Thursday 2 August 2012

Volatility falls...huh?

With the indexes opening significantly lower, the VIX could have been expected to open up 7-10%. Yet it opened flat..and soon turned marginally red. I'm really not sure what to make of it. It is something I've seen before, but its pretty rare to see a red VIX whilst the market has swung from sp+10 to -13 in pre-market.



VIX, weekly


A bizarre day in VIX land, and the close was just as bizarre, -7%

Bears will need to see the VIX +21 to confirm the declining indexes, amid increasing concern about the underlying economy.

*most VIX calls were actually up today, which probably tells you something is certainly not right with the quoted VIX today.

More later

Closing Brief

A mixed close, with a baby bounce continuing. We have clear bear flags on the hourly index charts. We may open briefly higher on Friday, but arguably any such moves are to be expected.





Bears can not complain about the latter day bounce. Considering we were up dow 100pts pre-market, this close is more than acceptable.

Now we have the FOMC, and the ECB out of the way. Next up...the monthly jobs data tomorrow morning.

More across the evening

3pm update - closing hour battle

It could be a bit of a battle in the closing hour. We are certainly some kind of baby bounce, and we're moved from 1354 to 1362 already. First resistance is the 10MA around 1368.

VIX remains weak, -3% or so.

sp'60min, rainbow



I'm staying focused on the bigger picture, bears must see 1340 broken within a few days to build further downside momentum.

*I am looking for a lousy jobs number in the Friday pre-market, and am seeking a close in the 1330s.

2pm update - holding onto losses

Finally, we have some significant declines, and they are holding. The one concern remains the VIX which continues to completely weird-out many traders.




VIX is trying to level out and begin a new rally, but so far...its still damn weak. I just don't know what to make of it. The VIX is just a calculation, and I can't imagine the Puts are cheaper today!

Best bear case remains a close in the 1330s by the Friday close. If thats the case, then a first attempt to break below 1300 by middle of next week is viable.

1pm update - sp'1340 first target

With the market starting to finally recognise that neither the Bernanke, nor Draghi are going to do anything in the near term, its time for a major down wave to begin.

We have the daily cycle rolling over yesterday..and today is good confirmation. We should (in theory) get further declines tomorrow, with our first attempt to break the lower channel of 1340.

Bears should be seeking a Friday close in the 1330s.




1325 remains a key target - as best seen on the weekly chart.

A few daily closes under 1325..and we 'should' then get 1225/00 somewhat quickly.

Ohh, and FB is in the teens, hahahahahaahahhahhaahha

*the really laughable issue is that its still overvalued by around 70%

12pm update - a real mess, but with underlying weakness

Despite the real mess that was the opening 90minutes - with a very weak VIX, the underlying weakness is again showing itself in the broader indexes.

Most important of all..the daily charts are clearly confirming a rollover which started yesterday. Remember that the last down cycle was ruined when Mr Draghi made his Thursday morning comments. Lets see whether this different.


VIX, daily


Bears need to see a close <1340 sometime in the next few days. 1325 remains an even more important target.

As it is..VIX remains completely bizarre, and is only just now marginally higher.

11am update - something smells nasty

So...Mr Draghi upsets the market...the Euro falls hard, the sp' swings lower by 20pts....and we open with the It was a severely bizarre open for the VIX, and now we've seen a pretty hard reversal, many stocks are already green.

I'm not one to say it often, but this sure smells of the infamous PPT doing their meddling. I could theorise they wanted to make it look like Draghi did not collapse the markets. How they managed to open the VIX flat/marginal red though, right from the open, I can't fathom.




We'll probably never know for sure if there are covert teams out there with unlimited balances to 'kill any decline' will. Yet, considering everything...its looking like 'they' might have been out there this morning.

Even the factory orders data sucked, and we still rallied back up.

A truly crazy market to be part of.

Stay tuned.

10am update - whats up with the VIX ?

The market is clearly rattled from the lack of action from Mr Draghi. Yet...more than anything this morning, whats up with the VIX ? Dow was -100, and VIX -2% Huh?  I've seen plenty of weird VIX action over the years, but this really is one of the strangest VIX openings I've seen.

VIX, 60min



VIX is not confirming the opening falls, and remains a very major problem for those bears seeking major falls across the day. I'm really not sure what to make of it.

Regardless, what is clear, the daily charts ARE rolling over, so I'd look for declines into the Friday close, but it will probably be a real chop-fest.

stock of the morning...

KCG, who are paying the price for their incompetence and dark-sided use of the auto-trading algo-bots.

Pre-Market Brief

Good morning. ECB keeps rates unchanged at 0.75%, although some are still looking for some kind of annoucement about help for Spain/Italy.

Jobless claims: 365k  vs 370 consensus

*Factory orders are due at 10am




We appear to be set to open much like yesterday, sp +5pts to 1380 or so.

There is little question that we are rolling over on the daily cycle - as lead by the Transports and Rus'2000 indexes, yet we're still trading within a channel that is now five weeks old.

Good wishes for Thursday trading!

Knight Capital: whose algo-bots went wild yesterday...-50% pre-market....have reported a loss of $440 million due to their crazy bots!

UPDATE 9.04am

Draghi notes that he does NOT have the authority to do anything else.

Market swings from a brief peak of sp+10pts to -10pts.


Is sp'1391 the top of this cycle?

With the FOMC failing to announce further QE today, the question remains, was 1391 the top of this cycle?


We have the very first sign of a rollover on the daily MACD cycle, and we're now a moderate 16pts below the recent peak. Even a move to 1340 will not break the key lower channel line though. So, bears really should not get overly excited, even if we're trading in the low 1340s this Friday afternoon.

Only with a few closes in the 1330s..and preferably <1325, can the bears start to consider the more bearish outlook.

sp,daily4 - the 'more bearish outlook'

The above chart is indeed the somewhat bearish outlook .It is pretty much as bearish as anyone could argue for right now.

The problem the bears face is that in each of the previous collapse waves (May 2010, and July/August 2011) both had a noticeable catalyst which really spooked the main market. In 2010 we had the first concerns about Greece, and last summer we had the concerns over the US fiscal deficit/debt mountain.

So, the bears really need a catalyst to whack this market back through 1340, then 1325..and ultimately the strong 1310/00 resistance zone. I would think most doomsters could reel off a list of dozens of 'big ticking problems' out there, but, I do admit, for any major down cycle to occur, bears need a motivating issue in the days and weeks ahead. At the moment, other than 'Mr Market waking up..and realising a US recession is likely', I can't see anything in the near term to cause 'severe market upset'.

One final chart to close the day...

VIX, weekly

VIX weekly remains one of my favourite bigger picture charts, and you can clearly see, if we do see VIX +22, then it'd be suggestive there is a reasonable chance of at least a mini explosion to around 35/40 within the next 3-6 weeks.

Both Thursday and Friday are filled with more econ-data, and we have the ECB who will doubtless do some meddling (even if its just words) this Thursday.

The initial first target is clear. Bears need a break under 1340, bulls merely need to contain things within the channel.

Goodnight from London

Daily Index Cycle update - rolling over

Today was certainly a bit of a choppy one. The close was not exactly inspiring for the bears, the declines were again only relatively moderate.

Yet, on the daily MACD cycle, we are starting to rollover, as lead by both the transports and the Rus'2000 small cap.





A very bearish day for the tranny, which even put in a nice close below the hugely important 5000 level. Two more daily closes under 5k..would be a real warning that the long awaited wave'3 lower might finally be underway.

See the MACD cycle on the Sp' closeup chart, it IS rolling over. Bears should arguably seek at least one major down day of sp -20/25pts either tomorrow or Friday. So..the target would be somewhere around 1350..preferably in the 1340s.

A close in the 1330s at any time would break the lower channel, and portend for possible severe falls next week.
A little more later.