Friday 31 January 2014

Volatility battles higher

Most notable action of the trading day was the double top in the VIX of 18.99. With equities seeing a typical latter day recovery, the VIX cooled down, went briefly negative, but settled higher by 6.5% @ 18.41. If sp' can break <1767 next week, VIX will see a mini explosion into the 20s.





Volatility is clearly coming back into the US markets. For the first time (it seems like years), we are seeing some pretty interesting intraday swings.

This past week, we've seen the resistance zone of 19/20s hold the VIX, but, if we can break <sp'1767 next week, market should see a mini freefall..all the way down to 1710/1690s, and that would likely equate to VIX is mid 20s.

The weekly chart clearly highlights the key resistance in the 19/20 zone. A daily close >22 would be extremely significant, not least because it would take out the 2013 high!

more later..on the indexes

Closing Brief

US equities opened sharply lower (sp -22pts), but saw a traditional latter day recovery. The sp' closed -11pts @ 1782. The two leaders - Trans/R2K, settled -0.2% and -0.7% respectively. The past 5 trading days are probably a large bear flag, suggestive of a key break <1767 next week.



*a pretty weak closing hour, with a clear rollover on the hourly MACD cycle. It bodes more to the bears..for the Monday open.

..and another week..and month comes to a close at the worlds wildest and rigged casino.

With trading pros like Oscar getting whipsawed day after day, it is no wonder how the less adept are feeling exhausted and confused. However, I can only suggest anyone go stare at any of the daily or weekly index cycles.

There looks to be further downside next week, and it could be all the way to the low 1700s.

Have a good weekend everyone!
*the weekend update - late Saturday, will probably be on the world monthly indexes

3pm update - strong resistance at 1800

Despite yet another latter day recovery, the bigger daily/weekly charts are warning of continued downside next week. For those taking the short-side into the weekend, worse case upside next Mon/Tuesday of 1810/15..whilst downside is a viable 1710/1690s.



Well, one hour to go....lets see if all of that $5bn of QE money gets used up into the close.

The new QE-pomo schedule is actually released at 3pm.

*despite higher indexes..the VIX has actually managed to hold moderately higher.

To anyone shorting into the weekend, it looks a reasonable risk/reward..with very clear short stops either at 1800..or somewhere in the 1815/25 zone.

updates into the close...

3.02pm.. hourly MACD cycle sure looks vulnerable to rolling lower here. We've seen another bounce get stuck in the low/mid 1790s...

who wants to hold long into the weekend?    

...thats right...I didn't think so.

3.07pm...we're rolling over on the hourly index cycle.  VIX is picking up..almost 5%

3.10pm...rolling...rolling....rolling.   Lets see how many of the bull rats make a run for it, ahead of the weekend!

3.16pm.. we have a spiky candle for the 2pm hour..and we're seeing the initial downside follow through. Bulls are going to struggle to get a daily close in the 1790s.

Keep in mind, last weeks weekly close was ...1790. Hmmm

3.23pm... AMZN -10.7%... do profits actually matter to the market now? 

VIX +6.7% @ 18.44.  A weekly close in the 19s (above the double top) that would be something..will need sp <1780 though.

*I was just reviewing the pomo schedule. There is nothing much on Monday, but there is sig' QE on Tue and Wednesday.. but then nothing Thur/Friday.

So..bears can rule Mon/early Tuesday, but then side step until late Wed...and short for the big jobs data? Friday'7 market massacre?

3.31pm I smell weakness out there.  VIX looks comfortable (from the equity bear perspective), whilst indexes are looking weak.

So...we're set to close net lower on the week...and the month.

3.38pm..the rats do NOT want to hold long across the weekend. Watch them jump ship into the close!
VIX is highly supportive of this view, +7.1%

3.47pm..rats.. want OUT.   A weekly close <1780 would be a bonus.

What would really be a major hint of trouble... VIX 19s

3.50pm... EYES on the VIX !!!  It'll trade AH until are still viable.

3.54pm.. we're going to conclude the week with a rollover on the hourly index bodes well for the bears at the Monday open.

..back at the close (a whole 5mins away)  :0

2pm update- hourly MACD cycle still positive

Most notable since the Tuesday open, hourly MACD cycle has remainder positive. Yet, after almost four full trading days, the bulls are unable to re-take the big sp'1800 level. Considering the daily/weekly cycles, a further wave lower - at least to test 1767, looks a given.



*I realise some have little concern for particular statistical indicators, but can see on the above chart - MACD cycle (blue bar histogram) has remained positive since the Tuesday open. Even this morning, we did not go negative cycle.

..and the VIX failing to break 19..was my concern, for anyone not tightening stops at the open.

Anyway.. we have yet another re-short opportunity now available.

Risk/reward is perhaps 1.5% upside, vs a possible 7% downside next week.

Obviously the immediate trend is UP..but the 1810/15 zone is looking overly tough to hit.

Next week should offer a real chance at breaking 1765..and if that is achieved..we're looking at major downside to the 200 day MA/lower weekly bollinger.

Gold bugs ending the week on a downer. After opening gains of $10...metals are now rolling over.

The summer 2013 lows will surely be taken out..its just a matter of when.

2.25pm... hourly index/VIX cycles are possibly starting to turn. Nothing decisive yet..but for those wanting to short the market..the window is opening again.

Right now..short-stops would be at the big 1800 threshold. Worse case..1810/15 next week, but today's price action (opening drop..not the QE fuelled recovery) is suggestive we'll break lower again next Mon/Tuesday.

1pm update - battle continues

The bulls have managed another notable bounce from sp'1770, but the bigger daily charts still look ugly, with very clear bear flags. VIX turned briefly negative. Risk of further upside to the low 1800s, but with significant downside still viable...including a key break of 1767 - the taper'1 low.




The daily bear flags are suggestive..'no higher than sp'1800' in the near term.

Weekly charts are still bearish, with the lower bollinger rising to 1795 next week.

Risk/reward for those re-shorting into the rather good.

Notable weakness: AMZN -9.6%, UGAZ -5.6%

1.30pm.. VIX trying to creep higher, with sp'1784. The hourly 10MA is holding as resistance on the indexes @ sp'1789.

Hourly MACD cycle still moderately bullish, but vulnerable to rolling negative into the close.

Metals weak..after opening gains, Gold -$3, with the miners weak, GDX -1.1%

12pm update - bear flags on the two leaders

Whilst battle continues, the daily cycles are still warning of trouble. The two leaders - Trans/R2K, both have very clear bear flags, and they are still suggestive of a further attempt to break <sp'1765 next week. VIX has failed to clear the 19s, and is now set to turn red.

Trans, daily

R2K, daily


*VIX, we have a clear double top at 18.99, but underlying momentum remains strongly to the upside.

So...right now, its a very conflicted market, but..bears still have the edge - on a multi-week basis. Obviously today won't be the big break some were hoping for this morning.

VIX update from Mr T

time for lunch :)

12.12pm ...and there goes the   The failure at 18.99 was indeed a real problem this morning.

However...bigger daily charts are still holding bear flags. Ideally, anyone who exited short this morning, will have a good re-short opportunity later today/early Monday. 

Despite equity recovery...AMZN failing to recover...-9.2%. 

11am update - VIX is not breaking out

The market is still sitting pretty close to the edge of a major snap lower. However, most notable this morning, equity bears are still unable to break into the VIX 19s. Critical downside support is around 1767/65 - where the 100 day MA is lurking.




*we have a very clear double top in the VIX- a perfect one of 18.99.

Unless we break >19, bears should be making an exit this morning, since there is obvious major threat of upside.

In the bears favour...

Bear flags on the daily charts
Weekly trend is currently...down.
Monthly charts offering an initial rollover (but VERY early stage)

Long day ahead....keep those eyes on the VIX

11.06am.. bears are losing it..window is likely closing at the typical 11am turn time.

VIX 17s imminent..with sp'1782...

I will note though, the weekly close still looks to be bearish, but the longer the bears take to test 1760s, the harder it gets to break it.

11.10am bears failed....VIX 17s..and market looks set to make another play for the low 1800s. Anyone short should have been short-stopped in the last hour.

$5bn of QE money out there today...and 'end month' issues.

11.30am.. battle continues. VIX 17s does not bode well for the bears..and with sp'1785..its not looking good for anyone still holding on the short side.

Daily charts still look good though..bear flags all over the place.

AMZN -9%....first time in a long while that opening post earnings declines not been reversed.

10am update - critical morning

The US indexes are sharply lower, and all those bear flags on the daily cycles..are close to being confirmed. A break under sp'1765 will open a fast and nasty drop to the 200 day the low 1700s. Metals are bouncing, Gold +$10. VIX has got stuck at the Monday spike high of 18.99




Opening black candle on the VIX, double top on the daily?

VIX has so far failed to break the Monday high of 18.99. Until that is achieved..equity bears need to be highly cautious...and tighten those trading stops!

So..we're lower, and typically, we'll see a secondary minor wave into 11am.

If market has not broken <1765 by late morning....the bears should be looking to make a run for it.

VERY busy day ahead...and with $5bn of QE... the market is to be treated...carefully.

10.05am..such a marginal situation. Problem remains..VIX not in the 19s...bears face major threat until that threshold is broken.

..and as is always the case..bears are battling against the clock.  QE money will be kicking in soon.

10.17am.. tick tock...tick tock....bears running out of time.   VIX still not >19.

Notable mover: CMG +14%..on very good earnings. Net margins of 10% or..which puts AMZN <1% to absolute shame!

10.29am..This is prime time for the break <1770..with VIX 19s... arguably, window of opportunity closes in the next 30/60mins.

10.36am..renewed VIX gains...almost there.........

10.43am Bears just still unable to break 19s.. anyone still short...surely should be tightening stops further here. $5bn of QE money out there today....bears got to keep that in mind.

Notable weakness: AMZN -8.2%.. so far..unable to see the usual post earnings recovery bounce.

Pre-Market Brief

Good morning. Futures are sharply lower, sp -24pts, we're set to open at 1770 - at the recent low. It would seem highly probable that we'll break the key zone of 1767/65 this morning, which has huge implications for the months ahead.



If we break < will be decisive enough to....

1. open a fast and nasty mini crash wave straight to the 200 day MA (1705), and lower weekly bol (1680s)

2. If the lower weekly bol' is hit..I'll call 1850 as an intermediate top for the giant wave from Oct'2011.

3. The subsequent bounce - from the low 1700s is likely a larger sub'1..with a bounce into March/April, and a significant collapse wave in April.

Major day ahead

Ohh, and yes...the 'bounce' surely already over - at the 0.38% fib (see hourly chart). Those hoping to re-short in the 1810/15 zone can likely kiss that idea goodbye. Instead, it is an issue of 'chase it lower, if break <1765).

Today is probably the most important day for the bears in over two years. Equity bears should seek a daily close in the 1750s..which will open up a Monday drop of a further significant amount.

Have a good day everyone!

Notable early movers: AMZN -8%, GOOG +4%...both justifiable earnings reactions

Video update from Oscar

..indeed, he recognises he is indeed the worse analyst this week on the planet. lol

9.00am sp' holding 1770.

Eyes to the VIX...bears need to see a new high in the 19s..if yes..then door is open to much higher levels.

Let me be clear..if we do break <1765 this morning, the door is open to a real nasty drop. Hourly MACD cycle offers 10-15 trading hours of downside..and frankly...that could be all the way to 1700.

*huge QE of $5bn today, but if < won't matter. Nothing will.

9.22am... market set to open , sp -21pts @ 1773.

As noted..look to the VIX, bears need to see 19s to have confidence of a possible break <1765.

9.36am.. VIX fails to break 19s....and sp' still holding 1770s...  Bears have until the typical turn time of 11am.  As ever, anyone currently short..should be tightening short-stops here, in case this nonsense does not break.

9.43am... market on the edge....bears got to break lower soon..or this could all reverse. Still no VIX 19s......but real close...18.98 !

End month QE fuelled bounce

Equity bulls look set to end the month with further gains. With $5bn of QE fuel, there remains high likelihood of the bounce reaching the sp'1810/15 zone - where there is multiple resistance. Regardless of the bounce, January is set to close lower by around -2%.



A simple reminder of the broader up trend, you can clearly see first key support is the rising 10MA..which is around 1705. If sp'1850 was an intermediate top, then we'll slip into the lower 1700s within the next few weeks.

Bullish upside?

For those who think 'this rally ain't dead yet'... here is one scenario that I am still keeping in mind...

sp'daily3b - fib levels

If we can clear the 50 day MA in the 1810s, and put in a daily close in the 1820s, bears should clearly have been short-stopped. There would then be viable March/April upside into the 1880/1920 zone.

Considering the style of price action from last Friday though, I'm highly inclined against the above scenario.

Looking ahead

We have an interesting little array of econ data tomorrow, with personal income/outlays, consumer sentiment, and most important..the Chicago PMI. Market is expecting 59, and anything in the low 60s would no doubt give the market an excuse to rally into the 1810s.

*there is very heavy QE-pomo of around $5bn...bears beware!

It has been a busy week so far..and I'll leave it at that.

Goodnight from London

Daily Index Cycle update

US indexes saw their first significant gains in over two weeks, sp +19pts @ 1794. The two leaders - Trans/R2K, both settled higher by around 1.5%. There is near term bounce upside to 1810/15, where there are multiple aspects of resistance.





We have what are pretty clear bear flags developing on the daily index charts.

Baring a continued surge into the sp'1820s, the market looks set for another wave lower. The big question is whether we'll be able to put in any daily closes <1765. If that is achieved, the door is open to a fast move down to the 200 day MA, which will be around 1707/10 next week.

a little more later...