Volatility flat, despite index weakness

Despite continued weakness in the indexes for a seventh day the VIX remains very low, closing effectively flat, and rest @ 17.99


VIX'60min

VIX'daily

Summary

The price action of the VIX in the past two days is suggestive of a 5 wave move. Whether we've had a truncated fifth this afternoon, that's too hard to guess. Even if we've still to have a fifth wave higher early Friday, it won't likely be very much, and thus the indexes will probably be free to start a rally into next Monday.

Best guess, a pullback in the VIX, flooring next Monday, around 16.25/50


Strange days

It has to be said, the VIX action of the past few weeks has been truly strange. I won't even waste keystrokes on any of the somewhat more kooky theories out there, but suffice to say..the VIX is not properly reflecting what is going on with the price action of the equity indexes.

I realise the VIX itself is a mere calculation of option prices, but still....something sure seems 'off'.
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I don't expect VIX to break >20 for at least another trading week. Perhaps we'll see the much awaited VIX explosion in late Nov/early December?

For the near term, it just seems like Mr Market is still tightly holding onto the bullish hysteria of the past four years.

Eventually...the delusion will break...Mr Market will awaken, and then we will indeed the VIX explode into the 20s.and far beyond.

Closing Brief

Another weak day in market land, with the indexes closing a touch lower. The VIX continues to show a near fearless market though, and remains under the important 20 threshold. 


Dow'60min

Sp'60min

Trans'60min

Summary

So, my original primary target of sp'1345 was almost hit today, and that is pleasing to see. The multi-month target of sp'1200/1175 looks a long way down, but as the past few weeks have shown, when the market does fall, the declines can be quite fast and extended.

*I remain on the sidelines, waiting for the next minor wave higher, which right now looks to not conclude until next Monday.

bits and pieces across the evening...as usual.

3pm update - another closing hour sell off?

Here we are again, one hour left of the trading day, and the question is..who wants to go long this closing hour? Well, in that case, the underlying weakness should probably start to appear again.


sp'15min

sp'60min

Summary

Lets see what the bull maniacs got in them, this closing hour. Considering the past few weeks, a last hour ramp seems..highly unlikely.

I remain on the sidelines, waiting for the next bounce to re-board the bear train.

UPDATE 3.35pm Weak market..a close at lows of the day very viable. Would likely complete a major third wave decline from 1430 to 1340s. Pretty good.

2pm update - moody bull maniacs

This is day'7 down in the current cycle, and around 2 months since sp'1474. The deluded bull maniacs must be getting really moody now. When will the bears be contained...and by whom? VIX is weak, certainly no sign of an explosion >20.


Trans'60min

VIX'60min

Summary

The tranny on the hourly looks like its floored - although it appeared that way at the open. We should have a very clear up wave develop across the next 1-2 trading days.

I remain sitting back..taking a break, and waiting for a significant bounce before re-boarding the bear train.

In theory, there should be a good short-trade (wave'5) from around sp'1365/70 to around sp'1345/35, with the floor no later than early next Wednesday.
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I have very high confidence much lower levels are coming on a multi-month basis, but it will be difficult in the near term to discern the smaller trends. As they say..'if in doubt...get out!'


UPDATE 2.15pm

For those seeking one final move lower in the indexes..there is a chance of that.

The VIX appears to have completed a tiny 4' wave down..with a 5' left.

So, there is still a chance we'll sell lower (yet again) into the close, target would be sp'1345/40.

Regardless of that, I won't be chasing it, and remain content to watch these micro-moves play out.

12pm update - yet more weakness

Market continues to struggle, and is now just 4pts away from my original primary target of sp'1345 VIX is slightly higher, but it certainly is nothing 'explosive' yet.


trans'60min

vix'60min

Summary

So, we've broken into the sp'1340s. The bulls must be getting annoyed now. VIX is still way below the important 20 threshold. I can't see that being hit for some days, maybe even until next month.

I remain a mere watcher, I can't be part of this.

time for lunch, back at 2pm
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UPDATE, a very interesting video referred to me by a trader...

Yes, its from clown network, but still, worth a view...



If he gets fired or 'disappears' next week, we'll know why. ;)
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UPDATE 12.30pm  Dow, to test the lower channel ? Its about 100/125pts 'to go'

That would probably equate to sp'1340/38...later this afternoon

UPDATE 1.30pm Transports trying to break higher again. Very risky time for anyone still short.

11am update - chop higher into opex?

Market is still showing a little weakness, but its nothing significant, and the VIX is still red. The transports continues to show the cleanest waves, and is suggesting we battle (slowly) upward into Friday afternoon.


Trans'60min

SP'60min

Summary

Its choppy, that much I think everyone can agree on.

I'm not quite sure what to guess for sp' by the Friday close, but somewhere around 1365/70 seems viable. However, since its opex, we could even go a little higher, as the market makers try to erase as many puts as possible.

So, I'm going to sit it out until Friday afternoon, where I will look to re-short into the weekend, and seeking a wave'5 on Mon/Tuesday, to hit 1345/40, before a thanksgiving/holiday bounce.

back at 12pm
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UPDATE 11.15am  We're seeing another bit of weakness. Its a very tricky area to be trading though, I won't be part of it.  We could easily drop to 1345/40 at any point, or merely crawl higher to 1365/70.

I simply won't be part of this. Transports still says we're due an up wave into tomorrow.

10am update - shaky market

Mr Market is still a little shaky, and once again we've seen opening gains vapourise in the opening 30 minutes. Its possible we'll hit my original primary target of sp'1345/40 within the next few trading hours.


Trans'60min

Sp'60min

VIX'60min

Summary

I'm leading with the transports index this morning, since it has the cleanest waves lately. (I wish I was watching it yesterday).

Tranny is suggesting we are close to completing black'3, and will soon be going UP for two days, into the Friday close.

So...as things are..I'm looking to wait for a re-short until later tomorrow.

Best guess..sp'1365/70 by late Friday. I suppose we could be a bit higher than that, but regardless, I sure don't feel like hitting any buttons right now.

updates...as necessary.

10.04am lousy phil' fed number -10.

Transports is resting on the lower channel line, with sp'1352.. thats probably it for this wave.

I sure ain't going long though, and it sure it not the place to be short.

Pre-Market Brief

Good morning. Overnight futures has been mostly muted, everything is largely flat, although the metals are one of the weaker areas. The $ is a touch higher, and that sure won't help take the underlying downward pressure off equities.


sp'15min

sp'60min

Summary

So....yesterday saw further significant weakness, and there really isn't any reason why today should be different. The only issue right now is that opex is tomorrow, and the market makers will be desperate to ramp the market to erase as many of the 'in the money' stock/index puts as they can.

As it is, I am holding to my primary target of sp'1345/40, and will seek to re-short, perhaps today, if we get a bounce of some kind, somewhere around 1365/70 would seem 'best case'.

*I highly recommend you read last nights closing post, if you have not already done so. There is a lot in there, concerning the bigger trends, and also a secondary count that I am keeping in mind.
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UPDATE - jobless claims 439k vs 376k expected, clown network immediately blames 'Sandy'.

*ohh, and the EU is officially back in recession. What a surprise, .../s

Recommended reading: 'toasted channel' - deflationland

back at 10am

Primary target about to be hit

Another day of weakness for the US equity markets, with even the VIX starting to show some latter day strength. The original primary target of sp'1345 is very likely to be imminently hit. A multi-week bounce then appears likely, but putting in an absolutely critical lower high.


sp'weekly2, rainbow

sp'monthly3, rainbow

Summary

Both of my infamous rainbow charts clearly show a US equity market that is rolling over.

The weekly chart shows a wave'1 down..and I'm guessing it will indeed come to a halt around the 1345/40 area - where the lower bollinger band is. I would look to late June 2011 on the chart, to see the sort of bounce that I am anticipating.

The monthly chart on the sp' is also now sporting a very clear sell signal, the first red candle since Sept'2011, and thus confirming the provisional blue candle warning in October.


Breaking sp'1266

Lets be clear, this new multi-month wave lower is very likely going to exceed the June decline, which was without doubt, a very cruel tease to the bears.

Primary monthly target remains sp'1200/1175. That seems a VERY viable target, and could be hit within weeks.
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To be clear...

I am holding to the original outlook...

1345..then bounce...1400...although I'd keep a very open mind about the 'lower high'.. could be as low as 1380..or as high as 1425.

What I am now completely ruling out is a new index high >1474 by year end. I think we can pretty safely rule that scenario out. All those 'pros' on clown finance TV touting sp'1500s are seemingly going to significantly fail to hit their targets.


Late night bonus chart...

sp'daily4

Special note, don't get fixated on 'when' the red line hits the sp'1200 level. Its going to be a nightmare trying to trade this market in December. Not only is there the fiscal cliff mess that the politicos 'might' be able to kick into 2014 (or beyond), but there is the seasonal upside bias via a 'Santa rally'.

However, considering the monthly cycle charts, I do confidently say that, the next bounce will be one to short, all the way down to the low 1200s.

*frankly, today was deeply frustrating for me. I'm not a happy bear, I've missed out on some much needed short-gains, but oh well, it could have been worse............I could have been long.

Goodnight from London
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Hmm..an update (before this even gets posted)....

Having read around a lot this evening, I've been trying to better ascertain where we are.

The transports count, which I posted the other day, I should have been looking at it more closely today, since the waves in the tranny have been much cleaner than other indexes.

I've a secondary count for the daily, as inspired by coolbizone (via daneric board)...


Sp'daily5g - count'2

This count - which would actually be supported by my own 60min trans, would be suggestive that we've not had the wave'4 bear flag (black count)..yet.

Instead, we are still in a strong wave'3 decline, that will likely get stuck around my primary target of 1345/40 in the next day or so.

This count then assumes a multi-day bounce of probably 30-50pts, before a further wave lower, and terminating around Dec'11.

Such a count would even allow for a Santa rally ! Everyone would be happy with that..right?
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Anyway, I thought I'd best share that, before the next posting at 10am.
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I will look to re-short in the morning, if we can get a bounce of at least 5-7pts, preferably 10, and then seek an exit around 1345/40.
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Daily Index Cycle update

The main market again showed its continued underlying weakness. There would seem no end in sight to the declines, but if the 5 wave count is correct, then we'll likely floor - as originally suggested, in the 1345/40 zone. The strengthening VIX in the afternoon confirmed the index declines.


Dow

SP'daily5

Transports

Summary

A very bearish set of daily candles to end the day. The transports is especially starting to approach a key level.  The bears will need to see <4800, although I don't believe that is viable in this current down cycle.


The Sp' 5 wave count.

I believe the count (blue) is probably correct, and if so, then it will be time to go long around 1340/45, sometime in the next few days.

Special note..

I have NO idea how to count that mess from mid September to October 18'th. I've seen a lot of chartists try to count it, and none of them have been able to adequately explain it.

All I know, is that I see two VERY clear bear flags - especially for a perceived wave'2, and thus we've just broken the wave'4 bear flag. We are surely in the last leg of this 5 wave down cycle.

Primary downside target is a very obvious 1345/40 - as based on daily, weekly charts, and even fib' levels.


Awaiting a serious bounce

A bounce to 1380/1400 is expected across the next 1-3 weeks, although it might even go a touch higher, a full back test of the broken Oct'2011 rising support - somewhere around 1415/25) which will become concrete resistance.

Lets be clear, I think we can start to call a top, at least for a few months @ sp'1474. Whether we can somehow break over that in 2013, well, that's something to merely keep in the back of the mind.

What matters now, the weekly and monthly cycles are both pressing downward, and the primary monthly target remains...sp'1200. That could occur within weeks if the market gets spooked by a perceived lack of resolution of the fiscal cliff.

A little more later..on those bigger charts.