Wednesday 24 October 2012

Volatility closes a little lower

Whilst the main indexes closed a touch lower, the VIX failed to go positive at all today. The VIX closed 2.7% lower @ 18.33.




Despite the red close, the bears should be reasonably content with how we closed. The hourly MACD (blue bar histogram) cycle is now fully reset, and there is good potential for upside across all of Thursday.

First target would be VIX 20'21.  A daily close >20 would be very significant, and would open up the secondary target zone of 24/26.

It is possible we could snap higher into the mid 20s, if we slip lower in the indexes to sp'1375 - where there is secondary rising support, and also the big 200 day MA.

more later.

Closing Brief

A small, but important victory for the bears. Tuesdays declines were significant, but the bears have managed to not only hold onto the declines, but successfully fought back the early morning rally. However, the VIX failed to confirm the moderate declines, and actually closed lower.





The main indexes closed lower by around 0.2% or so, but the transports suffered badly after NSC (train company) had lousy earnings.

All things considered, the close was fine for the bears, and sets up a gap below 1395/1400 at the Thursday open. If that is the case, a swift move to 1380/75 is possible tomorrow, with the VIX 20/21.

I remain short, and holding into Thursday.

More later

3pm update - Closing hour twitchiness

With the Fed statement amounting to nothing, what now? Bulls have a major problem, with the opening rally failing, and now they must be getting real twitchy about a new wave lower, one they breaks the important cycle low of sp'1397.




Market has been battling to break higher all day, but it has failed entirely.

The VIX MACD cycle is very low, and there is very significant upside potential tomorrow, VIX 20/21 seems very viable.

So, lets see if we can see at least a little market decline in this closing hour. A close <1407 would be a real bonus.

I remain short, and look to hold into Thursday.

More after the close

2pm update - awaiting the Fed

The FOMC are due to make a statement at 2.15pm EST. There could be a little volatile chop in this hour. Considering the 15/60min cycles - and when you take into account the earlier failed opening rally, I'm inclined to believe we could see a late day sell-off.




A Fed day is usually not one to be trading on. The volatility alone can make things too annoying for most. Yet, QE3 is already announced, there really isn't anything for the bears to fear until next spring - when I believe the Fed will increase purchases, at which time the mainstream will have realised the US is also in recession.

If we see a late day sell-off, and trade below yesterdays 1407 low, I will be tempted to close out before the close. However, we have durable goods orders data tomorrow morning, and I believe that will only add to the underlying moodiness out there.

Primary target remains 1395/1400, but a test of the 200 day MA @ 1375 seems increasingly likely, especially if we get close <1400 tomorrow.

Ohh, and don't forget...we have QE3 GDP on Friday.

back at 3pm.

12pm update - market still weak

Market showing some distinct signs of weakness. The transports, Rus'2000, and Nasdaq comp' are already red, and the Dow/SP' look set to follow as the day progresses.

VIX is a touch lower, and could close significantly higher.

sp'15min, rainbow


Transports, daily


I think the tranny is an interesting sign of underlying weakness, it is set to go negative MACD cycle by Friday morning, and I think that bodes badly for the Dow. We could be <13,000 within hours.

*weekly charts continue to warn that sp'1325 is viable..if 1397 is tested..and fails to hold. Other indexes already suggest it can't hold.

I remain short, seeking my next exit @ 1400/1395, with VIX 20/21.

Time for lunch...back at 2pm

10am update - failed opening rally?

Good morning. The market showed some opening moderate gains, but its starting to look like a failed rally already. There is no power behind the opening move higher. The VIX is a little lower, but it also starting to recover.




So...most of yesterdays drop is indeed holding, and the overnight gains are nothing significant. Bulls have a real problem again this morning.

RE: FB. Clearly, an epic short-squeeze. Nothing has changed..fair value remains $4. I look to pick up some Jan'2013 $18s, in the next few days.

I remain short, seeking an exit around 1400/1395...which could still be achieved by the close of today.

back at 12pm (unless we see major action before then)

Targets for the near term

With the main indexes closing lower, and the VIX back in the 18s, the bears are starting to build some serious downside momentum. A test of the 200 day MA on the main indexes seems very likely.

Lets take a quick look at the weekly and monthly charts, rainbow style!

sp'weekly, rainbow

sp'monthly, rainbow


So...what should the bears be seeking as an exit target?

In the immediate term, the daily chart suggest the cycle low of 1397..and then the 200 day MA of 1374. Now, its important to keep in mind that the Dow' and the Nasdaq are already very close to taking out their 200 MAs.

My 'best guess' - after taking into account today's significant price action, we should see the sp' test the big 200 day MA of 1374. However, it will be tricky, since as noted, other indexes are already close to doing that. It is possible the SP' might not hit the 200 day MA, and then the other indexes start ramping back into early November.

As ever, good short-stops will be 'useful' in the days ahead for even the most reckless permabear.

I will close with this somewhat bearish thought. If we can indeed break the 200 day MA on the sp' @1374, then there is a 'small' chance of a brief intra-day panic move to 1325. A good 'wash-out' is something that I think this market needs. I have other thoughts on what might happen if we can break down to the low 1300s, but its been a long day.

The monthly chart is suggestive of sp'1200/1175 as a 'doomer' floor late this year, but we'll need to see at least an October close <1380 to have any possibility of that.

Looking ahead to Wednesday

I remain somewhat confidently short, seeking my next exit around sp'1395/1400. We have housing data at 10am, and the FOMC decision, although at least there is no QE3 to be concerned about.

*keep in mind that Q3 GDP data is due Friday, I think if it comes in bad (I'm seeking <0.5%), Mr Market is going to have to price in the threat of an imminent US recession, and then we could have that 'wash-out' move.

Goodnight from London

Daily Index Cycle update

The broader market closed significantly lower, although the Rus'2000 saw only moderate declines, whilst the transports exists in a world of its own - climbing 0.8% The VIX confirmed the general index declines, and there is very likely to be further declines across the rest of this week.







Unquestionably, today was so very important. The closing hour Monday ramp was entirely negated, and we closed way below the 1420 target I was seeking. With the VIX almost hitting 20 earlier today, the market is actually starting to get really dynamic again. Finally, some price action!

other Key aspects of today..

-The Nas' comp closed <3k
-second major down day for many indexes, out of 3 sessions.

So, a good day for the bears, and certainly a relief after the closing hour nonsense of Monday. A gap lower sure makes things easier in many ways. I exited earlier, and sat out the rest of the day, looking for 1420/22..which never quite hit. The closing hour though sure looked weak, and so I was reasonably pleased to be back on the bear express train..destination sp'1395/1400, which might even be reached early tomorrow.

RE: Facebook (FB). The earnings were in line, and I will look to short that over-hyped nonsense in the coming few days. Fair value remains $4.

*I am short, seeking my next exit around sp'1395/1400, with VIX 20/21. I expect this to be hit no later than Friday morning, but it could even be the Wednesday open.

A little more later.