Friday 3 January 2014

Volatility melts into the weekend

Whilst the broader equity market saw some slight choppy weakness, the VIX slipped lower into the weekend, settling -2.7% @ 13.84  Across the shortened week, the VIX gained 11.1%. The VIX looks set to remain under the key 20 threshold until at least late January.





There is little to add.

VIX looks set to remain low, and there is even the small possibility that the VIX won't break back above 20 until the late spring/early summer - which would be extremely incredible.

My primary market outlook is for an intermediate top this spring. If that is the case, I'd be looking for VIX - at least briefly, to spike into the low 30s. The only issue is whether 40s are viable if the market gets seriously spooked by something  - such as a geo-political crisis (China/Japan?).

more later..on the indexes

Closing Brief

The main indexes closed the week, moderately mixed, with the sp -0.7pts @ 1831. The two leaders - Trans/R2K, both settled higher by around 0.5% Regardless of any minor weakness early next week, there looks to be continued broad upside into mid/late January, to around sp'1860/80.



A short week...and that makes for two trading days complete of 2014!

However we open next Monday, the bigger weekly/monthly charts most certainly are still offering somewhat higher levels.

If my weekly'8 chart is correct, we'll see 2-4% higher...only to see 5-7% lower by mid Feb.

Thanks to those who commented this week, it is good to hear from some of you out there! The usual bits and pieces across the evening.

Have a good weekend everyone!
**The weekend post will be on the World monthly indexes.

3pm update - minor chop into the weekend

The sp'500 looks set to close the week in the low sp'1830s, a weekly decline of around -0.5%. The metals are holding gains, Gold +$13, whilst Oil ends the week..weak, -1.6%. There is sig' QE-pomo next week, bears face the usual problems from next Tuesday onward.




A short week, but I'm kinda tired...just one hour to go!

Sp'1835...hmm....surely we won't close in the 1840s?

3.07pm.. UAL breaks $40 for the first time since Feb' 2008.  Next target is $48..a clear 20% higher.

happy flying!

3.14pm  sp'1836..a close in the 1840s would be something of a surprise, but then..underlying pressure remains up...and is exactly why I won't be meddling on the short-side until the spring.

Notable strength: UAL +6.0%, so far..hitting $40.05.

3.25pm.. VIX -4.5%...showing a fearless market..doesn't bode well for the bears holding short across the weekend.

3.41pm.. underlying MACD cycle is set to go positive in 1-2 trading hours..and frankly, I'd not be surprised if we open Monday in the 1850s.

Certainly, it looks a seriously risky situation for anyone to hold short across the weekend, with downside, at best..maybe 1812/10..if not only 1820/18.

3.56pm...chop expected........ back at the close.

2pm update - afternoon chop

The market is seeing continued minor chop into the weekend, with the sp' in danger of losing the 1830s, not that it is a 'mission critical' level. A drop to 1815/10 early next week is viable, before a renewed strong push higher. Metals are holding gains, Gold, +$12, whilst Oil is weak, -1.7%



*I've added a fib retrace to the hourly.

How about a target of 1820/18 for the floor, early Monday?

As noted earlier, it is a bit of a mess, but overall outlook looks reasonably solid, with a move into the 1850/60s by mid month.

Arguably, stock of the day, UAL, now +5.1%.

Making a play for the big $40 threshold...which opens up the  2007 high of $48 by the spring.

2.04pm.. UAL about to break $40 for the first time since Feb'2008.

1pm update - confusion in the minor waves

It remains a bit of a muted mess to end the week, with Dow/SP a touch higher, but with a weak Nasdaq - not helped with AAPL -1.7%. Metals are holding moderate gains, Gold +$12, whilst Oil remains very weak, -1.1%.



The break levels are pretty clear....

If >1839, throw out the the C wave idea, and just push higher across next week.
If <1829...a C wave down to 1815/10 early next Mon/Tuesday..before pushing higher later next week.

The point should be clear...risk of minor downside, but broadly..we're still headed higher.

I have to say, its arguably crazy for anyone to be attempting to trade these tiny little down moves. So damn difficult to time, and there is always the threat of low vol' algo-bot upside melt.

UAL..continuing to climb...

Primary upside target is $48 - the old 2007 double top.

12pm update - muted melt lower

The market has got stuck at sp'1838, and it would seem the sub'4 will take at least another day to complete. Downside is the sp'1815/10 zone, no later than early Tuesday. Metals are holding gains, Gold +$12, whilst Oil remains especially weak, -1.1%.



These retracement waves are often tricky..and it now looks like we'll see further moderate weakness into next Monday.

Most important though, higher levels still look a given by the end of next week, when everyone should have returned from their festive holidays.

Notable weakness in the coal miners, BTU -4.0%

A break <$18 would be a real problem.

VIX update from Mr T.

time for tea  :)


12.21pm.. UAL building gains, on lower oil prices, now +3.6%

12.31pm.. If Mr Market really wants to confuse people, it'll break >1839. Regardless...the declines are minor..and those weekly/monthly charts are still offering much higher levels.

AAPL, -1.8%, in the $543s. 

11am update - market holding together

Despite the mild concern from even some bulls yesterday, at the yearly opening weakness, Mr Market looks comfortable in the sp'1830s. The only notable weakness is in Oil -1.1%, but hey, aren't lower energy prices bullish for the broader economy? Metals build gains, Gold +$12.


USO, daily


*I suppose you could count the current micro wave up as a B', of an ABC sub'4, but whatever....the broader trend looks higher for another week or two.

Well, at least the first two trading days of the year have not been dull. There is plenty of price movement going on for those that look around a bit.
*despite the market gains, Ford remains expected, and those low 14s look viable at some point in the near term.

11.22am.. B wave top @ sp'1838 ?  If so..then the 1815/10 zone is viable next Mon/Tuesday. Regardless...I'd still expect higher levels from there.

Coal miners very weak, BTU -3.7%.

10am update - morning gains

US equities look set to end the week with some gains. Any weekly close in the sp'1830s will be enough to keep the broader up trend on track. Metals are trying to build gains, Gold +$7. Oil is weak though, -0.4%.


TWTR, daily


*looks like the bull maniacs are looking to close TWTR in the $70s this week.

So..we have a market that wants to rally into mid January...probably to the 1860/80 zone. With the QE starting again next week, bears face the usual problem.

Notable mover: UAL +2.3%.. probably on falling oil prices.

10.03am... weakness in Ford, and the coal miners. Apart from that though, market looks reasonably strong.

*clown finance TV highlighting that the Fed officials are due to start speaking soon, no doubt..Mr Market will be looking to ramp on any comments.

10.33am.. Oil really is weak...-1.0%...and will make for a pretty sharp weekly fall to start the year.

Rest of the market is holding together though..kinda. 

Pre-Market Brief

Good morning. Futures are moderately higher, sp +4pts, we're set to open at 1835. Precious metals continue to climb (but still below broken support), Gold +$6, Silver +0.6%. Hourly index cycles offer upside into the Friday close, if not all of next week.



*as I type, the big city is almost night at 1pm, we have floods, and lightning bolts are raining down, a crazy winters day!

So..we're set to open a little higher. Frankly, the bull maniacs should be content with any weekly close above 1835.

As it is anyway, I've little doubt we'll see the 1850/60s within the next week or two. For me, the only issue is whether we see 1870/80s, before things really do get overbought by mid/late January.

*be mindful of the Fed officials speaking today, comments could easily be used as an excuse to ramp on the recognition that QE is not going to fully end for some considerable time.

Early strength: TWTR + 1.6%,  DRYS, +1.5%

9.33am.. and we're off and running!  Would get interesting if we can break back into the 1840s by the early afternoon. Certainly, the underlying pressure will be up into next week.

DRYS +2%,,  VIX -1%..set for a weekly close in the 13s.

A dynamic market year ahead

US equities should see some pretty dynamic price action this year. Rather than the broad straight up ramp of 2013, the market has a very high probability of seeing a 2-4 month down wave. First of all though, there is probably another 2-4 months of upside to go.


Dow'monthly'2, rainbow


First, note the upper bollinger band on the monthly charts. Market is now offering the sp'1880s, along with Dow 16800s by mid/late January. By late spring, bulls will have an opportunity for Dow 17500/750, with sp'1950/2050.

BDI gaps lower to start the year

BDI, monthly

A 7% drop in the BDI to start the year, but there seems high likelihood that the BDI will battle into the 3000/3500 zone this spring, perhaps even the 4000s, before collapsing in half by late summer. This chart, as I will keep highlighting, has huge implications for the shipping stocks, most notably, DRYS.

The Mighty DAX

*a poster was asking about my outlook on the DAX.....and yes, I do take requests! I will also be covering the usual ten world indexes this weekend.

DAX, monthly

Germany remains the powerhouse of the EU, and without question, its fiscal position is better than the USA. The only problem is that unlike the US - which has the Fed to print endless money to fund any deficits, Germany is unable to directly finance itself via the print key, since it is part of the Euro currency.

Despite starting the year with a somewhat significant fall of -1.6%, the monthly charts are very much offering the big 10k level by the late spring, before an anticipated 10/20% fall this coming summer/autumn.

Equity bulls have downside buffer all the way down to the 8000/7500 (a huge 15/20%) by late summer, before the broader up trend is broken. Indeed, the 8000 level would be an effective back test of the old double top high of 2000/2007 - that would equate to sp'1625/1575 zone.

Looking ahead

There isn't much due tomorrow. Just vehicle sales, and the Oil and Gas reports. However, there are no less than four Fed officials speaking, including the Bernanke. Don't be surprised if a few comments are used as an excuse by the algo-bots to kick the market around a bit.

*no sig' QE until next Tuesday

A long..and tough year ahead

Tomorrow will again likely be somewhat muted, as many traders are still on holiday. Things really won't get going until next Wednesday when we have the FOMC minutes, and followed by the monthly jobs data on Friday.

The year ahead though is surely going to be another difficult one (when isn't it?). My best guess is that the market is desperate for a major shakeout move, and that we'll see a major wave lower once we are past the spring. I'm still resigned that the next major equity collapse wave of 40-60%, is still a good 2-3 years away. I realise many sure won't like hearing that, but that is how I currently see things.

Goodnight from London

Daily Index Cycle update

The main indexes closed moderately lower, with the sp -16pts @ 1832. The two leaders - Trans/R2K, settled lower by -1.5% and -1.1% respectively. Near term trend is for broad upside into mid/late January, to the sp'1860/80 zone.





A new year begins, and the markets open a little lower. Certainly, it is nothing for the bears to get overly excited about.

Technically, with the break <sp'1833, the door is open to the 1812/10 zone, but I find that hard to believe. Even then, we'll no doubt rally into mid/late January.

Arguably, for those who are still aching to short the indexes, the only reasonable entry level will be somewhere >1860..if not 1880. Even then, downside might only be 60-80pts - as was seen in the September down wave.

a little more later...