Tuesday 16 April 2013

Volatility smashed lower

After the Monday surge into the close, the VIX was smashed lower at the open, and saw further weakness into the close, with the VIX -19.2% @ 13.96. Near term count offers the opportunity of a fifth wave into the low 16s, VIX 20s still seem unlikely for at least another week.




Well, the VIX itself is becoming more volatile. Today's sharp drop was in stark contrast to yesterdays closing hour ramp.

We've seen this kind of action before though. If you look at the week of Feb'19'th, you can see an initial surge..then a one day sharp pull back..before yet another hyper jump on Feb'25th.

Are we going to see a jump beyond yesterdays 17s, Wed/Thursday? It seems unlikely though.

Near term best guess is we are still in a 5 wave count of initial wave'1 higher.  Today might have completed sub'4, with sub'5 to develop across Wednesday..possibly into Thursday. We'll see soon find out.

Regardless of the near term 'noise', VIX looks set to jump into the 20s within the next few weeks. There are simply so many little rumblings of problems out there. Those who are watching Copper, Oil, and the precious metals might well agree there are 'issues for Mr Market to deal with'.

more later...on the indexes

Closing Brief

The main indexes closed significantly higher, with the market leaders - Transports and R2K higher by 2.0 and 1.5% respectively. VIX closed sharply lower, -19% in the 13s. The metals and Oil maintained moderate gains. USD was very weak, -0.8%



Clearly, a disappointing end to the day for the bears.

I'm really not sure what to make of this afternoons continued rally. Its kinda surprising we managed to hit the mid 1560s, never mind the 1570s!

Was today really a sub'2 wave, with a big 3 down across Wed/Thursday?

Considering that we still holding under the critical 1580 level, I will still hold that today was sub'4, with a final move into the sp'1540s tomorrow - even though that now looks too far for a sub'5

*Regardless, I hold short overnight, but its now an annoying underwater position, and even the sp'1550s look a long way down.

The usual bits and pieces across the evening.

3pm update - closing hour weakness?

The smaller 15/60min cycles are highly suggestive of weakness into the close. Further, if sub'4 wave is complete, then sub'5 should at least take out the recent low of sp'1552. A break into the 1540s seems viable early Wednesday. VIX closing in the low 15s looks viable.




Lets see what the bears got in them, after what has been a pretty bullish day.

There ARE plenty of signs of weakness out there, not least of them the metals - slipping from earlier highs, the miners, and Oil.

*I will hold short overnight..seeking an exit in the sp'1545/40s, with VIX 15.75 / 16.25

UPDATE 3.33.pm ...bulls trying to ramp this into the close...urghh

Any price in the 1574s would ruin the ABC idea, and then the last hope is a 1-5 count, - which would suggest this is actually a 2 wave.

3.42pm...sp'  new high of day, and we're now in serious danger zone for bears. Anything over 1580, and it messes up the near term bearish outlook.
back at the close.

2pm update - still waiting

Mr Market is holding significant gains of around 1%. With two hours to go, bulls just need to hold things where they are. Bears could do with a close back in the 1550s, which will easily open up the 1540s early Wednesday. VIX is possible floored in the low 14s.




A somewhat frustrating day, but for those bears who haven't re-shorted yet, now might be the best time, not least with the low VIX.

I remain heavy short from sp'1563, and will hold into Wednesday

Target remains sp'1545/40, with VIX in the low 16s.

UPDATE 2.28pm looks like we're rolling over...

A close in the 1550s would be a bonus, after the stronger than expected bounce.

1pm update - bears need to push lower

Mr Market has managed to hit sp'1570, which after yesterdays sour afternoon, is quite an achievement. Bears need to push lower into the close, preferably under the hourly 10MA - which by the close will be in the low 1560s. VIX is holding in the low 14s. Oil still weak.



I think the above summarises where we probably are.

Bears MUST hold <1580, and frankly, I'll be pretty disappointed if we don't close back in the 1550s.

UPDATE 1.28pm ...here is VIX, hourly..with a count

Sp'1540s..probably would still be a lower high on the VIX, maybe 16s, before slipping back again into OPEX.

1.44pm...rolling over? We'll soon see!

12pm update - trying to be patient

The market jumped back higher after a mid morning decline. It still seems likely that a sub'5 is imminent. Bears might have to be patient and wait for those 1540s early tomorrow. VIX is in the low 14s, down 14% or so. Metals holding gains, whilst Oil is relatively weak.




Suffice to say..I hold HEAVY short from sp'1563, waiting for a 2-5 hour down cycle, which now seems to complete sometime tomorrow.

Bears need to keep a lid on this nonsense, there is natural resistance in the 1570/75 area, but frankly, that'd be really annoying.

time for lunch

VIX update...

back soon

A good example of what I want to see on the main indexes later today..

BKS..  opening rally...and its failed.  Looking for a red close. (not that I'm trading it)..

Daily MACD is actually now back to negative cycle.

11am update - sub'5 of initial 1...underway

It looks like we maxed out this morning @ sp'1566. Downside target for a sub'5 is somewhere in the 1540s. Those shorting this morning need to be cautious once we break into the 1540s. Daily index cycles are pressing lower, with the VIX wanting to break back into those 16s.



There is a lot of weakness out there, and the Trans/R2K are both leading the way back down.

I am holding short, seeking an exit in the 1540s later today.

*the plan is to then sit back... and wait (I won't be trading it) for a very likely bounce into Friday  opex, where we might go as high as the low 1570s.

That in itself would make for a superb re-short late Friday/early Monday.

11.17am.hmm, now market bouncing again. Maybe its just an ABC up..with yours truly shorting the A' wave. Not so great. Oh well, just have to wait.

11.30...is that it?

 We done yet?

11.42am...the battle rages @ 1566/65....

10am update - morning bounce..to fail

We're back in the mid sp'1560s. The 15min cycle is suggestive this mornings bounce will fail sometime between 10-11am. VIX is sharply lower, with the metals higher. Oil is failing to join in, and is flat.




I'm getting real restless already, is the bounce maxed out after just 10mins?

*I am on standby for a major re-short today, which might be within an hour.

Seeking a move from the sp'1560s down to the low 1540s late today/early tomorrow.

VIX..getting the smack down...

I won't be picking up any VIX calls until Friday/next Monday.

IWM..60min..black candle!

Transports..failing too now.

UPDATE 9.59am... am SHORT, from sp'1563

*Considering the Trans/R2K early action, I think there is high risk of imminent reversal in the headline indexes.

I might be a few hours early, but a re-short in the 1560s seems reasonable, with a clear 20pts downside by late today/early Wednesday.

The fact the daily charts are in full favour of the bears is extra support.

First key resistance against the bulls is the daily 10MA of 1568. I find it very hard to envision breaking over that and holding.

Anyway, I'm short, downside target is 1545/40

UPDATE 10.20...seeking a fail on the transports at the hourly 10MA

sp'1562..with VIX @ 14.58...seeking 1545 and VIX 16s...'soon'

10.35am...they are battling it out @ 1563...pretty fierce. 

Pre-Market Brief

Good morning. Overnight futures gains are holding, sp +10pts, we're set to open in the low 1560s. This is very likely a sub'4, following yesterdays wave'3.  A move from 1560s, downward to test the 1540/38 support zone is anticipated late today/early Wednesday.

sp'60min - with count



Well, futures are luminous green, and no doubt those bears holding short overnight are waking up with some mild dismay.

*Gold, Silver, and the miners are soaring, although the gains are still a mere fraction of recent declines.

Key things to watch for in the opening 30 minutes...

1. black candles on the hourly/daily index charts for IWM and Transports

They are usually the first ones to warn of a failed opening bounce/rally.

2. reversal candles on the VIX . Hollow-red, indicating failed bullish index gains.

I will seek a major re-short in the low/mid sp'1560s, via an index short, and will seek to exit in the 1540s late today..or early tomorrow.

Considering the daily index and VIX charts now have good MACD rollovers..I'm very confident with this plan..and the 60min count I have.

Good wishes for Tuesday.

Video... Oscar...


To be clear, I will seeking an index re-short this morning, I think I'll go with the IWM, with is almost 91..my downside target is about 89/88.50

Mid-term outlook now appears clear

With the US indexes closing sharply lower, it now seems clear that sp'1597 was the multi-month high. The only issue is when we take out the key low of 1538, not if. Primary downside target remains the sp'1480/70s, which will likely equate to a VIX back in the 20s.

sp'daily5a - H/S theory

sp'daily3 - fib levels

sp'weekly2, rainbow

sp'weekly6 - issues on possible drop

sp'weekly7 - fib retracements for key drops


Its been a long day, so I'll keep it mostly to just charts.

Suffice to say, today was a major decline, but until bears break the key level of sp'1538, bears need to remain cautious. The hourly index cycle charts are VERY oversold now.

Best guess..we see some form of multi-day bounce from 1540/38 again, and then form a possible mini right shoulder in the 1565/75 zone. This would likely take us into Friday opex. So, right now, I think sub sp'1530s are somewhat unlikely until next week.

Near term..'best guess', 60min, with count...

Certainly, today felt like a wave'3. Every little bullish attempt to rally failed - not least the one just before 3pm. Sub'4 should look like '2, so maybe 3-6 hrs of Tuesday chop..before another wave lower on Wednesday to test that sp'1538 level.

If we do fail to hold 1538 though, its arguably the time to just 'chase it lower'. There is 'free money' of 60pts for the bears if support breaks, and it could occur extremely quickly.

As things are, I am on the sidelines, and waiting for a bounce to re-short. Considering the AH action, it would seem we might open in the low sp'1540s. If that is the case, the bulls had better make an appearance by late morning, or Tuesday could see even bigger declines than today.

Goodnight from London

Daily Index Cycle update

The US equity market opened weak, struggled across the day, but more importantly, it sunk into the close. The two leading indexes - Trans and R2K, both saw a rather severe fall of 3.8%, with the sp -2.3%. Near term looks very weak, but there is rather strong support @ sp'1538.

IWM, daily




Today was an important day in market land. The daily closes were pretty severe - the deepest of 2013, its been a long while since we've seen falls of almost 4%.

Lets be clear... sp'1538 is the critical level for the market to hold.

Any failure to hold 1538, and the market could very easily free fall another 60pts to the primary target of sp'1480/70s.

However, if the bulls can make a stand across Tue/Wednesday, and hold the line, then a small rally into opex is possible, as high as the low 1570s.

From a trading perspective, its actually a very clear situation now.

a little more later, on what has become something of a very busy..and long day.