Tuesday, 21 January 2014

Volatility fails to hold the morning gains

With the equity indexes seeing a latter day recovery, the VIX saw most of the morning gains evapourate, settling +3.5% @ 12.87. VIX looks set to remain in a tight 14/11 zone until the FOMC of Jan'29. VIX appears unlikely to see the 20s for some weeks..if not 3-4 months.




Little to add. VIX remains low, and whilst equity bears are utterly unable to string together more than one significant down day in a row (I refer anyone to last Mon/Tuesday), VIX looks set to remain very...very low.

more later...on the indexes

Closing Brief

The main indexes opened higher, saw a reversal, but still managed a latter day recovery, with the sp'500 settling +5pts @ 1843. The two leaders - Trans/R2K broke new historic highs, both closing higher by around 0.6%



So...what to make of today?

Opening gains...failed to hold..a minor - but somewhat strong down wave to 1832..but then a latter day recovery.

Arguably, its just the sort of thing we've seen hundreds of times across the last few years. Baring a break <1815, the primary trend remains unquestionably to the upside.

With charts like FB, AAPL, and even the stinky TSLA looking very bullish, I have little doubt we'll make it to my target zone of sp'1860/80.

more later..on the VIX

3pm update - moderate daily gains

Most of the main indexes look set to close with moderate daily gains. Only the Dow remains a touch negative, VIX is cooling down after the earlier gains of 7%, and a fractional red close is just about viable. Metals remain weak, with Gold -$10.




*The VIX looks especially weak, and still utterly unable to break..and hold the mid teens. How can anyone expect the 20s any time soon?

There really isn't much to say about today's action, other than it just seems the usual 'tease to the bears' that we've seen so many times. Market drops 5, 10pts..only to recover...almost every time.

Considering the broader weekly charts, it would be surprising if we don't at least hit the minimum target of 1870 before the next FOMC announcement. 
Notable mover, NAT, +10% into the $12s. Fellow shipper DRYS, is struggling to hold fractional gains.

3.42pm... minor chop...holding the sp'1840s...frankly, bulls should be very pleased with that.

Notable strength in AAPL, FB, and TSLA. 

2pm update - underlying strength

The US market is again showing its underlying strength, with the sp'500 even threatening a close in the 1850s, which would no doubt utterly dismay the bears. Metals remain weak, Gold -$11, whilst Oil is again trying to re-build earlier gains, +0.7%.



With two hours to go, there is plenty of time for the bulls to smite the bears, with a daily close in the 1850s.

Regardless though, the Trans/R2K have already put in new historic highs, so it really doesn't matter if the headline indexes follow today, or not until later in the week.

Notable strength in tech giant AAPL...a daily close in the 550s now looks viable.

stay tuned!

1pm update - intraday floor of 1832

Mr Market is attempting to put in a floor at sp'1832, with a moderately higher daily close still viable. Considering the earlier weakness, equity bulls should be content with any daily close in the 1840s, which still keeps open the door to the target zone of 1860/80.



I should probably revert to just following the daily charts for a few days...

Regardless of this afternoon, it really does come down to 'not remotely interested, baring <1815'.

UAL continues to remain bullish, and is within $1 of breaking the 2007 double top high.

As noted many weeks ago, things get real interesting if >$50, although that does not seem viable in the very near term..not least if the main market turns lower after a spike high at next weeks FOMC.

1.44pm.. a clear 11pts above the morning low..and bears look in trouble. With 2 QEs in the rest of this week...want to be short here?

Just go stare at weekly'8 chart...that should clarify things. 

12pm update - Tuesday morning weakness

The main indexes have seen a morning swing of around 0.8% to the downside, with the sp' slipping from 1849 to 1833. Metals are weak, with Gold -$12, and Silver -1.9%. Baring a break of last Monday's low of sp'1815, the equity bears still have little to tout.




So...its been a bit of a mixed mess this morning. Opening gains - with new historic highs on the Trans/R2K, but then a sharp minor wave lower.

A reminder of the weekly chart highlights the bigger problems all those getting overly excited at this mornings action face. The weekly 10MA remains good initial support, and that is now almost in the 1820s.

Baring a break <1815, this is just minor chop.

With Sig' QE tomorrow..and Friday, the pressure will increase against the equity bears, but then..that has generally been the case for the last few years.

*optionmonster seem to have given up on their daily VIX updates, either due to lack of interest..or simply because there is little to be said about the VIX these days.

time for lunch.

11am update - new historic highs are bearish, right?

The opening equity gains have failed to hold, and we're seeing minor weak chop...back to the price action of the past few weeks. However, equity bulls can already tout new historic highs for the two leaders - Trans/R2K. Metals remain weak, Gold -$13, whilst Oil is holding gains of around 1%



Whilst the bears lose themselves in slight hysteria - that the opening gains have been reversed..the underlying fact remains that the two leading indexes did indeed break new historic highs.

Baring a break under last Monday's low of sp'1815, this mornings price action is to be dismissed as post holiday chop.

Notable gains in: TSLA, +3.6%,  FB +2.0%, clearly, most of the momo stocks are looking fine.

11.19am.. Well, the lines are very clear...sp'1815, along with Dow 16200. Until those are broken, these down waves are merely places to re-load on the long side.   Risk reward, 1% down...2.5/3.5% upside.

VIX +7%, but we're only in the low 13s...and last week showed how even the 14s are difficult to hold over.

10am update - new up wave underway

The market begins the week with moderate gains, and they look set to build across the week. A daily close in the 1855/60 zone looks likely, with the 1860/80s viable in the days ahead - supported on the bigger weekly/monthly charts.



What is there to say about all the recent bearish talk? Actually, there is a great deal to say, not least about all those touting the sp'1700s recently. Where are all those who were recently posting 1929 crash charts?

Oh thats right, they have again crawled back into their little cesspool holes, where they will likely remain until the FOMC of next Wednesday. Then they'll appear once more, touting the end of the world, and an 'imminent crash'.

Idiots..every gods damn one of them.  I guess that would make Daneric the doorman for the cesspool, yes? Most seem to have lost all perspective lately. I'm way beyond tired of it, and we're only 3 weeks into the year

 Notable strength: STX, TSLA

STX, daily

The mid 30s..from almost a year ago, now look a very long way down. The big $100 looks an easy target by mid 2015.

Pre-Market Brief

Good morning. Futures are moderately higher, sp +8pts, we're set to open around 1846. Precious metals are notably weak, Gold -$17, Silver -2.6%. Underlying hourly index cycles offer easy upside this week, with the bigger weekly charts offering the 1880s.



Well, the long weekend is over, and here we go again.

Naturally, market is pushing higher to start the shortened week. The only thing the bears do have in their favour today is that there isn't any sig' QE-pomo....that doesn't come until tomorrow morning.

The hourly chart is offering 1870 as a minimum near term target, and certainly, the weekly/monthly charts both allow that.

Notable early movers:

STX, +1.3% in the $62s (upgraded by MS).
HAL: +1.9%..on good earnings
DRYS + 1.0%...battling to re-take the $4s.

9.06am.. sp +10pts in pre-market. New highs in the 1850s look very likely by 11am.

With QE tomorrow, a daily..and weekly close in the 1860s looks a pretty easy target to achieve.

When will the VIX break higher?

Since the equity low of sp'1074 in Oct'2011, the VIX has seen a very steep decline from a spike high of 48 to the 11s. The US market remains at a very high level of complacency. Yet, as 2004-07 showed, the VIX can indeed remain at such low levels for a fair few years.

VIX, monthly'1, 9yr

VIX, monthly'3

SPY/VIX ratio, weekly, 10yr


Chart monthly'3, is not something I've posted before. I should note first, its just one of a number of scenarios. This particular outlook is based on the notion that we will see broad equity gains into late 2015/early 2016.

However, even though the broader trend in equities could well be higher for another few years, that sure doesn't mean the VIX won't at least briefly spike into the 20s..or beyond. 

Just consider the following

VIX spike highs...

2008: 89
2009: 57
2010: 48
2011: 48
2012: 27
2013: 21
2014:  ?

Frankly, even I find it incredulous to imagine the VIX not breaking >20 this summer/autumn. Consider the duration of the rally from Oct'2011,  we are now at month 28, I have to believe we'll see some increasing market volatility this year. The SPY to VIX ratio is at pretty crazy high levels, and we're more than due for some significant degree of equity drop.

As ever..the only issue is how high?

A fair few chartists/commentators out there are seemingly agreed - if from very different perspectives, for some sort of equity intermediate top this summer/autumn, with a decline of something in the region of 20%. I'm certainly still on board with that outlook.

So, I certainly would see VIX in the 20s this year, but really, things only get real interesting if we see a break >30. The 40s will be a tough struggle, even if the market has fallen to the low sp'1600s. After all, who won't be buying the market then?

The summer/autumn correction

For the equity bears out there, one thing to keep in mind this summer...and early autumn. If we do see a significant drop in equities...and a spike in the VIX, is that it sure won't last long. The subsequent rebound in the market (if Yellen goes nuclear with the PRINT key), will likely re-crush the VIX back <20, where it might remain for another 12-18 months.

As I have noted a fair few times, in many ways, 2014 could prove to be a really messy year for most traders. The bulls might get rattled for the first time in over two years, with the equity doomer bears making huge short-side gains, only to get nailed on a subsequent renewed equity hyper-ramp.

Back at the Tuesday open :)

Goodnight from London

Video from Gordon T Long

Interesting discussion, for those with an interest in the bigger issues.