Wednesday 17 October 2012

Volatility fractionally lower

With the broader market showing further moderate gains, the VIX closed 1% lower, to remain in the low 15s. It remains an entirely fearless market, despite the uncertainty of a US election, and the looming fiscal cliff. Incredible.


VIX' daily


There is not much to say really. The VIX remains low, the intra-day action remains muted, a few percent higher, then a few percent lower..its all mere..static.

Until VIX puts in a weekly close >20, any index declines are to be entirely dismissed.

Closing Brief

The broader market managed a third day of moderate gains, despite some underlying weakness from IBM and INTC. Mr Market is comfortably holding within a few percent of the QE spike highs. The VIX continues to confirm that this remains an utterly fearless market.





So, we're holding around 1% from the highs. With opex this Friday, and no econ-data of significance, this nonsense looks set to at least hold the gains for some days to come. If we're going to push to new highs, that looks more likely next week.

Regardless of the strong equity market, we continue to see increasing economic weakness, both IBM and INTC most definitely support that notion.

More later

3pm update - a typical bounce off the hourly 10MA

Once again the bears will be annoyed with the little tease this afternoon. For a brief moment it almost looked like the indexes might go red, but no, the hourly 10MA held as soft support, and the algo-bots continue to melt this market upward.

This rally continues despite IBM -5%, and INTC -2%, after all, who needs a strong tech sector, when we have the Bernanke?




We could easily close flat across the broader market, but a few doji-candle days sure won't mean the bears can have any confidence about the weeks ahead.

Only if the recent 1427 low can be taken out, can the bears have any hope that the critical secondary rising support - in the 1350s will be broken this Autumn. Right now..that is just such a long way down.

back after the close.

2pm update - afternoon weakness

Bears are being teased with a minor pullback this past hour, and it probably is just that...a cruel tease.The hourly 10MA @ 1456 will provide some good support, just as it did yesterday.

The VIX remains muted, and is largely flat.



So, a little intra-day pullback, but it certainly hasn't broken the near term trend/channel.

At best, bears could hope for a flat doji-candle close, of which we might well have a series across the next few days into opex.

Despite big companies like IBM and INTC showing underlying evidence in Q3 of weakness, Mr Market is still comfortably holding itself together.

As many agree, major falls before the US Election now seem very unlikely.

back at 3pm

12pm update - the rally continues

The main indexes are again comfortably holding onto their moderate gains. The SP' is just 1% from breaking new highs, although things are looking overbought on the hourly cycle charts. The VIX remains 1% lower, but its clearly all static.




Day'3 up in this cycle, and there is very little to suggest tomorrow will be any different. Considering its opex this Friday though, sideways chop seems more likely, than a break to new index highs.

Many out there seem resigned that there will be no index falls - certainly below the recent sp'1427 low, until after the election. I would tend to agree, except that we have Q3 GDP data next week, which if it comes in <0.5%, I would find it almost impossible to imagine that even this twisted market would be able to ignore it.

After watching last nights 'debate' (although I find it hard to use that word for such a clown-esque event), it is remarkable to realise that some will be buying stocks on the basis of either a Romney or Obama victory.

Time for lunch!

back at 2pm

10am update - mixed opening

Good morning. Its a mixed open, with the Dow lower - due to INTC and IBM slipping over 3%, yet the other indexes are all fractionally higher. Certainly, the mood is a little different out there today.

The VIX opens 2% higher, but..its a small move, and to be largely ignored.





As I noted yesterday, considering the 2 day mini-surge, and the fact its opex week, the best the bears can  hope for is probably sideways chop, with some doji-candle days. Its looking like that is very likely still.

We're only 1.5% away from breaking new index highs, and it sure won't take much to push the market up. more chatter on a likely Spanish bailout is certainly helping prop things up.

Only if the VIX manages to close +5 to 7%..minimum, could I take it even a little seriously. As it is, it could easily close red, and merely continue its current general 5 day decline.

back at 12pm

Bulls have to keep pushing higher

This latest two day rally from sp'1427 to 1454 is pretty impressive, not least when you consider the uncertainty of an election in a mere 3 weeks. Bulls need to put in a higher high >1474 in this new up cycle, or there is a very real danger of putting in a psychologically important major fail.

sp'daily3 - news to come

sp' weekly, 2yr


The bigger weekly cycle is continuing to warn of weakness - despite the last two days of gains. The underlying momentum (see MACD, blue bar histogram) cycle, is still set to go negative within the next 2 trading weeks.

With the June up trend broken, what is now vital to focus on is the secondary rising support - from the Oct'2011 sp'1074 low. That rising support is currently in the sp'1350s. So, the bulls have a huge 100pt buffer zone of comfort.

Considering the looming fiscal cliff, and GDP data for Q3 - which in my view will probably come in <0.5%, Mr Market is going to need to adjust to the downside across the next few months.

The good thing - and it is a good thing, at least there is no fear of 'ohh, what about the Bernanke, he might launch QE3'. I'm forever glad that uncertainty is now dealt with.

Looking ahead

The next few days could be mostly chop, not least since its opex. There are a few pieces of econ-data, but there is nothing too important. If the bulls get stuck below the recent high of 1470 (and QE spike high of 1474), then things could get real interesting. The last time we put in a marginally lower high was July 2011, and I think most remember where the market went from there across the next 12 trading days.

So, lets see if the bulls can make it 3 in a row tomorrow, or whether we get stuck, and start putting in a few doji-candle days.

Goodnight from London

Daily Index Cycle update

A second day of gains for the main indexes, with the SP' closing in the 1450s, which is clearly a significant victory for the bulls. However, we are still below the QE spike highs, and if the bulls fail to maintain this rally - and put in a higher high, the next wave lower could be a deeply severe one.






A day where the market jumped in the opening hour, and largely flat lined the rest of the day. Yet, the bears can be understandably very disheartened at this second rally day. We're now just 1.5% from breaking new highs - at least on the SP', and the bull maniacs are preparing to pull out their sp'2000 hats for 2013/14.

Fiscal delusion

It is remarkable that the market is comfortably holding in the 1400s, despite the looming crisis. It is indeed very much like July 2011. Now, I'm not yet claiming we're going to go collapse to sp'1200 (although that would remain the natural doomster target), but Mr Market has a real problem to address.

If the fiscal cliff measures are not largely delayed, there is a potential hit to GDP of somewhere between 2 and 4%.

Now, if you consider the very likely possibility that Q3 growth will be barely positive (data- Oct'26), then are we looking at a doomster outcome of Q1 2013 GDP of -5% ?

Regardless of the trading opportunities that will doubtless be there in the months ahead, I most certainly look forward to seeing how the market, and indeed the cheer leading maniacs on the clown network TV are going to cope if things do indeed..fall off a cliff. I imagine most of them will need to be put on suicide watch, not least if the SP' breaks secondary rising support - currently in the sp'1350s

Bullish popcorn...or in my case...chocolate.