Wednesday 19 December 2012

Volatility Surges (sort of)

The VIX surged today, but it was partly due to the futures contracts rolling over into the next month. The VIX closed 11.5% higher, to settle @ 17.36. We remain well below the key VIX '20 threshold.




The VIX futures rolling forward one month contributed to around half of today's gains.

Increasing the first target level

Yesterday, I noted the 17.50 level as key, yet, when you factor in today's issue about the futures moving ahead one month, I will have to raise that key level to at least 18, if not even 19.

As I keep noting, until we see VIX >20, bears still don't have the first real sign of market fear since the June low of sp'1266 - when the VIX was in the 27s.

Buying VIX lottery tickets.

There were some crazy VIX call trades flying through today, with people buying 50s, even 60s, for front month January VIX.

More later..on the indexes.

Closing Brief

The broader market closed lower, but its important to note that the most volatile and ramp-reacting indexes - the transports, and the Rus'2000, both closed higher. We remain a mere 2% or so from the mid-September FOMC highs.





A marginally interesting closing hour, with more intense weakness in the last 15 minutes.

The December 17'th low

For the bears, the critical low is from last Friday, sp'1413. Until we take out that low, the near term trend is unquestionably still UP.

Getting down below sp'1420 is going to be difficult, not least since Christmas trading volume could be so low as to allow the bots to melt everything back higher - even with the relentless concern about lack of a fiscal cliff agreement.

More later..on the VIX, which closed significantly higher.

3pm update - even sp'1420 is no good

With the indexes showing a little weakness, even if we slip all the way into the close, and even open lower tomorrow, its not going to be enough to decisively break the up trend. Even sp'1420 is not good enough, as a number of the daily charts clearly support.


sp'daily7 - fib levels.


I think the fib' chart is especially interesting, as it highlights that even a retracement to the low 1420s is just nothing in the scheme of things.

VIX is back in the low 17s, but as noted, this is more about contracts rolling over into the next month than anything else.

So, for me, it remains the case that until sp<1413, I just can't take any of this seriously.

UPDATE 3.20pm A eenewed little wave of weakness across the indexes - although Trans and R2K are still higher. A close in the low sp'1430s very viable, not that it counts for much.

Even Queen cheer leader on clown network, Ms. Bartiromo seems tired of the political games.


 back after the close

2pm update - Euro maxed out?

Whilst the main market shows a little weakness, consider the Euro currency, which is currently sporting a very prominent black fail/doom candle on the daily chart. Having broken key resistance, a break back into the 1.30/29s would be a problem.

Euro, daily


As I noted last night, the currency situation is already starting to move beyond the border, and the dollar is breaking an trend that goes back to spring 2011.

Yet, today's Euro candle is suggestive of a possible top, at least for a few days.

Without question, I won't have any confidence until I see USD back in the 80s, which would probably equate to Euro 1.29s

As for the indexes..


Its nothing to get excited over. I'm very much going to remain in the mindset of 'call me when we're <1413'.

VIX is +8%, but 5-6% of that move is likely due to futures contracts moving to the next month out.

VIX, daily

Give me a call if we break into the mid 17s tomorrow..with sp <1425, otherwise, this is all meaningless noise.

12pm update - mr market mindlessly meandering

Its still quiet, and baring any news this afternoon, we're set to just meander around into the close. Underlying pressure is increasingly upward, as the algo-bots remain in full control.



Its possible we might go negative MACD (hourly) cycle in about 3-4 trading hours, we could see a small retracement, to around sp'1425/20. Yet, even that sort of move - across 1-3 trading days, wouldn't bust the rising trend.

Notable stock movers - GE, STX and WDC. For some reason the disk drive makers are back in fashion again. I'd much prefer SNDK though, the flash drive maker, thats the way forward, not those spinning disks!

Metals remain weak, especially Silver.-1.4%

Special note

The NYSE Comp' has broken the mid-Sept QE highs, the first of the indexes to do so.

I suppose some could argue its just a brief move, but really, as with the SP', until we're back below that rising trend line, its NOT bearish!

UPDATE 12.20pm.. His highness, Obama is speaking about the fiscal cliff, no doubt the algo-bots are considering the ongoing transcript of his every word.

The president must be so very proud of his 'deficit reduction' plan. The sheer audacity of him using those words together. Incredible.

Meanwhile, the coal stocks are starting to suffer again. BTU is looking especially weak

First target remains support @  25.00


Transports and Rus'2000 are making a signifnicant break higher - whilst the main indexes remain largely flat.

Trans, daily


For the bull maniacs seeking sp'1500s 'soon', they need only look to the these two leading - and always most volatilie, indexes.

UPDATE 1.25pm Gold - which bounced earlier, now back to -$8

Another $32 to hit the 158 target. Gold bugs going to go nuts if the equity market turns lower (whenever that is)..and takes gold right through the 158 key level.

11am update - quiet morning

Aside from the expiring December contracts - resulting in a few minor jumps in various things, its quiet out there. The moderate declines are to be dismissed as nothing other than noise. Unless we trade back under the recent low of 1413, the primary trend is most certainly still upward.



...nothing to add...its quiet.

GE is lower, and arguably breaks what is a giant bear flag. Its the kind of chart I was looking for with the main indexes, oh well.  I'm honestly not sure what the reason for this mornings fall in GE is, ex-dividend?

Regardless, first target would be the 200 day MA around 20.40

10am update - tiresome

Opening minor chop. Market has no immediate direction at all, although of course, the daily trend is still upward. VIX is +6% - Dec contracts expiring today (I believe). The dollar is close to breaking <79. Despite the weaker $, metals continue to show weakness.




So, we're off and running. Baring some'll likely be a quiet day.

Quiet day...low volume...= algo-bot melt. A close in the low 1450s is thus very probable.
As noted last night, on any basis, bears really can't get in the least bit confident until we take out the recent low of 1413, with a VIX >17.50. I realise those levels are entirely arbitrary, but I think they're pretty 'fair'.

Metals are again weak...

GLD target remains 158

UPDATE 10.30am Minor declines..nothing to be excited about..sadly.

Until we break the recent 1413 low, it counts for nothing.

Pre-Market Brief

Good morning. Futures are moderately higher (again), sp is +4pts, we're set to open around 1450/51. The dollar is still weak, with the Euro naturally higher. The near term trend equity remains up, with empty air to the mid-Sept' high of 1474.




Another day closer to Christmas, and the low as it is, means those algo-bots can easily melt this market higher - unless a surprise news story upsets Mr Market.

Lets see if any definitive news on a fiscal cliff agreement appears today.

The clock IS still ticking, and from what I gather, it all needs to be wrapped up by tomorrow, or certainly by Friday.

*Gold bugs are going to be annoyed again, Gold is already -$6, and thats with a weak dollar! If the dollar does 'somehow' turn back upward, then the metals will come under even further pressure. 

A scary index for the doomer bears

The transportation index - the 'old leader', saw a daily close +1.6%, and that now makes for a weekly gain of 2.4%. We are fast approaching the 5400 level - the March highs. A few consecutive daily closes in the 5400s would be extremely bullish for the broader market into early January.

Trans, weekly

Trans, monthly

Trans, monthly2, rainbow


Just yesterday in the early part of the afternoon, the tranny was sporting a fifth spiky candle on the daily chart, but with the closing hour ramp, the tranny closed at the high of the day, and today's follow through was strong confirmation of underlying strength.

Breaking to the upside?

The big monthly transports chart is something I have been highlighting since I started this little blog in the early spring. We've been stuck in an extraordinary tight trading range ALL year, but once again we're on the edge of an important monthly breakout.

As I have kept noting, a close >5400 is bullish, whilst the bears should be seeking <4800. Today's close is a mere 1.5% away from breaking the bullish threshold. For the doomer bears, the transports had better reverse...soon.

A few bonus charts

USD, daily

USD, monthly2, rainbow

Ignore the count on the daily chart, regardless of how anyone might like to count the current waves, the dollar is clearly on the slide. It looks much more serious though from the monthly perspective, where we have an initial break of rising channel support.

A December close <80 would be a real warning that the slow - but gradual, up trend from April 2011 is over. Considering the US Federal Reserve will start 45bn of 'unsterilised' t-bond buying in January, you'd have to think this initial sign of dollar weakness will see follow through in early 2013.

For those seeking major equity declines, a new wave lower in the USD is going to really pose a problem. As many are increasingly noting, 2013 might be the year when 'currency wars' really start to intensify.

One last chart to close the day.

sp'monthly3, rainbow

We now have an outright bullish green candle, and again, its notable that we've not had a monthly closing red candle since September 2011. Considering the price action of the last two days, even a blue candle to close the year would seem overly hopeful.

Goodnight from London

Daily Index Cycle update

The main indexes closed broadly higher, with gains between 0.9-1.6%. The transports - the old leader, saw a major breakout, and is now starkly bullish. There is now empty air of around 2% on most indexes until the mid-September FOMC highs are challenged.

IWM, daily





It has to be said, today was a devastating blow to anyone holding a near term bearish outlook. The break over last Wednesdays FOMC highs was very decisive, and even the closing hour was once again something of a mini-ramp.

We can be clear on one thing..there is NO sign of a turn lower, or any levelling phase.

I won't be able to take any future index declines seriously until we take out the recent sp'1413 low, with a VIX >17.50.

On the flip side, a few daily closes >1474, and we really will be trading in the twilight zone once again.  All those crazy bull maniacs who were touting sp'1500s by year end, are now a mere 4% away!

A little more later