on the hourly MACD cycle. Its very minor so far, but it is slipping.

I remain short from 1364, looking for an initial exit 1345/40, although if we get 1355/50 tomorrow morning, I might take that ;)

More after the close.

2pm update - weakness in the afternoon

With Bernanke out of the way, what is left for the market now this month...and into August?

Doubtless, some will be looking for QE3 at the next FOMC Aug1'st, but I find that impossible to imagine. The first real opportunity for proper QE will be the FOMC of Thur' Sept'13. If thats the case, bears have two months to whack this nasty market lower. That is plenty of time.




Best bear case, marginal index declines, with a slightly higher VIX.

I'm not expecting too much this afternoon. Tomorrow morning offers the first real opportunity for the bears to show some strength. We've a fair bit of econ-data, so at least it won't be dull.

1pm update - double top? Urghhh

Well, the Bernanke is finally finished for today. Meanwhile, we've seen the algo-bots manage to kick the SP' to the recent 1374 peak.and briefly break it to 1375.

Neither the Dow, nor the more hyper-fuelled Rus'2000 index are particularly close to such equivalent levels.





Those bears who have been holding short since the recent 1325 lows will clearly be really annoyed now. I'm not entirely pleased either, but its..bearable.

From a MACD cycle perspective, it still looks okay into tomorrow. Bears will certainly want to see a close under the hourly 10MA.

A Friday close <1370 will likely mean a conclusion to the current wave...and on any basis..the bigger up trend since the sp'1266 low in early June.

With the Bernanke finished, lets see how Mr Market will manage across the remaining 3 hours of today.

More later.

12pm update - The Bernanke continues

Bulls trying to break the recent high of sp'1374.81, a few 'out there' remain suggesting a double top might be end result. Impossible to guess of course.

Bears should seek a close below the hourly 10MA, currently 1361..and rising. That still seems well within range by the close of today. A close under the broad up trend 1357/55 seems a little out of range.



VIX, daily

VIX remains in a broad -but slowing, down trend, bears will need a few closes over 18...preferably 20..just to begin a new up cycle.


As noted on the daily chart, first target for any decline would be to break the 1310/05 level - where we got stuck June 25'th. That is a good 60pts lower, 4%, so even the very first target is quite a way lower.

Conversely, we're now just 3.5% from the April highs of 1422.

Anyone want to go long here, and stay long into August?

* would seem that the legendary Maxine Waters has overloaded the live feed of Bernanke. That is probably bullish, right?

11am update - its time to go down

With the Bernanke now speaking, Mr Market is all set for a multi-day rollover.

I can only guess the opening 30minutes swing/bounce, was some sort of algo-bot stop sweep against the bears. Clearly though, the recent high of 1374 has so far not been taken out, so few (if any) big money bears will have got the kick.




The move to sp'1370 is now just 4pts from the recent high. It is going to be a close run thing today. Yet the smaller 15/60min cycles are pretty high now, and it will be difficult for the bulls to break.

The VIX is lower, but just 2/3%.....bears should be seeking a VIX green close.

*I am short, and looking for a first exit around 1340, which may come as early as later tomorrow.

10am update - Shorting the Bernanke

The Bernanke is due to speak very soon. Unlike yesterday where we eventually built gains later in the day, I believe today we'll slip lower, perhaps considerably.

As at 9.45am..I'm now short.




I am short from sp'1363. The hourly cycle looks primed for a day or two lower, and considering 'everything' out there...I'm fine with my entry.

So..lets see if we can break yesterdays low of 1345. A close under 1350 would be a major victory for the bears - it would break the up channel on the hourly cycle, and could confirm that the count is correct.

Those bears shorting today, will want to see a VIX close +7% or so. That would be some useful confirmation that we have indeed seen the top at 1374.

More later...

Pre-Market Brief - its Bernanke day...again

Good morning. Here we go again, today will once again be all about the Bernanke, who speaks to the House Financial Services Committee at 10am.

Futures are moderately lower, sp-3pts, so we're set to open around 1360 - that is still pretty high, and just 14pts under the recent peak of 1374.




So...when is this market going to drop? We've now seen around six full weeks of a broad up trend. There is mention in many other places of a 'necessary gap fill' around 1367/70. That would certainly make for a perfect top in this cycle.

I will look to short around 1367/70, if we can cycle higher today.
Look to the MACD cycle on the daily chart, the third tower will be pretty close to completing today.

*there are 4 pieces of econ-data tomorrow, and I'm inclined to be short ahead of them, but as noted, it depends on the early action this morning.

Good wishes for Wednesday trading.

VIX/SP'500 Fibonacci targets for August

To close the trading day, lets take a quick look at the outlook for both the VIX and SP'500 - as based on extrapolated 1.6x Fib extensions. The Fib targets are based on the notion of a wave'1 down..and the 'best bear case' of wave'3 being 1.6x as strong as wave'1.

SP, daily, fib levels

VIX, daily, fib levels


VIX 35, and SP' 1170 ? Hmm, I suppose it could be argued that those two targets kinda match up, although perhaps we'd have VIX 37/40.. if we break into the sp'1100s.

Its very difficult to say of course, but...those are the levels to keep in mind for this August.

*Remember, we have more Bernanke tomorrow at 10am. I will be very tempted to re-short in the early morning if can get an early bounce to around 1365/70..and level out on the 15/60min smaller cycles.

Goodnight from London

Daily Index Cycle update - almost there

Across the various indexes, its looking like we're just about ready for the rollover, and the first attempt to break the recent sp'1266 low.

The dow in particular is setting up a very clear H/S formation on the daily cycle.







A particularly weak day for the tranny. I'm not sure why this is, but the 'old leader' is probably just warning of trouble ahead - as it often does. We'll see if the rest of the main market catches up (or rather...down) in the next few days.

Whether sp'1374 holds, I'm really not too overly obsessing over. It is viable, but increasinly unlikely. The last real chance for 1375> is tomorrow or Thursday. Bulls need to keep pushing this market up..or it'll quickly fade - just as we saw this morning.

Under no outlook do I foresee the market breaking over..and putting in consecutive closes >1390.

If you think back to May..when the big wave'1 down began, I was noting the 'huge resistance zone' of 1375/80 -  that is probably still a factor in the next few days.

Those good bears who have been patiently waiting on the sidelines since the recent 1325 low, its almost time to start hitting buttons.

A little more later.