Volatility slumps into the close

With the indexes showing some strength into the close, the VIX closed very weak, and closed over 8% lower @ 16.41. Despite the index declines across the week, the VIX declined by almost 12%, this is a truly bizarre aspect, and all doomer bears should be take this anomaly seriously.


VIX'60min

VIX'daily

VIX' weekly

Summary

A week where the bears were in charge, and yet Mr Market just wasn't concerned at all really. The fact the VIX lost 12% in a week where the indexes all fell, that's quite a strange thing to see. It is pretty remarkable that we've seen the sp' decline from 1474 to 1343, and yet the VIX hasn't been able to break the 20 threshold, not even on an intra-day basis.


Trouble for the bears..or a gift?

I think if we see a daily VIX close early next week <16, that would be a VERY serious warning that we may be about to see a strong multi-week bounce, maybe one that even last into next year - helped by the usual seasonal Santa rally.

My best guess however remains that the general trend is downward, and that any bounces are merely bonus opportunities for the bears to re-short from.

I am seeking a slightly higher Monday open, maybe a few hours of a topping pattern, and then a rollover, with a significant decline across Tuesday, perhaps extending into Wednesday. It is difficult to project a floor for a wave'5, but it could take out this mornings low of sp'1343. 

As things are, even a brief decline into the sp'1330s would seem unlikely to see the VIX >20.

More later.

Closing Brief

A good week for the bears, and where my original primary target of sp'1345 was hit earlier this Friday morning. The smaller wave counts are suggestive we'll still see one final (but probably sharp) wave lower before thanksgiving, and it could easily be <sp'1343.


Sp'60min

Trans'60min

Summary

It would appear we completed the B' wave just before 3pm, and we're now in the C' wave.

I'm guessing - and hoping, we open at least a little higher at the Monday open, somewhere around sp'1365/70.

Have a good weekend everyone!
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Bits and pieces to round up the day across this evening.
There will be a weekend posting, late on Saturday, probably dealing with the weekly charts.

3pm update - last hour of a busy week

The bears have been in control for almost the entirety of this week, and though we look set to ramp into the close, bears should be pleased. The VIX remains weak though, and is -4% right now.


sp'60min

Summary

Its possible we've just seen the B' wave lower on the hourly charts. Tricky to guess though. We'll have more clarity by the close, and when we open on Monday.
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I've updated the hourly sp' chart, and it reflects the anticipated ABC move, seen even more clearly on the transports chart.

I've widened the upper channel a little, and I think there is a chance we open Monday 1365/70..maybe even briefly 1375. Anything over 1375, and the count will be probably have to be thrown out.
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I think there is a pretty good chance for a minute (but important) wave 5' lower next week from 1365/75, down to the 1330s..before a 4-6 day slow crawl higher, after thanksgiving.


3.17pm. Its looking pretty good, in that a B' wave looks like its done.

So, that leaves just a C' wave to go, and I'm guessing that will take us into early Monday morning.

I will likely be hitting some bearish buttons then 10/11am Monday :)

2pm update - building gains

Mr Market has seen a little churn, but the recovery-gains are holding, and we'll surely build upon them. The near term outlook still looks like an ABC 'black wave 4' - as best seen on the hourly transports. However, it remains very possible we'll be trading <1343 before the thanksgiving holiday next Thursday.


Trans'60min

SP'daily5g

Summary

It has been especially pleasing to see the market behaving itself the last few weeks. The cycles look reasonably clear...almost 'natural'.


RE: the ABC wave.

Its pointless to try to guess where the A' wave will end, and play the B' wave.

Safe trade...wait for a pullback..and then a final lurch higher, with the C' wave...next Monday.
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It is feasible we'll see a big spooky scared market next Tue/Wed, and be trading in the sp'1330s.

So..I'm sitting it out until next Monday, and seeking a re-short around sp'1365/70

UPDATE 2.30pm

We're seeing a little wave lower, but I would be pretty stunned if we break the morning lows.

On the 15min chart, looks more like a bull flag than anything else.

1pm update - I know my ABCs

The mini-ramp this morning has probably surprised many, but not me. Whilst the media attribute the ramp to Boehner comments, Mr Market was going to ramp higher anyway. Again, its a case of mis-attribution by the media, they just don't understand...and never will.


Trans'60min

VIX'60min

Summary

I'm using the transports- which has cleaner waves, to trade the SP'. That may seem odd, but it makes sense, if you think about it. All the indexes trade together to a large extent.

I'm seeking a very clear ABC wave..a 'black 4'....with a final wave'5.

That 5' may...or may not take out the sp'1343 low from earlier today. Impossible to guess.

All I can guess is that we're due an up cycle..and that's what we're seeing.
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VIX is weak, could easily slip back to low 16s by early Monday.

As things are...I will very likely wait for a re-short until early Monday, once the C' wave is complete.

12pm update - its a nasty market

Mr Market is putting everyone through a washing machine on spin cycle today. We've seen two waves lower, and now a mini hyper ramp, with the indexes green, and the VIX -2%


trans'60min

Summary

Black wave'4 UP....now underway.
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That probably equates to sp'1365/70 by late today/early Monday.

I remain VERY content to watch this nonsense.

UPDATE 12.25pm   Well, a nasty opex bounce...and its probably annoying a lot of the bears, although they had TWO opportunities to exit this morning.

sp'daily5

I do not expect a move over 1370.

See transports hourly chart...black wave'5 could still take out todays low of sp'1343..Mon/Tue.

Good bears..should be patient.

11am update - still expecting a bounce

Mr Market seems to have completed a minute fifth wave (of black'3) lower. A moderate bounce is expected into the afternoon, not least since the market makers will be desperate to wipe out as many Put optons as possible.


trans'60min

Summary

Seeking black wave'4 UP..into late today, although it might extend as long as Monday.

Will have more clarity later.
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Happy to sit on the sidelines..and having seen my sp'1345 target hit ;)
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UPDATE 11.33am Market seeing a further small down wave..taking our the earlier low.

..and that..is why I am not going long, despite expecting a 'likely wave up'.

still..waiting for a bounce.

10am update - seeking a small wave higher

Its a choppy mess this Friday (opex) morning. Again, there is a touch of weakness out there, but we are due a noticeable wave higher, which is seen most clearly via the transports index on the hourly chart.


trans'60min

sp'daily5

Summary

A long day ahead, it will probably be a bit of a mess, one that confuses traders with lots of a minor chop.

I'm looking for a black wave'4 - as best seen on the hourly chart. Its possible this wave will complete BEFORE the Friday close.

We'll have a much better idea by 2-3pm.

As it is, I'm sitting back, and waiting for this nonsense to cycle back upward. 


UPDATE: 10.04am original target of sp'1345  HIT  :)

Pre-Market Brief

Futures have swung moderately higher, with the sp' +5pts, we're set to open around 1357.


sp'15min

sp'60min

Summary

Its hard to call how today will go. We could still have a tiny fifth wave lower - as part of this 'black 3' count.

Regardless, I'm seeking a noticeable black 4' higher, which will probably take until Monday to complete..

The transports count shows it better...

So...a re-short around 'black IV', next Monday. I think that could be a good trade into Tuesday.
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In the news, another great example of how socialism can kill a company. Twinkies and Ding Dong maker 'Hostess Brands' has been liquidated - see Zerohedge I'm sure those union people must be celebrating their victory! Great job guys, you just ended 18,000 jobs.

Doubtless, someone will buy up the brands, and probably some of the factories, but not all. Hell, why not just buy the brands, and outsource the whole thing to China...or Mexico?

Good wishes for Friday..its almost the weekend!

Multi-month decline underway

Since the Bernanke infamously announced QE3 on Sept'13'th, we've seen the market decline. November has confirmed those initial signs of weakness we saw in October. Yet, so far we've not seen any real sign of market panic, never mind an end-wave capitulation day.


sp'weekly2

sp'monthly3b

Summary

The weekly cycle target of sp'1345 was almost hit today. It has certainly been good to see the broad outlook pan out (so far) as expected.

Regarding the (black 1-5) count on the monthly chart, don't get too fixated on the precise levels as such, but more the broader type of wave, and the time frame. Right now, I'd look for a general low to be put in around Feb/March. I have the suspicion that the Bernanke will be increasing monthly purchase amounts at that time, when the mainstream come to accept the US is in recession. Of course, such increased QE will likely cause at least a short term (2-4 month) ramp in the broader market.

As for Friday, well, I can't work out whether we've seen the near term floor. I'm seeking at least a little bounce of sp' 10/15pts, before a re-short. I think there is potential for one further major decline before the thanksgiving holiday period. See my earlier update on the hourly and daily cycles for details.

Goodnight from London

ps. is it time to 'buy the dip' yet?   ;)

Daily Index Cycle update

The indexes closed moderately lower for a seventh day, and we're now far below the QE highs of sp'1474. All those bull maniacs who were seeking a year end close in the 1500s, are really starting to get twitchy. The VIX closed effectively flat, and Mr Market is still yet to see even moderate 'panic'/capitulation.


IWM

Sp'daily5

Trans

Summary

So..yet another day where we saw an opening minor rally fail...a lot of price-chop, and late afternoon weakness. Even though we closed off the lows, today's price action is very impressive for the bears across the mid-term.


Adjusting the minor counts/wave outlook

A few days ago I did an hourly cycle count on the transports. That has really worked out well, and has the cleanest index cycles I'm seeing right now. So, I'm using that as a guide for the SP/Dow.

I've come to conclude that we have not yet seen a wave'4 - as I had labelled until yesterday evening. Instead, it seems we are STILL within a significant wave'3 decline, with a multi-day wave'4 bear flag to develop sometime around the thanksgiving holiday period.

I am now looking for the indexes to provisionally floor sometime around Dec'11th. I'm not going to get too fixated on that particular day, but 'mid December' will remain a time when I would not be shorting anything again until January.

Indeed, a Santa rally is something the bears should actually hope for. Let the maniacs have a multi-week rally, and put in that critical first lower high on the weekly cycle.


Here is an updated 'rough guide' to what I'm seeking on the daily cycle...

*Special note on the fifth wave (black) of blue'1.
I'm not at all sure yet where we might floor. With black'3 being 80pts lower (so far), maybe if we rally 30pts from 1340 to 1370...and take off 75-100pts - the 'capitulation wave'..that would get us into the upper 1200s.

Right now, its just a vague price guess, what I am more confident about is the time frame of Dec'11.

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The multi-month target of sp'1200/1175 looks increasingly likely, the only issue is whether that target zone is hit in December - via a fiscal cliff market panic, or if it takes until early spring 2013.

A little more later