Thursday 19 July 2012

Volatility hits new low

With most of the indexes closing moderately higher the VIX was again weak. In AH trading the VIX closed -4% lower to 15.45. This was a new low for this down cycle, and represents extreme complacency in the wider markets.

With volatility this low...its clearly a sign of the underlying strength in the world economy, right?


VIX, daily

VIX, weekly


Another 4% lopped off the VIX. Just how low are we going? I suppose if sp'1385/90 - the extreme upper limit in my view to continue to the broader outlook, VIX might fall to 14.50 /14.00...briefly.

Bears - and those seeking to catch the floor (probably a crazy idea though), should look for a hollow red reversal candle in the opening 30 minutes of trading both tomorrow and Monday.

The TVIX, UVXY players again suffering with losses of 2 to 4%, I really can empathise with them, but we've yet to see any sign of an up turn.

Closing Brief

A pretty dull closing hour, there really isn't much to add, other than its opex tomorrow, nothing much to get excited about until next week.





Sp' is the leading index right now. The dow arguably completed a double top today, with the Rus'2000 (see IWM chart), lagging everything - which in itself is kinda unusual.

The VIX again closed moderately lower, confirming the very marginal index gains.

More later

3pm update - messy closing hour?

Today is turning out to be a bit of a tease for the bears. Early morning minor losses, quickly reversed..then the recent break below the hourly 10MA in the past hour..only to see a quick jump back up to sp'1376.

Kinda hard to guess the close, but with opex tomorrow, seems unlikely any drama until next week.




As noted a number of times in recent days, sp'1390s would be a real problem for the bears, it would just about ruin everything.

So, bears have a buffer zone of barely 10pts, and we know a morning gap higher of that amount is always viable for 'no good reason'.

Mr VIX is again red, and considering the current mini ramp...I'd be surprised if VIX can close green.

More after the close

2pm update - baby breakthrough

Well, today is flying by pretty swiftly so far. A lot of great econ' stories out there on Zerohedge, something to fill the time whilst the market is trying to churn out a top..and rollover.

Bears need to see a break through the hourly 10MA @ 1374...which is just about to happen as I type.




We've a break of the hourly 10MA, which is often a key initial sign.

Bears should seek a close under the 10MA by the close, anywhere <1370 is arguably a bonus, considering the relentless melt up that the algo-bots have been doing again lately.

Only with a break of the lower channel line..currently 1362 can the bears claim a turn is possibly starting.

*VIX about to go green again...we might yet close with a blue candle on that rainbow chart ;)

1pm update - battered bears

With the daily cycle still crawling higher, I knew it was going to be kinda difficult to halt this rally - even with anticipated lousy econ-data, but this market is again showing its ugly side. Near zero-volume...melt up. There are no buyers out there, its the type of action the bears have nightmares about.

The upper channel on the hourly, and the declining trend from the sp'1422 high in April allow a high of 1390 by the Friday close. We are now disturbingly close to breaking above ALL key trends.


VIX, daily, rainbow


So much for the initial blue candle on the VIX rainbow chart, we're now back to red again, and 'normal service has resumed'.

Just one more day higher, and we'll be at the threshold of destroying all the bigger downward trends that began in April.

Something for those damaged bears out there...

12pm update - wondering..and waiting

I'm patiently waiting for a clear turn lower. The hourly cycle remains set up to nudge prices lower later today.




You can see the third and final little blue tower on the MACD daily cycle..its about done. Look for a rollover 'any day'.

Time for lunch!

11am update - lousy holding together

Despite the set of lousy econ-data, the market remains holding together. I'm actually not too surprised. Any major big cycle will take a few days just to get some downside momentum going.

The hourly cycle remains primed to go negative cycle in the next few hours, so I'd look for increasing weakness as the day proceeds.


VIX, daily, rainbow


A long day still ahead, lets see if the moon maniacs (a fair few were suggesting July'19 as a cycle high, matching the new moon) were right ;)

VIX remains marginally green, and we do have the very sign of a turn..a blue candle!

Stay tuned!

10am update - wondering where the lunacy will stop

Opening gains, moderate, but certainly vulnerable to a reversal, at least for a few hours.

Phil Fed Survey:  -12.9  vs -16.6     Lousy!
Leading indicators: -0.3  vs +0.4   weak!
Existing home sales:4.37m  vs 4.55m  - weaker than expected

Update - econ' data all poor, nothing good there.


sp, daily5


We're at the top of the channel on the hourly index cycle, so...its going to be difficult for the market to hold these initial gains. 

With the lousy econ-data, early gains fading, but we're not collapsing. Bears have ZERO downside momentum right now. Its going to take a few days just to get a down cycle started.

VIX flips the low in for volatility?

More later

Pre-Market Brief

Good morning. Futures are showing sp +6pts, we're set to open @ sp'1379 or so.

We do have four pieces of econ-data today, the usual weekly jobless claims, but also leading indicators, phil' fed survey, and existing home sales. So watch for market direction at 10am. Any opening rally is set to either be reversed hard...or to accelerate at 10am. Considering the smaller cycles, we're more likely to fall than keep going higher, but then..we are in a broad up trend still.




Many out there seem agreed we will be getting stuck somewhere around 1375-90. A few suggest as high as 1400/05, and I've yet to see anyone seriously tout new highs >1422. I read around an awful lot, and everyone from the 'moon maniacs'/astrology traders to economic fundamentalists (myself..the latter!) are seeking a turn any day now.

Next week should be very different as the critical GDP Q2 data for both the US and EU is announced. I anticipate it will be again wake up the mainstream from their usual delusion that 'everything is gonna be okay'.

More than anything, look to the daily MACD cycle (blue bar histogram) to show a rollover. Of course, if today we close up again, that won't happen, but a smaller tower is exactly what I am seeking.

So, lets see if the bears can put a lid on this up cycle.

Good wishes for Thursday trading

On the edge of breaking the declining monthly trend

With the Sp' hitting 1375 today, we were within just 47pts - a mere 3%, of the April peak. If the monthly down trend - as marginal as it currently is, is to continue, we need to see some kind of significant decline by the end of this month (9 trading days).

Arguably, bears should look for July to close at least around the 10MA @ 1330. Best 'bear scenario' right now would be a close under the support zone of 1310/00. That is around 5/6% lower, its..possible.

sp, monthly


I'd seriously consider the bigger bearish picture - an outlook that I've held since the April rollover, in critical jeopardy if we see any daily closes over sp'1390. Any move over 1422 would of course completely destroy ALL bearish outlooks.

The remaining 9 trading days of July are going to be very important for the bears to show some 'attitude'. Bears should target at minimum, VIX 20 and SP'1330, far better though, would be VIX 25...and SP'1300.

Goodnight from London

Daily Index Cycle update - no clear turn yet

The indexes again climbed higher. Most notably, the SP' fractionally exceeded the recent 1374 peak -forming what could be a double top, although the other indexes are lagging somewhat lower.

There remains no decisive turn lower. With opex this Friday, we could merely trundle sideways into next week.





I expect the SP' MACD cycle to have displayed a clear rollover within the next 2 or 3 trading days.

The transports - the old leader, remains very weak, and a move below 5k is expected no later than the end of next week.

Near term Sp' targets...

First minor target is a break of the current hourly cycle up channel - which will be as high as 1370 at the Friday close. So bears only need a tiny decline to break the trend from the recent up move from 1325.

The second target is a pretty important one...1310/05. That was the old support level/zone that held in late June. A break of this area will open the door to a first attempt to break the June low of 1266.

Bears certainly have a lot of resistance levels to break below, but with the VIX at what is near 100% complacency, and with indexes now 100pts higher than the low from 6 weeks ago..there is pretty good risk/reward for those traders taking new short positions.

A little more later.