Wednesday 18 September 2013

Volatility snaps lower on maintained QE

With the Fed maintaining QE at $85bn a month, equities snapped higher, and the VIX naturally collapsed lower, settling -6.5% @ 13.59. Near term trend looks weak, and the VIX 12s look viable by the Friday close.




So...the market is breaking new highs, and the VIX has lost the mid 14s.

Near term trend is very clear now, with higher equities, and a VIX that looks set to break into the 12s late this week, or early next.

The bigger H/S formation on the VIX daily, is suggestive of VIX 11s in early October.

more later..on the indexes

Closing Brief

The main indexes closed significantly higher after the Fed surprised the market with no cut in QE. The sp +20pts @ 1725. The two leaders -Trans/R2K, closed higher by 1.5% and 1.0% respectively. Near term outlook is for a continued hyper-ramp into early October.



So...the Fed has once again resulted in the equity bears getting effectively nuked.

Now, from a purely technical perspective, the set up was pretty clear earlier today. In many ways, as I noted, there was an extreme risk of upside..vs. downside.

With the close >1709...we have a major break, and there is very likely at least another 2-3 weeks straight up, which should take us to the 1750/75 zone..if not even the low 1800s.

Frankly though, the bigger picture is still suggestive of sp'2000s in spring 2014.

After all, we'll have the Twitter IPO then, arguably the most bullish economic signal the western world has even seen!

the usual bits and pieces across the evening.

3pm update - day of horror for the bears

With the Fed maintaining QE at $85bn..the market has snapped significantly higher. The break >sp'1709 is massively important, and opens up the 1750/1800s within the next few weeks. VIX has naturally collapsed, and the 12s are back on the agenda. Metals/Oil...both soaring.




*SP' nearing the top of a channel, 1727/30 by the close...just about viable.

For those bears out there still short...I do sympathise. Yet..from a purely technical perspective, the smaller cycles were all floored earlier today. Even yours truly - a heavily biased doomer bear, saw it.

The only issue now is whether the market gets a close in the 1720s , with VIX 13s.... or 1730s with VIX 12s.

sp'1728....moving into hyper-ramp mode....jeez. I wonder how many retail accounts are getting blown up today, who are margin-short.

Transports making new historic highs...the 6700s open up the 7000s in the very near term

Trans, weekly

The only issue is whether 8000s are viable by year end.

3.05pm... and here come the sp'1730s...after earlier @ 1700. Thats almost a clear 2% swing. VIX 12s...look due at the close.

Biggest miners....incredible gain of almost 9%

GDX, daily

Amazing day for the miners!

3.27pm.. market getting stuck at channel resistance on the hourly..but hey..any daily close in the 1720s is wildly bullish for next week..when there are three significant QEs.

Anyone starting to also consider the hyper-bullish outlook for spring 2014? 

3.43pm.. Gold +$50.. GDX +10%.....biggest up moves I can remember in a very long time.

Sp' making another break to close at the highs.

Anyone want to be short into tomorrow? I didn't think so.

2pm update- USS Bernanke set to land

The main indexes are holding very minor declines. The smaller 5/15/60min index cycles all look primed to snap higher. Metals have rebounded, with Gold back to flat. Oil is holding significant gains of 1.4%. VIX is holding effectively flat in the mid 14s.


I wish I could believe in the following Fed outcome...

As it is, I'm guessing it will actually be the USS Equity-Bear

So...lets see what the FOMC have for us!

*special note again...the 'real action' is more likely once the Bernanke press conference is done, rather than the initial press release.

standing by!

2.01pm... lol...what a farce. Not even a mild cut...

naturally. .market snaps to new all time historic highs.

Bears getting nuked.....the horror :(

VIX smashed -7%... sp' set to close in the 1720s.

Awful day for those on the short side without stops....this is about as bad as it could.

2.08pm... metals screaming higher.. from earlier -$13... to +33.

Despite things being a little twitchy out there, ZERO reason why the market won't build.

So, a close in the 1720s.. VIX 13s, and ...everything is all fine..with the printers at 85bn a month. Great huh ?

2.13pm..fierce gains now.. vix -8%....and a close viable in the sp'1730s ?

2.25pm....and this is the kind of hyper-ramp nonsense that scares me. There is no reason why sp'2000s won't be hit in the early spring.

QE ain't ending..hell, they won't even cut if back a little.

A close in the 1730s, with sp +1.5% now looks very viable..along with VIX 12s.

2.30pm.. a clear break on the daily charts...

Ohoh, and here comes the Bernanke..which will probably last a good hour.

2.42pm.. all weekly index charts looking hyper bullish into next week. sp'1740/50s now look viable by end month (hey deflation're back on track !)

1pm update - market in a holding pattern

The main indexes remain a touch lower, but the current declines merely help to reset the smaller cycles even more, ahead of the FOMC at 2pm. Metals are weak, but the interesting action is in Oil, continuing to build gains, +1.7%. VIX is fractionally higher, after the opening Sept' opex.



I have to think this market is going to snap significantly higher into the close.

Everything is now set up for the bulls, all the smaller cycles are pretty much floored, and the weekly index charts are still outright bullish.

*as it is, despite that increasingly bullish view, I'm not getting involved on a Fed day.

One thing looks likely though, we're going to be closing >1710...or....<1700.

Today's close should offer some real clarity into end Month/early October.-

AMZN, perhaps the most insanely valued stock in the market..looking strong.


*I actually bought something on Amazon today, so I'm doing my part to help keep it unprofitable.

As many recognise 'they lose money on every order, but make up for it on volume  ;)

1.24pm metals jump...does someone know something?

GLD, 5min


12pm update - market setting up to snap higher

The main indexes have slipped a little further, but the 5/15/60 minute index cycles are all arguably close to flooring. Metals remain weak, Gold -$12. whilst Oil continuing to build gains, +1.2%. Despite equity weakness, VIX is still in the red.



I have to think, the bears are facing a severe risk of a major late day ramp on 'fed speak' nonsense.

Worse case... a snap >1709..and a daily close in the 1715/25 zone.

Certainly, I'm inclined to just sit today out. For the day-traders out there, at least the stop levels are clear enough.

VIX update from Mr T.

So, a few are buying outright Oct' calls, but really, VIX is still very low, and the notion of 20s any time soon seems very unlikely.

Metals looking ugly on the weekly charts...

GLD, weekly

Its only Wednesday, and it sure looks ugly in metal land. First target..120/118

11am update - chop chop

The main indexes are a touch lower, but it would surprising if the market can hold even moderate declines ahead of the FOMC. Metals remain weak, Gold -$10. Oil builds on opening gains, on lower than expected reserves data, +0.8%



Underlying MACD (blue bar histogram) is now negative cycle, and will be offering a floor by the afternoon, and that is certainly not the best set up for equity bears.

VIX, daily,, possible H/S ?

Unquestionably, bears should seek a daily close in the 15s, which isn't that much higher.

stay tuned!

10am update - opening minor chop

The main indexes open with minor chop. Importantly, the sp' is holding under the key 1709 high. Precious metals are weak, with Gold -$13. Oil is 0.4% higher, ahead of the usual oil report at 10.30am. VIX is similarly seeing minor chop, now fractionally lower.



Market looks set to remain within a holding pattern until 2pm.

Absolutely no reason why sp' will break >1709 before then..or similarly,  <1700.

Notable movers so far..AAPL, FB. The hysteria stocks are really only ones seeing any action.

AAPL, daily

Not exactly so bullish now, despite the recent Golden Cross. A death cross - viable no earlier than October, would be kinda interesting.

*I remain on the sidelines, until at least 2.15pm..if not tomorrow.

Pre-Market Brief

Good morning. Futures are a touch higher, sp +1.5pts, we're set to open around 1706 - a mere 3pts from the key high. Metals are weak, with Gold -$6. Oil is a touch higher. The US markets have a very interesting day ahead.



So, we're set to open a touch higher, but I sure don't expect >1709 before the FOMC.

We're likely going to see some serious price action in the last two hours of today..although perhaps most importantly to keep in mind, the real market reaction might not be seen until after Bernanke has completed his press conference, and that could be as late as 3.30pm.

My simple rule trading until after the FOMC at 2pm.

If sp > short trades..regardless.
Will consider a short trade if price action looks weak.

Over in Permabull land, Mr C believes QE will not be reduced today. That is rather a bold call - since the mainstream consensus is for a reduction of $10/15bn, so it'll be interesting to see if he is right.


Walker with a special Oil/Metals update

*I will endeavour to be here across today, although I'm out of be a problem.

8.37am..oh noes....Blankfein on clown finance TV..just said something the Gold bugs will be highlighting for months..maybe years...

(rough paraphrase) 'unlike a FIAT currency...Gold has no intrinsic value'.

I'm sure someone will post up video of that later!

Awaiting the Bernanke

The US and World capital markets are cautiously awaiting the decision and words of Bernanke. Despite a potential 'sell the news' event, with the Nasdaq and R2K already breaking new highs, equities are more likely than not, to continue battling higher.




So, the sp' is a mere 5pts shy of breaking new highs. The VIX daily MACD (blue bar histogram) cycle is starting to tick higher, but there is nothing conclusive yet. Bears need a daily close in the 15s to have any confidence/hope of equity downside.

Default trend remains upward

Even if the market fails to break new index highs tomorrow, it is going to take a sizable drop (across a few days) just to offer an initial turn. It is a guess, but even a break under the weekly 10MA of 1678 will barely be enough to turn the current weekly candle blue.

All those seeking major downside should be desperate for a weekly close under last weeks low of 1656. That is almost 50pts lower, although we saw two similar sized declines in August - both taking two days.

sp'weekly8 - mid term bullish outlook

Looking FOMC day

There is 'Housing Starts' data in early morning, but the market will have little concern for that.

The FOMC are set to announce at 2pm, with the Bernanke due for a press conference around 2.30pm. As many recognise, the markets reaction to the press conf' will probably be more important than the initial announcement.

Best guess - QE will be reduced by $15bn. Whether its 5/10 MBS/POMO or 10/5bn MBS/POMO, is entirely irrelevant. A monthly QE of $70bn is still a huge annual amount of $0.84trn. For the economic doomers out there, just consider that amounts to around 5% of GDP.  It could be argued that minus QE, annual GDP is actually (2%, -5%).... giving a deeply recessionary -3%.

Trading plan

Frankly, I'm not likely to get involved tomorrow. Trading on a Fed day is generally not a good idea. The price action could be pretty unstable once the announcement is made. Even then, as we've seen a number of times this year, the 'real reaction' won't likely be clear until the Bernanke has completed his press conference..and by that time, it'll be 3.30pm or so.

Further, if we break >sp'1710 at ANY time, I'd absolutely rule out going short in the immediate term. The fact the Nasdaq and R2K are already at new highs bodes VERY badly for equity bears tomorrow.

*I will note, Oil looks especially weak on the daily chart..along with the precious metals. If we do see downside into the Wednesday close, I'd look for commodities to be especially weak.

A pissed permabear

"What makes it hard is not that you had it bad, it is that you are so pissed that so many others had it good"

...and thats all I've got to say about that.

Goodnight from London