Thursday 6 September 2012

Volatility smashed lower

With better than expected jobs data (if only the reality were true), and Mr Draghi saving the world (I'm sure he imagines it), the market above broke key resistance, and ramped hard.

Naturally, the VIX was smashed lower, closing -12%, back into the lowly mid 15s




With the up channel now ruined, its likely it'll take some days for this down cycle to complete. Primary target is somewhere in the low 14s.

Its important to note, that the bears sure don't want to see yet another lower low put in <13s.

The MACD cycle is clear, we'll probably trundle lower for a good 3-5 days, but it could be considerably longer, depending upon the German court and the FOMC next mid-week.

More later.

Closing Brief

The opening gains held very well for the bulls, and the large bullish pennant that has developed across the last two weeks was confirmed with today's snap higher.

Further upside is anticipated, target is sp'1445/50, probably sometime around Tue-Thursday.





As permabear, it is often too sickening to go long, so even though I expected today's move I did not go long. However, at least I got out of the way of this freight train, and was not short. If I could see this snap higher coming -as bearish as I am, it is surprising to see so many who did not. You won't see many finer examples of a bullish pennant, with the bollinger bands super tight.

Tomorrow could open a little lower, but regardless of what the open is, I sure won't be getting involved until later next week. Re-shorting around 1445 would be a very nice level to get back on the doom train.

More across the evening.

3pm update - holding firm

Mr Market is somewhat euphoric today, there is certainly something starting to stink, not least that which is leaking from the clown finance TV networks.

Everything is fixed...right?




Bull flag likely being set up on the hourly cycle, target is somewhere around 1445 by middle of next week.

More after the close.

2pm update - consolidating gains

It looks like the market is now moving into a consolidation phase, that could last just a few hours, or even continue across into next Monday. We have the big jobs data tomorrow, at worse we'll trundle a little lower early tomorrow, before closing higher.

Regardless, the daily trend is UP, with probably at least another 2 or 3 days in this cycle.


dow, daily


I'm looking for a little bull flag to appear on the hourly charts. Could take some hours, or even a few days to complete. Dow will surely break to new post 2009' highs.

*even though the tranny is up too, its still badly lagging, and is around 8% below the spring high. As noted last night, it remains a major provisional warning of autumnal trouble.

More in the next hour...

12pm update - up we go!

We have some very impressive gains for the bulls, but its probably on very limited buying volume. Regardless, follow through to the upside is likely across the next few days.




I am very content to sit back, and will seek a re-short, no earlier than next Tuesday. With the Bernanke due next Thursday, there is the real threat of continued meltup all the way into spring 2013. That is a viable scenario, and we'll know whether we can eliminate that by the Thursday close next week.

time for lunch!

More later at 2pm

10am update - bullish pennant confirmed

Good morning. With good jobs data and Mr Draghi announcing an unlimited bond purchase program, the market is breaking to the upside. The bullish pennant has been confirmed, and we're now starting a new up cycle.

All things considered, we'll probably break to a new index high (at least for the Sp') next week, somewhere in the 1430/40 area seems very reasonable.




So, up we go...and its nice to see my 'best guess' turn out correct.

My next guess is that we'll level out this new up cycle around next Wednesday. Interestingly, that is when the German court will rule. I will be hitting buttons next week, that's for sure.

What is clear, no one should be re-shorting yet, there is very likely going to be some serious follow through to this opening gap..

As I like to say, the patient the successful bear.

More later at 12pm.

Transports still warning of trouble ahead

Whilst the main market is comfortably holding itself together, the transports are continuing to show weakness, and today closed very poorly, failing to hold above the big 5k level.

Transports, monthly, rainbow

Transports, weekly


The rainbow chart gives a good overview of what is a very weak transportation index. So far this month, we do indeed have a confirmation red candle to help confirm the weakness seen in August.

First downside target is the June low of 4800, that seems viable as early as the end of September.

My primary target for Autumn remains the 4500/4400 zone. That probably equates to around sp'1300, although it might be sp'1200, if the main dow/sp indexes play 'catch-down' to where the tranny already is.

Near term up...mid-term..down

To be clear, my best guess for tomorrow is the start of a new up move, that might last all the way into the FOMC of next Thursday. Yet, the transports are an important issue as I've been noting for months. I will be very inclined to re-short later next week, especially if we're somewhere in the sp'1420/30 range. Whether we make a new index high or not, I really don't think it matters too much.

What does matter is how the transports close September. As has been the case since the Spring, bears need a monthly close under 5k. That would be a very strong warning of broader market weakness this Autumn. I'm certainly not expecting a collapse this Autumn- as some still are, but it remains possible we could briefly hit the low sp'1200s, before the Bernanke initiates QE3.

Goodnight from London

Daily Index Cycle update

The broader market closed largely flat, but the transports were once again particularly weak, and potentially warning of a snap below key support 'if', the ECB disappoints both European and US markets tomorrow.





We remain in what is a clear bull flag on the SP and Dow indexes, yet the Rus'2000 has already broken up and out, whilst the transports has actually close below the key 5k level.

Were the Rus'2000 small cap as weak as the transports, I'd be inclined to be short right now, but until the sp, breaks below sp'1397, its a very unclear situation, and I'll wait for a clear direction.

From a MACD cycle perspective, we are due to go UP for the next 5-7 days, all the way into next Thursdays FOMC decision (where I do NOT expect QE3 to be announced).

So, Thursday is ECB day, lets see what those maniacs decide. Its possible they'll do nothing of course, and yet still cause a market gap up due to some 'we'll do what is necessary' policy statement.

A little more later