Tuesday 18 December 2012

Volatility smacked lower again

With the main indexes closing significantly higher for a second day, the VIX declined again, falling almost 5% to settle @ 15.57. There is no sign of even mild concern in this market, and a VIX in the 15s remains remarkably low.




Urghh, another crazy day in the US market. Considering the index gains, it is not surprising to see the VIX lose almost 5%.

Clear thresholds for the bears

Whilst the main indexes have now broken above their FOMC highs from last Wednesday, its important to keep in mind the key levels.

The first soft level of importance is around VIX 17.50.

However, infinately more important is the 20 level. As many recognise, VIX 20 is a key level, and a few daily closes >20 would signify something major is underway.

Without question, a lot of the major 'bear money' would be wise to wait for the 20 threshold to first be breached, before taking any further short index - or long VIX positions.

more later..on the indexes.

Closing Brief

The market opened with only very minor gains, but with Boehner appearing, another wave of hysteria came over the market, and the FOMC highs from last Wednesday were decisively taken out. The close was bullish, and there is no immediate sign of the current trend ending.

The closing hourly charts..





With the continued ramp higher, the hourly charts are starting to look a little weird, in that the usually narrow trading range is getting so wide, its making things look...odd, if that makes sense.

There is no sign of any levelling phase, and what we saw in the closing hour is likely a baby bull flag, setting up yet another micro wave higher tomorrow.

Bears need sp'1413<

With today's latest ramp, bears now need a break under the recent low of 1413 to bring any clarity that the current up 4 week up trend is over. A few daily VIX closes >17.50 would be some further small confirmation that this latest nonsense is complete.

The usual bits and pieces across the evening.

*I want to note, all comments as ever, always appreciated, and it was good to hear from a few of you out there today.  A special hello to all those who appeared from Polska today!

**Just 7.5 trading days left of the year (next Monday is early close).

3pm update - is this what capitulation sounds like?

Mr Market is stuck in the low sp'1440s, a level that arguably breaks most of the mid-term bearish outlooks. Only with a move back under the recent sp'1413 low, and with a VIX >17.50, can the bears can confident that this was merely a capitulation final wave higher.





The VIX is trying to build a floor, but...its to be largely dismissed until we see a daily close >17.50, and right now, that looks a long way off.

Lets see how this bizarre twisted freak of an equity market...closes.

UPDATE 3.30pm  We could merely be seeing a baby bull flag on the hourly indexes right now.

Lets be clear, there is nothing but empty air until the mid-Sept' high of 1474 - although the NYSE is already so close to taking that out.

back after the close.

2pm update - lunatics in command

Mr Market sure has come a long way since the November post-election lows. We have moved a clear 100pts higher from sp'1343, in little over a month. That is pretty impressive considering 'everything' else going on out there. With the VIX still in the lowly teens, it would seem the lunatics in command...have once again convinced the market that...all is well.




Not much to add. We're comfortably trading in the sp'1440s, even a close in the 1430s wouldn't be bearish. The damage has been done, we have break throughs on just about every index, hell, even the Euro is higher today.

I was reminded of this just now by poster 'cdude'

More later...as ever.

GOLD update...just another $35 to hit the 158 target

 What happens @ 158 will be important. A few daily closes <158, and surprisingly much lower levels are viable.

UPDATE 2.30pm VIX trying to build a floor, but its very unreliable at these low levels - as we saw yesterday in the closing hour.

Only with a daily close >17.50 can the bears start to get confident...and mid 17s sure look a long way up from here.

12pm update - musings on Boehner

Whilst the market continues with its latest round of nonsense, lets reflect on the crazy political scene, not least in terms of what appears to be, a likely agreement on the fiscal cliff measures.

A year of lies

So, for the past year we saw the Republicans campaign for leadership. They dismally failed, despite a lousy economy, and a president that not even many democrats particularly favoured.

Yet, despite over a year of endless talk of '$1 of tax increases for 3 or even $4 of spending cuts, I saw house speaker Boehner on clown network this morning, effectively tout a 1-1 tax/spending ratio.

2 trillion 'cuts' over.. a decade...lol

It now looks like they will come to agree on a 1-1 ratio, roughly a trillion tax increase, with a trillion of spending cuts. Naturally, the spending 'cuts' will be phased in, and are largely mere accounting tricks.

With a 1 trillion annual deficit (and that's probably being overly optimistic), with 200bn of annual cuts per year (again, that's assuming no gradual phase-in), we're still looking at 800bn a year, so that means we'll see the US debt around 20 trillion in 2016.

$22 trillion.....boom

As early as 2005, it was always my outlook that the US bond market - along with related 'currency issues', would eventually hit the brick wall when the federal deficit hits $22 trillion or so. At the current rate, we'll be there some time around 2017/18. Certainly, it will be before the end of this decade.

Being from this side of the great Atlantic Ocean, I can only imagine what the republican voters must now be feeling. They have been totally sold out, mere weeks after voting them back in.

As many have noted over the years, its all a one-party game anyway. I can only imagine the laughter behind the scenes between Obama and Boehner.

Congratulations America...and especially to all those who voted republican.



So long as the market can hold over sp'1430 - as at end of this week, we remain in a very strong up trend, with open air to the mid-September FOMC high of sp'1474.

A red index close seems near impossible. It is far less likely than yesterday where we saw early afternoon weakness, only to conclude in a major ramp into the close.

back later

*I'm keeping this post up for another hour..or two. I'll add updates though..

UPDATE 12.50pm  No sign of this madness stopping, we just keep on going...

Hourly charts looking horrifically overbought, but this is merely day'1 of a breakout, and lets be clear, it could just keep on going, its ALL empty air until 1474.

A severe case of Christmas hysteria might be unfolding.

After all, 2 trillion of 'cuts' over the next 10  years, that will solve the deficit spending, right?

GOLD update...

Looks like the Gold bugs are going to also be as disgusted with today, as much as the bears are...

Considering the indexes, I don''t blame them. Prime target remains GLD 158, so, a further $43 to go in this cycle.

11am update - breaking bad

The trans, R2K, and Sp' have now broken their FOMC  highs, only the Nasdaq Comp' and Dow are lagging, but they aren't far behind. There is arguably nothing but open air from sp'1439> 1474.


VIX, daily


A rough day for all those in bear land.

Arguably, the recent post FOMC re-shorts should all have gotten the kick >Sp'1438.

Dollar..and VIX both on the slide. VIX daily chart looks especially bad, with MACD due to break negative tomorrow.

On any basis, the bears...failed.

All the downside momentum from the major FOMC in mid-September...gone.

Transports, making a break for it...

The recent 4 candle spike/flat top..completely negated. This is a clear breakout.

UPDATE 11.20am  Nothing but open air until sp'1474

To think that Santa has not even arrived yet. Add on 5-7 days of Christmas trading zero volume algo-bot melt, and we'll be at new highs.

10am update - too close for comfort

The Transports and Rus'2000 have now taken out their FOMC highs from last Wednesday. Are they leading the way again? The bigger Dow/Sp'500 are just 0.2% shy of their highs.




So, we're seeing small opening gains, and sitting oh so close to seeing all indexes break the FOMC high.

As things are, there is no sign of a turn lower, nor even a levelling phase.

Pre-Market Brief

Good morning. Futures are showing moderate gains of 0.4%, the sp' is set to open 6pts higher @ 1436 - a mere 2pts from the FOMC highs.  We are now sitting on the edge of a significant breakout. A daily close in the 1440s would do critical damage to all near/mid term bearish outlooks.




Well, we haven't got a gap straight over the FOMC highs, but its almost as bad. We'll likely open in the high 1430s, and will probably test the 1438 high.

If we take out the high, a fair few short-stops will be triggered and we'll probably jump into the 1440s.

I suppose it could merely be a double top, but..considering Santa is next Tuesday, and volume is low..its going to be just so very difficult to see a reversal with some real selling volume behind it.

Underlying momentum is ticking higher on the daily MACD (blue bar histogram) cycle again. The one minor bearish aspect is that we could merely be putting in a third smaller tower within the formation.

Anyway...lets see how long it takes to break into the 1440s..urghh.

Special note on Mr $

We are down 0.09bps in pre-market, and its arguably breaking the lower support again.

If we start putting any daily closes in the 78s, equity bears are going to have major problems, on top of everything else!

UPDATE 9.25am Futures slipping back...sp' now set to open just 1-2pts higher.

Hmm, are the big institutions selling into strength?

UPDATE 9.35am. Black candles appearing on a lot of charts.

Ultimate fake out? The bears can...'hope'.

Trans test the old high...turning lower.

On the edge...again

With the indexes closing significantly higher, we are right back near the FOMC highs of last Wednesday  A daily close this week >sp'1438 would qualify as a very bullish signal. With Santa a mere week away, is the market about to rip the heads off the few remaining bears?

sp'monthly3, rainbow



Hmm, today was not good at all. The sp'1430 close was yet another little bullish aspect that bothers me.

In theory we could merely be making yet another back test of the original Oct'2011 support. Technically - as at end December the back test level will be as high as sp'1460 - a mere 1% from the September highs. However, the back test argument is getting a little bit old I admit.

As noted earlier, a daily close >1438, and the daily'4 outlook, gets put on hold, but I can understand if some would suggest it should just get trashed.

sp'daily4 - ready to be trashed

The stuff of bear nightmares

After today, the scary thought for the bears has to be that a mere overnight futures move of more than 0.5%, and we will be trading above the FOMC levels  There is open air from sp'1438 all the way to the Sept FOMC 1474 high.

Even worse, there are still some noted market forecasters suggesting the market will yet close the year in the sp'1500s. Such outlooks probably assume a hyper ramp, due to a 'fiscal cliff agreement' of some kind.

We've seen some crazy bullish ramp action over the past few years, I am now seriously concerned we're going to see another bout of mass market delusion, cheer leaded by the clown network finance TV maniacs.

Goodnight from London

Daily Index Cycle update

The opening moderate index gains held into the early afternoon, then a little weakness..but the closing hour saw a major ramp. The main indexes closed higher by around 1.3%, with the VIX confirming the gains, via a near 4% daily decline. The bulls are close to breaking up..and out.


Nasdaq Comp




Without question, the closing hour was salt in the wounds for the bears. The afternoon weakness appeared on schedule, only to get completely negated. I'm not sure what the reason was, but whatever it was, the indexes are now just 0.4% away from breaking the FOMC highs.

If we get a daily close tomorrow (or whenever this week) >sp'1438, anything in the 1440s will arguably mean the bigger picture bearish outlook needs to be at least put on hold..or worse..simply thrown in the trash.

I have to say, I am kinda surprised at today's closing levels, not least when the transports was putting in a fifth spiky daily candle earlier today, only to close close to the recent 4 candle peak.

We closed today..pretty much sitting on the edge of a bullish breakout. Arguably, any of the remaining 'serious money' on the bear side will have 'last line in the sand' short-stops around sp'1338/40.

A little more later