Wednesday 29 May 2013

Volatility holds some gains

The VIX broke a new short term high today, hitting 15.65 in early morning - whilst sp'1640, yet with the indexes rallying back, the VIX lost most of the gains, and closed +2.4% @ 14.83. Near trend is bullish volatility, but its going to be very difficult to break much higher than the 16s.




A positive VIX close for the second consecutive day, but the gains were only moderate, and we're still not able to put in a close in the 15s.

Underlying MACD (blue bar histogram) cycle is still ticking higher, but its now getting a little on the high side. It would seem, at best the bears have two more days higher.

VIX 20s look as far away as they have done since the start of the year.

more later, on the indexes

Closing Brief

The main indexes declined across the morning, and saw what was arguably a partially QE-fuelled recovery into the late afternoon. VIX managed slight gains of 2% or so. Near term downside looks to be sp'1630/25.



Interesting day, a bit messy, but still....pretty good for those on the bearish side.

*I hold minor-short the indexes overnight, seeking an exit around sp'1630/25 tomorrow/early Friday.

3pm update - stuck under 1660

Mr Market has battled up from 1640 to 1653, with the VIX now a mere 1% higher. Bears are seeking a red close, and all things considered, will just about get one. Daily index cycles all still look weak, and with no sig' QE tomorrow, bears have another window into early Friday.



Another little 5 wave micro count, like the A' wave?

I find it hard to believe we'll get a close in the green.

Obvious re-short level is 1655/57.

*I'm considering a minor re-short into the close, but there is fair risk of a brief Thursday gap higher.

updates into the close.

3.04pm ..looking at the 5min..we're due one last up cycle into the close.

best case is around 1656/57

3.12pm...seeking a re-short from 1655/57 ..into the close.. ETA, 20/30mins

3.21pm... still waiting..sp'1651s.. I want to see another 4-5pts

still waiting..for 55/56

3.29pm.. sp'1652...another 3-4pts to go....plenty of time.  Standing by to short the indexes.

3.42pm.. am minor-short the indexes, via IWM.  Will hold overnight.

2pm update - how high the ramp?

Market managed to hold the sp'1640s, and is now on an up cycle, the only issue is how high. First target is the 1655/60 area, which 'might' be a RS of a small H/S formation. All the daily index charts will remain bearish, baring a close in the 1670s. VIX looks set to close red.




So.. a little afternoon recovery ramp is underway. Bulls should be pleased with ANY close >1655. Whilst bears should be at least seeking a moderate red close, somewhere in the 1650s.

 It does look like VIX will close red, and that is certainly not best of sights for those seeking much lower index levels across the next few days.

*I remain on the sidelines, will consider a re-short tomorrow, depending on the price action.

1pm update - market trying to hold the 1640s

Significant weakness across the morning has given way to more subdued sideways trading, with the VIX just 4% higher. Its a somewhat confusing near term outlook. Prime downside zone remains 1630/25, but there is very viable upside to the low 1680s by the Friday close.




A real tricky Wednesday.

Bulls must hold 1640..or things will unravel into the close, at which point the sp' could be -30/35pts..which would certainly make for one major daily decline.

Bears on the other side, need to at least close lower, but that looks increasingly difficult, and the VIX sure looks stuck under the earlier highs.

I'm more than content to sit back, and watch.

UPDATE 1.25pm Looks like market will hold the 1640s.

Here is a new idea....

If we get stuck in the 1655/ low 60s tomorrow for much of the day, it'd be an interesting re-short level. Although there is a huge 5-6bn QE on Friday at 10am.

Will keep this scenario in mind for rest of the week. comes the ramp. Bears had ALL morning to exit..we're now 11pts above the low

12pm update - bulls fighting back

The main indexes remain significantly lower, but the smaller 15/60min cycles look floored. With the VIX similarly looking toppy, bears have a real problem into this afternoon. As expected...weakness today...but it is 'tricky out there'. Oil is very weak, now -1.5%




Those smaller cycles could easily be floored @ 1640.. forming another slightly higher low.

With 3bn of QE money sloshing around today, market could easily rally back. A green close sure looks difficult, but we've seen them do it so many times this year.

*I remain on the sidelines after a very profitable exit at the open.  Would have been twice as good if I'd waited another 2hrs, but oh well. A gain is a gain. the even crazier OTC market...Fannie Mae having all sorts of troubles...

FNMA, 1min

A flash down to $2, but now they're buying it back into the high 2s.

VIX update (ignore the first 10 seconds of mess)

12.02pm.. here comes the MACD snap...bears...on the run now.

12.20pm.. FNMA now down just 4%... its effectively doubled in the last hour, lol.

11am update - weak market

The market is still weak, and has now taken out the pre-market lows. It remains a tricky trading day, not least with the QE out there. VIX is 6% higher, in the mid 15s. Oil is naturally weak, -0.5%, with metals moderately higher: Gold +$7  USD is very weak, -0.6%




The opening black (fail) candle on the VIX has now been negated.

Original downside targets of sp'1630/25 are again viable within the next few hours, with VIX 16s.

*I remain content on the sidelines though, I'm simply going to avoid any days where there is significant QE.

11.02am..well, its the sp'1641s..and still falling. Looks like the secondary target will be hit after all...with VIX 16s.

11.28am... ignore the count..but still.. it could easily floor at any point. I still argue its a risky..messy day.

Bulls need to break > 1674

11.38am..ohoh, FMNA..opens higher...swift reversal

.Not good for those buying the open

11.47am... market making a more serious rally attempt. 15min MACD cycle set to go positive around 12.30pm. Bears should be frankly...terrified. Upside into the low 1680s IS viable by late Friday.

10am update - time for another QE

The main indexes are lower by around 0.75%, certainly nothing too significant. The hourly/daily charts are offering 1630/25, even 1600, yet...QE remains the ultimate problem.  Lets see how Mr Market fares after $3bn starts getting distributed after 10am.




Black candle on the VIX at the open is usually not a good sign for those in bear land. I'd say it works 70/80% of the time.

Today could be a bit of a mess. There is underlying weakness, but the QE will no doubt take the edge off.

*I was stopped out at the open at sp'1651, which was a very reasonable exit.

Considering the significant QE this morning..I am very content to be back on the sidelines

10.25am.. market struggling, first rally attempt..failed,but the VIX is still below the opening high.

First soft resistance is @ 1635 - the recent double floor, but thats a good 12pts lower..

Pre-Market Brief

Good morning. Futures are significantly lower, sp -14pts, we're set to open around 1646. Hourly MACD cycle is set to go negative by 10/11am, and there is the possibility of a swift move to sp'1630/25 by late morning, with VIX 16s. Bears need to be very cautious with a QE of 3bn though.




So, we're set to open around 1% lower on most indexes, and that's a pretty good start for those who held short overnight.

The problem once again is the QE. We have 3bn of QE that will get distributed to the primary dealers at 10am, and no doubt some of that will funnel its way into buying equities across the morning.

Now, I'm sure not saying the QE will over-ride the selling pressure/volume, but bears must be extremely cautious on such days. We've seen this happen hundreds of times in the past few years..and there are probably a lot more QE-inspired rallies to come.

*I am heavy short from sp'1672, and will seek an exit very early this morning. Frankly, I am VERY concerned about what is a rather significant QE of 3bn, which could easily kick the market back upward in late morning, and into the early afternoon.

Right now, the plan is indeed for an early exit, but I will consider a 'minor' re-short later in the day, if the price action looks like favourable for Thursday (which has no sig' QE).

Oscar remains in permabull mode...

updates across the day

UPDATE 9.25am. sp' -10pts , now set to open @ 1650.

I look to exit overnight shorts at the open.

After all..I fear the QE-pomo. How could any bear not?

9.31am.. short-stopped @ 1651. Now as good as I hoped, but it'll do.

QE a'coming...bears beware.

9.34am.. VIX candle..  NOT good for the bears.

Bears have a real problem here if market gets stuck around 1650.

I am wondering if we might be dealing with some sort of 5 waves -forming a wave'2 bounce, and this is sub'4.

Anyway, I'm out....back to sidelines.

Seeking another wave lower

The main indexes closed higher, but well below their highs, and on balance, we should see some weakness early Wednesday. Daily Fibonacci might suggest a marginally lower low in the sp'1632/30 area, but weekly fib' is offering far lower levels, first prime target would be 1540s.

sp'daily3 - fib levels

sp'weekly5 - retracement, from the Oct'2011 low


Well, today was rather good. I was looking for a re-short somewhere in the 1660/65 area, but managed 1672, and I'm very pleased with that entry.

I think Wednesday will indeed open somewhat lower, but as ever, the Fed is messing up the natural cycles, with a QE of 3bn. That will doubtless take the edge off whatever downside pressure there might be tomorrow.

Best guess..we have a 'moderate' chance of hitting sp'1632/30 tomorrow, but I'd have to guess we'll rally back upward as the day proceeds.

It will be a bit tricky tomorrow morning with the latest QE, and frankly, I'll settle for an exit anywhere in the low sp'1650s early tomorrow.

For those seeking a big down wave

I am trying to keep in mind the mid-term issue that we are over due a multi-week down cycle. Obvious target would be the rising lower weekly bollinger band - currently @ sp'1459. This is of course a rather huge 200pts lower.

sp'weekly'4 - hyper bullish scenario

However, by early August, the 'best case' downside would be around the 1550s - which is interestingly where the weekly Fib' chart suggest.

So, despite my seemingly bizarre obsession (if not terror) of regular QE-pomo, I am keeping in mind the bigger weekly/monthly charts. At some point, we WILL see a significant move lower. Whether that began last Wednesday...that is the big unknown..

That's all for today...goodnight from London

Daily Index Cycle update

The main indexes all closed broadly higher, but well below their early morning highs. The Transports barely managed a flat close, whilst the R2K still held a rather strong gain of 1.3%, just 3pts shy of 1000. Near term downside target remains sp'1630/25, with VIX 16s.





So, another positive Tuesday close for the bulls, but today was a little different, and the daily charts are certainly looking a little bearish for Wednesday, despite what were net gains.

The 'old leader' - Transports, closing flat was an especially bearish index/sector, and it did indeed flirt with moderate declines for much of the afternoon.

R2K still looks pretty strong, but a move down to the 50day, at the 950 level looks viable at any time.

*I am heavy short the indexes (from sp'1672), looking for an exit in the sp'1630/25 area, but that looks very difficult ahead of the rather large QE @ 10am. Best bear bearish case right now, seems to be a marginally low in the 1632/30 zone.

I realise many are seeking a test of the 1600/1597 area, but considering the big QEs in the next few days, that just doesn't seem viable any more.

a little more later...