Volatility...nuked

The VIX opened 2% lower..and just kept falling across the day. The closing decline of 20.7% is the largest decline since March, with the VIX settling the year @ 18.02. This was the first year since 2006 that the VIX never traded in the 30s.


VIX'60min

VIX'daily

VIX'weekly

Summary

In terms of the near term situation, I think we could be seeing a simple ABC wave'2 retracement. The closing action though shows no sign of the VIX decline stopping though, and the 17s are now imminent.

Despite todays massive drop, the doomer bears need to keep things in perspective.

We've now seen three days where VIX was trading in the 20s, and this is a significant event that many have been seeking since the indexes peaked at the mid-September FOMC.
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The bigger weekly VIX chart looks a real mess right now, but then...it did in mid July 2011..and we saw what came next.
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There should be strong support at the weekly 10MA @ 17.51, although as can be seen, even in summer 2011, we briefly broke below that.

On any basis though, going long VIX at these levels seems like an easy trade, and I will be seeking to pick up another VIX call option block within 2-3 days.

Closing Brief

The market closed the year with a significant bullish reversal from the key 1398 low. With the VIX back <20, the bulls are now rife with hysteria and revelling in delusion. They will be awoken soon enough.


The closing hourly charts...


Dow

SP

Trans

Summary

Well, thats it for the 2012 trading year.
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Sincerely..the very best New Years wishes to all of you!
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*the usual bits and pieces to wrap up the trading day across the evening.

3pm update - bulls on a mini rampage

The most notable aspect of the day so far, are the bullish engulfing candles on many of the daily index charts. We're seeing gains of 1.5% on a number of indexes, and with the VIX -16%..the bulls are on something of a rampage.


sp'60min

vix'daily

Summary

In many ways, its turning out to be something of a bear massacre today.

Yet, even I saw this bounce coming, and I'm far from being much above 'amateur'.
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With the VIX already in the low 19s..it now looks like the18s will be the eventual flooring level. The daily/weekly charts will offer good support on their rising respective 10MAs.
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back after the close
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UPDATE 3.03pm... woah, this is surprising even me now... 1424, really?

frankly, who knows where this madness will stop. What is clear,...can't be shorting here..the momentum is so strong, probably will see follow through into Wednesday.

UPDATE 3.33pm I gotta say, seeing my revised best guess of 1422/24 being hit today, a real surprise.

It looks like VIX has a chance of breaking (briefly) into the 17s on Thursday, assuming the market holds together until then. On any basis, going long VIX in the teens seems like an obvious trade, not least when we've had a number of key warnings triggered in the past week.

Eyes on the bigger charts !

2pm update - the patient bear

The market is doing all it can to battle back after its 50pt decline from 1448 to 1398. Many charts are all suggesting broadly the same outlook... sp'1422/24..with VIX in the low 19s. That would make for a perfect wave'2 bounce..before 'something' upsets the cart.


sp'60min

vix'daily

Summary

I sure am glad I exited at the open, the VIX is massively lower, and the market looks set for the low 1420s...late today, or Wednesday.

This lunacy is exactly the sort of thing that can understandably drive many traders - not least on the short side, to utter despair.

Given a few days, this will very likely be seen as just another 'stupid bounce'.

Eyes on the bigger charts..weekly/monthly.
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*some crazy spiky action whilst the President is talking...to sp'1418..then to 1410 within seconds.

12pm update - letting the bounce play out

The market is choppy, but it does look like 1398 was again a key flooring level. A bounce is now well underway, although it will probably be limited to 1415/20. Its difficult to estimate whether we'll see that early Wednesday or late Thursday. What still seems clear, the bigger downside targets.


sp'60min

vix'daily - a bounce off the rising 10MA @ 19s?

Summary

So..a bounce, and even if it lasts 2-3 days, it might amount to no more than 1.5%. A brief flirtation into the 1420s seems viable, but it won't be easy.

The bigger weekly charts are firmly pressing lower, and so any bounces are going to be greatly restrained.
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I remain patiently on the sidelines, after my exit at the open. Considering Tuesday is closed, I'm increasingly content to sit this nonsense out until we resume on Wednesday.

I need a break, back at 2pm
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UPDATE 1pm ..looks like market spiking..and may have just completed an A' wave.

B' wave , after Obama speaks... with C' early Wednesday @ 1422/24 ?

I think so..and I'm starting to quite enjoy today.

11am update - a choppy few days?

Mr Market is trying to put in a floor at 1398 - which is also the level from Dec'5. It looks like we have a reasonable chance of bouncing across the Tuesday holiday, perhaps even into Thursday. A fierce wave into the sp'1200s looks likely to begin within 3-4 trading days.


sp'60min

Summary

I've added a count to the hourly chart, and I think it might be a good one.

Upside to 1415/20 seems very possible, especially if this is a (black) wave'2 bounce.


So...as things are...I'm sitting back..and trying to be patient - which remains a difficult task.
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If we somehow snap higher on pure nonsense late today, 1416 or higher, I'll be sorely tempted to do that re-short.

On any outlook though, this market has got major problems ahead.

Bears shorting across the next 2-3 weeks should in theory see spectacular gains.

10am update - bounce underway

Mr Market is seeing a natural bounce, that could take us all the way into the close. VIX could even break back below 20. Bigger targets remain unchanged, low sp'1200s...within a few weeks.


sp'15min

vix'15min

Summary

So, its bounce time, and it will only take a small rumour for the bulls to go crazy and have us trading around sp'1415.

I would be somewhat surprised if we break back into the 1420s.

Just who is going to be buying at those levels?
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*I am back to cash, but will look for a full re-short, later today.

Pre-Market Brief

Good morning, and welcome to the last day of 2012, although I should already say happy new year to all my Asia readers ! Futures are as expected, we're opening around the levels seen from last Fridays after hours session. The sp' is -10pts, and we're set to open around sp'1392/90..somewhere just over the 200 day MA.


sp'60min

sp'daily5

Summary

So, it looks like we're going to open in the low sp'1390s. This is good, and is our first break below 1400 since Dec'5th.


What am I doing today ?

I need to rollover some option positions, so I'll exit at the open, and look to re-short later in the day, but in a further out month.

Be absolutely clear, I will now be shorting all the way to the low sp'1200s. However, I will try to 'dance' in/out of a few positions if the smaller 15/60min cycles look oversold at various times.

*I have my backup mobile internet now working, so I will be able to post as necessary, intra-hour updates..if price action is 'dynamic'.

Good wishes for Monday, and.the very best of bearish hopes for 2013 !
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UPDATE 8.50am ... I'm not sure why but the market is jumping higher... sp now -2pts..set to open around 1400.

hmm, well, if we open @ 1400, I'll sit back and wait for lower levels. I am not exiting @ 1400. 

UPDATE 9.35am  CLOSED spy puts and VIX calls

I'll re-short later in the day...probably.
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Bounce potential..probably sp'1410/15...but I can't see 1420s again.