Tuesday 27 August 2013

Volatility on its way to the 20s

With equities seeing consistent weakness across the day, the VIX finally managed to break above the recent 16.56 high, settling +11.9% @ 16.77 (peak of 17.13). Near term trend looks to the upside, and the big 20 threshold looks set to be tested in the coming few days.





*a note on the weekly cycle, which has initial resistance of 20/21. A weekly close in the 21s..or higher..would be a key warning of 'serious market turbulence'.

For the bears, today was a significant victory. Not only has the threat of a return to the sp'1680s now clearly been removed, but the threat of sub sp'1600s is now on..along with VIX in the 20s.

Regardless of how Wednesday might open - and there is the real chance of a minor bounce in early morning, the bigger trend is clearly in favour of equity bears.

Weekly index charts..target : sp'1570/60s..with VIX in the low 20s.

more later..on those indexes

Closing Brief

The US market saw significant declines, with the sp -26pts @ 1630. The Trans/R2K saw rather severe falls of 2.6% and 2.4% respectively. Near term trend looks very weak, and a hit of the bigger target - sp'1570/60s look viable, with VIX in the low 20s.




*I've removed the fib-retrace levels...I no longer think a move to sp'1680s is viable in the near term.

So...a clear victory for the bears, with rather significant index falls, and the VIX breaking into the 17s.

On any basis..the daily/weekly charts are highly suggestive of further declines in the coming few days.

*I am LONG VIX..overnight, seeking an exit in the 20/21s, before the weekend. It will not take much of an overnight scare to send the VIX up another 20%.

the usual bits and pieces across the evening...

3pm update - Mr Market is an inhuman monster

The main indexes are strongly lower, lead by the Trans/R2K, both lower by around 2.25%. The VIX has decisively cleared the strong resistance of 16.56..and the door is now open to the low 20s..at ANY point. Gold and Oil remain strongly higher.




*I have been so overly wrapped up in the smaller cycles, that I've completely failed to be part of ANY of the decline from the sp'1709 high.

That should no doubt give some of you a good laugh. The only thing left for me to do..would be to go short at sp'1570/60s.

Regardless of my own 'lost in the noise' failure, the primary trend remains clearly downward..at least on the bigger daily/weekly charts.

With the increasing war talk, VIX could easily open in the 20s tomorrow, with sp' <1600.

yours..still paralysed...if only in terms of trading.

'Nothing indeed'

updates into the close....

3.09pm.. So..the question is..who the hell will want to go long into the close for overnight?

Thats right, I didn't think so.
Its not like the Syria issue is going to 'improve' now, is it? Its just a matter of a week or so..if not days until the missiles start flying.

Key VIX thresholds..

20/21...after that...the 2012 high of 27.

VIX 27s however would surely need a break <sp'1560..which would really surprise many.

3.25pm... I am LONG VIX.

Very annoying day. Certainly..risk of a stupid bounce tomorrow, but daily AND weekly charts are VERY clear.

3.33pm..I sure do NOT like chasing the market, but the targets are pretty clear.

So...I am long VIX..will hold overnight..and gods willing...VIX 20s..within 1-3 days...certainly before the weekend.

The really BIG issue now is just what happens over the long THREE day weekend?

A Syria attack over the weekend...very likely

3.48pm.. VIX been trading over the 16.56 high for over two hours now. I have to think we'll see VIX 20/21s before the weekend.

..back at the close.

2pm update - market still struggling

The bears finally manage to break the VIX above the morning high (also the Aug'21 high) of 16.56..but VIX has again started to cool off. The indexes remain very weak, lead lower by the Trans/R2K, both lower by around 1.75%. Gold and Oil..both naturally higher.




So...what now?

I have to say, in terms of the intra-day stuff, this remains a real mess.

The bigger picture though, that is pretty clear, broad declines..back to the June lows...somewhere around sp'1570/60s.

For the swing traders out there, just a case of sit back and enjoy the ride lower..with 'reasonable' short-stops.

On bigger time frame, daily charts are offering much lower levels...

R2K, daily

The 950s - a level I've been touting for a few weeks..looks very viable

1pm update - bulls ready to snap it higher

With the smaller 5/15/60min cycles all looking exhausted on the downside, the bulls look set for some degree of bounce this afternoon. As ever, how we close will be kinda important. VIX has remained stuck under the opening high of 16.56.




Seen on the 15/60min cycles....this market looks floored..at least for a little.

*the problem with anyone going long is the very real threat of any 'war comment' sending the market into another tumble.


Considering the ViX, I think the bulls are set for an attempt to close in the sp'1650s.

1.05pm...sp'1636., but more importantly..VIX still failing to break higher..>16.56.

1.23pm... VIX 16.54...still NOT confirming the lower lows in equities.

1.27pm...finally... VIX breaks the morning high..and the high of Aug'21.

Bulls look to have entirely failed, and with the VIX breaking higher...could be a rather bearish close.

Primary downside target remains the lower weekly bol...currently 1563

12pm update - VIX still not super strong

Despite the main indexes significantly lower (esp' the trans/r2K), the VIX is currently only 8% higher in the low 16s. This remains a market not particularly concerned about a western attack on Syria. Gold +$15..Oil +2.5%..the latter of which actually seems a relatively small move.




*there remains a lot going on...

Smaller 5/15/60mins cycles are weak, but there is threat of upside into the 1650s this afternoon.

Bears really need a daily close in the VIX 17s.. with sp <1639 again.

If that is achieved, there is imminent threat of a flash lower to the 1570/60s..at any point in the remainder of the week.

VIX update from Mr T.

time for lunch!

Big threat of a ramp this hour...just need to see sp >1642... that will open up 1650...which would be a green Dow.. urghh.

12.13pm...another test of the 1638 low...Mr Market still looks primed to ramp..its not like we're not seen this type of action a thousand times before.

VIX should be the tell, if it can't break the opening high of 16.56... bears have problems.

12.25pm.. bulls trying to form a floor around the old broken low of 1639.

This is one frustrating market. For those playing the smaller cycles...now is time to go long, right?

For the bigger daily/weekly cycles..just sit back and ignore the noise. sp'1570/60s should be hit soon enough.

Naturally, yours truly remains paralysed on the sidelines. urghh.

11am update - primary downside target remains sp'1570/60s

Whilst the bulls and bears battle it out ahead of a 3 day weekend, the bigger weekly charts have been warning of trouble for the past month. Sp'1709 was likely a mid-term high, and we're now in the process of battling back down to the June lows. Oil is understandably +2.3%




*the smaller 5/15min cycles are offering upside into the afternoon, but with the break of 1639...bears kinda have the edge here...not least with what seems to be an assured attack on Syria.

There are rather huge implications to that of course, but for now, suffice to say...underlying pressure remains to the downside on a daily/weekly cyclical basis.

Going long for a bounce...crazy risky.
Going short...marginally risk, with moderate risk of a bounce into early afternoon.

Either way..at least I'm not losing money today, unlike those bull maniacs.

The obvious 'safer' long, is in the 1570/60s.

11.32am.. looks like an intra-day floor is in, @ 1638..and we're already brushing 1644. A move into the 1650s..very likely into the afternoon.

10am update - market under pressure

The main indexes are all lower, but the bears are not seeing enough clear breaks yet. The sp'1639 low has held, and the VIX is offering a black-fail candle to start the day. Gold and Oil remain sharply higher on understandable war fears.




*there is a LOT to deal with today, so..bear with me!

First, the ONLY index so far taking out the recent low is the Dow, but that is already seeing a sig' bounce already.

Update on the bigger picture...


Blue candle'4...has turned red..and a hit of the lower weekly bol'...now looks likely within a week..if not days.

As ever..price action today will be critical. Bears need to see 1639 taken out, and that will open up a further 75pts to the downside.

10.02am..econ-data comes in 'reasonable'.

This is shaping up to be one hell of a interesting day.

For the moment, I'm content to see what kind of bounce we get into early afternoon.

BIG QE this morning of $5bn...can the market indexes turn green? If yes..then I sure won't be short.

10.12am.. bears looking tired...either they break 1639 real soon, or sig' bounce into afternoon...and with QE..there is real threat of indexes turning positive.

Tricky market..as ever.

10.30am..well, there goes the recent low of 1639. Bears making a secondary push lower, and VIX is trying to take out the opening high.

For the bears..this is finally starting to look good. Primary target remains the lower weekly bol...1564.

10.37am.. price action in the tran/r2k...very weak..a hit of the 200 day...looks a given..

That equates to sp'1570/60s..within the near term.

Pre-Market Brief

Good morning. The market is clearly spooked by the likely attack against Syria. Futures are significantly lower, sp -16pts, we're set to open around 1640 - a mere 1pt above the recent low. Precious metals are soaring, Gold +$18, Oil is higher by almost 2%, to $108.



Well, things are taking a turn to the downside it would seem.

If the sp'1639 low is taken out, then we can probably forget about the 1680s.

VIX looks set to open 10% or so higher, into the mid 16s.


*Underlying MACD (blue bar histogram cycle) set to go negative cycle at open, so...there will probably be some follow through until 11am.

Next key levels..1635/25.

The obvious first 'big support' is the lower weekly bol'..currently @ 1564.

Even Mr Permabull is bearish...

Stay tuned,...busy day ahead.

8.54am... sp -17pts, set to open 1639/38, effectively confirming breaking the low..and opening up 1635/25 by 11am.

Something to keep in mind this morning...and no doubt, many others will have the same...

sp'daily4 - the 5 waves lower

So.. 5 waves lower..and then a bounce?

I find it hard to imagine we'll drop to 1564 - lower weekly bol' on a sub'5.

ohh man..another video.....this one from Walker...

So many videos..so little time..although they are arguably better than watching clown finance TV.

*note at 2min 50' ..Walker outlines the 'weekly'9d' scenario...with downside to low 1400s..AFTER a drop to the 1560/70..and then a RS bounce to 1680s. It would make for a dream autumn for the bears.

Walker makes the interesting point about the fib' retrace. Any move under 61% - sp1617..and that almost guarentees a straight fall to the 1570/60s..- where the 200 day MA is lurking.

What am I planning now, with the break of 1639 ?

Well, weekly cycles say SHORT to the 1570/60s...so...if i take a trade, it'll be a 'chase it lower' one.

First though, lets see the current wave level out by 11am..and see what sort of bounce we get into the early afternoon.

If the market is weak, then we should probably rollover into the close again.

9.33am.  VIX opens up 10%..as expected.

Typically, we should see a market floor around 11am..and some degree of bounce into 2/3pm.

Depending on the price action, I'll consider a 'chase it lower' trade..later this afternoon.

9.43am.. black candle on the hourly VIX.   Hmm, that is usually not great for the bears. ..and so far..the 1639 low is holding

Four blue candles

The US markets remain comfortably under the recent sp'1709 high, and there looks to be very reasonable downside into September. Prime target zone within the next 3-4 weeks is 1600/1575, which will probably equate to VIX briefly in the low 20s.

sp'weekly7 - near term overview

sp'weekly5 - fib levels


So, a weak closing hour for equities, and that made for a 13pt swing from the earlier high of sp'1669.

Yet, the weekly charts are offering a lot more for the bears. We now have the fourth consecutive blue candle on the 'rainbow' chart. Based upon many of the multi-week down cycles in the past few years, the current four candle setup is HIGHLY suggestive of much lower levels across the next few weeks.

Certainly, I can envision sp'1620/00s next week - even with Monday closed.

In terms of Fib' levels, the 1560s are particularly attractive, and there are a fair few other MAs and channel/trend support around that level.

Bigger picture...still tricky

I will again highlight the 'best bear case'...below...

sp'weekly'9c - a hit of the lower trend?

Under my rules, I need to see a hit of the lower weekly bollinger (currently 1564..and rising), otherwise I'll be VERY concerned that the next bounce will be able to take out the 1709 high. Any daily closes >1709, and this scenario would need to get trashed.

Looking ahead

There is a small array of econ-data for Tuesday, case-shiller, consumer confidence, and Richmond Fed. If those are at least 'reasonable' the market will have its excuse to rally not least helped with....

*very significant QE of $5bn for Tuesday.   bears..beware!


I remain on the sidelines (it has only been two weeks, but seems like years), and am seeking an index re-short in the sp'1680s. Considering there is further QE on Wednesday, I'm expecting to wait until then.

Goodnight from London

Daily Index Cycle update

The main indexes closed moderately lower, after moderate gains for much of the day, with the sp -6pts @ 1656. The two market leaders - Trans/R2K, both managed to close effectively flat - after earlier gains of 0.5%. Broad trend still appears slightly to the upside.





The closing hour certainly helped wake everyone up, after what had been a very subdued day of algo-bot melt, with an sp' high of 1669.

The declines in the headline indexes - Sp/dow/nasdaq, are slightly interesting, but still..the two leaders - Trans/R2K, closed flat.

With very large QE of $5bn for Tuesday, and $3bn for Wednesday, equity bears face major problems across the next two trading days.

I'm holding to the original outlook, seeking the sp'1680s...before renewed significant downside into September.

a little more later...