Thursday 13 December 2012

Volatility breaking higher

With the indexes showing some distinct weakness across the day, volatility is coming back to the market. The VIX closed 3.8% higher, to settle @ 16.56. A Friday close above 17.50 would be very significant.




Certainly, today's gains could be classed as 'barely moderate', but still, we're back in the mid 16s again, and we're less than 1.00pt away from a daily close in the mid 17s - which in my view, is the first key level to watch for tomorrow/Monday.

If we can get a close >17.50, that should mean an imminent move to 18/19. Whether we can then break the psychological 20 threshold, that is the great unknown.

I suppose if the indexes break below the 200 day MA @ sp'1387, then we have a chance at VIX 20+.

If there is one early Christmas present many bears would like, it is probably a VIX >20.

More later, on the indexes

Closing Brief

The market saw declines across all indexes, in what may be a post FOMC depressionary reaction. The closing hour saw a little spike higher due to news that there will be yet another meeting at the whitehouse later today.  Despite the bounce, the close <sp'1420 was a very good sign.





The bears should be pleased with how today turned out. With the break below sp'1420, it has taken us comfortably away from the FOMC spike high of 1438.

Those hoping to surpass the mid-Sept FOMC high of 1474 now have a real problem.

Many secondary factors are all turning back towards the bears, VIX, $, and the bigger weekly index cycles showing a failed/spike high.

More later

3pm update - closing hour depression?

Mr Market is in a bad mood. Its slipped considerably away from the sp'1438 peak. With the VIX and Mr $ rising, the downward pressure on the main market is likely to continue into tomorrow. Taking out the recent 1398 low will be the first warning of 'serious trouble'.




We're seeing a nice failure/topping spike on the weekly charts.

The daily charts are all starting to show breaks on the ascending channel.

Baring some stupid bounce into the close, today has gone VERY well for the bears.

I remain short (yes, still), seeking a first exit around 1395, although my target low for next week is around 1380.

UPDATE 3.22pm We had a break earlier below the 10MA on the daily, thats strike'1 for the market.


back after the close

2pm update - is it time for another FOMC yet?

The market sure is weak today, even weaker than your resident permabear was seeking. Is the market suffering from a case of 'post FOMC depression'? Regardless, the ascending channels on the daily index charts are being busted, now its just a matter of seeing how far we decline into next week.


Nasdaq Comp


Things are looking pretty good. The sp'1438 high is now a fair ways away, creating a nice buffer zone for those who are re-shorting at the current levels.

Death Cross for the Nasdaq'100

Poster HiRev' highlighted we have a death cross in the nas'100. I tend to follow the Nasdaq Composite, but that should similarly see a cross either tomorrow (on the first snap lower) or early next week.

We should see death crosses for the Dow, and shortly after the SP'500, no later than mid-January - assuming we are trading at least in the low 1300s.

People are starting to pick up some very speculative VIX option positions...

more later

UPDATE 2.20pm We're in the process of taking out no less than THREE MAs all at once!

The 10 just failed..the big 50 day is next, and then the 100 @ sp'1414.

A close @ 1412/10 seems very viable now.  :)

1pm update - crush your enemies!

Yesterday's QE spike high of 1438 is fading away now, and we've already broken my end-week target of <1420. This is good! The USD is about to break 80, and the VIX is up a moderate 2-3%



A move to sp'1380 seems reasonable next week, considering the Santa is lurking out there, I really don't think the recent key low of 1343 can be taken out this side of Christmas, and on balance, probably not until early January. has to be said, if 1438 was the peak in the wave'2 bounce, then the low sp'1200s will indeed be with us faster than most care to consider.

That is good...indeed!

UPDATE 1.27pm Trans, 3 spike top..that seals it, in my view.

12pm update - maxed out @ sp'1438

The daily index charts are all suggesting the same, we maxed out yesterday @ sp'1438. The old leader..the transports is especially supportive of such a call, with no less than 3 spiky daily candles. Considering the bounce we've had in the past 3 weeks, I think we're done.



sp'weekly2, rainbow


I've added a rare weekly chart during the day, to highlight the key issue...

The bears should be seeking a weekly close <1420. That should be more than enough to clarify that the multi-week bounce is complete. I'd like to see the current green candle turn blue by the Friday close.

That is not to say we won't just churn largely sideways across the Christmas period, but it sure is suggestive that we won't be going any higher.

time for lunch

UPDATE 12.25pm In the next down cycle, I'll be referring to this chart a lot...


A close today/tomorrow under the 10MA would be a nice way to end the week. 

Sp'1343 is a long way down.

Best guess, we get down to 1380* next week, then minor bounce into Christmas week.

A move from 1438 to 1380 would make for a reasonable minute wave'1 (or 3) down. More on that later.

11am update - the smell of weakness

Minor chop so far today, and the latest micro rally is probably a great opportunity for anyone to re-short. There is still a lack of direction in the market, but that could easily be a sign that we've topped out @ 1438.




Transports is putting in a third daily spiky candle. Thats a VERY nice bearish sign.

Choppy, but a close in the low 1420s..easily possible.

The multi-week up channel (wave'2 bounce) is set to be broken either today or tomorrow.

10am update - morning weakness

The market opens a little lower, on balance, we should see some further weakness this morning. First target is sp'1420, and then 1415, the latter is certainly possible later today. Mr $ is higher, with the VIX a little lower.


GLD, 60min


The daily index cycle is rolling over, although it will likely take 4-6 days just to get to negative MACD cycle.

The importance of taking out the recent 1398 low can not be overstated.

re: metals

GLD confirms a perfect bear flag on the hourly chart. Primary target remains 158. So long as Mr $ can get back into the 80s, and break into the 81s, seems very viable.

special note...
*I am keeping in mind the GLD 158 level. It could be used as one secondary way to work out when the equity indexes have floored in the next down cycle. Right now, perhaps GLD 158 equates to sp'1380 ?

UPDATE 10.15am . Transports trying to break above the recent highs. I'm guessing it will fail. A few hours of chop around this level, and then reversal down..hard.

It would be very surprising if we close over the last two spiky days.

Pre-Market Brief

Good morning. Futures are a touch higher - as they have been most of the night. Retail sales, jobless, and producer prices all came in roughly inline. The $ is a touch higher. Most notable since early in the night, the metals, which are being hammered lower, Gold is -$18, Silver -80 cents.




It will be important for the bears to put in a lower high today. Certainly, any move into the sp'1440s would be a massive problem, although I find that unlikely, now that the FOMC is out of the way.

What is clear, until we are back under the recent 1398 low, I really don't think any bear can be confident that the bounce is confirmed as over. The big 1400 is actually rather close, barely 2% away, so one major down day, and the bears will be right back.

Good wishes for Thursday trading!

Back test...complete?

The sp'500 hit 1438 today, that was 95pts higher than the recent 1343 low, just over three weeks ago. If this was indeed a wave'2 bounce, then we should be seeing the first declines into next week. The first sign that the current up trend is complete will be a few consecutive daily closes under the recent 1398 low.

sp'daily4 - original bearish outlook

sp'daily7 - fib levels

sp'monthly3e - seeking a red candle


So, we closed 10pts below the high of the day, with the sp' closing fractionally higher @ 1428. My original wave'2 'stupid bounce' was seeking a move from 1345 to the 1400/25 zone. The recent closes in the 1420s have been put it politely.

Yet, despite what has been a significant 6% bounce, the monthly charts are still holding their provisional blue candle warnings of trouble.

Bears should be seeking a monthly close under the 10MA @ 1396. This is just 2pts under the first target of 1398. So...a daily close in the 1380s..would be pretty decisive.

Breaking back into the 1380s

The fib chart - even though its just a basic one, illustrates how a daily close in the 1380/70s would be a very natural target in any initial wave lower. Personally, I'd really like to see 1380/79 hit, before Christmas. Now that the FOMC is out of the way, that target is a lot more viable.

Thursday will see retail sales data. A red index close, even a small one, would be very useful for the bears. However, on any outlook, the bears should be seeking sub 1400s sometime next week.

Goodnight from London

Daily Index Cycle update

The main market closed largely flat, although the transports and Rus'2000 small cap were especially weak. With the VIX closing slightly higher, and the $ recovering in the afternoon, things are starting to turn back towards the bears.

IWM (representing Rus'2000)




A bearish engulfing candle on the Rus'2000 (see IWM chart), that is probably the most bearish signs out there today. First target would be a daily close <81. If we see 80/79s, then a fast test of the recent 76 low seems likely - equating to sp'1343.

The tranny hit my rough target of 5200, and has put in its second spiky/topping candle in a row. A major down day is expected either tomorrow of Friday.

The sp' daily chart also put in a second spiky candle, and even though it closed a tough higher, that is starting to look like an exhausted multi-week rally.

Key targets

The doomer bears need to see watch for the following. First target, the recent 1398 low, and then the 1343 low. I will note that once we are trading back below 1398, I'll be again confident that my original bearish outlook is still likely correct.

A break of 1343 - which seems more likely AFTER Christmas day, will open up a VERY fast move to the June 1266 low, and I'm guessing that won't hold long, and we'll floor somewhere around 1225./1200 by late January.

With Bernanke now out of the way until next year, things just got a whole lot simpler for the bears. I am quite looking forward to the remainder of the week.

A little more later