Monday 13 August 2012

Volatility back to the March 2012 lows

Even though the main indexes were lower in the morning, the VIX was still lower by around 4%. The close of -7% to 13.70, is just a fraction above the March intra-day low of 13.66.

The current VIX level is truly bizarre.


VIX, daily

VIX, weekly


Today's action in the VIX makes little sense. We're now just a few weeks away from what will very likely be a very turbulent September-November trading period.

Arguably, loading up on further VIX calls (Nov/Dec month) seems like an obvious 'sit in the background' trade position to take on at this point.

However, only with a VIX into the 19s..and more importantly, over 21, can the bears start to get a little excited about the months to come. For the moment, this remains an utterly fearless market.

After all, everything is fixed in the economy now..right ?
More later.

Closing Brief

Markets closing just a touch lower, although tech managed a positive close, no doubt due to AAPL +$8





Nearly a flat close, after morning losses of around 0.5% or so. Nothing much really to get excited about.

The VIX closes in the 13s....bizarre.

More across the evening

3pm update - minor chop

Quiet conditions still... VIX weak, but a lot of the chess pieces are lining up now.

sp, daily5b


A top seems to be in place, seeking the first bigger move lower tomorrow into the 1380s

More after the close.

2pm update - weak afternoon

Trundling mostly sideways, not much going on really.

VIX breaks into the 13s, for the first time since the March low.

sp, daily5b

VIX, daily


Quiet day. Look for more dynamic moves tomorrow, where a close in the 1380s is viable.

*metals weak, Gold just recently broke lower.

1pm update - moderately weak Monday

Both the Rus'2000 small cap, and the Transports have been weak for days (and months on the larger cycle), it seems the main indexes are starting to play catch up - or rather 'catch-down'.

VIX is acting weird still, completely weak..showing no sign of closing net green.



It would be really good if the H/S formation plays out, but...thats a mere hope. First things first, lets see if we can break into the 1360s later this week.

Interestingly, this is now day'3 down, on the MACD (blue bar histogram) cycle. At the current rate of decline, we're due to go negative cycle in 3 or 4 days.

So, look for bigger declines, probably this Thursday.

12pm update - small declines...the start of something

The declines remain very minor, but they certainly help reinforce the idea that the last 3-5 days have been a topping formation.



You can see the first floor is the lower wedge/channel of 1382 today...which will have risen to 1400 by this Friday.

I find it highly improbable -considering the daily charts, that we'll be somehow still over 1400 by Friday.

So..the wedge will break to the downside, and that opens up a move into the low 1360s. A good 40pts downside across the next 3-5 trading days.

Time for lunch !

11am update - rainbows have the answer

The indexes are showing a little underlying weakness. From a broader perspective, we're putting in a pretty good top on the daily cycle. We're at least due for a move down to the 1360s.

VIX still weak, it sure is a long way up to 20.

SP, daily, rainbow

VIX, daily, rainbow


The rainbow charts (elder impulse) help to make trend changes a little more clearer sometimes.

We can be clear that on the indexes - all of them, we now have a top, and the first signs of downside momentum.

So far though, VIX showing zero sign of a turn.
At this point though, both the bigger weekly and monthly cycles remain bullish.

Bears have a real problem until we are back under 1340...preferably 1300.

10am update - VIX reversal

Despite marginal opening index declines, the VIX has fallen 4% lower, almost breaking into the 13s. Note that the low in March of 13.66 However, as I type, VIX is recovering, and currently showing a classic hollow red reversal candle - 'often', a sign of a floor.

With no real news due until tomorrow, no major moves should be expected though.




A quiet start to the week, I do expect things to get a lot more active with each successive day. Its opex on Friday, so...expect some chop!

Pre-Market Brief

Good morning. Futures are marginally lower, but again, so far, its all noise.



The above is one possible scenario for the next week or so. I am not very confdient of it, but its something to keep in mind, especially if we do get a bounce in the 1360s.

Good wishes for the week ahead