Tuesday 4 February 2014

Volatility cools down for a day

After the Monday surge into the 21s, the VIX is in a brief cooling phase, settling -10.9% @ 19.11. If sp'1710/1690 in the near term is hit, then VIX looks set to briefly soar in the 25/27 zone - perhaps testing the high from June 2012 - when sp' was a mere 1266!




*the VIX jumped in the brief 15mins of AH, back into the low 19s.

So..a significant drop in the VIX, but overall, it is holding up relatively well. Equity bears seeking much lower levels should be able to take away some confidence from the VIX.

We have a VIX that is holding the high teens, which is something we've not seen since summer 2012

If sp'1710/1690 in the days ahead, then VIX should be at least 22/23..if not 25/27. From there..we should see a significant multi-week equity bounce..with a corresponding major collapse in the VIX..back to the mid teens.

Something to ponder over...if 1850 is a key inter'3 top, then how high will the VIX spike across the next few months? I'd have to target at least the low 30s...but things would really get wild if we can briefly trade into the 40s - a level not seen since Oct' 2011.

More later..on the indexes

Closing Brief

US equities saw a minor bounce, sp +13pts @ 1755. The two leaders - Trans/R2K, settled higher by 1.2% and 0.8% respectively. Near term price action remains weak, with a primary downside target zone of 1710/1690..within days.



*we have a clear bear flag on the hourly index charts. Bulls have a real problem tomorrow

..and another day in market land comes to a close.

For the bears, today's bounce is nothing of significance, and does little to negate the Monday declines.

Perhaps most important to note, the VIX, which is holding the high teens, something it wasn't even able to do in late Dec' 2012.

Bulls should be very wary of the rest of this week.

the usual bits and pieces across the evening...

4.24pm.. The VIX clawed into the low 19s in the brief 15mins of AH trading, as equities have somewhat  weakened from the official closing level.

3pm update - rolling lower into the close?

The smaller 5/15min index cycles are offering closing hour downside. Whilst a net red daily close is unlikely, any close <sp'1750 will bode well for the bears tomorrow. Primary downside remains 1710/1690, which should equate to VIX (very briefly) in the 25/27 zone.



So...bulls have managed..not quite a 1% bounce after being ground down across Monday.

All things considered, equity bears have little to be concerned about. The only issue is tomorrow's sig QE of $3-4bn.

Worse case..a further brief push to test the old broken floor of 1770, and then a renewed push lower, although recent price action is more suggestive that we just rollover from here.

Regardless...things remain broadly on track.

This coming Friday sure will be 'fun', not least in pre-market when the jobs data are released (8.30am EST).

*I've clown finance TV on 'mute'..so I'm missing out on what deputy CNBC cheer leader Mandy Drury is saying, but I'm guessing its not anything particularly 'useful'.

3.03pm...ironically, whilst on mute..they also cut the picture.

*the European viewers have all sorts of things get censored/cut from US TV feeds, you have no idea!

Bullish media sector?

3.08pm.. market sure looks vulnerable here. Bull maniacs had ALL day to ramp this back..and they didn't even manage 1% index gains. Weak weak weak!

Eyes on the VIX, 18.60s....bears should charge for a close in the mid 19s.

3.18pm... market looks done... 5/15min both rolling over.... sp'1755....

Equity bears should be gunning for a close <1747..with VIX mid 19s!

3.28pm..the rats...want OUT.  Eyes...on the VIX... 18.79...

3.30pm..the rats....are making a run for the life rafts....watch them jump!

*there is a possibility that you could count today as a sub'2 bounce. In theory, tomorrow should be see major declines.

3.38pm..more minor chop... but hey..that sure looks like a big bear flag on the hourly index charts.

Anyone holding long overnight..at best..upside of 0.7%..but risk of a gap lower..right <1739 (ADP jobs report?). Makes for a possibly quite exciting Wednesday open.

3.45pm.. VIX hourly MACD cycle close to flooring..but nothing conclusive yet. As it is, equity bears getting opportunity to go long VIX in the mid 18s, after we were in the 21s yesterday.

UGAZ cooling down a little, now just +20%

3.55pm.. well, even if we open tomorrow at 1765, that still makes for a VERY clear bear flag on the hourly charts - see closing post..coming right up! Bulls are getting a chance to exit in the 1750s...they'll surely be whining by Friday....somewhat lower!

2pm update - VIX floored in the 18.40s

Considering the recent price action, there is high likelihood the market has already maxed out in the current bounce, with sp'1758, and VIX in the 18.40s. There is zero reason why the market won't slip to Dow 15000/14750, along with sp'1710/1690..within days.



For those closely watching...we're fast approaching the typical turn hour of the day.

...who wants to go long here?

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

A marginally red equity close..along with VIX back in the 20s..very viable.

Notable strength : UGAZ +26%....

One of the few times when holding a 3x lev' ETF doesn't result in net multi-month gains. Soaring nat' gas prices..that is bullish US consumer..yes?

2.25pm.. well, we're 5mins away from the typical turn time.

Equity bears have 95mins to close this market fractionally red, not that its 'necessary' anyway. Broader trends remain bearish, with old 1770 support...now resistance.

2.40pm... closing target... sp <1747..with VIX 19.50>

1pm update - awaiting a turn

US indexes are still holding moderate gains, with sp'1750s, and a VIX in the mid 18s. Considering the strong downside momentum on the daily/weekly index cycles, a turn can't be too far off. The 'magical' time of 2.30pm will offer equity bears the first real opportunity of renewed downside.




*ignoring the smaller hourly cycles this hour...keep in mind the daily charts.

Even if the indexes could hold the Monday low of sp'1739..it'll take another 3-4 days for the underlying downside momentum to really begin to level out. The notion of going long at these levels..whilst downside momentum is so strong....crazy!

We have an interesting afternoon ahead...it kinda feels like last Friday..which itself was a good example of how things often unravel after 2.30pm.

For once...bulls..beware!

1.20pm... VIX offering an initial turn...but nothing conclusive yet. We'll probably see things get entertaining after 2.30pm.

Regardless, anyone who exited shorts late yesterday, are getting a very reasonable re-entry on the short side.

Notable strength - UGAZ +25% ! 

12pm update - building moderate gains

The indexes are slowly building moderate gains, with the sp +0.7% in the mid 1750s. VIX is -12% or so, in the upper 18s. With another large dose of QE tomorrow, equity bulls are making a play to re-take the busted 1770 floor. Daily/weekly cycles suggest very high probability of failure.




So..we're still holding gains, but its nothing of significance. Arguably, the very best the bulls could hope for - by late tomorrow morning, is a back test of the old broken 1770 floor.

Regardless, bigger cycles remain bearish, highly supportive of a further wave lower to 1710/1690.

No doubt the monthly jobs number - this Friday, will greatly determine whether we get down to there. Market is seeking net gains of 181k, which frankly seems bizarrely high. With many getting laid off - post Christmas sales, considering Dec' was 74k, I'd not be surprised at a net decline, although we've not seen that since mid 2010.

VIX update from Mr T.

Hmm..so..the market is expecting a lower VIX, but that would imply no lower than sp'1740 in the current cycle, and I can't go with that outlook.
time for tea :)

12.23pm.. VIX trying to floor in the mid 18s. We have a pretty high chance of a turn by the usual time of 2.30pm. Equity bears should be gunning for a fractionally red close, which will set up another push to near the 200 day MA.

*..yes yes, the Dow has already broken the 200 day MA, but I try to look at the indexes as a collective, rather than cherry pick the most bearish..or even..the most bullish.

11am update - choppy minor gains

US indexes are holding minor gains of 0.25-0.5%, certainly nothing for the bulls to get excited about. The VIX has cooled down by 10%, and is holding just above the recent double top..in the low 19s. Metals are weak, Gold -$7



Regardless of the minor bounce...we'll surely resume lower again. Daily/weekly cycles are pressing down very hard....target remains 1710/1690. Closer we get to there...target will likely be slightly refined.

Update on Japan, Nikkei, monthly

*chart does not update until the US daily close.

Tuesday decline was -610pts, to 14008.

As I noted at the weekend, 14k is the first major level, with 12k after that. I suppose 12k might equate to sp'1700/1680s..which is just about possible in the current multi-week down cycle.

11.21am.. VIX holding the low 19s very well, considering the index gains. 22/23 looks an easy target..if not 25/27.  Regardless, there is a clear 40pts downside in the sp' right now.

Notable strength: UGAZ, +19%

10am update - opening failed gains

The smaller 15/60min index cycles are clearly oversold, but momentum is so strong to the downside that even a 5/10pt bounce is fading within minutes. The only hope for the bulls is QE today, but the effect of that will likely be very short lived. Metals are weak, Gold -$6




*VIX opens lower by around -6%, but it looks set for the 25/27s..when sp' is testing the 200 day MA @ 1708..and rising each day.

The bigger weekly cycles are what most should be looking at. As ever...'don't get lost in the minor noise'.

Notable mover: UGAZ +18%....so Nat' gas prices +6%.  I guess its still cold? Urghhh

9.54am... and the market jumps into the 1750s....

Another re-short opportunity..very viable..today....with a clear 40pts of downside. 

After all, who wants to go long here, seriously?--

Arguably, ideal level for a re-short...back test of the recent bear flag...1770..but that seems just a little out of range. More likely 1760/65..and then another rollover.

10.01am.. Factory Orders -1.5%...not great, although that was for the Christmas/holiday season.

VIX -10% in the low 19s....that is going to be an attractive level soon.

10.09am Best case for the bulls..a bounce to 1760/65..by 2pm..and then a late afternoon rollover. Considering the current gains..a red close still very viable.

VIX holding the low 19s.. just over the old double top

Interesting level for VIX calls...after opening index gains.

10.25am.. minor chop..mess.

Well, anyone out there is getting a chance to go long VIX in the low 19s...with sp'1745/50.

*the overnight drop in Japan..pretty significant..I'll cover that later though.

Pre-Market Brief

Good morning. Futures are a touch higher, sp +2pts, we're set to open at 1743. Metals are lower, Gold -$4. With sig' QE this morning (and tomorrow) equity bears are at risk of a minor bounce, but with major downside pressure from the weekly charts. Target downside remains sp'1710/1690.



*awaiting factory orders data at 10am. Like ISM yesterday it might be enough to give the market a nudge..one way or another.

So..what about today?

There is clearly risk of a minor bounce, but we'll likely still close net lower on the day. There really isn't any support on the sp' until the 200 day MA, and that is a clear 30pts or so lower.

Something I will be looking for in the rest of this week.. VIX >22..which would break the 2013 high of 21.91.

Video update from Mr Permabull

The one thing I will agree with Oscar on...  a flag is a flag..is a flag. Which is why I was particularly highlighting the daily charts last week.

8.23am... Market picks up a bit...sp +7pts.... whilst metals weaken... Gold -$8.

Notable early mover: UGAZ +10%..so.. Nat' Gas is around 3.3% higher.

8.58am... still creeping higher.. sp +9pts... Gold -$9/10

I'll be looking for any bounce to max out by 11am...somewhere in the low 1750s. A red close is still easily viable.

9.44am.. weak weak weak.   Long day ahead !

Major problems ahead for Mr Market

With the break <sp'1770, the down trend has resumed, and we're set to hit the target zone of 1710/1690 within the near term. A hit of the lower weekly bollinger, will give high confidence that 1850 was an intermediate'3 top, with broader downside to the mid 1500s in the months ahead.

sp'weekly7b - bearish H/S

sp'weekly9 - fib retracement


January saw the Dow lose over 800pts, today's decline of a further 326pts provides strong initial follow through to the downside.

There is high likelihood that we'll hit the 200 day MA - sp'1707, along with the lower weekly bollinger, now in the upper 1680s. Certainly, that would really give the bull maniacs a good scare, before some degree of multi-week bounce occurs in March/early April.

The busted Dow

The mighty Dow is in trouble, and we have a break of long term trend support. However, this is the only index (of six that I follow) that so far is showing this.

There is no doubt the US market has a real problem. The old resistance - which became support in November of 15500/600 is now resistance again. Next support is 15000/14750 - the old lows from last August and October. As many recognise, a bounce from there would support the notion of a large H/S formation, with a RS of around 15700.

Looking ahead

We have factory orders at 10am, and Fed official Evans is on the lose at 12.30pm.

*there is sig' QE of $2-3bn..bears should be somewhat cautious, but sell side volume should be enough to over-ride the new money. Any minor bounces...are to be seen as such, and re-shorted.

Eyes on the bigger prize

Certainly, the move from 1850 to the 1730s is an interesting one..but really, in the bigger scheme of things, its a relatively minor multi-week fall. What the equity bears should be seeking within the next two months, is a re-short on the next bounce. So long as the next bounce - which will likely take 3-6 weeks to complete, puts in a lower high (<1850)...then we have the real chance of a major 15/20% collapse wave...as early as this April.

First things first though..lets see if we can hit that lower weekly bollinger band, which was 1687 at the Monday close - and which remains rising each week by around 10/12pts.

Goodnight from London

Daily Index Cycle update

The US equity indexes saw very significant declines, sp -40pts @ 1741. The two leaders - Trans/R2K, both settled lower by -3.2%. There is near term downside to around 1710/1690 within days. The VIX confirms the underlying market tremors, closing in the mid 21s.





Clearly, a very rough day to start the month, and it bodes very badly for the bulls for the next few months. Suffice to say...near/mid term trend is strongly bearish.

Closing update from Mr TopStep


a little more later...