Thursday 26 July 2012

Volatility slips, VIX fills the gap

VIX closed 9% lower today, although that is not surprising considering the ramp in the main indexes. The gap from the Monday leap higher is arguably now filled.


VIX, daily


The hourly cycle looks pretty floored, but the daily MACD cycle is threatening a rollover. However, in price terms..VIX seems very unlikely to go much lower.

Unless the main indexes claw above sp'1380, I hold to my mid term target of VIX 35/40.

Closing Brief

A strong close for the bulls, bears failed to kill the ramp..and instead, there is now the threat of new highs, unless the Friday GDP data spooks the market.

Bears have a real problem with this closing level.



*awaiting FB/AMZN earnings.

Friday will be VERY important. Bulls will understandably be clamouring for a break over 1380...with bears desperate to break back under 1350.

Those bears looking for much lower levels are going to need to see another VIX +20/30% day in the near term.

More later this evening.

3pm update - mysterious closing hour

Well, its time for the closing hour. Do we sell off - as yesterday, or do we ramp to close at the high of the day? This is more difficult to call than yesterday, since the size of the gap up is just so damn huge.

VIX remains weak...but at least its not putting in new lows..yet.

sp'15min, rainbow



So...where now? Today is clearly nonsense, hardly anyone would be deluded enough to believe otherwise.

The bigger cycles all suggest downside..still, but again, now that we're back in the 1360s..its getting borderline again. A break above the recent high of 1380 would be a severe problem for ALL bearish outlooks, and considering that July only has 3 trading days left...the monthly cycles would arguably start flipping to outright bullish.
*ohh, and don't forget, we have FB and AMZN earnings at the close

Something for the closing hour... a glimpse back to the 80s...when the market was somewhat less insane that now. A time when dividends and earnings were considered 'important', not the mere talk of some European central banker.

2pm update - intra-day double top..again?

Yesterday we saw a very clear intra-day double top, which of course did indeed get confirmed as we rolled lower into the close.

Lets see if they can crawl it higher to 1361/62 again..and then fail.

sp'15min, rainbow.


Merely...waiting...which seems to be the case most days.

If we close over 1362/63, I'd be pretty disappointed. As it is, 1350 seems out of range for the bears.
*FB/ AMZN earnings at the close.

1pm update - battling away

Bulls are fighting to hold onto their meaningless ramp. For the bears, this is not easy viewing! One major consolation for the bears today, VIX is now only -5%. In the scheme of things, that's not too much, and considering the dow was +220pts earlier, this is reasonably decline with still three hours left of the day.




There is no point exiting here, I'll hold short into next week if I have to. I won't be shaken out by what is a 100% complete nonsense ramp. Its definitely a day to stay in the bunker, and keep in mind the bigger picture.

*we have entertainment at the close..

Earnings from AMZN..and FB. Both of which could easily collapse 20%. FB though is especially hard to guess. I won't be playing either...but it will be fun to watch.

12pm update - time for the bears to play

Market snaps higher on utter nonsense, yet the underlying weakness - via the daily, weekly, and monthly index charts is showing through once again.

Its time for the bears to come out and play...




VIX is confirming the weakness, and its very viable that VIX will close green, with indexes close to red.

It really could just be one of those 'stupid' days, that we get in this casino.

So..we've had the Tuesday 3pm 'Fed chatter' mini ramp...and now the Thursday morning 'Dragi..I'll do anything' ramp.

Whats in store for Friday?

Stay tuned!

ps. everyone loves Panda bears, right ?  ;)

11am update - STFR

Sell the proverbial algo-bot rip. Mr Market really starting to struggle to hold it together right now. Any move under 1350..and we could even close red.




*note the black doom candle in the opening 30minutes...the VERY first sign of a failure.


It would be truly hilarious if we can close red today. As it is, I would settle for anything under 1350. That still allows a test of 1325 by the Friday close - when we have key GDP Q2 data.

More later.

10am update - a gift to 'some' bears

A very annoying start to the day, with Draghi of the ECB making 'comments'. Clearly, everything is again fixed in the EU, and market is going to make new highs..right?

Err. no. For those with spare ammo, today is a gift to short at much higher levels.




I'm short already, wrapped up in my flak jacket, and consuming chocolate to calm myself.

We've all seen this nonsense before..and it will probably last even less than the previous times.

For those chasing the open..and expecting >1380...good luck with that.

Pre-Market Brief - trouble for the bears

The market is ramping hard right now with still 2 hours to go until the open. Dow is +125, Sp+15pts, we're set to open around 1355.

The dollar is significantly lower by 0.5%, and it seems comments by the ECB Draghi are causing this latest nonsense. Urghhhhhhh




Well, I'm short already, so its time to put on the flak jacket again. No point exiting in the 1350/60s - I'm assuming the top is in at 1380.

Bears do have a fair bit of key econ-data today and tomorrow, so if that comes in rough, then the bulls will struggle to maintain these provisional gains.

More across the day.

Can July close under sp'1300 ?

To close today, lets take a look at the big picture again....

Sp, monthly, rainbow (Elder Impulse)

*Don't get too focused on the projected scenario on this chart, its merely one of many outlooks I am considering.


I think the rainbow style charts have something useful to offer. Here you can see we are awaiting the first red candle. For that to happen we need the MACD to go negative cycle, with a bearish cross. Right now, that does not seem likely until we take out the previous early June low of 1266. I think its important to note that in each of the previous two down cycles we did have one significant red's what I'm looking for again in this current cycle.

I would really like to see a break below 1325 either tomorrow or Friday. That will open the door to the first attempt to break what is the important support zone of 1310/00.

If we can close July under sp'1300 (August is next Wednesday...this year is flying so fast!), I have high confidence 1266 will quickly fail..and then the only issue is whether we floor around 1225/00 or 1170/50.

Looking ahead to Thursday

We have the usual jobs data, but also Durable Goods Orders, and some more housing data. I doubt either of those will be good, but as usual Mr Market is usually more about 'perception', than the underlying reality.

*There were some interesting stock moves after hours in AKAM, LVS, FB, and ZNGA

Both the 60/15min smaller cycles are all primed for a very bearish Thursday and Friday. With the daily cycle still weak, lets see if we can break the recent 1325 low. 

Goodnight from London

Daily Index Cycle update

The indexes closed particularly mixed today, but the broader trend remains downward. First target is the soft support of sp'1325, a break under there will open up a fast move to test the 1310/00 support zone.

If the bears can close under 1300, then a major collapse is viable later next week, to around 1225/00.

IWM (representing rus'2000)





Very choppy day. The open was broadly higher, but those gains sure were weak, and the SP' saw a very nice reversal lower to 1331. Yet,..we rallied to 1344..only to form a double top..and rollover into the close.

Certainly, everything is set up for the bears tomorrow. ALL cycles are now primed for big declines across both Thursday and Friday. Bears very much has a good opportunity to hit the 1310/00 by the Friday close.

Considering the drop from 1380 last Thursday, a 2-3 day bounce at the 1300 level would seem very reasonable, and right now, if we are around 1300 at the Friday close, I'd look for a little bounce to around 1325/30 by next Wednesday.

A few are suggesting there might even be QE3 next Wednesday. See video below. Personally, no way can I see that, my target for the Bernanke to fire his next bullet..Thursday Sept'13. Bears..make note of that key date.

A little more later.