Friday 14 December 2012

Volatility climbs a little bit more

With the indexes pulling back lower, away from their FOMC highs, the VIX again closed a little higher, this time by 2.7%, to settle @ 17.0. The near term trend looks upward into Monday, perhaps into the low 18s. Considering there is no fiscal cliff agreement yet, the VIX remains remarkably low.





We have a distinct little up channel on the hourly chart, the close of 17.0 should be considered as some progress for the bears. Yet, we haven't tested the 18/19s since mid November - when SP' was in the 1340s.

The daily chart offers support for 18/19 - briefly, this early Monday.

The bigger weekly chart is offering a VIX that could easily explode at any point. Even a move into the high 20s would be minor in the grand scheme of things.

Those bears who believe we'll be trading in the low sp'1200s in early 2013, should probably be looking for VIX to spike into the 35/45 zone.

Those VIX Feb' $25 calls for $1, look very tempting right now, with upside of 1000% sometime in January. As it is, I will not look to pick up any VIX calls until after Christmas day. 

More later, on the indexes

Closing Brief

A pretty bearish end to the week, after the FOMC high of sp'1438. The main indexes closed broadly lower, confirmed with a moderately higher VIX. Provisionally speaking, the weekly indexes are now all rolling lower, and my original target of sp'1225..looks on schedule for January.





I'm tired, its been a long week. Suffice to say, we ended the week well, and it is pleasing to see the market act a bit more 'normal' again.

There will be the usual bits and pieces to wrap up today, but do have a good weekend.

*there will be a weekend posting late Saturday, probably on the weekly index cycles.

3pm update - last hour of the week

Well, its been another crazy week in market land. With FOMC ramp to sp'1438, we were on the border of a major breakout, but no. No one wants to buy at these levels, and with the year soon coming to an end, year end selling is going to be a persistant feature.

Ohh, and then there is that little matter of the cliff.





There is a lot of weakness out there, a close <1410 would be a bonus to end the week.

The only variable not currently in favour of the bears is the dollar, -0.44% at present.

UPDATE 3.14pm  Market showing the weakness I expected.

I rarely ever highlight this one...

sp'daily6 - Keltner bands

Highly endorsing my near term target of 1385 early next week.

UPDATE 3.25pm Transports indeed rolled over..first big target will be 5000.

Its been a long week....

back after the close.

2pm update - selling into the close

With the transports now looking like its rolling over, we should see further weakness all the way into the close. VIX is sporting a baby bull flag on the hourly chart, and a close in the low 17s looks very viable. The Dollar is surprisingly weak, -0.5%.




With two hours to go, I'm not expecting anything dramatic, but baring another stupid rumour/news report - as we saw yesterday at 3pm, this market should slip lower into the close.

Anything <sp'1410 would be useful, and set up a straight forward gap under <1400 at the Monday open.

1pm update - naughty tranny

The transports has been trying to make a break above the recent triple spike high today. If the trans does rollover this afternoon, then the sp'500 will probably be somewhere <1410. The VIX similarly has a good chance at closing in the low 17s, opening up 18/19 on Monday.




Whilst the other indexes are moderately lower, I just think its useful to keep the old leader in mind.

If tranny does rollover, then we should see more significant weakness in the last few hours of this trading week.

Conversely, a trans close >5220 would be a problem, and suggest another chance of sp' breaking back into the 1430s. I don't think that's likely though, and we should see trans rollover into the close.
UPDATE 1.15pm Tranny is rolling over.

MACD should show a confirmed fail/rollover by the close.

*meanwhile, the US news is reporting a rather dark-sided story to end the week

12pm update - weak weak weak

The market continues to show underlying weakness. With more indexes breaking the ascending channel from their November lows, underlying upside momentum is being quickly lost. A move <sp'1400 seems very likely early next week.




Its going okay, and everything looks like the weakness will increase significantly into next week.

It remains remarkable  that we're just 17 days from 2013, with zero sign of delaying - partly..or fully, any of the fiscal cliff measures. It looks like we're going over the cliff.

In which case market has to re-price to GDP falling 2 to 4% in Q1 2013, and a weak Q2

...and that ladies and at least sp'1225.

*AAPL remains very weak, and could easily breach the big $500 level at any time. If so, then a fast move to 480/475 seems viable.
Time for lunch

11am update - a weak market

Considering the FOMC, and yesterdays initial decline, this market sure looks weak. Bulls are struggling just to hold things at sp'1415. A late day decline to around 1405 is very viable, with VIX in the mid 17s, which opens up a break <1400 early next week.




Its looking rather good. We're seeing consistant attempts by the bulls to get a ramp going, but so far..its just relentless fail.

Bears should look for a close around 1415, is possible we'll see some 'selling into the weekend', a close @ sp'1405, even 1400 would be a major bonus.
time to cook !

Just noticed the tranny, which is making a fast attempt to break a new high. Hmm

Not sure what to make of it, it could just be the usual bizarre-ness that is the transports.

UPDATE 11.25am.. AAPL on the edge

If breaks 504, then 480/75, within a few hours

10am update - rotten AAPL

The market opens with another sprinkling of weakness, lead by none other than AAPL, perilously close to breaking the big $500. Mr $ remains a touch weak, with VIX a touch higher. So far though, nothing dramatic, but it a trend down day.




I would be content with a close anywhere <1420. Certainly 1415 would be good, that'd be a net loss on the week, and clarify a spiky/topping candle.

From a MACD (blue bar histogram) perspective, we're set to see the bigger downside move in about 2-3 days. So, those seeking a break <1400 will probably have to wait until Tue/Wed. Perhaps a floor next Thursday?

As for AAPL, this is not exactly a bullish it?

Regardless, the sp'1438 high is slipping a little further away this morning.
Some chop is to be expected. I am seeking a moderately red close though, to confirm the Thursday declines.

Pre-Market Brief

Good morning. Futures are largely flat, the sp is set to open -1pt @ 1418. AAPL is a notable stock, in eearly trading, slipping $14, and is now a mere $15 from breaking the hugely psychological $500 level. The $ is a touch lower, metals are again a little weak, with Gold -$3




It would be 'useful' to see some follow through to the downside today.

Baring a stupid rumour about fiscal cliff resolution, this market should close at least a little lower.

Bears should be content with anything <1420, but a close <1410 would be very useful to set up next week.

A day of weakness

With the main indexes closing lower, it has to be asked, is that really it for this up cycle? The move from 1343 to 1438 may indeed by the 'stupid bounce' that I had originally sought..and now apparently is complete. The doomer bears still need to be cautious in the days ahead, but...things could soon get rather exciting.


sp'weekly2, rainbow

sp'daily7 - fib levels


Today's declines are certainly nothing dramatic, but considering we were brushing up against the scary sp'1440s yesterday, it is very pleasing to be pulling back lower. The fact we closed <1420, was a little bonus in my view.

Spiky weekly charts

The weekly index charts are starting to put in clear spiky tops, which are often indicative of a turn - just as spikes are often seen at key floors. The weekly rainbow chart is still sporting an outright green bullish candle, but I'm not too concerned about that.

Fib levels

The recent low was sp'1398, I'm pretty confident that won't hold, in which case, where then? The 200 day MA @ 1387 will be massively important, so..yes, I'm certainly seeking a return into the 1380s next week. The fib' retracement would suggest maybe we'll get stuck around 1379..somewhere in that area.

So, considering the moving averages, past key lows, and the fib' chart, I'm seeking my next pre-Christmas exit around 1385/80 - next week.

Bonus chart

I wasn't planning on throwing this one out there this evening, its more of an academic curiosity than anything...

NYSE Composite, weekly, 20yr, Renko - 3 bubbles

Even though I generally (to my own surprise) only write about short term charts, my background is really in economics, with a great interest in the 'bigger picture'.

The above chart summarises the past few decades of nonsense. Three giant bubbles, each more insanely based than the previous one. The present 'paper' bubble, created in part by Bernanke - but also by other central bankers, is of course what is likely the final bubble of the modern era.

At some point in the years ahead, - my best guess is sometime between 2015-17, the paper bubble blows up. Whether its via a bond market collapse, hyperinflation, or just a combination of societal/economic issues, the end of the paper bubble will be a painful one.

In terms of this Renko chart, we have our first brick/block to the downside. A break <6500 will be significant, and signify a move into the 4000s. That is around 40/45% lower than current levels, equating to the sp'700s.

Whether that happens in 2013, 14..or 15..doesn't really matter in the bigger scheme of things. What is clear, when this bubble ends, it will be the start of another series of difficult years, especially for the EU and United States.

Looking ahead

I am quite looking forward to tomorrow. We have two pieces of econ-data, consumer prices and industrial production - both announced pre-market. We could open higher on any 'spurious' fiscal cliff news, but so long as we stay in the 1420s, I'll have no concerns.

Indeed, right now, the ultimate stop level is arguably now sp'1438. The big money bears can start to increase their positions in the days ahead. All thats missing is a VIX back in the 20s, that would really spice things up before Santa appears.

Goodnight from London

Daily Index Cycle update

Today will probably be seen in the weeks ahead as an important turning point. With the FOMC out of the way, the market is now left on its own again, and the main indexes showed consistent moderate weakness across the day. The SP' closing <1420 was a very useful starting decline for the bears.

IWM, daily

Nasdaq Comp




First, lets start with the Rus'2000 small cap, where we saw yesterdays bearish engulfing candle get confirmation, with a candle that clearly breaks the multi-week up channel. This is a VERY good sign.

The tech' sector was especially weak again today, and it too has broken the up channel. The Nasdaq'100 saw a death cross today (chart not shown), I'm sure the composite will follow within the next few days.

The SP'500 broke the up channel, and today's close of sp'1419 is a good start. You can see the 3 MAs (10, 50, 100) clustered around the sp'1414/16 zone.

We can be clear about the following...

A break <sp'1410 will be VERY significant, whether it happens tomorrow, or early next week. I would expect the recent low of 1398 to be quickly taken out, and then a challenge on the 200 day MA @ 1387.

The trans did manage a green close - why not eh? , its the crazy tranny after all. Yet, we have a clear three candle spiky top, and frankly, that is the bearish chart of the day in my view.

A little more later :)