Tuesday 25 September 2012

Volatility jumps (finally!)

With the indexes losing around 1% today, the VIX responded in the late afternoon, closing around 9% higher in the mid 15s.

It has to be noted, a VIX under 20 remains largely unreliable, and the 'doomer bears' can't get guns blazing short..yet.




The one really bearish thing for tomorrow and the rest of this week, the VIX daily MACD cycle has a good few days of upside in it. There is no reason why we can't hit 16, and 17/18 remains viable by Friday.

VIX 18, would probably equate to sp'1420, and right now, that's where I'd guess this cycle concludes.

Those doomer bears looking for a 'collapse wave', need to see a lower high in the next index up cycle. So, we should look for the next high as anything sp<1474. That will be something I'll bring up again in the days ahead.

More later

Closing Brief

A superb end to the day for the bears, a reversal day no less! Even the VIX showed some support, and the daily VIX cycle is highly suggestive of further index declines for a few more days.

The only issue is how low bears can push in this cycle, right now, a break under 1400 still seems out of reach.

The closing hour cycle charts...





Finally...some action, its about damn time!

The big 1440 will surely be tested in AH trading, and there is a fairly good chance we'll gap under that at the Wednesday open. A break of 1440 opens up the very important 1420 level.

The VIX closing +10% certainly confirms that Mr Market is finally starting to wake up from its semi-coma.

I remain short, seeking an exit in the 1430/20 zone, later this week.
More later

3pm update - a close under 1450 ?

Here we go again, seeking a close under 1450. The one thing the bears do have on their side - the MACD cycle, which is due to go negative in the next 3-6 trading hours for most indexes.

Sp'1440 seems viable later this week - although I said the same thing last week, urghh.




So, low volume 'battling it out'. Considering the bulls rallied at the open..and failed, I'm inclined to believe they had their chance, and a close under 1450 is viable.

If that's the case, 1440 will likely be hit tomorrow, the only then is whether that can hold.

Sp'1420 and VIX 17/18 by the Friday close -as the low of this cycle?

VIX remains a little higher, +3%, but we're still only in the mid 14s. Even a move to 16 would still be a historically low level.

I remain short, seeking an exit later this week.

Back after the close.

2pm update - need to take out 1450

With volatility so low, the moves are still very minor, its very hard to guess general direction, other than the usual 'primary trend is UP' mantra I regularly tout.

What is clear, a close under 1450 would open up a test of 1440, and offers the small hope that 1420 will be hit within 3-5 trading days - before yet another up move begins.




So, we're declining, but its slow, and there remains a near total lack of downside momentum.

The daily cycle -see MACD (blue bar histogram) is now at least half way reset, and the market is just 20pts off the high.

A logical projection is this cycle will level out in the 1440/20 zone.

With things as they are, I can't see the more important recent low of 1397 being taken out for some weeks yet.

back at 3'

12pm update - toppy, immediate term

Its looking a bit toppy on the smaller cycles. A red close is still viable, but I sure am not looking for anything under 1455.




I suppose the bears can at least say the VIX hasn't broken the recent 13.50 low, as if that is something to be joyous about.

So, looking for late day weakness, but it likely won't be much.
Time for lunch...back at 2pm :)

10am update - morning chop

Good morning.A choppy open, we could easily turn a little red in the next hour, but really, its all noise again. There appears near zero downside momentum, and the VIX confirms the near complete confidence in the market that 'everything is just fine'.




Action in the indexes is very much like the latter half of August. Sideways chop for over a week, and then... BAM, further moves higher ! So, the question would be, whats the next excuse for a major gap higher into the 1480/90s ? With the QE3 decision out of the way, maybe earnings will come in 'better than expected'?

Frankly, its looking pretty bad for the bears. The only negative remains the transports and Oil, both of which could close the month in a pretty bearish way.

Even sp'1440 right now looks a stretch.

Back at 12pm

Tranny - still red and under the big 5000

Despite the transports rallying 1% today, the monthly trend is still warning of trouble for October.

Trans, monthly, 6yr, rainbow


With 4 trading days left of the week, month, and the third quarter, the tranny is still red

Primary downside target is 4500/4400 by the end of November. That would probably equate to around *sp'1350/25.

*The problem is if the market is in the mid 1300s by late November, that would have broken the post October 2011 low of 1074 trend/ lower channel. Without going into the 'what happens then', if the transports does continue to weaken, it IS a warning that can't be dismissed, even with the Bernanke now buying up MBS and soon - monthly $40bn blocks of unsterilised T-bonds.

The tranny will remain my primary red flag warning, lets see if we can close the week under 5k with a red candle. The secondary red flag is WTIC Oil, and I remain seeking a weekly close <$90. Stay tuned!

Goodnight from London

Daily Index Cycle update

Minor declines for the indexes, although the transports showed some significant closing gains - after its 6% decline across last week.





Frankly, its not looking so great for the bears. Both the Rus'2000 and the SP' look as though they are just creating yet another bull flag. We could easily trundle slowly downward for the rest of this week, - with the daily cycle fully reset, and then another ramp higher into mid October (SP'1500?).

As was again seen today, any down moves in the morning are very minor, never hold for more than an hour or two, and then up we go again.

What remains clear, until the VIX is back over 20, and until the SP' takes out the recent important low of 1397, the bears are fighting against a freight train driven by the Bernanke.

A little more later.