Tuesday 11 December 2012

Volatility fails to breakout

Whilst the indexes rolled over in the late afternoon, the VIX recovered to flat, but..completely failed to hold level, closing 3% lower, to settle @ 15.57. Until the VIX is >17.50 - when the sp'500 was trading @ 1398, all VIX upside spikes are to be dismissed as mere noise.




The failure to hold the low 16s was an embarrassing fail for the bears this afternoon.

There is no sign of the near term decline ending, and indeed, the VIX daily cycle looks especially bad. The lower bollinger band is a further 6% lower at 14.39. All those bulls seeking sp'1440/50s..should be looking for VIX in the low 14s leading into Christmas week.

So, as things are, there is absolutely no sign of major VIX upside, and VIX 20 looks an almost insurmountable height to reach.

More later..on the indexes

Closing Brief

The opening index gains - breaking the recent sp'1423 high, were very damaging to those with bearish outlooks into early next year. The weakness in late afternoon was only minor, and unfortunately did not undo enough of today's gains.

The closing hourly charts:





A disappointing open..and an equally disappointing closing hour. Despite the rollover - lead by the 'old leader' transports, the main market held together.

You can see on the hourly charts, despite the weakness in the afternoon, we held within the upward channel.

There is nothing here for the bears to be pleased about.

Things will become somewhat clearer tomorrow, after we see how the market reacts to the final FOMC announcement of the year.

more later...

3pm update - closing hour bull fail ?

There is a touch of weakness right now, but the damage has already been done to the bear case. Until we break the recent sp'1398 low, the more cautious bears should arguably wait. VIX is trying to battle back to close flat, but even 16s..would be embarrassingly low.




Kinda interesting.

Only a red close would make me feel marginally less annoyed today, and red indexes look next to impossible.

What remains the greater concern is how the market will react to Bernanke tomorrow.

UPDATE...tranny...weakest..and once again...the leading warning.

 Thats a pretty significant failure-spike, a red close would be...something for the bears to hold onto.

UPDATE ...VIX hourly..breaks the down trend...its a 'soft' level, but..there IS potential for a mini snap higher into the close.

Trans index.... RED.  

Sp'500...looking very spiky now...jeez..surely not..a red close? hourly charts would support it, but it has to keep pushing from here...no pausing!

UPDATE 3.30pm,  bears need a close <sp'1422 to clearly break the ascending channel.

With VIX back to flat..@ 16.01...the bears have at least something to end the day with..although its not much.

back after the close

2pm update - did the market close yet?

The morning gains are still holding, and the main market now appears frozen in time. No volume, no..nothing. The bulls would like a close in the 1430s, but they really only need anything >1423.  The damage has been done to the bear outlook. Bernanke could seal it tomorrow, if he so decides.




Very little going on.

Bears could hope for a VIX close 16s, but that is probably optimistic. Often the case, the last hour will see a further VIX wave lower, and close at the lows.

Ugly market...

One stock of note...BTU, I was reminded it as a few people were highlighting the coal sector/stocks.

Could be a bearish H/S, but until its below the rising support of 24/25, thats yet more speculation. Good company, but...with a difficult economy, could yet hit my secondary target in 2013.

UPDATE 2.10pm Trans..now ticking lower for the third hour.

Yet, frankly, until we sub' 5000 on the tranny, I can't take ANY decline seriously now. A lot of technical damage was done to the bearish outlook today.

1pm update - rough day

We're still lurking in the 1430s, propped up by those nasty algo-bots. Volume is doubtless near zero. The longer we maintain these levels, the more likely we are to seeing 1440/50s tomorrow, if the market decides it likes what the Bernanke has to say. A disturbing thought.




Its pretty dire in the immediate term. It won't take much tomorrow to break into the 1440s, a level I've noted as probably the sign the bearish outlook needs to get thrown in the trash.

The FOMC of mid-September marked the high.

Surely tomorrow won't be a similar high?

12pm update - afternoon consolidation

The market is comfortably holding onto the opening gains, which have been added to, as the algo-bots melt everything slowly higher. With the FOMC tomorrow, volume is near zero as almost everyone merely waits for the Bernanke.




A really frustrating day to see the sp'1430s again. On balance, we're likely to just see minor chop/consolidation this afternoon. Considering we have broken about the old highs, it'd be a little surprising if we managed to close under them.

Metals remain a little weak, despite weak $.

A mere 2% needed

Now, here is the thing, a mere 2% swing to the downside, and we're right back on the borderline 1400 level.

Yet, it has to be said..so far..there is still ZERO sign of levelling out on the indexes, not least with the daily charts ticking higher again.

The markets reaction to the FOMC tomorrow will likely determine the rest of the year.

t-20 days until the cliff...and with no agreement... VIX 15s. Seriously? 

Time for lunch.

Ford..looking a little weak. Massive support at the 50 MA, about 90 cents lower.

Ford has had a good run since the summer lows, rising almost 50%. 

11am update - to da moooon ?

With the gap over the prior sp'1423 high, the market is now melting inexorably higher, and we're already in the low 1430s - right back to where the post election snap lower took place. VIX is 'only' 2-3% lower, but its arguably back to being mere noise.




There is ZERO sign of a turn or levelling so far today.

With low volume, the algo-bots are merely able to melt this nonsense ever higher.

As I noted earlier..the last of the 'serious money' on the short side just got stopped out.  Only the reckless and 'doomers'..remain.

So, what am I doing? Recklessly holding out. Either I'm going to look back on today as some sort of brief 'bear capitulation' day, or..it was merely the start of another major wave higher..all the way into 2013.  If its the latter, I'm going to be somewhat more annoyed than the present.

For those others that are also recklessly hanging in there....I can only say '..if there are bear gods out there, now would be a good time for them to interfere'. Urghhh

Gold update.. the metals are surprisingly weak considering the main market is higher..AND the $ is lower.

GLD, daily.. yesterday black (fail) candle is being confirmed with this mornings minor declines.

Target remains 158.

10am update - major bear fail

With the market opening over key resistance of sp'1423, bulls now have open air into the 1430s..and beyond. With volume so low, the algo-bots are back in control, and hey, everything is fixed in the western economies, right?


VIX, daily


I have to wonder if Bernanke is back to buying ES mini contracts in the overnight sessions. We were sp-5pts last night, and we're now +9pts.

What a lousy stinking day its already turned out to be.

Lets be clear about one thing. Any 'serious money' on the bearish side just got short-stopped >1423.

I suppose this nonsense could all go into full reverse later today, or after the FOMC tomorrow..but there is ZERO sign of that.

Bad day for the bears. it could simply...just keep on going higher.

Pre-Market Brief

Good morning, but really..its not looking so good in bear land. Futures are sp +7pts, we're set to open at 1426, which is clearly over last Mondays spike high. Volume will again likely be light, and now that we're set to gap above resistance, the algo-bots will find it far easier to melt this market into the low 1430s by the close.




I suppose this could just be a brief spike open higher, but it will be a new high, and frankly, the last of the 'serious' bear money should be getting short-stopped out at the open.

With the 1430s now just 4pts away, this is looking somewhat bad, but as noted last night, this was always going to be a borderline situation.

Bulls just need a close in the 1430s, and then they might be able to melt this nonsense higher into year end..all the way into the 1500s on a mini wave of delusion.

Great.  Just great.

Not much left of 2012

There are now less than three weeks remaining of the year, a mere 14 trading days, of which one (Dec'24) will be shortened. Mr Market remains utterly complacent, with the VIX @ 16, and the SP' a mere 3.5% from the sp'1474 highs in mid-September. Incredible.

sp'daily3 - news to come

sp'monthly3, rainbow, count

sp'daily5b - scenarios


This week will be all about the Fed. Will they follow through with their planned - as announced at the Sept' FOMC, of 45bn t-bond buying, beginning in January? With unemployment data (official Disneyland version) now at 7.7%, might the Bernanke cancel the planned bond buying?

If that happened, I'm sure Mr Market would be pretty upset, and would quickly break <sp'1400, with yet another test of the big 200 day MA, now @ 1386.

However, there is the ultimate problem of who will then buy the bonds, if the Bernanke doesn't ? This would not be such a problem though if ALL fiscal cliff measures are allowed to pass, slashing the US fiscal deficit almost in half. See, there is a bright side to every doomer outcome!

The Big Count..unchanged

The original monthly count remains unchanged. My broad outlook is for low sp'1200s in early 2013, with the next multi-month up cycle starting in March/April.

As for the near term, I'm guessing we see a decline, but then one final bounce. That bounce may easily fail to break a new high >1423 (scenario D), and merely rollover into year end.

There is nothing much to move the market tomorrow - unless some US politician opens his mouth, and we're more than likely going to see a repeat of today's 'nothing'.

Goodnight from London

Daily Index Cycle update

A dull day in market land, where volume was close to zero, and the algo-bots were able to melt the market higher a few times. The transports climbed 1%, but the gains were not confirmed by the Rus'2000 - which normally matches the trans. The small cap R2K has now been stuck for 8 trading days, a break lower would be significant.

IWM, daily




Most notable today, the Rus'2000 (see IWM chart) remained within a very significant flat top, now 8 days in duration. A close <81 later this week would be a major warning.

The transports broke out today, and looks like it'll make a hit on 5200 tomorrow..but then I'm guessing, it'll once again max out.

The SP'500 failed to break the spike high of 1423 from last Monday, although it got within 1pt.

My best guess - as noted on the sp' chart, is that we'll see one moderate wave lower this week..perhaps hitting 1375 (briefly) before a final wave higher into Christmas week - which of course will have even lower trading volume than we saw today.

A little more later