Thursday 9 January 2014

Volatility just can't climb much

Whilst US equities saw continued minor price chop, the VIX held fractional gains across the day, settling higher by 0.16% @ 12.89. Near term outlook is for the VIX to remain in a tight 14/11 range. Indeed, if sp'1860/80 within the next few weeks, then VIX should briefly drop into the 11s.




Little to add.

Small chance of a brief VIX spike into the 14s tomorrow - if market decides it does not like the jobs data, but really...14 seems the highest that VIX will go for some days..if not even a few weeks.

The idea of VIX >20 any time soon..seems near impossible.

more later..on the indexes

Closing Brief

It was another day of minor chop for the US indexes, with the sp' +0.6pts @ 1838. The two leaders - Trans/R2K, settled +0.95% and +0.1% respectively. There is slight near term uncertainty, but the broader trend remains to the reflected in a fearless VIX.



We've now had around 20 solid trading hours of minor price chop..a range of barely 1%. Not exactly exciting, but then, there has been plenty of significant action in individual stocks..especially UAL, DRYS, and the coal miners.

Best guess for tomorrow?   I'd have to guess we gap higher on a 'good news is actually good news' interpretation.

Those holding short overnight, if they are lucky will get a quick washout down to 1820/18..but really, I'd only give a 20% probability of that outcome.

The fact there is sig' QE-pomo tomorrow of around $2-3bn, should, as ever, concern the bears.

the usual bits and pieces across the evening :)

3pm update - further chop into the close, surely?

Considering the last 19 trading hours of price action, there is no reason why we won't see continued muted chop into the close - ahead of the big monthly jobs data. Metals are holding minor gains, Gold +$3, whilst Oil is -0.7%




The daily chart is offering a possible bigger ABC decline..with the morning peak of 1843..the B.

Regardless. baring a break <1812/10....the primary trend is absolutely still bullish.

*As for tomorrow...worse case for the bulls...a brief washout to the 1820/18 zone...before a multi-day ramp across next week.

A lot of pretty strong individual moves today, its been kinda difficult to just select a few...I'll cover the miners a little more in detail after the close on the Fair Value page.

UAL still cooling down, +7.5%..but is still in the $44s..a huge gain since last week.


3.19pm.  sp'1839...a close in the 1840s would certainly open up the 1850s on a gap higher tomorrow.

Yes...there is downside still viable - to 1820/18..but the risk is towards the bears getting nuked. After all, the primary trend is UP.

Interesting latter day recovery in RIG, from -55 to +5...hmm

3.37pm...looks like we're going to see the indexes close broadly flat...although VIX looks set to close fractionally red.

All those buying VIX calls last month..utter waste of I thought. They'll be -20/30% just on the decay alone.

2pm update - holding the 1830s

The main indexes continue this seemingly endless period of sideways chop in the sp'1830s. The lower bollinger on the hourly cycle is now up to 1830..and indeed, that should hold as support into the close. Metals holding minor gains, gold +$4, whilst Oil slips ever lower...-1.0%



Lets be clear..there is 'small risk' of downside to the original fib target zone of 1820/18...if Mr Market really wants to confuse the mainstream.

Not that such a down move will do anything to negate the broader upward trend.

Best jumps into the 1840s tomorrow...and keeps on going on,  'good news is actually good news'.

DRYS is still struggling... -3%

Next support is the 50 day MA..around the price cluster zone of $3.50. I'd be real surprised if that doesn't hold. The bigger weekly chart is also offering key rising support in that mid $3s.

1pm update - what a chop fest!

A micro rally to sp'1836, and the sp'500 is back to flat. For Mr retail trader out there, this is a real messy week..and for those not focused on the bigger picture, understandably...confusing. Metals are looking weak, with Gold just +$2. Oil remains very weak, -0.8%


USO, daily


*first major earnings for the close of today.. AA

Well..a real messy week indeed..but for those with eyes on the bigger trends...we know where this is going.

Ford building gains, +2.5%, and its back above the 200 day MA.

1.37pm.. the chop continues...but the coal miners..weaker... BTU -3.9%..pretty major.

12pm update - choppy mess

The main indexes continue to see minor price chop, although we have a marginal break of the Wed' sp'1831 low. Regardless of any further minor downside..the broader trend should strongly reassert itself once the monthly jobs data (Friday, 8.30am) is out of the way.




*VIX looks set to struggle, just to break >13.50. Certainly, the 15s look completely out of range for some days..if not a few weeks.

So..a bit of a messy morning, opening gains..swiftly reversed...but really, the declines right now are still very minor...and in the scheme of be dismissed as noise.

UAL is cooling down a little, +9.5%, but still represents a huge gain, and is good follow through from yesterday. The $48s look due next week.


12.21pm... sp'1834...hmm, this is such a choppy mess. real tough to guess the smaller waves. Regardless, there is still chance of a weekly close in the 1850s, not that it is 'necessary' anyway.

notable strength: Ford, 2.1%..on the CEO not leaving for MSFT.

time for tea :)

11am update - choppy morning

The main indexes continue to see chop, and this is now hour'15 of a particularly tight trading range from sp'1831/43. Metals are a little higher, Gold $2, whilst Oil continues to see broader weakness, -0.3%. Mr Market is clearly in a holding pattern until the monthly jobs data.



*yes, the current hourly candle is the strongest down action we've seen since last Wednesday, but really..there is little reason to expect the market to break <1830..or >1849..until the jobs data is out.

Price action is highly indicative of a very strong market..there occasionally likes to tease the bears, with little 5/10pt drops..only to swiftly reverse. Today is just a continuation of that.

Notable mover: UAL, holding very powerful gains of 10%, and it remains surprising even to me how fast a stock will move when it breaks a key level.

The obvious question (as I noted yesterday)...if UAL breaks $50..that has some very serious implications for the broader market.

11.11am..well, so much for the 1831 floor. Marginal break..and the original fib target of 1818 is  back on..surprisingly.

Regardless, this is just another minor wash out before the next up move. 

11.25am... continued chop..and so far 1830 is holding, but things do look weak.

Coal miners, particularly weak...

BTU..clearly broken

In danger of the low teens again.

10am update - UAL turns on the scram jets

The sp'500 is back in the 1840s..although clearly, we're going to see some resistance at the historic high of 1849. A weekly close in the 1850s looks highly probable, which opens up a short term peak in the 1860/80 zone before month end. Metals hold slight gains, Gold +$2



Not a particularly exciting open, but certainly, the 1820s are now falling away out of range...and we're set for new highs..once we get the jobs data tomorrow.

*unquestionably...stock of the day..perhaps the year so far...

UAL..+12% in the $46s..

 ...a mere $2 from my late spring target

10.09am.. notable weakness..coal miners..breaking under support..all of them in major trouble now.

10.20am... baring a break <1831..highly unlikely, this is just another bit of chop before the jump into new territory.

BTU -2.8%.  RIG..weak again, -0.6%

Despite the price chop, VIX is showing ZERO concern, just +1% @ 13.00

Pre-Market Brief

Good morning. Futures are moderately higher, sp +4pts, we're set to open at 1841  - a mere 8pts from the historic high. Metals are similarly higher, Gold +$6, but still $35 below old broken support. Equity bulls look set to push into the 1850s by the Friday close.



*weekly jobless: 330k, a reasonable number I guess you could say, but the monthly data really needs to be coming in with net gains of 300-500k to really offer a genuine sign of economic recovery.

So...a little higher to start the day, and again, for those expecting the 1700s in the near term...we'll pulling away from key support zone of 1810/00.

Indeed, I think it very viable now, that we won't break <1800 until the summer.

notable early movers: UAL +2,4% in the $42s, a mere $6 from the historic high from 2007.

A quiet day in market land

It was a pretty quiet day for US equities. Despite reasonable ADP jobs data, and the FOMC minutes where the Fed discussed lowering the headline jobless target to 6.0%, the market just saw minor price chop. All of this recent price action is mere consolidation..before further upside.



There really isn't anything to add. The bears are still getting overly excited at any micro drop...only to see the market rebound each time. The broader trend remains unquestionably to the upside.

The next intermediate wave lower

I've posted the following chart a few times over the last few months, back when the 1800s seemed impossible to many. Yet.. here we are, and now the issue is whether the 1900s..or even the big sp'2000 threshold will be broken above, before the next major wave lower.

sp'weekly'9 - the next fib retrace.

I'm starting from the assumption that we should be looking for at least a 38% retrace of the entire wave - that started way back in Oct'2011, when the sp' was a mere 1074. If you then work backwards, from the notion that the 1625/1575 - the high from 2000/2007, is now support, then it gives the least.

Upside target zone into the late spring remains.. sp'1950/2050. We'll just have to see where we are in March/May..and re-assess then.

Looking ahead

There will be the usual weekly jobs data, along with two Fed officials whose comments might move the market a little. Other than that though, there really isn't anything significant. Market looks set to remain in the 1835/45 zone until early Friday.

*next sig' QE-pomo is not until Friday.

Goodnight from London

Daily Index Cycle update

The main indexes closed with some chop, sp -0.4pts @ 1837. The two leaders - Trans/R2K, settled +0.3% and unchanged respectively. There appears relatively easy upside to the sp'1850s within the next few trading days, and possibly 1860/80 before the next minor top is complete.





Little to add, on what was a pretty quiet day in market land.

We arguably still have bull flags on just about all the indexes, and there is pretty easy upside of 2-3% into end January. The transports looks especially strong, and is holding the up trend from early October.

Certainly though, the sp'1900s look unlikely in the current wave.

a little more later...