Wednesday 7 November 2012

Volatility close to exploding

Whilst the main indexes saw one of their biggest closing declines in a year, the VIX did close higher, but somewhat less than what would normally be expected. The VIX rallied in the brief AH trading period,  closing  8.5% higher, @ 19.08





First VIX target remains a daily close of 20/21.

Any intra-day explosion >26, and there is imminent likelihood of a flash crash to at least sp'1345.

*I re-shorted at 2pm today, holding overnight, seeking sp'1380, with VIX 20/21 as my next exit target.

However, primary near term (1-2 week target) is sp'1345, with VIX 24/26.

Closing Brief

The main indexes closed lower by around 2% - with an especially weak closing hour, making it the biggest closing decline in many months. The VIX closed only 7% higher, and remains below the important 20 threshold. Near term, it would be very surprising if we don't see a continuation to at least sp'1380, if not 1345.




*looks like the mini bear-flag snapped lower in the last 10mins. A bonus for the bears.

Today's price action confirmed a lot of things. We saw the bear flag - as seen on the daily charts confirmed, we saw a break of the key cycle low @ 1397, and we even briefly moved into the 1380s.

I think the size of the declines has surprised many, and there will doubtless be many wondering into this weekend whether the QE spike high of 1474 really was the top on a longer term perspective.

We have (yet another) Greek austerity vote later, that is around 6pm EST - just in time for when the futures wheel spins up.

much more later, especially focusing on those bigger cycles, which are showing where we are headed.

3pm update - closing hour collapse?

We have seen a very reasonable sp 14pt intra-day bounce, and that was very likely it for the bulls. Next downside target is 1380..where we have the big 200day MA. It is important to recognise that most other indexes have already broken the 200day.

It seems VERY unlikely the sp' can hold 1380 tomorrow.

Primary target..within days...sp'1345



I am short, and holding overnight, seeking 1380 early tomorrow morning, if not considerably lower, with VIX 20/21

*I hope the rest of you are having as good a day too.

back after the close

UPDATE 3.20pm

VIX is battling back..a close in the 19s would be useful for the bears.

2pm update - shorting the bounce

Market has seen a significant bounce from the morning 1388 low. Primary target - based on weekly charts remains 1345, within the next few trading days.



Short from sp'1400. I may be somewhat early, but we've seen a significant bounce from the 1388 low.

Seeking 1380 (at least) tomorrow morning.

back at 3pm

UPDATE 2.15pm

We're seeing some serious resistance around sp'1400 /dow 13k.
This bounce is surely maxed out.


I'd like to see a close <1395, which sets up a gap to 1380 at the Thursday open..possibly 'massively' lower.

1pm update - eyes on the prize..sp'1345

Mr Market is seeing a very natural bounce. Target is 1405/10. More importantly though, the key target - as based on weekly index cycle... sp'1345/40..within the next few trading days.




Standing by for a re-short, somewhere around 1405/ time will be 2pm or so.

Lets be clear, I'm gunning for a primary exit around 1345, but I'll try to trade in/out sometimes, to avoid any stupid intra-day bounces - like we are seeing today.

back at...2pm

12pm update - intra-day bounce underway

Market is significantly lower that most of the doomer bears could have hoped for. Even the VIX - which has lagged earlier this morning, saw a 10% gain, moving into the 19s.




There is a massive problem for the market now.

We've taken out the 1397 low, and that opens the door to 1345.

*I exited spy puts @ sp'1391 earlier, I am seeking a latter day re-short around 1400/10.

We have the Greek austerity vote later, and I wish to be re-short ahead of that.

The weekly cycle target of 1345 looks very viable within days.

time for lunch back at 2pm..or earlier..if 'any drama'.

11am update - first target remains 1397

The Dow has lost 13k, the Nasdaq Comp is well below 3k, and the sp' is battling to hold 1400. It seems a hit of 1397 is now viable today. Whether we hold that level today for the sp' seems largely unimportant. The bear flag on the daily indexes has been confirmed, we're headed down.




VIX remains subdued, which is very unusual with index declines of this magnitude.

As I've been noting for days, the weekly charts suggest a sp' target of 1345. That is viable within the next few days.

sp'weekly2, rainbow

*lower bollinger band @1343, a very natural target for this down cycle.

back at 12pm

UPDATE 11.01am

second warning...confirmed.
all thats left is the 200 day @ 1380

If that fails..then 1345...within hours.

UPDATE 11.40am closed spy puts @1391, seeking a re-short 1400/05, later in day

10am update - confidence is high

Good morning, and welcome to another four years of his highness. Despite the victory, Mr Market is significantly lower, which is probably a combination of post-election blues, and renewed concerns about the EU.





First target remains sp'1397, that seems somewhat tough to hit today, but the hourly cycle would allow it.

The VIX is barely up, but that is partly due to the loss of the uncertainty concerning the election.
Generally speaking, it looks like the bear flag has been confirmed, and we're on our way to 1380/75..if not 1345/20..within the very near term.

Confidence is high...I repeat..confidence IS high.

 Back at 11am

Post-Election Blues?

The market saw a rather embaressing ramp based on more election-rumour nonsense this morning. The big issue for the rest of this week, and indeed, into year-end, will be whether the market suffers a bout of 'ohh, its over, what now?'




When this post appears, we may already have a reasonable idea of who has won the US presidency. Regardless of that though, the charts continue to warn of...trouble..

The daily index cycles are still presenting clear bear flags. Only a daily close >1445/50 would negate the flag.

The weekly charts are also suggesting underlying weakness, with a very clear downside target of sp'1345/20 across the next few weeks.

It is hard to know how we'll trade Wednesday. The hourly index charts are starting to rollover, so there is some inclination for weakness. Yet, if there is any day when the usual rules don't apply, it will be tomorrow.

One thing is for sure, there will be a lot of delighted, but also VERY moody and disappointed Americans tomorrow morning.

Goodnight from London

Daily Index Cycle update

The main indexes closed higher by 0.75-1.0%, after some nonsense election related rumours in the late morning. The market managed to hold onto most of the gains, although there was a touch of weakness in the closing hour.

Nasdaq Comp




So...a day of gains for the bulls, but we remain within VERY clear bear flags on the daily charts for just about every index.

The underlying momentum - see MACD (blue bar histogram) has been resetting itself for six days, and is close to going + cycle. A third, could offer the elusive major wave lower that many of the doomers out there have been seeking since the QE spike highs of mid-September.

Any break under 1397 would open up a swift and slightly scary fast decline to somewhere in the 1345/20 zone.

The weekly/monthly charts are still suggesting weakness, but it is now a very marginal situation. Another 1-2% higher in the indexes, and those bearish signals will be nullified.

Lets be clear, the remaining 'serious money' on the short side, will have stops between 1450/74.

A little more later