Thursday 30 May 2013

Volatility primed to jump

Whilst the main indexes held moderate gains across the day, the VIX melted lower, closing -2% @ 14.53. However, the last hourly candle of the day was pretty bullish, and bodes for some degree of early Friday surge. VIX 16s look viable.




Yesterdays black daily candle was confirmed by today's marginally lower close. Yet, today's drop was indeed only minor, and the hourly chart is looking bullish at least for tomorrow morning.

The real issue is can the market break last weeks double floor of sp'1635. If that can be done, then VIX 16s look an easy target.

more later, on the indexes

Closing Brief

The main indexes effectively flat lined for almost the entire day after opening moderate gains took the sp' to 1660. The closing hour did show some distinct weakness, with the hourly cycles rolling over.

sp'60min2 - H/S formation idea


I'm not entirely sure what to think of today. Daily charts are now looking moderately bullish - although nothing conclusive yet.

However, the hourly charts ARE rolling over though, and those on the short side should be desperate for a break under 1640 early tomorrow..and more importantly...1635.

That will be difficult across Friday, not least with a QE of 5-6bn.

Have a good evening.

3pm update - VIX melting lower

Despite the indexes holding flat since the early morning, the VIX has continued a slow, but consistent decline, and is now -3.4%. Sp'1660 is clearly an important level, and it almost looks like we're right back to the recent algo-bot melt.




Hmm, its turned out to be something of a dull day.

I will hold short overnight, but considering there is a 5-6bn of QE tomorrow - along with end-month price shuffling, I'm no longer looking forward to whats ahead.

Very frustrating..and now we're sp'1671s

3.29pm..well, we're rolling over on the hourly chart.

Considering how dull the day was, ANY close <1660 should be a...relief.

2pm update - still stuck

The market has been stuck for the past four hours, and is arguably due to rollover into the close. Whilst the indexes are flat lining, the VIX did break a new low, and is now -2.6%. Bears really need to see at least half of the current equity gains to evaporate by the close.




Oscar would say 'flat tops equal market drops', although I'm not sure he'd apply that to an hourly cycle. We certainly remain stuck, on what is a day without any significant QE.

With two hours to go, there is still time for some distinct weakness, but there is no sign of it yet.

Gods forbid some kind of last hour ramp, a close in the 1670s would really be a problem.

1pm update - battling it out

Main indexes are still holding moderate gains, with the VIX on the edge of taking out its earlier low. Bears are broadly holding the market under the important 1660 line. The rest of the afternoon will be critical, bears arguably need at least a fractional red close.




The H/S formation idea is arguably still viable, but we must close <1660, and preferably <1550.

Certainly, there is NO rollover currently, but the smaller 15/60min cycles could slip lower all the way into the close.

I remain heavy short..and trying to be patient!

12pm update - still holding under sp'1660

The main indexes are still holding moderate gains, with the sp' sitting on the edge of what might be the top of a RS. Bears really need to keep any hourly candle closes <1660. Meanwhile, VIX is occasionally a bit higher, and is warning of possible trouble later in the day/early Friday.




Its turning out to be something of a slow motion battle at what is arguably pretty key resistance of 1655/60.

I think the VIX is the tell, but hey, I'd say that, right? Long afternoon ahead...

*I am heavy short, and seeking an exit <1640.

More nonsense going on in FNMA, after yesterdays bizarre waveform price action...

VIX update coming...

12.02pm.. well, there go the sp'1660 short stops. Hmm

11am update - on the edge

The main indexes continue to hold moderate gains. Bears have already been teased with one micro rollover, but there is still the threat of a break into the 1660s. A daily close in the 1660s would bode badly for those short into next week. Despite equities, VIX is holding about flat.




A close up of what 'might' be a H/S formation on the 15min chart, clearly shows the battle line. A few hours >1660, would be 'annoying' to put it mildly.

ALL daily index charts remain bearish, despite the current gains.

Perhaps the VIX is the tell right now. Its holding very strong, although yes..from what remains a very low level.

*I am HEAVY short, from sp'1651, and also this morning from 1658. Seeking an exit <1640.

10am update - morning skirmish

The various econ-data has come in marginally poor, but the market is still largely holding together. Bears just need to contain this morning under 1660, and there should be increasing weakness as the day proceeds. USD is weak, Oil very weak, Metals are strong.




Market on the edge of violating my little H/S idea. An hour or two trading in the 1660s will mess that up.

15min cycle is probably going to max out though pretty soon.

*I remain short, will probably hold until at least the latter part of today, if not early Friday.

A short, but wise economics chat...

UPDATE: 10.01am... Adding to existing SHORT position, from sp'1658s


What you think? A fail here would make for a rather interesting afternoon.

10.18am..15min cycle rolling over..and so far..bears have held the line. Now we need to see the indexes go red by lunch time.

Pre-Market Brief

Good morning. Futures are battling a little higher, sp +6pts, we're set to open around 1654. Bears need to keep any morning rally under 1660. There is an array of econ-data this morning, so Mr Market has a lot to deal with. Metals are showing a little strength, with Gold +$3

sp'60min''2 - H/S formation idea



A long day ahead, lets see if the bears can keep this contained, with a break <1640 later this afternoon.

*I am short the indexes, seeking an exit in the sp'1630/25 zone.

Near term trend remains weak

Despite yet another latter day recovery, the market closed moderately lower. There is still a distinct weakness out there, and bears probably have another few days of opportunity. Primary downside target remains sp'1630/25, secondary is also unchanged @ 1600/1597.

sp'60min - H/S formation idea

sp'daily3 - fib levels


Its been a long day, so I'll keep this short. Daily charts remain generally bearish.

I'm wondering if the recent few days of chop is just building a H/S formation, with the RS peak around sp'1655/60. Hard to know, and its just an idea anyway.

Bears need to take out that double low of sp'1635, and that should open up a further 5/10pts to the downside, with VIX in the 16s.

Looking ahead

There is quite a bit of econ-data tomorrow. We have the gas/oil reports, there is also GDP, jobs data, home sales, and corporate profits. That is plenty for Mr Market to be dealing with.

There is no significant QE for Thursday, so bears arguably have more chance of consistent downside. I realise many would disagree with that theory though.

Bonus chart!

Okay, here is something to close the trading day...

Japan, Nikkei, monthly, 20yr

Equity bears should be seeking a May close <13800, which would make for a marginally red candle. However, the current monthly candle certainly is already spiky, and a reasonable sign that the Nikkei might at least be maxed out for the early summer.

*I am holding minor-short the indexes overnight, seeking an exit in the sp'1630/25 area, no later than early Friday.

Goodnight from London


Video bonus, from Biderman

Update 10.50pm (EST), Nikkei is down almost 400pts, and indeed, might close the month with a huge monster red spiky candle. First downside target is the old breakout level of 12k.

Daily Index Cycle update

The main indexes all closed moderately lower, and that was somewhat above their 11am lows. The sp' close of 1648 was a fall of 0.7%, and its notable that the bears should now be somewhat desperate to break the double floor low of 1635. Near term trend remains weak.



So...a bit of a tricky day in market land. We saw opening moderate declines that built until 11am, to be followed by almost 5 hours of the market battling back higher.

There was a touch of weakness in the closing 15 minutes, and its very possible that was the start of the next major wave lower - across Thursday, and even into early Friday.

Best guess is that sp' will floor in the 1630/25 area this Friday.

I do realise though, there are plenty out there who are seeking somewhat lower levels, with a gap-fill of 1597. In my view the bears have a window until late Friday morning. After that, there is a very large QE of 5-6bn, along with a lot of end-month trading issues to settle.

a little more later...