Thursday 11 April 2013

Volatility knocked lower into the close

A somewhat dubious end to the day in VIX land. For the fifth consecutive day, the VIX fell lower across the last few minutes of the trading day, and closed -1% @ 12.24  Near term trend looks like a mid-term floor in the 12.25/11.75 zone will hold.




The VIX broke out of the 4 day down channel earlier today, but closed (somewhat surprisingly) in the red.

Although, it should be noted the closing action was VERY suspicious. This was the fifth day where the VIX was whacked lower in the closing minutes. Today was especially the case, where the VIX was flipped from -1% in a matter of a few minutes.

Today was day'4 down, and clearly, there is STILL no turn/levelling phase. Yet, the Daily lower bollinger band is very close @ 11.41..and that is itself rising.

The VIX might see a brief Friday spike lower - and then a major intra-day/morning to the upside.

Regardless of tomorrow, the VIX is historically cheap insurance at these levels, and I'd have to expect a move into the 15/16s before this month is done. Whether we can break into the 20s this May.. that is the ultimate question.

more later..on the indexes

Closing Brief

The market closed somewhat mixed. The transports closed slightly red, and its close companion - the Rus'2000, closed somewhat weak. The headline Dow & Sp' indexes managed moderate gains. The question now stands...was 1597.35 the high of this cycle?





First, note the Transports have pretty clearly broken the upward channel....with the R2K set to follow it tomorrow.

The big headline indexes though, that's another matter, and they remain extremely resilient.

It should be noted that the recent 4 day surge has been associated with a decline in the USD. If the Dollar starts to rally next week, that will be a major problem for equities, but especially Oil and the precious metals.

*The VIX does look like its floored in the low 12s, and the bears should be seeking a Friday close in the 13s

3pm update - Transports and R2K...weak

Whilst the headline indexes hold moderate gains, the Transports and R2K are now moderately bearish on the hourly cycle. There should be at least some weakness into the close, and most of Friday morning. VIX is trying to build on the current fractional gains.


R2K, 60min



So far then, Transports is the first index to break the rising channel that began last Friday morning. R2K looks set to follow early tomorrow.

Whether the headline indexes will continue to ignore - what ARE the two market leaders, is to be seen.

For those still bearish...a short-stop at the 1598 level is pretty obvious.
updates into the close...

 *I will hold Oil (short) overnight..seeking an exit in the 32.70s...tomorrow.

Indexes want to rally still, far.. that 1597 high..holding.

3.25pm...Sp'500...a choppy top on the hourly..its a viable short-trade, with stop @ 1597/98.

Oil looks weak into the close, and for me, that at least takes the edge off what has been a difficult few days.

One thing that does seem clear, IWM is probably a better index short than the SP', the latter of which is possibly more prone to POMO/media hysteria, ..maybe.

3.35pm... Sp'500, its certainly due a down cycle tomorrow, but its going to be tough to get a weekly close <1580, which remains something I will be focused on.

back at the close

2pm update - afternoon minor battle

Market now seeks stuck at 1595/96, and the VIX is still holding fractionally green. USD is still moderately lower. Precious metals holding slight gains, but they sure don't look good for the mid-term. Oil remains particularly weak, with further declines likely into tomorrow.




Hmm...the 1597.35 indeed holding.

Yet, there is always the underlying pressure of the 'latter day' ramp..fuelled by a moderate POMO earlier today.

Two close red....possible... yes...but somewhat unlikely.

*i will merely hold short Oil...into Friday.

Bears just need to break <sp'1591..  hourly charts are set to go bearish within 2-3 trading its possible we might see a little weakness into the close after all.

UPDATE 2.17pm...indexes..sliding a touch..and the VIX is confirming it.

Will be interesting to see how we close. 

1pm update - VIX wants to break higher

Whether sp'1597 was the near term high, we clearly won't know for some days..if not weeks. Meanwhile the VIX is now outside of its 4 day down channel. Equity bears should be seeking a close (more likely tomorrow) above multiple hourly MA resistance @ 13.50.




The best that bears can hope for today is a moderate red close in the indexes, and a VIX in the mid 13s. All things considered, that'd be a major achievement.

*Oil remains weak, which is pretty bad considering the USD is -0.5%

VIX update.. from Mr T.


Looks like the big money are buying some May protection, and will build such positions into next week.

1.05pm... IWM, back at the highs...

Clearly, there is NO turn yet on the daily charts, and in fact,  even if we get stuck here, we won't see a decisive MACD turn until middle of next week.

1.28pm..well, at the current rate, the sp'  will see a bearish cross on the hourly chart late tomorrow morning.

So, bears have a chance at closing the week <1580..but its going to be..difficult whilst daily cycles still pushing upward.

12pm update - are we done @ 1597.35 ?

This mornings follow through is again particularly discouraging to the bears, but for those watching the daily cycles..we might be 'there'. However, until we take out the sp'1538 low...bears really can't get excited. USD remains weak..not that this is helping a particular weak Oil.



USO, daily2


First, I want to highlight a comment from poster 'Christian Gustafson'

In 2007, the weekly top Bollinger was at 1580; we topped 4 pts below it at 1576.This week, Google charts shows the top Bollinger @1601. We just reversed at 1597.35, again 4 pts below'

I certainly also place a lot of emphasis on the standard Bollinger bands - especially the weekly and monthly ones.

Did we just see a hugely important top? As might take a VERY considerable time to be sure..

VIX looks set to snap higher in the next hour or two. A close in the 13s would be useful.

Oil is an interesting spot of weakness..and along with Copper..I'm still inclined for the deflationary outlook.

No doubt the QE-POMO is keeping things together to a large extent.

*its certainly pleasing to see USO start to cliff fall. ;)

time for lunch!

UPDATE 12.30pm...VIX is outside of the down channel...bears need a close >13.50..that seems possible, if not today, then tomorrow.

11am update - hourly 10MA remains first support

Market continues to battle upward, and we're in now a mere 8pts from hitting the big psy' level sp'1600. Meanwhile, USD remains weak, which is probably helping precious metals a little, although Oil is one particular weak spot of the market so far.




The hourly 10MA is @ 1584..and rising. By the end of today it will be 1591.

Bears need to break back below that today, or the chances of closing back in the 1570s tomorrow look very slim.

*I remain short USO, and looking to exit before the Friday close in the low 33s.

11.05am..well, we're at the top of the sp' wedge on the weekly chart.....yet the bulls can aim for the upper bol which is now @ 1613 ! urghh

This is the kind of 'extra nonsense' I was fearing yesterday, hence my switch from short short Oil. So far..the Oil is actually still down.

Despite the continued gains...the Trans, R2K ..still below their recent March highs.

11.29am.... sp'1597...and still rising. The big 1600s imminent. Incredible.....

I can only imagine how pleased the Bernanke must be. Clearly, the 'wealth effect' will trickle down into the wider US economy.

But hey..since when do we need jobs growth anyway?

11.42am...VIX is getting VERY close to snapping higher..breaking the down channel..and making the first move up.

10am update - a little weakness due

Good morning. On any basis we're due some form of minor down cycle. More than likely though, bulls will comfortably hold above the old historic high of 1576. VIX is a touch higher, Oil is moderately lower, USD is lower, with the precious metals a touch higher.




As I noted last night, more than anything..those bears seeking a multi-week down cycle - which STILL includes yours truly, MUST be seeking a sp' weekly close back under 1580.

That is certainly possible, we're only talking about 0.5% lower.

*I remain short USO, seeking an exit in the low 33s.


USO actually looks like a rather large H/S formation on both the hourly and daily charts. A break below the floor of 32.90s would bode bearish for the broader market.

UPDATE 10.13am...lets see if we get that VIX gap-fill today, in the 11.70/60s..

Market hits 1591....Metals trying to break +8...hmm

Last gasp..or big new up wave?

With the SP' breaking through the Oct'2007 high, and closing comfortably in the upper 1580s, the issue now is whether this is a last gasp little wave higher, or the start of something much more significant. Weekly charts for the Dow, SP, and Nasdaq, are back to a rather disturbingly bullish outlook.


sp'weekly2, rainbow

sp'daily3 - fib levels


So...yet another bad day for the bears, with the Friday morning low of sp'1539 now looking a very long way down.

Unquestionably, the break - and daily close, above the old high of 1576 is important to recognise. Bears should arguably now sit back, at least until early next week, and then reassess.

The weekly'2 (rainbow) chart flipped to a green candle when the SP' broke 1580/81 this morning, and if it closes the week with a green candle, that's a very serious problem for those who follow these Elder Impulse charts.

*I checked all the six main indexes...
The Dow, SP, and Nasdaq Comp' are flashing green, whilst the R2K, Trans, and NYSE Comp' are still blue.

I suppose it could be just a blow off/mega short-stop run on the three 'headline' indexes, with the other indexes telling the 'real story'. We shall see.

Those bears who still believe we are forming a top, MUST be seeking a Friday close in the 1570s..or lower, and get those candles back to blue! Fib' land

I'm still keeping a count on the Fib' chart, but its something I am now very uncertain of. Just how should we count this post November series of little waves higher? What is really bizarre, is just how far down the sp'1480s now look!

Just how are we going to be trading down <sp'1500 this spring, whilst the QE-POMO is continuing?

Regardless, the current trend IS up in the immediate term, and until we're under that key (March'19) low of sp'1538, the bears have nothing to be pleased about.

Goodnight from London

Daily Index Cycle update

The main indexes closed significantly higher, lead by the Transports and R2K which are playing catchup, both closed 1.8% higher - although still below their March highs. Near term trend looks like the current up cycle will last into next week. VIX again confirmed the utter complacency.






That is probably all that needs to be said about today.

Underlying MACD (blue bar histogram) cycle on all the indexes ticked up for a fourth day, and is set to go positive cycle on all indexes by this Friday. There is now little reason to believe that the current momentum will be able to turn back lower within the next 3-4 days.

With new highs for the SP - and other indexes pushing back upward, bears arguably should step aside, and wait at least until next week.

a little more later...