Friday 7 September 2012

Volatility whacked lower again

Whilst the indexes largely consolidated yesterdays massive gains, the VIX was whacked a further 8% lower today, and now resides in the lowly 14s.

The big question now is whether VIX breaks the low of Aug'17th of 13.30.



VIX' weekly


A huge - and possibly significant bearish engulfing candle on the VIX weekly cycle, with the VIX losing almost 18% this week. It could be signifying a huge new up move in the markets - the great anticipation of QE3 from the Bernanke.

Unless you believe VIX is going sub'10 in the weeks..and months ahead - with a 'booming economy', I just think this VIX move is another bonus to those bears who are bold enough to re-short next week. In option land, this VIX drop represents a huge discount for index puts and VIX calls.

However, as noted many times, until VIX starts put in a few daily closes in the low 20s, any index declines are to be dismissed.

More later.

Closing Brief

The main market closed broadly flat, although there was some interesting action in a few areas, especially the mining sector.

IWM, 60min




It still appears like we are setting up bull flags on the hourly charts, a flat Monday would make sense before a further leap higher on Tuesday.

I find it hard to believe we can put in any daily closes over 1450 next week, even if Benny does QE.

The hourly MACD cycle is now around 50% reset. Another 3-6 hours of flat prices, and we'll be ready for the next up move.

*bits and pieces across the evening to round out the week.

2pm update - quiet end to the week

The main market remains content to trade sideways into the weekend. There are a few notable exceptions , the miners are doing really well, many are up around 5-7%, some +10%.

VIX is -6%, and confirms the near term fearless market.




Sp'1445 remains the target for next week, I can't see a daily close 1450+, next week, even if Bernanke announced QE3.

I remain content to sit back, and wait for this current up cycle to rollover. That may be as soon as Wednesday. Will the Germans vote 'Nein' ?

More after the close.

12pm update - bull flag growing

Market seems content to trade flat today, and that will help make for a nice bull flag to take into next week.



Not much to add. It does look like a bull flag is developing on the hourly cycle, that could take all of Monday to complete.

I would find it hard to imagine the market breaking over 1450 next week, even if the Bernanke launched an open-ended QE - which I don't believe he will.

Regardless, no point shorting here, not least in options, which will decay across the weekend.

Back at 2pm

10am update - seeking a bull flag

The jobs data was pretty lousy, but that is clearly good news for this nasty market. With renewed hopes of QE, this market is battling higher, and many of those who vainly shorted yesterday are getting stopped out.

I'd guess we'll now make a bull flag - that will take us into Monday, before moving into the mid 1440s by next Tue/Thursday.




Another 'bad news is good news' day. 96k is good huh? That still doesn't even meet the 150/175k necessary just to keep 'real' employment stable.

*MACD (blue bar histogram) cycle on the daily cycle is now positive. Look at the daily chart, I've outlined a possible trend scenario for the next few weeks. What the actual price the next peak will be, that is too hard to say, but without question, immediate trend remains UP.

There is NO point shorting here until next week. Arguably, the most cautious bearish traders should wait until the FOMC of next Thursday.

I've a lot to say on the prospects (or lack of) of QE next week, but more across the weekend for that issue.

*notable moves of the day so far...the metals, Gold swinging from -$12 overnight, to +$31 a little earlier. I guess the Gold market is expecting 'open-ended QE' next week.

back at 12pm :)

Pre-Market Brief

Good morning. Futures are moderately high, sp +3pts, we're set to open around 1435.

*Jobs data: 96k /8.1% vs 125k /8.3% consensus. The revisions are often so large, these numbers are probably nonsense too.



My target is indeed 1445, so if the futures gains hold, then we'll only be a mere 10pts shy of my target.

Lets not too fixated on targets though, all we can say with confidence is that this is day'2 of an up cycle, and its probably going to continue until next Tuesday at least.

More across the day.

Primary trend remains UP

With the indexes soaring around 2% today, the bulls must be feeling pretty pleased with themselves. Yet, what about the bigger picture?

Lets close today with a look at the rainbow chart...

sp, monthly, rainbow


Stripping away all the usual chart stuff, we're left with a pure simple green candle for the sp'500.

We can be clear about this, the primary trend is still up. No matter what any of the doomers out there might wish to claim, the trend IS up. It is almost amusing how we are seeing claims of 'overbought', and yet its only day'1 of this new up cycle.

A very natural target for the bulls would be the upper bollinger band of 1467 - and that itself is rising. By mid/late October, the top band will comfortably allow 1500. So if the Bernanke or the Germans, fail to upset the market next week, sp'1500s are a very reasonable target for the autumn.

As for tomorrow, well, I'm not going to get too excited about the jobs data. It really doesn't seem to matter too much a lot of the time. We could open a little lower, and we'll still probably close green.

As permabear, I will merely sit back and watch. Lets see how high those bots - or even those rare 'real people' wanna keep buying this market.

Goodnight from London

Daily Index Cycle update

A strong snap higher for the market, confirming the bullish pennant that I'd been concerned about for some days. With the VIX falling -12%, the immediate trend is most certainly upward.

Most of the main indexes closed at or a touch above the spring highs. Considering this is just day'1 of this up cycle, we could go some considerable way further yet!

Nasdaq Comp




Some strong gains for the broader market, and clearly the bullish pennant theory 'get out of the the way bears' was indeed the right outlook yesterday. I sure feel glad I bailed at sp'1401, which looks a fair way down from here!

That MACD (blue bar histogram) cycle sure is useful sometimes. If you look at the cycle, we could easily trundle a further 3-5 days higher before we complete this new up move.

Regardless of whatever the jobs data is tomorrow, I still think we'll battle our way higher, target for next Tue-Thursday is around sp'1445.  So, we're only talking about 1% or so higher to go, its really not much, but it'll probably take a few days to claw to that level.

As things are, I sure won't be re-shorting until late Tuesday at the earliest, and there is some significant risk in that trade idea, with both the German court and FOMC next Wednesday and Thursday respectively.

Busy days ahead!

A little more later.