Friday 17 May 2013

Volatility breaks short term low

With the US equity indexes closing at new highs, it is no surprise that the VIX is back on the slide again, closing -4.7% @ 12.45. The next level is the mid April low of 11.99. That seems likely to be broken. Across the week, the VIX lost 1.1%.




So..another week of minor chop in VIX land, and we remain at bizarrely low levels.

With no sign that the Fed are going to end QE, it would seem VERY likely that we'll see the VIX remain under the key 20 threshold for many weeks..perhaps months.

It remains a mere academic question, but will this year be one where the VIX never breaks >20. The last two times that happened was 2005 and 1995 - both of which saw extremely strong bull market rallies.

Small spike..eventually

At some point in the mid-term, we're going to see the VIX spike, but just like April, it won't likely last long, days..if not hours..and I'd be surprised if the spike is much above 15/16. Baring some kind of 'baby black swan', VIX 20s just look out of range.

more later..on the indexes

Closing Brief

The fourth consecutive weekly gain for the market, with most indexes closing today up 1%. Across the week, most indexes rose 2%. It remains a twisted and QE-pomo fuelled market, but more importantly..there is absolutely no sign of it ending. Could be a very...very....long time.



So, a 4th week higher, and one which will further increase the level of annoyance and frustration for those on the bearish side of the fence.

*I would agree with anyone out there that we are massively overdue a correction, but if my primary count is correct, then we'll be lucky to see 2-4% in the next down cycle, which in my view is generally pointless to attempt to trade.

Having exited an SLV (short) very early this morning, I am content to be on the sidelines, especially across the weekend. Oil/energy sector longs look to be the play for next week, and across the summer.

Finally, thanks to those who commented this week. Ironically, I remain the counter argument to many bearish posts. What a twisted world it is.

Have a good weekend

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

**next main post, late Saturday, which will be on the US weekly index charts.

3pm update - upward pressure to end the week

The main indexes are at the highs of the day, with a confirmatory VIX -5% in the mid 12s. Metals remain weak, Oil is +1.1%...despite a strong USD. With no end in sight for QE, the bulls can look forward to many weeks..if not 'many months' of this Fed inspired nonsense.



SP'1600 now looks a considerable way down from here. Anyone think we can fall more than 4% whilst QE continues?

It sure didn't work out well in mid April for the bears, and there is no reason to expect any different in the near term.

Its been a tough week, and I don't expect next week to be any easier.

3.20pm.. R2K @ 995.... can it hit the 1000 ? I'd guess no, but there must be a lot of short-stops from here until 1005 or so.

An r2K weekly close in the 1000s would arguably the ultimate smack down for the bears to conclude the week.

3.34pm.. sp'1666...1000pts from the March'2009 low....50 months ago.

3.44pm. Tranny +1.2% in the mid 6500s.. very strong...another 650pts to go, which probably equates to sp'1750/1800 - somewhere in that kinda area.

2pm update - little ramp seems likely

The main indexes are holding gains of 0.5%, although the Trans/R2K are +0.8%. Considering the mornings price action, a further little wave higher this afternoon seems likely.  VIX is -5%, a close in the 11s looks viable. USD looks set to to close the week very strongly.



Relentless underlying strength, no doubt much of it is resultant from today's 5bn pomo.

A close in the sp'1660s looks very viable.

How about a close of sp'1666, something for the kooks to get all excited about?

Nothing has changed..primary outlook holds...

Trans, weekly3

The 7000s look viable as early as mid July

2.34pm...and here comes the little ramp.

1pm update - time for a short-stop run?

The main indexes are holding onto moderate gains, we've still not broken a new high on the sp', perhaps the bots want to do a little short-stop run >1662 this afternoon? Precious metals look floored on the hourly chart, Oil is holding gains, VIX is -5% in the low 12s, 11s look viable at the close.


R2K, daily


Considering its opex, prices are rather stable. I would guess that's merely the pomo cancelling out the downside that would have naturally occurred.

SLV might be a viable re-short next week, but clearly..not today.

Oil looks like it'll close the week pretty strong, and that bodes for WTIC Oil in the 110/120s later this summer. So, I'll be looking to go long that.

VIX update from Mr T.

back at 2pm

Stock of the day..perhaps...

Ford, daily

Clear breakout, I think the next level are the $18s, from spring 2011.

12pm update - just another QE day

A very frustrating end to the week for those on the bearish side. The main indexes are all moderately higher, lead by the Transports and R2K , the latter of which is 7pts away from hitting the psy' level of 1000. Metals are still weak, but Oil is holding gains. USD is strong.

r2k, daily



*oil is a tricky one, opening black/fail candle...then downside..but you can see its already trying to floor. Weekly oil chart now very bullish for the summer.

As for the indexes, with the POMO money out there today, no reason why downside is possible. Hourly index charts even offer a weekly close in the sp'1670s.

VIX update coming...

11am update - bears can't outgun the QE

Another opex, and so far, bulls remain firmly in control. The large 5bn of QE will now be distributed (however it happens)..and Mr Market will surely be absorbing some of that money across today. Precious metals remain weak, with Gold -$23. Oil is holding gains of 0.8%


R2K, daily


*VIX is very weak, -5%, keep in mind VIX opex is next Wednesday, so 'they' will probably like to keep a low vix until then.

Rus'2000 index.. getting real close to the big 1000.

I've no doubt it'll get there, if not today, then sometime soon.

I am content to remain on the sidelines after a moderate gain in SLV.

Metals remain very weak across the mid/long term, but the immediate threat is of a late day ramp. The 15/60min cycles are weak in price, but there is a real possibility of late day recovery.

10am update - here comes the QE-pomo money

The main indexes open moderately higher, but things are looking tired. Moderate 'natural' downside seems likely, yet we have a huge 5bn of QE that will arrive via the primary dealers this morning. Its going to be extremely difficult for the bears to take control today.




All things considered, I just can't see the bears having any significant power today.

Its opex, a traditionally choppy day, and with big pomo, the market has a massive bid under everything.

SLV is lower, but nothing significant at all...yet.

UPDATE: short-stopped out of SLV, moderate gain. It'll do.

I might take a trade later today.

10.30am.. not looking good for the bears, with sp'1659. How about a close in the 1670s?

Hourly MACD cycle offers 5-10 hrs UP, which takes us into next week.

won't take much now to cause a short-stop cascade, and we'll be in the high 1660s.

Pre-Market Brief

Good morning. Futures are moderately higher, sp+6pts, we're set to open @ 1656. Precious metals are slightly weak, whilst Oil is +0.75%. USD is significantly higher, +0.6%. Today will likely be a choppy opex, fuelled by a very large QE of 5bn. Bears...beware.


SLV, daily


Those bears hoping for follow through from yesterdays closing hour will already be annoyed. I suppose will merely want to short the opening pop, but really, its opex..and the big pomo are going to be a real problem.

Frankly, there is little reason why we couldn't break new index highs today.

*Looks like SLV will open moderately lower. Clearly nothing significant though. Silver bears need a break into the 21.50s for things to get interesting.

Oscar..on Gold

Its almost the weekend!

Bears will struggle to hit sp'1600

Despite a little weakness in the closing hour, the weekly and monthly index charts are 100% bullish. There is absolutely no reason why anyone can justifiably get 'significantly' bearish. First key support in the near term is the sp'1600/1597 zone, bears will struggle just to get that far.

sp'daily3 - fib levels



A simple fibonacci chart, highlights the 1600 level, which would be a very natural minor retracement of 3-4%. I just can't see the market decisively breaking <1600 any time soon though. The underlying momentum is just so strong to the upside.

Looking ahead

Friday is opex, but perhaps even more importantly, its a 5bn QE-pomo day. Even if tomorrow morning opens with a little weakness into the low sp'1640s, it looks exceedingly difficult for the bears to break any lower.

There are two pieces of econ-data for the market to look at - consumer sentiment and leading indicators. Although as we saw today, the market doesn't seem to care about any negative data.

Indeed, with the pomo money out there, it'd not be surprising if we comfortably close the week in the sp'1650s.

*I hold SLV (short) overnight, seeking a further major wave lower in the precious metals, with SLV <20.

Goodnight from London

Daily Index Cycle update

The main indexes closed moderately lower, lead by the Transports which closed -0.8%. On any basis, the market is due at least a minor retracement of 2-4%, but that will be difficult whilst the QE-pomo continues. Bears face a market that is still being fully propped up by the Fed.





The closing hour had at least some price action to wrap up what was generally a dull day of nothing. Were tomorrow not opex, nor with a giant 5bn of POMO money, I'd be pretty bearish for tomorrow.

My best guess, there is a reasonably chance of a few percent lower...but AFTER opex. It would be a real surprise to see the market unravel on an opex, whilst fuelled with a very large POMO.

In terms of near term rising support, most indexes have a very clear 3% downside buffer zone before breaking the accelerated channel.

I will hold to the bigger weekly charts, which suggest general upside into August, with Trans in the low 7000s, and Sp'1800s.

a little more later...