Tuesday 4 September 2012

Volatility - black fail candle

A bit of a choppy day for the indexes. The index lows of the day were a little after the weak ISM data at 10am, and the VIX indeed maxed out at that time - putting in a classic black doom/fail candle.

A further decline in the VIX seems very likely, the key unknown is whether we fall into the 16s again.





The VIX weekly cycle still closed positive MACD cycle today, for the first time since the start of July. This is indeed a very bearish warning for equities - although the indexes look set for at least another day or two higher.

So, lets see if we can break into the 16s later this week, or whether the hourly cycle up channel holds.

Stay tuned!

Closing Brief

A bit of a choppy day, but as expected, those early declines never really held. Most notable of all today was the reversal in the Rus'2000 small cap, which saw a latter day surge. With the transports similarly showing a significant reversal, further gains should be expected across at least the next few days.

Closing hourly charts...





The closing hour was a little weak, but I don't think it matters. The daily cycles (to be updated later), are suggestive of significant upside for the rest of this week.

The VIX daily clearly looked toppy this morning, and I'm pleased to be merely a spectator again. There will likely be a much better re-short level sometime in the next 3-5 trading days.

More later

3pm update - daily cycle reversal

The minor declines are now largely reversed, and we're already seeing both the Transports and the Rus'2000 small cap show significant moves back to the upside.

The VIX could easily close a touch red, and that bodes very badly for the bears tomorrow, and perhaps the rest of this week.




I've A LOT of good charts to highlight later, today was kinda important, and so far, its going as expected. We seem set to get 2 or 3 days higher, the only issue is whether we can take out the previous 1426 peak, right now..that seems more likely than not.

More after the close

1pm update - crawling higher

Floor looks to be in, looking for 1410/15 tomorrow.



Nothing smells good right now, daily cycle is low, even best bear case is only 1385/90, and might already be floored.

VIX is clearly overbought, and a pullback to the 16s looks viable.

*notable stock movers, NFLX, FB, and BTU. Those coal miners sure could fall a long way yet.
back at 3pm

12pm update - battling it out

With near zero volume, it just appears this minor drop is just that..minor, and it won't last.



Its a bit of a mess, and I'm pretty sure than of the doomer bears looking for much bigger drops in the next few days are going to be real disappointed, if not worse.

The VIX is slipping back, I'd feel much more confident re-shorting with VIX in the 16s later this week.

Time for lunch

11am update - bounce due

Well, a subdued opening 90 minutes, despite the mark downs of 0.5% or so, this is not bear market weather.

The 15min' cycles are warning that a turn is due.




I bailed earlier from ALL short positions, considering the daily cycles, things just don't look inspiring right now. There is a very high chance of further nonsense talk from Draghi kicking this market back to 1410/15 at any moment.

I'd be inclined to re-short anywhere over 1410, but for the moment....I'm very content to be a spectator again.

Until we break into the 1340s..the primary trend is UP. Bears...beware.

10am update - lousy open

This is a lousy open for the bears. Considering the weekend news, we should be significantly lower, but no, we're roughly flat.

ISM and construction data due at 10am



VIX, daily


This is just no good for the bears. There is the very real threat of new meltup highs of sp'1450 this month, unless we get some sell side volume. Right now..there is nothing.

Even worse, we have a black candle on the VIX hourly and daily charts - at the top of the channel no less.