Wednesday 17 April 2013

Volatility breaks the Tuesday high

With the main equity markets significantly lower, the VIX closed +18.3% @ 16.51. However, the VIX did briefly exceed the Tuesday closing high, hitting 17.90. It appears VIX concluded a fifth wave higher, and is now set to fall into the low 14s/13s by the Friday opex.




I have to say, I was surprised, and a little concerned when the VIX broke above the Tuesday high earlier today.

I had originally thought it'd struggle just to hit the 16s - even if sp' broke into the 1540s. But no, the VIX surged yet again, and came very close to hitting the 18s. I think its clear that volatility is indeed coming back to this market

As things are, if the count is correct - with initial main wave'1 complete, we should seek a standard ABC pull back into Friday opex. Considering recent market complacency, a VIX back in the 14/13s seems VERY likely - and that would probably equate to sp' back in the 1570s.

I expect VIX 20s next week, and if the market takes out the sp'1538 low, I believe there is a significant possibility of a very brief spike into the low 30s by next Thurs/Friday.

*I will be looking to pick up a VIX call block late Friday/early Monday, with an exit target of VIX 25/27.

More later, on the indexes

Closing Brief

The market saw significant declines in the early morning, but appears to have formed an immediate floor @ sp'1543. Hourly charts offer general upside into the coming Friday opex. The VIX closed higher, but around 1pt lower than the high. USD was sharply higher.



An interesting trading day, and I have to say, I'm rather pleased that it seems the count was right after all.

The really exciting aspect if that if correct, if bodes for a severe wave'3 down next week.

First things first though, we need to see another up cycle into Friday opex.

*Having exited a heavy SPY short position in the early morning, I hold Long Oil (via USO) overnight, seeking an exit in the 32s.

I'm seeking a VERY heavy re-short late Friday, of the indexs, VIX (long), and USO (short).

the usual bits and pieces across the evening. If I have time, I will add a closing chart on where we might go next week...

3pm update - closing hour upside

The bears have seen a strong fifth wave lower, and despite a lot of doomy chatter out there today, it would seem we'll see Mr Market claw a little higher into the close. Bulls should be seeking anything in the 1550s, which easily opens up the mid 1560s tomorrow.



Its been a bit of a choppy few hours, but a floor looks like its holding very well - with a nice floor spike @ 12pm.

I do not expect new lows into the close.

*Holding LONG oil ( via USO) overnight, seeking the 32s...

USO, hourly

Need a break outside of the down channel, with 31.25/30s
back at the close

2pm update - market floored

It now looks very likely that the market has floored for this week, and there is now general upside into the Friday opex. The VIX is cooling down, and is now back in the 16s. Target for the Friday close is sp'1570/75, with VIX in the mid 13s.




Looks like we have a pretty secure floor @ 1543.

*I hold long Oil, into Thursday

1pm update - no passing

The market has seen a little further weakness across the lunch hour, but we're still comfortably over the critical 1538 low. The VIX is similarly holding a touch under the recent highs. Near term trend looks like a floor is in, with general moderate upside into Friday opex.




We're seeing a lot of chop in the mid 1540s...which was the target zone of this fifth wave lower.

Baring a VIX break into the 18s, it looks like the overall outlook is correct.

*I remain LONG Oil, via USO.. will hold into Thursday

12pm update - floor in for initial wave'1

It would seem the floor for this initial wave lower - from the sp'1597 high, is in. A moderate bounce into the 1570s (again) seems likely into Friday opex. Baring a break of sp'1538, bears should probably be sitting it out for a few days. VIX looks like its topped out.




It does look like the fifth wave is complete.

*I sure can't stomach going long the indexes, but I have instead taken a moderate Oil (long) position, will hold into tomorrow.

Time for lunch!

11am update - sub'5..nearing completion

It looks like the original 5 wave decline was right. Bears should arguably be seeking an exit across the next hour or so. This market seems very unlikely to break 1538 today..or this week. VIX is +22%..back in the 17s, which is something of a surprise.




So, a little snap lower, and the bulls are getting a little rattled.

I am indeed surprise at the power of the VIX right now.

There is one theory that yesterday was merely a sub'2, in which case today we'll slice right through key support 1538..and just keep falling to 1480 - by THIS FRIDAY.

My best that won't be the case

*I am merely on the sidelines now.

UPDATE 11.13am...sp'1446s..we are right at the zone where I'd like to see this level out.

ANY break <1538..would be a critical break, and would invalidate the current outlook. If thats the case, you'd see VIX in the 20s by the close...

but..I'm still guessing the original count IS correct.

11.28am... I'm making a bold move. Going long OIL (via USO)..

Seeking the low 32s tomorrow/Friday.

I just can't see the indexes breaking <1538, in which case we generally see upside into Friday opex.

10am update - very weak open

The US indexes have opened pretty weak, and we've already taken out the yesterdays low of 1559. VIX is higher, but its already cooling off, +9%. Copper and Oil are very weak, but precious metals are catching a bid, despite a much higher USD.





After the power of yesterdays ramp, I'm somewhat concerned we won't break much lower today.

The count still calls for sp'1540s, but I'm just being overly cautious.

*As it is, I just got stopped out @ 1559, a small gain, after what was...a less than perfect entry.

I won't be trading any further today. I'll consider a re-short on Friday afternoon/early Monday.

10.18am...sp'1556, looks like we'll take out the 1552 low..and trade in those 1540s..before levelling out.

A small rally into Friday opex is expected..again, getting stuck around the low 1570s.

10.26am  My concern is this could even be a truncated 5', that falls short. They don't always need to take out the third wave low - 1552.

I just get the sense, this nonsense will trundle somewhat to the upside - 1570s by the Friday close.

15min cycle is VERY low, sure, it could go lower for another hour or two, but we could easily jump back into the 1560s.

I'm glad to be stopped out, and will likely be on the sidelines until late Friday.

10.50am...a yesterdays low taken out.

Count looks correct. wave'5 should be done within next hour or so.

Pre-Market Brief

Good morning. Futures are somewhat lower, sp -11pts, we're set to open around 1563. Notable mover is the USD, +0.5%. This is helping to pressure the metals (again)..and Oil. Bears need to break under yesterday mornings low of 1559, that will open up the 1540s later today.




So, we're likely to open in the low 1560s..after yesterday afternoons late mini ramp. Indeed, the market likes to mess with the minds of as many as it can.

I hold to the original count. If we are seeing a sub'5 play out, it likely will be concluded today, somewhere under the wave'3 (Monday) low of 1552.

One particularly thing to look for is a lower high on the VIX. I don't expect 17s, even if we break into the sp'1540s. VIX...has its quirks.

*I remain heavy short from yesterday, seeking an exit in the sp'1545/40 zone, with VIX in the low 16s. I still expect upside pressure into Friday opex.

updates across the day!

8.50am... Gold flipped from negative to +$18 just earlier. No idea why, but this sort of be expected.

Bears need to see sp -17pts to conclusively take out yesterdays low. Its kinda important we do that early on.

9.38am...well, we're under yesterdays low....

seeking the 1540s...

9.42am...I have a tight stop in place, if i get the be it. I'm just annoyed my entry was not so great yesterday.

Sp' look feasible.

*I have exited @ sp'1559, minor gain...after concerns with the VIX.

Weekly charts still rolling over

Despite today's sharp rebound, the US equity indexes are still rolling over on the bigger weekly charts. The sp' is currently lower by just 0.9% this week, but there is still plenty of time to close the week under the important 10MA @ 1550. Mid-term primary target remains the 1480/70s.


sp'weekly2, rainbow

sp'daily5a - H/S formation idea

Summary opened as expected - with a gap higher, but it sure didn't end with the weakness I was seeking. Indeed, the close was pretty bullish, and with the VIX back in the 13s, the bulls must be pretty pleased with themselves after Mondays surprise routing.

Yet, despite today's ramp higher, the weekly charts ARE still rolling lower. Underlying MACD (blue/green bar histograms) are ticking lower, and we're due to go negative cycle within the next 3-8 trading days.

Looking ahead

The only major things tomorrow are further earnings reports, and there the Fed 'beige book' at 2pm. Of course the market could use that as a further excuse to ramp, if a weak outlook means the QE will continue.

Tomorrow will be important from a chartist perspective. We must not trade over sp'1580, or it will really mess up the micro-count. If however we can break into the 1550s by late tomorrow, that would offer the opportunity for a further brief gap lower on Thursday into the 1540s - where I am still guessing we'll then see a push back upward..into Friday opex.

*I remain short from early Tuesday, and seeking an exit in the sp'1540s, with VIX 16s.

Goodnight from London

Daily Index Cycle update

The main indexes saw a sharp swing back upward. The two leading indexes - Transports and R2K, closed 2.2 and 1.7% higher respectively. The sp' closed +1.4%, around the important 1573/75 zone. Near term trend is now indeed somewhat mixed and uncertain.





I had expected an opening gain of maybe 10pts on the sp', so when we opened in the low 1560s, this was certainly no surprise. Indeed, we got stuck early on @ 1566, but the latter day ramp into the mid 1570s was a real disappointment.

The SP' closed below what is the critical level of 1580. That is where the assumed sub'1 wave floor is - which the current count should not breach above for a sub'4.

Ideally, we should still get a sub'5 lower into the sp'1540s, but that's now a good 25pts lower, which is perhaps too far for a final fifth wave to go.

A little confusion

Near term then, I have to note I am now somewhat uncertain. The weekly charts ARE rolling over, and we're certainly seeing much higher day to day volatility. Yet, we're now just 22pts shy of last Thursdays 1597 high.

Absolute worse case for the bears would be a daily/weekly close >1597, at which point it would again be 'white flag' waving time.

It remains a market that is rarely 'easy'.

a little more later...