Volatility - again drops heavily

For the second day running, the VIX significantly declined. The VIX opened a touch lower - even with indexes similarly lower, and declined across the day, closing -12.7% @ 14.73 The last six trading days have all seen very dynamic moves in the VIX.


VIX'60min

VIX'daily3

Summary

So, the first six weeks of the year were dead in VIX land..yet the last 6 trading sessions have been pretty wild. We've seen three massive spikes higher, and three significant daily declines.

It is very difficult to call tomorrow. It will be largely dependent on whether we can break the previous daily cycle highs of sp'1530. The Dow has already broken that equivalent level, but thats just one index.

On any basis, VIX 'insurance' in the 14s is a pretty reasonable level...but not if the sp breaks >1530.


Patient bear

I am sitting on the sidelines...how we trade in the opening 30 minutes of tomorrow will be VERY illuminating.

If I see a red reversal candle on the VIX - like the one on Monday morning, AND if the sp stays <1522, I'll do a major index re-short.

Otherwise, from a bearish perspective, its a case of sitting back until mid-March..with sp'1550/70s.

more later...on the indexes.

Closing Brief

After opening a touch lower, the indexes turned higher, and didn't look back. The clown networks are still overly obsessing over the Dow, but the other indexes are still holding below their Monday highs. VIX was smacked lower by around 12%


dow'60min

sp'60min

Trans'60

Summary

*closing 5 minutes were a touch weaker, but still, its negligible.

I have to note, I am surprised at the strength of today. I thought 1510 was certainly viable..but 1519/20...thats..kinda bizarre.

Yet, should we be surprised?

Today was a 5bn super POMO fuelled trading day, was that partly why this latest up cycle was so strong?

As will always be the case...we'll simply never know.
--

I remain content to be on the sidelines.

If we break 1522, its arguably pointless to consider a re-short, and I would assume (blue) wave '5 - see daily charts, is now underway. Blue'5 might get stuck in the 1550s, but that might take 2-3 weeks to pan out.

So, those bears hoping for one final down wave...might well have to sit it out until mid March.
--

more later...on the VIX

3pm update - maxed out?

The index and VIX action is very similar to the two day ramp of Feb 21/22. The opening 30mins of Feb'23 were even better entry levels for the bears...perhaps it'd be better to sit it out overnight..and see how we open. Transports back >6000..metals remain especially weak.


sp'60min

vix'60min

Summary

I am surprisingly patient today, but then its been a rough week or so. I'd rather miss out on a decline, than get nailed on a gap over sp'1530 tomorrow.

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Best guess...we are VERY close to the top of this wave.

There is a 30-50% chance we'll get a minor gap lower in the VIX in the opening 30mins of Thursday..at which point, if I see a reversal candle..and black candles on the hourly index charts... I will re-short..from a much more comfortable level - not least that the Bernanke is out of the way.

..updates... probably across this closing hour...things are getting kinda interesting at these levels.

UPDATE 3.10pm ...VIX still melting lower.

With things as they are...I think I'm going to sit it out until early tomorrow. Those SPY puts sure are tempting though at current prices.


UPDATE 3.20pm  Clown network hosts getting overly excited about the Dow.

 *so far, dow is only index above the recent highs. I'd not consider it a valid leader.

3.40pm...sitting this nonsense out.

sp'1519/20....there is soft resistance in that 1520/22 area..but Transports is screaming higher...

more on that..after the close.

2pm update - the conservative bear

The market appears to be churning out a short term top, having maxed @ sp'1514. The VIX looks like a floor is being built. Metals remain weak..and are continuing to slip lower.


sp'60min

vix'60min

GLD, daily

Summary

I'm still waiting to hit buttons for a re-short, but I'm getting impatient. Maybe I need to increase the chocolate dose?

I'm also still recovering from over three hours and 8 minutes of the Ben Bernanke. 
--

On any basis, the VIX is due a recovery bounce after two heavy down days.

UPDATE 2.05pm

vix'15min

I'd feel a lot more comfortable doing an index re-short, if the vix can see one further down cycle.

A good example is the action on Feb'22, from 3pm..where we even saw a minor gap lower - with classic reversal candle.

So..I might sit this out until tomorrow...regardless..I think we're pretty close..if not already floored in VIX land.

2.25pm  Indexes getting that little extra kick higher that I was concerned about...

This could be the last extra move higher. Those SPY calls..sure are cheaper...-10% in the last 20mins !

Lets see where we are at 3pm

12pm update - waiting for it to level

The indexes are comfortably holding to moderate gains of around 0.7%. The VIX has been whacked another 11% lower. The hourly cycles are very primed to level out this afternoon. Metals are weak, despite a similarly weaker dollar.


sp'60min

vix'60min

Summary

Hmm....indexes still showing NO sign of levelling out.

I'm giving it another 2-3 hrs. Lets see where are around 2.30/3pm.

I still think very significant chance of a fifth wave lower. As it is, if we max out late this afternoon, the fifth wave would most probably complete early Friday. - March 1'st

*today was a very large POMO of 4-5bn. Hmmm indeed !
--
time for lunch

*VIX update from Mr T.




back at 2pm

11am update - morning ramp

Mr Market is picking up a little momentum. The hourly index charts are seeing some bullish signs..and thats all being confirmed with a VIX that is down another 10% - after yesterdays big decline. Metals remain weak.


sp'60min

vix'60min

Summary

Clearly, near term trend remains upward..and there is no point in shorting this..yet.

Bulls should arguably be tightening stops..in case of a reversal, which could easily come at any time.
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*I've a soft target for the VIX of 15/14.50 within the next few hours.

If we can level out on the MACD cycle by 3pm..I will seriously consider a re-short - for a fifth index wave lower across Thurs/Friday
--

back at 12pm

10am update - another morning with Bernanke

Good morning. Mr Market is little a bit confused. Minor opening chop. The micro 15/60min cycles are problematic, we could see a snap lower at any time, but we're set for a bullish MACD cross on the hourly within the next hour or two. Metals looking a bit weak, gold -$7


sp'60min

vix'60min

Summary

Things are unclear. I'm sitting back.

I'm still seeking a fifth wave lower..to 1480/75, but those hourly index charts are threatening a snap higher around lunch time.

A move to 1505/10 is very viable..before that final wave lower.

Those seeking a re-short..would probably be better to at least give this nonsense another 3-4 hours to play out..and see where we are.
--

updates...across the day :)

Expecting a wave higher into March

The main indexes are seeing a multi-day wave lower - much like the one we saw in late December - and we all remember how that turned out. Best guess is that rising support @ 1480/75 will hold..and we will see a new wave higher across March, perhaps lasting into April


sp'daily7 - fib levels

sp'daily4 - bearish scenario

Summary

The fibonacci level of sp'1480 still looks a very good target, especially when you consider the 50 day MA, and the rising channel support.


RE: daily4' chart

On a very broader wave count, I remain resigned to at least one further moderate multi-week wave higher. I suppose it might be a truncated fifth/E wave, but whatever it is, it'd mean we'll soon see another ramp, taking us into the sp'1550/70s.

I am holding to the small hope there will be a very significant decline in May. Although if we are around 1550, even a 10% decline only gets us back to 1400 - where we began the year. Breaking into the mid 1300s - as some notable chartists are touting, will be...difficult.


Wednesday - more Bernanke

Bernanke will appear again at 10am..so the market will have another few hours of the Chairman to focus on. There is durable goods orders before the market opens, and it will be interesting to see what that does to Mr Market before the Bernanke appears.

If the market opens higher, I will be sorely tempted to re-short, if only for a few hours. A move from sp'1505/10 to 1490 would be fine in itself, although my ideal wave'5 target remains 1480/75 - the latter of which seems more likely on Thursday.

Goodnight from London

Daily Index Cycle update

A choppy day in market land. Opening gains failed, but a latter day recovery saw those failed gains recouped. This equity bounce is probably just a small wave'4, with a final decline to sp'1480/75 still viable within the next few days.


Dow

SP'daily5

Trans

Summary

So, we saw a moderate day higher, but the gains sure weren't very stable. The morning weakness..even turned a few indexes briefly red. This is not the sign of a good floor! The closing hour action was reasonably bullish.


Bears getting tired

On a MACD (blue bar histogram) cycle perspective, we're now very low on the daily cycle. Considering there is very key rising support @ sp'1480/75, I find it very difficult to imagine breaking under that zone.

Hence, I'm looking to go long...within the next few days, upside target would be somewhere around 1550/70

A little more later