Volatility on the rise

With the indexes closing moderately lower, the VIX continued to rise for the second day, climbing 4.8%, to settle @ 16.64. On balance, the VIX should be 18/19 within the next few days, the only issue is whether it can break >20.


VIX'60min

VIX'daily

Summary

The VIX is most definitely on the move, and for me, the only issue is whether we will finally see the VIX bust above the key 20 threshold - a level we're not seen since late July.

All the pieces on the chess board are in place for a VIX mini-explosion, the bears should be in control for most of this week, so, there is most definitely a window of opportunity.

At minimum, I'm seeking VIX 19, but as has been the case, we could easily get stuck there, in which case the indexes would likely rally into year end.

More later..on those indexes.

Closing Brief

The market closed moderately lower across all the indexes, and was once again lead lower by the transports, which was the first to break the rising lower channel/trend. With the VIX 4% higher, the near term trend for the indexes looks very much to the downside.


Dow

Sp

Trans

Summary

I'm very pleased with how today has gone. We have a very clear spike at the open, and it would make for a great cycle top - in the immediate term, at the very least.

The aim for the bears tomorrow should be to puncture the sp'1400 line, a break of that should open up a fast move to around sp'1390/85 - no later than lunchtime Wednesday.
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The usual bits and pieces across the evening.

3pm update - falling into the close?

All the main indexes have now broken their up trends (hourly cycle), and there is no reason why we won't see general weakness into the close. A break <sp'1410/09 would be..useful, and could begin a snap lower to test 1400 by early tomorrow.


sp'60min

vix'60min

Summary

Its looking good for 1390s, and on a bigger time frame...much lower levels are very viable if Mr Market gets spooked this week.

HUGE downside potential....

Minimal..to zero upside, and today's spike - seen best on the daily charts, probably marks a cycle top.
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I remain short, trying to be patient.
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UPDATE 3.20pm, SP' breaks into the 1408s...this is good!

2pm update - weakness..as expected

The weakness I was seeking is starting to show through also on the main Dow/Sp' indexes. A close <sp'1410 would be very useful for the bears. The VIX is slowly building upside momentum, first target is 17s, which is possible by the close.


sp'daily5

sp'60min

Summary

Its looking good for low 1390s by early Wednesday at the latest.

More soon.
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For sheer amusement...

see: Zerohedge, for comments on his highness, currently on twitter
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UPDATE 2.20pm, The VIX is due to snap higher, more likely on Wednesday than tomorrow

Obvious target is 19, the big 20 would be a major warning, if its broken through.

1pm update - seeking afternoon weakness

Mr Market is looking tired, and everything is set up for at least moderate declines into the late afternoon. The 'old leader' - transports, has already broken the up channel, and is highly suggestive that the broader market will follow as the week develops.


sp'60min

trans'60min

Summary

Perhaps the most notable aspect of today is how the cheer leading maniacs on clown finance TV have cooled down since the open. They sure seemed hyper bullish this morning, but now they're largely mute again, muttering mild concerns about the fiscal cliff.
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I remain short, and seeking a close <1415 today, preferably 1410/05.

Right now, a Wednesday morning exit in the low 1390s seems 'best bear hope', although the channel (if its right) suggest 1375/65 is viable by late Friday.

12pm update - Monday chop

The opening gains were merely a nasty brief minor spike higher, and it still looks like we should be starting a new down wave. Eyes to the VIX, Dollar, Oil, metals...but most of all...the transports, which is seeing a very decisive turn on the daily chart.


sp'daily5

trans'daily

Summary

I remain concerned the market might yet largely hold together until early January.
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I've little doubt we'll (eventually) get down to the low sp'1200s, but...it could be a real messy few weeks before the major wave occurs.
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Until we take out the recent sp'1343 low, bears need to be real careful.
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I remain short, seeking 1380s, in the latter part of this week.

Here is something to keep the bears awake..on this somewhat sleepy Monday...



Maybe Boehner can sabotage this market week? 

back later

11am update - tired of the bounce

Maybe its just me, but this bounce sure seems 'tired'. The headline Dow/SP indexes have been flat for 14 trading hours now. However, the old leader, the tranny has broken the rising up trend. Given another 4-6 hours, the Sp' should be trading somewhat lower.


trans'60min

sp'60min

Summary

We have a really difficult week ahead. I am increasingly concerned that this wave'2 might not be complete after all, and will drag out into end year.

Regardless, near term trend 'should' be to the downside.

My next short-exit target is around 1400/1395

10am update - failed opening bounce?

The opening gains are annoying, not least since the Thursday highs have now been broken on most indexes. VIX is holding mostly stable though, although the dollar is back <80.


sp'60min

trans'60min

Summary

The one notable sign of weakness so far this morning is in the transports, which has not only put in a brief failed spike, but did not break the Thursday high. Now red.....interesting.
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Bears should be desperate for a close <1415.

I'm sure not pleased with what I'm seeing so far today.


sp'daily5b - scenarios

Surely not 'A'  ? urghh
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UPDATE 10.25am Transports is rolling over on the daily. Bears should be watching this sector/index VERY closely.

*I'll probably highlight it again, but the tranny was warning of trouble this morning right from the open, and was 'leading' the other indexes by around 3-5 minutes. For the fast day-traders out there, it remains a very good early warning.

See daily MACD (histogram) cycle, rolling lower, at current rate, the bigger declines will be late this week, Thur/Friday, when the cycle goes negative.

*VIX is a touch higher already.

Pre-Market Brief

Good morning, and welcome to the last trading month of the year. Futures are higher, with the sp +6pts, we're set to open around 1422. This clearly breaks the Thursday morning high of 1419, and so we are going to be testing the 50 day MA @ 1422/21 at the open. There is soft fib' resistance around 1424/26.


sp'60min

sp'daily5

Summary

As was always the case, it won't take much for the bull maniacs to short-stop another group of bears. The higher open is obviously disappointing, and I have to believe this is just one of those annoying things before the next wave lower truly begins.


Breaking the channel

Most of important today is this...to break below the rising channel, the bears merely need to close Monday <1415.

So, might we see a brief morning rally into the mid 1420s, only to reverse, and close 1412/10 ?


Dollar weakness..equties/commodities UP

Since the overnight trading began, we've seen weakness in the dollar, and that is clearly a primary reason why we're currently set to open somewhat higher.

**we have two pieces of econ-data at 10am, so Mr Market will probably be nudged one way or another at that time.

Good wishes for what will very likely be a rough week ahead.