Wednesday 25 July 2012

Volatility still set to explode

With the morning gap higher on the indexes, the VIX quickly fell 5%, but then briefly went green as the indexes all fell to pieces. The latter day index rally again saw the VIX fall almost 7%, before a moderate recovery into the close.


VIX, daily, rainbow

VIX, weekly


The VIX has formed a nice base in the 15s, and has already passed the first target of 20.

Bears should look for VIX to break 21 either Thursday or early Friday. A break of 21 opens a fast move higher to around 24/25.

The mid-term outlook remains VIX 35/40, with sp'1225/1170.

More later.

Closing Brief

With an intra-day double top - as clearly seen on the 15min cycle, the market was weak into the close.

The closing hourly charts...





Not the most inspiring close, but we did see a nice rollover on the 15/60min cycles..and it does offer some good potential for Thursday morning.

Holding confidently into Thursday, seeking sp'1325, and 1310/00 by the Friday close :)

More across the evening.

3pm update - closing hour rollover, or more meltup ?

Mr Market is slowly melting upward, and has indeed broken over the morning gap higher.  VIX is lower by 6%, nothing major..yet, but for those short, its starting to get a little annoying.

sp'15min, rainbow



Certainly, there is no descernable turn lower yet, but we could lose at least some of the current gains in this closing hour. The question is, why would anyone wish to be long here? The daily cycle is still very much warning of serious trouble ahead.

I hold sternly into Thursday, seeking a break of the next level @ 1325...and then 1310/00 by the Friday close.

More after the close.

UPDATE 3.15pm ..looks like a rollover

sp15min rainbow

2pm update - secondary bounce

Market is attempting to take out the earlier gap higher peaks. A fail at these levels would make for a very nice intra-day double top.

VIX is starting to slip away a bit, which is a little concerning.




Despite the current gains, I'm looking for closing hour weakness, although the stronger indexes - Dow, and Rus'2000, could still close green.

Bears should seek a flat close for the Sp', with VIX preferably no lower than 19.

Regardless, I will hold short into Thursday. I'm trying to keep the bigger picture in mind, seeking sp'1325, preferably 1310 at the next exit.
*we have key econ-data both tomorrow and Friday, little of which will be good for the bulls.

UPDATE 2.30pm

sp'15min - double top, ready to rollover?

1pm update - next stop 1325, then 1310

Mr Market seems content to largely churn today. Whilst the indexes are mixed and prices go sideways, the hourly cycles are resetting themselves.

VIX is moderately lower, but is still holding up reasonably okay.




Bears should be okay to hold into tomorrow, my target remains 1325, and then 1310...for the Friday close.

12pm update - weak market

Mr Market remains pretty mixed, the dow and rus'2000 keep flirting with green, and yet there really is nothing bullish out there now. The fact that even AAPL missed is again a reminder that the US is slipping into recession.



Weak market!

Holding come later today by the close with VIX'22.

Will hold sp'1310 for the Thursday open. 'best bear case'.

Stay tuned.

11am update - Selling every bounce

The surprisingly opening gains..have not so surprisingly failed to a large extent.

VIX could explode into the mid 20s at any point.




From a MACD cycle perspective we getting kinda close to a bullish cross, but..even if we  get one, I don't think it'll last very long. Certainly nothing the bears holding short across multiple days should worry about.

I will hold short until the Thursday open at least - where I'm thinking there is a fairly good chance of a significant gap lower..maybe even as low as 1310 - if we can break 1325 today.

10am update - hitting buttons

Market is showing the bounce many bears were looking for. How high will the bounce go? Sp'1345/50 seems pretty difficult. Its looking very weak already.

sp'15min, rainbow



*Short from 1338.
I might be early..urghh..but this market smells of major weakness.

Pre-Market Brief

Good morning. Err...futures across the 3 main indexes are truly bizarre.and are a massive turn around from last nights lows of dow -100pts, after AAPL disappointed.

We're now set to open dow +100pts.. sp+6pts...but the nasdaq is -0.25% !




Well, I was desperate for an opening bounce..and it surprisingly looks like we are going to get one.

I will look to re-short somewhere around 1345/55, although I find it somewhat difficult to believe 1355 is viable.

Underlying pressure is down,and my Friday closing target remains sp'1310/00.

Good wishes for what will surely be another crazy at the casino...also known as the NYSE.

We're on the way to the sp'1100s

There is no longer any question about the near term outlook. The last three days of price action are very bearish, and the VIX is completely confirming this initial move lower.

Dramatic declines are ahead, along with the VIX exploding into the 30s..perhaps 40s. There will be VERY strong bounces along the way (today's closing hour was again a pretty fierce reminder), with multi-day bounces at times. The primary trend though, is down. 


A close view of the daily cycle shows the very strong three daily bearish candles. We're now decisively below the lower channel of what was a wave'2. There are plenty of levels to take out just to get to the recent 1266 early June low, but they'll all be swept away across the days and weeks ahead.

We have three consecutively smaller towers on the MACD, and the third was indeed the prime opportunity to short this market last Friday.


The bigger view is a very bold outlook, but sp'1100s are the target zone.

*The 1.6 Fib extension targets (as recently posted), are sp'1170, with VIX 35.

**the latter post-Sept/Oct scenario is entirely dependent upon the actions of the printing maniacs at the Fed -and other central banks. If they do enough QE, then we rally into the Spring, otherwise, it'll fail across mere weeks, and then we collapse below the critical sp'1100 level (see monthly chart) - as Mr Market realises the US will join the recesssion club.


Today was too annoying for me to trade. It is frustrating on days like today when the market just doesn't give a clear enough re-short opportunity. There was simply too much risk of indeed the last hour did indeed show.

Looking ahead to Wednesday

With AAPL earnings providing a somewhat stark miss, the market is set to open lower. Yet, we did close pretty strongly. Lets see if the underlying cycles will play out, or if we just drop from the open..and keep going as we did today.

I will look (somewhat desperately) for a re-short opportunity, but if we open 1325/20.or will be difficult to find an acceptable entry.

In any case, I wish to be short ahead of the Thursday and Friday econ-data. I believe that gives the bears their first shot at breaking the recent support zone of 1310/00. If we can close below 1300 by the Friday close, then it is indeed time to set Condition One throughout the bear fleet.

Goodnight from London

 ps...a reminder on the bigger keep everything in perspective!

sp, monthly, 6yr, H/S formation theory