Friday 26 April 2013

Volatility primed to soar

It was a rather quiet day in VIX land, gains of 4% failed to hold as the indexes saw a small afternoon rally, and the VIX closed -0.07% @ 13.61. Across the week, the VIX lost 9%. If the indexes are maxed out at sp'1592, then the VIX should have a chance at 20s next week.





The action today is pretty similar to that of Friday April'12. The following Monday saw the VIX break into the 17s. The pattern certainly looks similar, so it will be fascinating to see if next Monday is a day for the bears.

It has to be said, the weekly VIX decline of 9% is disappointing to see though. We've again come close to breaking back into the bizarrely low 12s.

Hourly cycle offers upside ALL of next Monday, so the bears do have a window of opportunity.

Best bear case for late Monday afternoon, now seems sp'1550s, with VIX 17.

a little more later..on the indexes

Closing Brief

The market closed broadly higher for the week, with the SP' gaining around 2% on the week. The one solace for the bears is that the April'11th high of 1597 was not taken out. It looks like we closed the week with a small index bear flag, suggestive of weakness on Monday.



Its been a long...and tough week for those in bear land. I'm glad its over.

As noted, at least we didn't take out the 1597 high, the obvious key objective for the bears is to take out the recent low of 1536.

Have a good weekend.

*bits and pieces to wrap up the day, across the evening. 

Next main post, late Saturday, on the weekly US indexes

3pm update - rough week

Regardless of  how we close today, its been a rough week for those in bear land. We've seen a broad climb from sp'1555 to 1592, with VIX back in the 13s. Baring a break over 1592, bears have their first opportunity on Monday of showing whats possible in the weeks ahead.



Still looks like a minor 2 wave is being formed. Maybe we'll slip in the closing hour, but anyway, it looks okay for downside across Monday.

A difficult week for many.

*I will hold heavy short across the weekend, seeking a first exit in the sp'1550s, with VIX 17s.

3.08pm .. I still think this is just a tiny bear flag. Unless we are >1592, this is arguably prime re-short territory. 

3.38pm...sp'1585s...clearly, this is annoying to those bears getting the kick.

It still looks like a small wave'2 bear flag...just like April'12.

back at the close

2pm update - baby bear flag, ahead of Monday?

The decline from sp'1592 to this mornings 1577 might count as the first little wave lower. Perhaps we're due for a small bear flag into the Friday close, before major downside on Monday? VIX has lost the 14s, Oil and precious metals recover from earlier declines.



A few hours rally, forming a small bear flag - much like April '12.

Clearly, we're not going to close particularly down much, even <1580 looks difficult now.

Regardless, I'm reasonably confident for next week, baring a move >1592.

1pm update - a close under 1570 will be tough

Market is battling to break back into the sp'1580s. VIX is holding minor gains of 3% in the low 14s. Precious metals and Oil appear somewhat broken, and both look vulnerable into the close. Bears should still aim for a close <1570, but that does look overly difficult.




More than anything right now, the VIX daily chart is probably the most support for a near term 'bearish market' outlook. We are very close to seeing a confirmed turn.

First target are the low 17s. I suppose thats viable on Monday.

I remain heavy short, SPY, USO, will hold across the weekend.

UPDATE 1.28pm..looks like might just be building a tiny wave'2 into the close.

A close in the 1580s would be disappointing, but it'd set up much lower levels on Monday in the 1550s. We shall see.

12pm update - weakness into the weekend

Mr Market looks to have put in a marginally lower high of sp'1592. Daily charts are starting to offer a viable turn, with a challenge of the 1536 low later next week - along with the VIX in the 20s, for the first time since last December. Things could be getting real interesting..soon.




Things are starting to look rather good.

First downside target are the low 1570s. A daily close around 1568/66 is viable today, which would really help to clarify things for next week.

*Oil has broken. USO breaks <33, and it is arguably confirming top as also seen on the daily charts.

Near term target is 32.00, but 28/27 remains a primary zone by late May - which would equate to Oil in the 70s

VIX update from Mr T.

time for lunch

11am update - broken rising channel

Moderate morning weakness, with a break <1580, sp' has arguably broken below the rising channel since the rally started last Thurs/Friday. Bears should seek a weekly close <1570, with VIX in the upper 14s. Precious metals holding minor gains, Oil looks maxed out.




Certainly, the price action is still very minor, but underlying trend appears to be turning to the downside.

Bears need to see the sp'1560s, before they can be confident that a successful break under 1536 is viable.

Long day ahead.

*notable mover..AMZN, -6% @ $258. Over-priced by...probably 90%, not that I'd ever meddle with that nonsense.

UPDATE 11.38am.. Oil breaks..  USO back <33...under the hourly 10MA, and is probably starting a new multi-day cycle. 

10am update - morning weakness

After a 5 day rally/bounce, the market is seeing moderate weakness. Bears should be desperate for a weekly close <1570. That won't be easy, but a 1% daily decline is not exactly asking too much either. VIX is higher, but only a few percent.




So, the GDP data comes in a little lower than the market expected, but hey, it has to be said..2.5% sure isn't a negative number.

The hourly chart suggest there is channel support @ 1580, so it'd be useful if we can break that this morning.

Baring a break...and close above the recent 1597 high, I still think there is a high probability that the market is merely putting in a marginally lower high.  It'll take some days to know if that's the case, and by then, we would be challenging the 1536 low.

*I am short Oil - via USO, from the opening low 33s.

First target is low 32s.

10.12am.. Despite it being very minor so far, the weakness IS out there, but it looks like bears first real chance of significant downside will now be Monday.

Problem with that, is the weekly charts will close today somewhat bullish. Hmm

Pre-Market Brief

Good morning. (as at 8.15am) Futures are a touch lower, sp -3pts, we're currently set to open at 1581. GDP data is due shortly, and that will likely have a considerable effect on Mr Market for today, and perhaps the next few weeks.




Hourly index/VIX charts remain highly suggestive that underlying price momentum is swinging back to the bears, although until we're trading back <sp'1570, bears really can't be confident that a new 5-7 day down cycle is underway.

Best bear case today, seems to be a close in the low 1560s, with VIX in the 17s. I realise that is a bold scenario, and it would make for a very clean reversal from the recent multi-day ramp.

So..lets see where GDP comes in out first....

UPDATE 8.30am

Headline GDP Q1 : 2.5%.  somewhat below estimates, but still clearly positive, and well above stall speed.

I can't fathom how it came in that high, regardless, bulls should consider it more than acceptable. Futures are a touch lower on the data.

*I plan to take a USO short at the open..


Primary target remains 28/27, although that is highly dependent on a new index cycle lower, with a hit of sp'1480 within the next few weeks.

9.45am.. Am short USO, from the low 33s..

VIX breaks into the 14s..with SP..on the threshold of breaking lower channel support @ 1580

On the edge of a cliff, or a breakout?

With the main indexes climbing for a fifth consecutive day, we're close to breaking the recent highs from April'11. It is a classic breakout to the upside..or cliff dive to the downside situation. Friday will likely be a pivotal day, and shape the next few trading weeks.

sp'daily5a - H/S formation idea

sp'daily5b - best guess

sp'weekly2, rainbow


I'll start with the third chart, the 'rainbow' (elder impulse) weekly chart. With further gains, the weekly candle has now flipped to outright bullish with a green candle. If we close tomorrow with a green candle, I have to say, I will be somewhat despondent.

Bears REALLY need a Friday close back under sp'1570. That's 1% lower, certainly that's easily viable, but...the current trend is obviously UP, today being day'5.

As for the daily5a and b charts, I will hold to a possible H/S formation, unless we break above the 1597 high. Obviously, we almost did that today, and if the market considers the GDP data tomorrow 'acceptable', then sp'1600s look a has to be said.

Looking ahead

US Q1 GDP data is released @ 8.30am. It could potentially shape the next few trading weeks. Market is expecting 3.1%. I still find that almost impossible to believe. Baring some 'accounting gimmicks', how could the US economy have been growing 3%..or even 1% in the first quarter?

Just think about how things felt across January-March. Many of the econ data-points during that time sure didn't look like 3% growth to me.

Here is something to consider. Even if Q1 data comes in marginally negative tomorrow, will that be enough to send this market into another 5-7 day down cycle? Or, would the market take the bad data, spin it, and build further gains on the notion that the Fed is again less likely to end the QE programs?

Friday will be interesting. I'll be here,..and maybe YOU will be here too!

Goodnight from London

Daily Index Cycle update

The main indexes closed with moderate gains, with sp +0.4% @ 1585. The latter day weakness was somewhat interesting, as was the close fractionally under the hourly 10MA of 1585. Yet the bears can't be confident until we're back <1570, with VIX back in the mid teens.





So...we saw the bull maniacs really rattle the bears today. The break into the 1590s - which held for a few hours, was indeed disturbing to see.

Frankly, had we put in a daily close >1597, I would be kinda lost as to what to say.

Near term underlying MACD (blue bar histogram) cycle is still ticking higher, and is now positive cycle on a few indexes, and even if the bears can break <1570 this Friday, its going to be another few days before we see the trend flip back to the downside.

Tomorrow will be important. Bulls will merely have to hold the current gains, whilst bears should be desperate to get back down into the 1560/50s. As it is, a weekly close in the 1550s seems a tall order, even if the GDP data comes in bad.

a little more later