Thursday, 2 May 2013

Volatility melts lower

With the equity indexes clawing back all of Wednesdays declines, the VIX melted lower across the day, closing -6.2% @ 13.59. A Friday close <13 would bode very well for the bulls, whilst bears are still needing VIX 16/17s to indicate any type of real market concern.




The hourly charts clearly show a rather gradual decline in the VIX across the day.

What should be a real concern for the bears is the daily MACD (blue bar histogram) cycle which is now ticking back lower. Today's VIX decline has really messed things up for those hoping for significant volatility to close the week.

My real concern is that the past 7 trading days are perhaps a large bear flag, rather than the original idea of a flooring stage.

Arguably, any break <13, will clarify things have turned fully to the market bulls.

more later..on the indexes

Closing Brief

The market reversed all of yesterdays declines for most indexes, with significant gains of 1.0-1.5%. The transports and the R2K did not quite recoup all of Wednesdays declines. VIX confirmed the once-again very bullish US market, with a fall of around 6% in the mid 13s.



So much for yesterdays declines..all taken back..and for those short, today has been truly lousy.

more later..on the VIX

3pm update - another rough day

Regardless of how we close, today has been another rough one for those on the bearish side. Whether it was because of the ECB rate cut, or the latest POMO, the market is again higher, and we have the sp'500 and Nasdaq pushing to new post 2009 highs. VIX is continuing to melt lower.




The real problem for the bears is that the daily cycles have now reversed. We have the indexes ticking higher, and the VIX has similarly taken out yesterdays low.

Bad day, tomorrow can be no worse, right?

Were it not for posting here, I'd have just switched my screen off some hours ago.

*ohh, and I can only imagine the glee of the cheer leading maniacs on clown finance TV. I'm certainly not watching them, but I can just imagine the marginal hysteria they are starting to experience this closing hour.

Weekly index charts ALL back to bullish. Baring a close in the low 1580s tomorrow, the upside target would be 1625/30.

Anyone think we can break into the 1570s tomorrow? I have given up on hope of that.

Clearly, we should all bought FB. After all, its PE is only 65, clearly under-valued, yes?

3.25pm You can see the Trans is well below the recent highs, despite +1% today.

Hard to imagine right now, the target of 5500/5400 being hit, with the current type of market.

...VIX just quietly melting away into the close. Unless the market gets smacked lower tomorrow, we're looking at VIX 12s again, if not 11s, with sp'1620s.

This is where at least some of the hot 'pomo' money is going...

FB, daily

Many still think this is ultimately headed the way of myspace..and geocities. but as those shorting at the close of yesterday are again realising, that could be 'some years' away.

2pm update - SP'500 and Nasdaq leading

It is something of a split market today. All the main indexes are higher, but the sp'500 and tech sector is where the money seems to be moving into. VIX is melting lower, -5% back in the mid 13s. Bears remain powerless, fighting against the latest daily dose of QE-POMO.


Nasdaq, daily


So..the sp' has broken a new high, and this has been backed up by the strength in the Nasdaq.

What is clear, even if the jobs data comes in lousy tomorrow, whats the 'best case' downside?

sp'1575/70 ? Certainly, with today's climb, the 1560/50s now look well out of range.

Yet, the 1570s are no good, that doesn't do enough of a dent to have any near term hope of breaking 1536.

This whole thing is dragging out way too long, and even the 1480/70s now look a stretch by late May/early June, at which point we'll just ramp again, with the likelihood that QE will be increased.

*Oil is significantly higher, although a few are using it as an opportunity to re-short, such as Knight, see the almost as bearish slope of hope site.

I still like the Transports though..looks okay for a H/S formation,

target remains 5500/5400,...which would imply sp'1480/70s

1pm update - is it Friday yet?

The sp'500 fractionally breaks the recent 1597.57 high, although other indexes are not yet doing the same. The trans/r2k are indeed significantly below their Tuesday peaks, and are looking a touch weak this past hour. VIX looks floored in the upper 13s.




*Did you see the previous video on the Kondratieff winter? Highly recommended.

It remains a tough feels like we're back to trench warfare again. Its a POMO day - as almost all are, and the free money is helping to give things an extra kick higher.

Without question, tomorrows monthly jobs report will be critical in shaping the market for the next few weeks. Bears will arguably need a number <80k.

VIX update from Mr T

It would seem some of the big money thinks the market won't be breaking lower until at least after mid June.

1.32pm..sp'1598.46...the big very close.

Other indexes are ALL below their recent highs...well, except for the Nasdaq.

12pm update - back to the border of despair

Mr Market is clearly delighted with the ECBs reduction in rates. After all, we no long need depositors in order to lend for capital formation, right? Once again, we're back to a very borderline situation. How we close today will be important..but then, isn't it always?




Suffice to say, this is indeed getting annoying again. All of yesterdays declines are wiped out - aside from the Trans/R2K.

Due to the size of the ramp, it can't be a bear flag.

Even Oil is now starting to ramp higher.

If Friday sees a break into the 1610/20s..then its time to wave the white flag of surrender again.

*without question, any 'serious/big money' will have short-stops @ 1597/1600, and won't be holding any higher than that.

Here is something for Thursday lunch, for those in an especially bad mood...

back later

11am update - Mr Market trying to spook the bears

The market is holding onto moderate gains, with the sp back in the low 1590s. The ultimate issue remains, will the bulls be able take out the key 1597 high? The daily, weekly, and even monthly charts are still highly supportive that this will not be broken. We'll know soon enough.



Bear flag on the hourly chart?

We could easily just churn prices sideways - with a touch of weakness, into the close. I guess you could even count today as a possible sub' 2.

That would set up a bearish Friday.

regardless, I hold short into Friday. No gain.

Oil - via USO, daily2

 Oil is following the main market, but could easily close a touch red by the close.
*I am short USO from the 33.20s, seeking the 31s.

11.13am.. sp'1594s...a mere 3pts to go for those who are seeking much higher levels into mid-May.

There will no doubt be a lot of short-stops at the 1597/98, and the big 1600 level. If the market really wants to mess with everyone today, jump above..and close under. 

11.42am... VIX is holding in the 13.80s... are bulls look a bit stuck @ 1595/96.

No doubt this is spooking many.

10am update - a bear flag for Thursday?

The market opens moderately higher, but despite the gains, the daily index MACD cycles are still rolling over - its day'2 down. Perhaps a bear flag for Thursday, with some decent and very significant downside on Friday? As is often the case... look to the VIX for the real direction.




Considering the weekly, and monthly charts (esp' for Trans/R2K), I find it again very unlikely that sp'1597 can be decisively broken/closed over.

Whether we close a touch lower, flat..or a touch  higher today, I am resolutely holding across into Friday - heavy short indexes/Oil.

This mornings bounce is giving EVERYONE the opportunity to get positioned - as they prefer, for tomorrow.

There can be NO excuses about not 'having had time/opportunity' to be ready.

10.24am.. well, we're 1592 already, a mere 5pts from the high.  I realise some out there are still looking for the 1620s in May, before a rollover. I'm still holding to the original outlook though. 

We'll find out soon enough who is right.

Pre-Market Brief

Good morning. Futures are moderately higher, sp+5pts, we're set to open around 1587. The ECB cut interest rates from 0.75 to 0.5% this morning, and that is giving the markets an excuse to bounce. The metals and Oil are both higher by around 0.5%




For those who are following the daily index and VIX charts, arguably, today is a good opportunity to exit remaining longs, and/or increase short positions. The weekly charts ARE still suggesting a major wave lower.

Further, as noted in my overnight post, the two leaders - Trans/R2K are now actually rolling over on the hugely important monthly charts.


*I am heavy short the indexes and Oil, and seek an initial exit late Friday afternoon, preferably with sp'1550s and VIX 17s.

I would think the weekly chart is pretty clear, we're now stuck for four weeks.

sp'weekly5 - fib levels from oct'2011 low

Primary target is the 1480/70s, where the first key fib is. Further, the lower bollinger - still rising, will be in that area by early June.

Bears should be seeking either an early morning reversal today, or just a drawn out bear flag on the indexes - hourly chart, with a small bull flag on the VIX hourly.

That would set up tomorrow for the real action.

Video from Oscar...

Interesting two days ahead of us.

The two leaders are warning of trouble

The Transports and the Rus'2000 were the first and most powerful indexes to rise since the November lows. Interestingly, both saw net declines for April, and May has started with a rather significant opening fall. The next few trading days could be a little exciting.

*I will cover all the monthly charts at the weekend, but for now, lets look at the Trans/R2K

IWM (repre' R2K)



Today's declines for the Trans/R2K were rather impressive. Certainly, the bulls should be a little concerned at the style in which we closed today. With the FOMC out of the way, the bears now have a 7 week window to whack this market lower (next FOMC June'19).

I do think its very appropriate that not only the 'old leader' Transports closed April lower, but also the R2K. For those doomer bears seeking significant weakness across May, these two indexes are now the first supporting evidence.

With renewed weakness in the precious metals and Oil market, I think bears have a real chance now.. How we close the week will be so important.

Oil - so far, so good

I have been doing rather well in Oil across the past two months,  I am 8 for 9 trades (4 were even on the long side), no one can say even a permabear doesn't go bullish 'sometimes'.

The following two charts are pretty good I think. Don't get too fixated on any count, price formation/cycle-wave is arguably all that matters.

USO, daily2

USO, weekly3, downside ideas

I should note, if the market does unravel - at least to the sp'1480s, then USO in the 28/27 area looks viable - as based on two previous down cycles. Daily MACD cycle is indeed now ticking lower, and the weekly cycle is still very much in negative territory.

There really isn't anything bullish about Oil in the immediate term, and I am most definitely looking to ride USO lower across most of May..possibly even into early June.

Bonus chart - Copper, monthly2, with fibs

Copper started the month with a 3.9% fall, and is now just 7 cents from breaking the big $3 level. I have to think there is a very significant chance of a major snap down to the low 2s by early June.  If that occurs, it has very big implications for Gold, Silver, and arguably the Oil and broader equity market.

Trend is clearly down, frankly, I'll be very surprised if I'm wrong about this particular bearish outlook.

Looking ahead

Thursday has the usual weekly jobs data, but we also have trade data, and productivity/costs. There is also the usual weekly Gas report.

More importantly, I look to the big Friday monthly jobs data. Market is seeking 153k gains, and its possible we might only see half of that figure. Today was day'1 down of this new cycle...lets see if the bears can string together another two days of downside.

Goodnight from London

Daily Index Cycle update

The main indexes all closed lower, with the sp -14.9pts (0.9%) @ 1582. The two market leaders - Transports and R2K, slipped by a much more significant 2.3%. The daily MACD cycle is now rolling over, and further declines into the Friday close are expected, with VIX 16/17s.





So, the FOMC nonsense is out of the way. Indeed, the Fed-speak of 'might increase or decrease purchases' is exactly why I will continue to call everything they issue...nonsense.

Now the bears can move forwards, and look to a new index down cycle. The daily MACD (blue bar histogram) cycle ticked lower on all indexes. Today shall be deemed day'1.

*I realise a very considerable number of chartists/posters are looking for some kind of bounce in the 1570s. I find it difficult to imagine the market holding together across Friday if the jobs data comes in bad.

Downside targets?

As indicated on the hourly chart (see earlier post), the first key level in my view is a daily close <1570. We're still almost 1% from that, and its possible we'll just largely churn out a large bear flag across Thursday.

Regardless of what happens tomorrow, I'm seeking a weekly close in the sp'1550s, with VIX 16/17s. That seems a very reasonable downside target, and its kinda close to a challenge of the more important low of 1536.

I'm moderately hopeful that 1536 will be taken out in this new down cycle, but its going to be VERY difficult if the declines are only 25/30pts. Bears really need a -40pt day, but we're not seen that level of daily decline for a very long time.

The ultimate daily target is 1485, but that is indeed almost 100pts lower. There is virtually no one out there who is touting that across the next 3-7 trading days. So..I may as well be the one.

First though, lets see how we close this week.

a little more later