Thursday 23 August 2012

Volatility picking up a little momentum

The VIX closed higher by almost 6% to around the 16 level. This remains a bizarrely low level, not least considering all the macro issues out there.

With the main indexes closing lower by 0.8% or so, the VIX only made moderate gains, but gains nonetheless.


VIX, daily

VIX, weekly


Some pretty interesting turns are starting to develop on the bigger daily and weekly VIX cycles.

There are some very obvious breakout levels.

Bears should look for a weekly close >18. That will be very difficult to achieve tomorrow, even if the market loses a further sp'12pts to the next soft support level of sp'1390.

So..look for 18/20 VIX next week, but whether it can close at that level, that's one hell of an unknown issue. With the Bernanke due to do his speech at the hole next Friday, its really any ones guess how next week (and the month of August) will conclude.

Closing Brief

Reasonable declines for the bears today. We didn't close under the big 1400 psy' level, but 1402 will suffice. That is a fair 24pts lower from the Tuesday high of 1426.

The closing hourly index charts





Indexes all look fine for further downside in the coming days, the only issue is how far can we get down to..1380, 70, or even a straightforward bounce off the post June trend line of 1350.

The VIX closed up around 6% to 16, that is still a very minor move, but its at least something for the bears.

More later.

3pm update - near term trend remains down

Hmm, we're 4pts off the earlier 1400 low, but the hourly cycle trend is certainly still downward.

A close under the 1400 would be a bonus right now.



A close under the hourly 10MA of 1407 would certainly be preferable.

It does look likely 1390 will be hit sometime tomorrow, it sure will get tricky if we move into the low 1380s though early next week.

More after the close

2pm update - underlying weakness increasing

Market declines are holding very nicely for the bears.

It appears the market is further upset after a report via FOX clown network that 'Romney thinks QE3 is NOT the way to go'. Commodities - including even the metals, are now suffering as a consequence.




I've been watching CNBC clown network, and just earlier, the two hosts were seemingly coming around to the notion of 'no chance of QE before the next FOMC of Dec 11/12'.

That is FIFTEEN weeks away! Can the algo-bots hold the market above the key 1354' level until then?

It sure is going to be a battle this September between the QE believers, and the deflationary doomers.

*the weekly VIX is also turning somewhat doomy, but more on that later.

12pm update - minor declines holding

Market holding onto minor declines. Its certainly nothing for the bears to get overly excited about, we're still above 1400 after all, and the VIX remains smashed in the mid teens.



You can clearly see the rising trend/channel on the daily chart..the 50 day MA is actually rising right underneath the channel!

With the 200day MA rising too @ 1333, the bears have an almighty task ahead of them, just to get back to the low 1300s this September.

Underlying momentum is now slightly negative, so I do anticipate net declines between now and the Friday close, with perhaps a bigger move on Monday (weekend doomer news?).

Yet, lets be clear...attaining any daily closes under 1380 will be very difficult, and considering the Bernanke is next Friday, I'd guess there is more chance of a bounce off the trendline..than a break through it.
Time for lunch...back at 2pm.

11am update - kinda weak

The declines are still not that significant, but they remain a nice reversal from the overnight futures of sp+5pts.

VIX is starting to creep higher, the door is starting to open for a move to 18/19, but that is still far short of what is necessary to break the previous cycle high of 21.




A minor bounce seems underway, but unlike yesterday, there is no Fed report to act as an excuse for latter day recovery/ramp.

Bears should still be seeking a close in the 1390s, with VIX in the mid 16s.

10am update - morning weakness

Good morning. So, overnight futures of sp+5pts have turned to opening losses of -5pts. Hmm, its all relative noise though. Where are we going to see a decent sp-20/25pt day? It all seems a distant hope.




First downside target remains the same as noted yesterday, sp'1390.

The ultimate break level remains sp'1354, which looks way out of range for the bears this month.

VIX remains pretty flat, only rising 3% so far.
Stay tuned!

Eyes still on the tranny

Whilst the main indexes like the Sp'500/Dow'30 do their thing, it remains important to keep in mind the old leader. - the Tranportation index, aka...the tranny.

Transports, weekly

Transports, monthly, 6yr


As the monthly shows, the key levels are very clear, bulls will seek a monthly close over 5500, bears will want a monthly close under 5000 (the 4000 level is the long term ultimate support).

So, lets see how we close August, as things are, it looks like we'll again close within the trading range that has held since the start of the year, its pretty remarkable really.

Goodnight from London

Daily Index Cycle update

A bit of a messy day. Some indexes closed marginally lower, but the declines were nothing of any significance. The primary trend remains up, although underlying upside momentum is certainly very weak now.

Dow, daily

Sp, daily5



So, the Fed minutes kinda helped inspire the cheerleaders on the clown network TV to suggest 'QE is near', although they been playing that tune for oh so many months now.

The key levels are pretty clear. Bulls will be seeking a new high >1426, and the bears are absolutely desperate to break the previous cycle low of 1354. Frankly, the latter just doesn't look likely in the near term. There is simply so little downside momentum, the market is practically dead, and we still have the threat of the next huge round of QE sometime in Q4.

Are we really going to see the Fed launch QE with the SP' over 1400, and Oil close to $100 ?

With just 7 trading days left of August, its kinda unsettling that early Autumn will soon be here. The one upside though is that at least volume is likely to increase...a bit, right?

A little more to close the day later.