Tuesday 8 October 2013

Volatility breaks the key 20 threshold

With the main indexes seeing continued weakness, volatility continues to broadly increase from the late Sept' low - of the 12s. The VIX closed +4.8% @ 20.34 - the highest daily close since late June. Next key target is the 23 spike high of Dec'2012, and then the June 2012 high of 27.




So..the equity bears have managed their first daily VIX close in the 20s since June. That is kinda impressive, but what will be impressive is if the weekly VIX close is in the 20s. We've not seen a weekly VIX close in the 20s since Dec'2012, and that situation was slightly affected by the holiday/end year issues.

What would be real interesting is if the market really gets rattled, with a break <sp'1627, and that might be enough to at least get the VIX into the mid 20s. The 2012 high of VIX 27 will be tough to break.

Just reflect on the fact that when VIX was 27 - in June 2012, the sp' was...1266.
more later..on the indexes

Closing Brief

The main indexes closed significantly lower, with the sp -20pts @ 1655. The two leaders - Trans/R2K, saw heavy falls of -1.4% and 1.7% respectively. With no shutdown/debt ceiling agreement likely in the immediate term, the current down trend looks set to continue.



*very weak closing few minutes, bodes badly for the bulls at the Wednesday open.

For those on the short side, another pretty reasonable day. Certainly, the declines we're seeing in the indexes are not dramatic yet, but we're now a fair way lower from the FOMC 1729 high.

The levels/targets are clear for the bears...

Sp'1627...and that will open up 1600/1590- where there is a cluster of support, not least the lower weekly bollinger.

Dow 14760 /720.   Dow 14600s would open the door to a massive further decline (if briefly) of 2000pts.

So..another day for the equity bears, and with no sign of an agreement this week...the bears should be able to push the market lower all the way into the weekend.

more later...on the VIX..

update... 4.34pm..

Boehner speaking, is not helping..and the sp slipping another 2-3pts..so the 1640s are already real close to being hit.

3pm update - significant market weakness

The main indexes are continuing to slip, with the sp' in the 1650s. There really isn't any major support until the key low of sp'1627. Below that is a cluster of support in the 1600/1590 area, and that might equate to VIX in the 27/30 zone.




Suffice to say...the bears now have the daily and weekly cycles in their favour. The Dow will flip negative on the monthly cycle in Nov'..even if it doesn't fall any further this month.

With no agreement in sight..there is little reason to believe the broader (if not exactly dramatic) falls will continue for the rest of this week.

3.22pm... market struggling just to claw back to sp'1660...and VIX looks like it will put in a very comfortable close in the 20s - the first one since June.

3.26pm ...hourly index cycles trying to put in a floor..but even the 1670s will do nothing to counter the main down trend.

3.33pm..and there she goes '..we're off the lows of the day'.

Clown finance TV head cheer leader.. Bartiromo, surely paid per use of that line.

3.52pm.. Rats selling into the close. Who wants to be going long right now, with no agreement in sight?

VIX peaked 21.01...should just about hold the 20s into the close..although surprisingly we're only talking about a daily gain of around 4%.

2pm update - Momo stocks getting hit hard

The main indexes remain very weak, and the declines are starting to become significant, with the sp' failing to hold the 1660s. VIX is comfortably holding above 20. Meanwhile, the momentum (momo) stocks are getting smashed, many with declines of 5%.

FB, daily

NFLX, daily


They all broke this morning, when the sp' failed to hold the 1670 level.

The daily charts for all of them..bode for further declines tomorrow.

As for the main market. well, it'd seem we'll be trading consistantly in the 1650/40s tomorrow, that should be enough to kick the VIX to the 23s - the Dec' 2012 spike high.

Q. How much of a market upset do the political maniacs need to motivate them to reach an agreement?

5% ?  10% ?   Although I realise many will be seeking 15/20% 'briefly' within the near term.

2.10pm.. 89pts until the Dow takes out the big 200 day MA...

..considering its only Tuesday, and those political maniacs look unlikely to do anything until the tail of next week..serious technical damage looks likely.

2.32pm.. King O' not exactly inspiring the US markets, same old political-speak.

1pm update - ignore the bounces

US equities are showing another day of moderate declines, with the sp' having now broken the 100 day MA of 1662. Despite any intra-day bounces, momentum is clearly with the bears, and even the weekly index/VIX charts are flashing major warning signals.


Dow, monthly


*Dow is especially weak as many realise, but on the monthly chart, you can see the importance of the Aug' low.

A Dow break <14500..opens up another 2000pts lower, which is certainly a target bears currently have in mind.

Dow MACD histogram set to go negative - assuming current declines hold, next month. something we've not seen since last December.

MOMO stocks continue to get hit hard today...

FB, daily

along with NFLX, TSLA...the usual suspects.

12pm update - no buyers before an agreement

The main indexes are moderately lower, with the sp' testing the 100day MA of 1662. Primary target for the doomer bears should be a break of the 1627 low, which if taken out, would break the two year trend of higher highs..and higher lows. VIX has broken into the 20s..first time since June, when sp' was 1560.




*rather than get lost in the noise of the smaller cycles..for this hour...consider the broader weekly charts..both of which are now turning to the bears.

More than anything, equity bears should seek a weekly VIX close in the 20s, along with sp <1627, although the latter seems unlikely this week.

VIX update from Mr T

Time for tea.

12.37pm... there goes the 100 day MA of 1662... next key level...1627..with the 200 day of 1598 - which is also where the lower weekly bollinger is lurking.

For those short...congrats. Looks like a few more percent lower to come, lead by the Dow, which is only 0.6% from breaking the August low of 14760.

11am update - market breaks lower

The main indexes are moderately lower, with the sp' breaking below the recent 1670 low. Buying interest looks set to remain near zero until an Obama/Boehner agreement is reached, and that doesn't look likely until next week. Despite further equity declines..VIX is slightly lower.



So...a break of 1670...kinda interesting...

Notable breaks lower.. in the momo stocks of FB, TSLA, and NFLX.

Special note...

For those watching the bigger charts..with the break <1670..the weekly charts are turning outright bearish...


A weekly close in the 1660s..or lower..will offer a test of the key 1627 low next week.

Were that to fail to hold..then it would clarify that the rally from the Oct'2011 low...has likely ended.

11.15am...for the doomers out there...here is a good target to keep in mind...

Dow, daily

Previous low...14760....and the 200 day is coming up to that.

Without question, a break into the 14600s..will be a provisional signal of real trouble. Will similarly need to take out the sp'1627 low though..to confirm it.

11.39am... and there are the VIX 20s...its been a fair few months since we seen that.

Now...the issue can the VIX close in the 20s. Next soft target is the June high of 21.91. 

10am update - morning weakness

The main indexes are moderately lower, but the sp' is holding just above the recent key low of 1670. Equity bears really need to break into the 1660s this week to maintain the moderate downside momentum. Metals are turning a touch higher, with Gold +$4.




So, a touch of minor weakness, but certainly, there isn't much downside power right now.

Despite the opening equity declines..VIX is already red. However - without sounding permabullish (gods forbid!), VIX probably needs to cool back into the 18s..at least for a few hours.

VIX hourly

The 20 threshold remains a very tough level to break/hold over.

Notable mover...STX, which is becoming something of a personal favourite in the tech sector.

STX, daily

Keep on spinning! Ohh, and yes..if the main market unravels..STX will likely put in a double top..at least in the short term. Regardless, relative to the rest of the main market, its under valued by at least 50%

10.20am.. On the hourly index charts..market trying to put in a spike-floor. Bulls need 1678/80. Underlying cycle looks pretty much exhausted on the downside, at least for a few hours.

On the flip side, who wants to be buying in the 1690s?

Could turn out to be a very quiet day. Next major thing is the FOMC minutes, Wed' 2pm.

10.50am.. micro-down cycle....breaking 1670 !

Next level is 1667/65

Pre-Market Brief

Good morning. Futures are a touch higher, sp +1pt, we're set to open at 1677. Equity bears need to push lower today into the 1660s. The key low to break below remains 1627. Precious metals are moderately weak, Gold -$4.



A rather quiet overnight futures session, and it looks like we're going to open effectively flat.

There really isn't anything to add to what was already noted in the overnight closing post.

The VIX will very likely be a key signal to watch. It has been a very long time since we had a series of daily/weekly closes in the 20s (or higher).

*I'm tired of meddling in the indexes, and will likely leave them alone until after the debt ceiling is resolved. I'm currently just short SLV, and will trade that in the days ahead. 

Weekly charts still offering a bull flag

Whilst the last nine trading days have remained in a narrow trading range of around 2%, the broader weekly index charts are still generally bullish. If the current price structure is indeed just another bull flag, equity bulls should be seeking 1750/75 once Obama/Boehner can come to an agreement.

sp'weekly8 - mid term bullish outlook


It was something of an interesting day, but still, many indexes declined by less than 1%..not exactly significant falls. Then there is the issue that trading volume remains very low. I would agree that volume is low most of the time anyway, but still, the point is...there isn't any panic/significant selling.

The current weekly rainbow chart is offering a second blue candle. I think bulls need sp'1695 to turn it green, whilst bears probably need 1660/55 to turn it red.

A weekly red candle in the 1650s would most certainly at least suggest an attempt on the key low of 1627. If that low is taken out, it would END the series of higher highs and higher lows...that we've seen from the Oct'2011 low of sp'1074.

Doomer bears need VIX 20s

More than anything, those seeking much lower equity levels of sp'1500/1400s within the remainder of this year, need to see a VIX that can hold the 20s for longer than a few hours. For the past 15 months, the VIX has occasionally broken into the 20s, but it has always been a brief affair.


So...regardless of how we trade tomorrow....lets see if we can get a weekly VIX close in the 20s...above the important 200 weekly MA. If we break VIX 23, then first target is the 2012 high of 27. After that, the target zone would be the 2011 spike zone of 35/45.

Looking ahead

There really isn't much tomorrow, aside from a few of Fed people whose comments might motivate the market..a little.

*the next sig' QE-pomo is not until next Tuesday.

*I exited index shorts this morning, and frankly, am tired of meddling with the indexes. I might just leave the main market alone until after the debt ceiling is out of the way. I realise..many of you out there probably feel the same.

Bearish lights

To conclude the day, here is a little news story that won't get much attention, but is probably one of the bigger issues that most people will be whining and bitching about if it happens this winter

see BBC news - National Grid warning about lack of power

It remains lame that each year the UK - and indeed most other western nations, live increasingly on the edge of power loss. To think that with just a week or two of 'winter cold', and the UK grid will struggle to provide enough power to the general populace.

Hell, if we ever do have a winter like the 1960s (not that I was around then), then large parts of the UK will be without power for up to half of the day. I guess you could say I'm bullish batteries and blankets.

Video update from Mr Permabull

The trendline that Oscar highlights is certainly important, but infinately more important is the actual low of sp'1627.

Goodnight from London

Daily Index Cycle update

The main indexes closed moderately lower, with the sp -14pts @ 1676. The two leaders - Trans/R2K, both closed around -1.1% lower. Near term trend remains weak, but the bears are still struggling to put in any consistent downside price action.





The overnight futures were somewhat interesting, and indeed we opened in the mid sp'1670s, but then..the usual intra-day bounce of around 10pts really smeared what was initially a bearish open.

The closing hour was certainly weak, but trading volume remains very low, and equity bears are a very considerable distance from breaking key low of 1627. Only if that low is broken..and held under, can the equity bears have real hope for much lower levels this autumn.

Considering the recent price action since the FOMC high of 1729, the bears are going to struggle to break much below 1660.

a little more later...