Monday 19 November 2012

Volatility on the slide

With the indexes closing around 2% higher, the VIX slumped, closing 7% lower @ 15.24. Considering the fiscal cliff is yet to be delayed (partly or fully), this is a truly low VIX, and it sure won't stay this long forever.




The VIX remains extremely choppy at these low levels. We'll often see a few hours higher, only to see if smacked lower into the close.

As I have posted for some months, until we see the VIX >20, all index declines are to treated with high degree of caution.

VIX 20+ in December?

My index count is suggestive that sp'1200s are viable in December - although, seasonal factors would strongly argue against such a decline.

If sp'1200s, then VIX will surely finally make a break into the 20s. Whether we'll see the VIX truly explode, into the 30s..even 40s, that is really impossible to guess right now.

If we do see my sp'1425 target met, then I'd guess the VIX will be trading in the 13s.

This remains a bizarre market, a fearless market. The fear will return, its just a matter of when.

Closing Brief

The market closed strongly, although the volume was somewhat light. VIX closed weak, and is back to bouncing around in the mid teens. Primary target is sp'1425, to be reached early next week.





The opening gains showed some considerable strength, and the market quickly made a challenge of the 200 day MA @ 1382.

The close was strong, and there is no reason why we can't rally all the way into early next week.

Primary target is sp'1425, and is probably to be treated as an early Christmas present to those bears who managed to sidestep this bounce.

more later.

3pm update - the bulls have command

In this somewhat strange short 3.5 day trading week, the bulls are most certainly back in command. The sp' is holding around the 200 day MA @ 1381, and looks poised for further gains in the coming days.




Primary target for this wave'2 bounce is 1425, although this is certainly subject to change.

There is the issue of time - as many chartists would note, although surely 6-8 trading days would be enough to fit with the wave'1 of 19 days (that assumes a start date of Oct'18)

As we move closer to the thanksgiving holiday, the bulls must be so relieved..they are back in command.

back after the close :)

2pm update - bulls consolidating gains

Mr Market is holding onto most of the gains, and so long as we don't close <1370, bulls should be confident of a further 30/40pts to go. VIX is -5%, but is completely unreliable lately.




A very minor down cycle is viable across the next 2-4 trading hours, but its going to be high risk for anyone re-shorting here, even as an intra-day trade.

I'm very content to remain a spectator until next week. Primary target is sp'1425

back at 3pm

12pm update - big bounce

Mr Market is rallying hard in a classic 'holiday reversal'. There seems virtually nothing that will stop this bounce from breaking 1400 by this Friday. It would seem we'll likely level out next week, somewhere in the 1410/25 zone. This bounce would make for a very natural wave'2, as part of the current multi-month decline.


sp'monthly3, rainbow


We probably have another 30/40pts to go in this 4-6 day bounce, but I won't be part of it. I am content to sit on the sidelines until next week.

Prepare for bullish hysteria

As I noted to a few traders last evening, bears should be prepared to see a lot of bullish hysteria this week. After all, everything is fixed, right? Clearly, there is nothing to worry about, fiscal cliff, US recession, jobs, its all fine again.

The bulls will be touting sp'1500s in the days ahead.

I will let the market bounce, wait for it to level out, and then hit buttons ;) week.

*there will doubtless be a few tiny down cycles across the next few days. Bears need to be VERY careful to avoid such tempting declines. They will be so small, as to be untradeable.

back later in the afternoon.

UPDATE 12.40pm

Something on the fibs. A retracement to 1425 - my upper target, sure looks promising for next week.

I suppose we could get stuck around 1400/10, but..considering the size of todays move, and the fact we're already trading above the 200 day MA, 1425..sure looks the primary target.

UPDATE 1.15pm As day proceeds, I am refining target for next week. sp'1410/25 looks like the zone to be focusing on.


We could pull back in late afternoon to 1375/70, and it'd not be a problem to the bulls.

As it is, looks like we'll be somewhere around 1375/80 at the close.

Primary target is sp' next Tue/Wed.

11am update - up into the 1400s

Market is stronger than I had expected, clearly..the multi-week decline is complete. A very strong 1-2 week bounce is now underway, and is likely to level out around 1400/25 by end of November. Bears should be careful not to get sucked into any micro down waves. Near term trend is UP.




So..we're headed what many were looking for...a 'holiday reversal'.

It looks like we will see 1400 hit this week, and 1410/25, early next week.

At that point, I'm VERY confident we'll get stuck in the low 1400s.  The only issue is how long do we churn sideways before we fall like a rock.

Right now.. Monday Dec'3rd looks 'interesting' for the bears ;)

AAPL seeing something of a short-squeeze...

First target is there is a very likely $40 yet to go.

10am update - original outlook on track

A few weeks ago I set out a very broad outlook, and it remains on track. With primary target sp'1345 hit, we're now set for a very strong wave'2 bounce, levelling out somewhere around 1400/25, this will take until next week to level out.


sp'daily4 - original outlook (from late October)


More than anything, lets be clear, the size/power of this opening bounce is too much for the bears to be re-shorting into. I would be very surprised if we saw a reversal lower now, and I sure won't risk that.

I will sit this ENTIRE week out. No longs.

Bears face a very strong wave higher into the 1400/25 range across the next 4-6 trading days. 

So..last Fridays wave 4 & 5 outlook on the hourly chart gets thrown out, and I'm reverting back to the original outlook.

I will simply wait to re-short next week in the low 1400s.

back at 11am

Update..take a look at the sp'weekly rainbow chart...

Look at the stupid (wave'2) bounce we got in June 2011

We soared 70pts in a single week, then some churn..and then a wave'3 lower - on the debt ceiling/ratings concerns.
Thats a fair example of what I'm seeking in early December.

So...I'm sitting it out..and merely letting the bull maniacs ramp it...hard.

Pre-Market Brief

Good morning. Futures are now showing sp +12pts, we're set to open in the low 1370s. There is some housing data at 10am, and it does seem likely we'll be lurking in the 1370s for most of the morning at least.




Anything over 1375 would break the upper channel on my hourly index charts.

Those bears seeking a re-short today, should wait at least until after the housing data, to give the market some time to at least exhaust the opening ramp.

Whether we tumble lower into the close, perhaps even closing red, that is the big question today.

Best guess -as based on transports, we are in a minor wave'4, with a final fifth to play out between now and the Wednesday close.

Good wishes for this shortened 3.5 trading day 'thanksgiving' week*.

back at 10am...just after the housing data!
*market closed Thursday, and only trades Friday 9.30am>1pm.

UPDATE 8.35am futures now sp +15pts, we're set to open 1374/75, at the borderline of the descending channel. 

UPDATE 9.05am futures +16pts. We're breaking out of the channel.

It would appear my original outlook was right all along.


So..with the gains as they are..even before housing data..we could testing the big 200 day MA @1380 later today, or tomorrow

With my primary target of 1345 hit, the next original target was sp'1400/25 - perhaps a back test of the Oct'2011 rising support.

If that is the case, then bears MUST be patient for another 4-6 trading days, effectively not until the very tail end of November. things are...I'm not set to sit this week on the sidelines. I won't go long...too much risk of a news wire report whacking this market lower. What I won't do though is fight a bounce that is already close to breaking outside the channel.