Wednesday 7 August 2013

Volatility a little higher

With equity indexes slipping for the third day in a row (ohh...the humanity), the VIX still struggled to stay green, closing just +2.0% @ 12.98, having peaked in the morning @ 13.91. The VIX looks set for higher levels in the days ahead, but the upper teens look way out of range.




Once again the VIX tells the story of the underlying strength..and lack of fear in this market.

Frankly, the mainstream simply aren't taking the current declines seriously, and I have to note, I kinda understand that sentiment. The sp' is a mere 1.2% below its recent high, and the bears need to keep the current three day wave lower in perspective.

VIX 14/15 certainly looks viable within the next few days, perhaps as early as late Friday - if sp' is trading in the 1660s.

However, anything higher than 15 looks really difficult.
more later..on the indexes

Closing Brief

Many bears will no doubt be very frustrated with the latter day recovery, but the bigger trend now appears clear, with a high at sp'1709. The sp' closed just 0.4% lower @ 1690. Near term outlook is for a continued bounce into Thursday, with first key downside target in the 1660/50 zone.



Indeed, many out there will be somewhat annoyed with the latter day recovery (as we've seen so many hundreds of times), but today was arguably important in that the mid-term picture is highly suggestive a top is in.

I don't expect 1709 to be taken out tomorrow..or indeed for another 2-3 months.

*I am seeking an index short in the sp'1700/05 area tomorrow..after the morning QE of $3bn is out of the way.

the usual bits and pieces across the evening :)

3pm update - interesting closing hour

The market is holding moderate declines, but certainly nothing for the bears to get overly excited about. There is underlying slight upward pressure into the close, bulls should aim for a close above the hourly 10MA of sp'1692.



Best guess, slight upside into the close, with follow through early tomorrow.

It will be difficult for the bulls to sustain any price action >1700 though.

*earnings at the close: TSLA...a stock surrounded in almost as much hysteria as FB.

3.05pm.. sp'1692...bulls about to clear the hourly 10MA...and spiking it into the close.

Prepare for the whining and complaints on Zerohedge. ;)

2pm update - climbing into early Thursday

After the morning declines, it would seem unlikely the market will break a new low into the close. Moderate upside into the 1695/1705 zone seems likely into Thursday morning. Precious metals are a touch higher, with Gold +$3.



The price action is still relatively calm..the moves are very small, and there is little reason why some degree of bounce won't continue into the close.

Underlying MACD cycle on the hourly charts remains extremely low, and a good 4-6 hrs of upside should be enough to reset the cycle by late tomorrow morning.

*I remain on the sidelines, trying to be patient and wait for this bounce to fully play out.

1pm update - naturally bouncing

As is usually the case, the market has floored around 11am. A test of sp'1700 looks a fair target, although more likely tomorrow morning (with QE), than by todays close. VIX is cooling down, now just +5%. A red VIX close is very viable if sp>1700.



I am somewhat unsure of how to count the decline from the 1709 ABC, I guess.

Anyway, the issue is...we're VERY low on the hourly MACD cycle, and I won't feel comfortable until the market at least recovers across 4-6 hrs.

So, right now. I'm going to seek an index short, tomorrow morning, somewhere in the sp'1700/05 area.

VIX update from Mr T.

Clearly, the big money is really not interested in heavy long VIX..yet.

12pm update - bears battling

With sp'1709 now apparently the high, the bulls are fighting a losing battle in each of the bounces to come. First key downside target is the 50 MA, currently @ 1650. VIX is higher by another 7%, but we're still only talking about the 13s.




Well, it does seem pretty clear now.

Market is exhausted, even the cheer leading maniacs on clown finance TV have come to realise it.

So, for those yet to join the short-train, the only issue is finding a decent entry level.

As it is, I'm still inclined to wait. The hourly MACD cycle is VERY low, and with a sig' QE tomorrow morning..I'm just overly cautious.

Time for lunch!

11am update - short term floor

The main indexes are starting to confirm that the bullish wave from sp'1560 is very likely complete. With the near term support broken, the only other level to confirm a top is some price action under sub'4 wave.. <1675.



I'm tired of things today...

Certainly, who the hell wants to be short ahead of another damn $3bn QE tomorrow morning?

I'll wait and see where we are then. Urghh

10am update - is that it ?

The indexes are down just a little, but the declines are arguably important. We have a rather clear break of rising support (which held yesterday), and the mood out there is increasingly weak. If the bulls can't claw back into the low 1700s later today, its very likely over for them.



Well, its now increasingly likely 1709 was the cycle peak from the 1560 June low.

Bulls should be desperate for a Wed' close >1700.

I'm now waiting for a short entry, but considering the hourly MACD cycle, I'm in no hurry today.

Besides, we've still to see any real power on the downside yet.

*notable movers: MRO, -4% (was -8%) bad earnings?

10.01am... sp'1687...well, that looks pretty decisive now. looks like we have clarity, and now its just a case of finding a 'reasonable' entry.

Pre-Market Brief

Good morning. Futures are slightly lower, sp -4pts, we're set to open @ 1694. This will be a touch under key support. Precious metals are naturally weak, Gold -$5, with Oil also moderately lower.



So, yet again we're set to open lower, and its looking to be around/just below the lower channel - as seen on the hourly charts.

Bears have an opportunity here to make things clear..that sp'1709 was a key top.

However, from a MACD (blue bar histogram) cycle perspective, this is a lousy place to be launching any new short positions.

I am still highly suspicious that we'll see one further little up wave into early Thursday.

For the moment, I want more clarity that the last seven weeks of nonsense are indeed coming to an end.

Time is almost up

The bulls are in their seventh consecutive week to the upside, but we're now seeing increasing signs of weakness. This is especially the case for the two market leaders - Transports and Rus'2000. A few more days, and a short-term ceiling should become apparent.

sp'weekly7 - bearish mid term

sp'weekly8 - bullish mid term


The above two outlooks are what I am keeping in mind for the coming few months.

Broadly, the issue is whether a key multi-month high has been/about to be put in.

My best guess is that weekly'8 is the outlook to go with. That will indeed be seeking a multi-week down cycle into September, but then broad..and very significant upside into spring 2014.

If indeed the second outlook occurs, then the bears really don't have much to look forward to across the next 6-9 months. SP'500 in the low 2000s seems very viable next spring, and that's even if the Fed reduce (if temporarily) QE to $60bn a month.

Looking ahead

Again, there is very little econ-data/news due tomorrow. Neither is there any significant QE-pomo.

So..I remain on the sidelines, and am still seeking an index short from the sp'1715/25 level. Considering there is a mid-sized QE on Thursday, I'm inclined to wait until then, and see how the price action is at that time.

If the market does max out this week, first downside target within the next week or two, will be the sp'1660/50 zone, where there are a few price-attractors..not least the rising 50 day MA.

Goodnight from London

Daily Index Cycle update

The main indexes all closed somewhat lower, with the sp -10pts @ 1697. The two market leaders though were far weaker, Transports -1.3%, and R2K -1.0%. A new multi-week down cycle into September, looks due to begin within the next few 1-3 trading days.





So...a little washout in the morning to the 'traditional' time floor of 11am. Interestingly, the market held the lower channel line (see hourly index charts), and the market closed just above support of 1695.

Best guess remains, one further little up wave for the sp'500, maxing out somewhere in the 1715/25 area. Although the Trans/R2K look unlikely to make new highs, and will make for some good divergences between the 'headline' indexes.

a little more later...