Tuesday 18 February 2014

Volatility breaks the down trend

Despite most indexes closing a little higher, the VIX managed to break the 7 day run of declines, settling +2.2% @ 13.87. Near term outlook is for higher equities, and that should equate to VIX remaining in a rather tight 15/12 zone into next month.



VIX looks set to remain under the key 20 threshold for some weeks, probably no earlier than mid April.

more later..on the indexes

Closing Brief

US equities closed somewhat mixed, sp +2pts @ 1840. The two leaders - Trans/R2K, settled -1.0% and +1.1% respectively. Near term looks broadly bullish into mid/late March, with viable upside to 1880/1920 - so long as 1850 is broken before end Feb. VIX reflects a near fearless market.



Little to add, on what was a very muted day.

Merely, slow motion algo bot melt..to the upside, helped a little by some QE-pomo fuel.

more later..on the VIX

3pm update - upside into the close

Considering the hourly index MACD cycles, there looks to be minor upside into the close. Any daily close in the mid 1840s will allow for an easy gap into new territory at the Wednesday open. Metals are holding gains, Gold +$4, but Silver up a much more significant 2.0%.



A very muted trading day. At least tomorrow will have a few things of note, esp' the FOMC minutes. I'd guess the market will merely use it as an excuse to rally into the 1855/65 zone.

For me, the only issue now is whether we just proceed 'straight up' to 1890/1910 or so..before end month. Certainly..at the current rate...it looks very probable.

All the bulls need is to break the micro double top high of 1850..and a whole truck load of short-stops will get hit..and we'll spiral higher into the coming weekend.

4/5 weeks to go....bears.......


3.31pm...market trying to break new intraday highs...naturally. VIX still in danger of closing red..for the 8th consecutive day.

2pm update - afternoon chop

US indexes remain somewhat mixed, with a borderline significant gain of 0.9% for the R2K, whilst the Trans is weakest, -1.2%. VIX continues to hold minor gains of 3% in the low 14s. Metals clawing higher, Gold +$5



Hourly MACD (blue bar histogram) cycle is already negative, and will be close to flooring in the near term. There is clear viable upside across Wed/Thursday..into new historic territory.
Considering the price action, and with a heavy QE on Thursday, it would seem it is just a matter of whether the next major up day is tomorrow..or Thursday.....rather than 'if'.

2.27pm..the chop continues. Eyes on the VIX. A red close is still possible, which would be the 8th daily decline.

UGAZ +13%, hmm

1pm update - 7 of 9

The sp'500 has climbed for 7 of the last 9 trading days, and looks set for new historic highs this week. The weekly cycles are offering the 1870s in the immediate term, the 1880/90s will be difficult until we move into March. VIX looks weak, with a viable 8th consecutive daily decline.



Little to add. Slow motion upward melt.

If we are in sub'3, then in theory, we should just go straight into the low 1900s...within 5-10 trading days, I realise that sounds like crazy talk to some of you out there.

Notable mover...

UGAZ, daily

As it is, spring is coming...I'm sure noticing the lighter evenings already. Would make for an interesting short..once the current cycle is complete.

night falls..and the fireworks..begin. LIVE UKRAINE.

12pm update - broader strength continues

Despite notable weakness in the Transports, the rest of the equity market is comfortably holding together, with slight gains. Precious metals continue to attempt to build further gains, Gold +$4. VIX is trying to break a 7 day run of declines, +3% in the low 14s.




*VIX sure doesn't look so good for the bears, does it?

A pretty quiet morning, and aside from the tranports, everything is behaving itself as expected.

A break into the sp'1860s looks very viable later this week, most especially on Thursday when we have heavy QE of $4-5bn. Friday is opex, so...that will likely just be a bit of a chop fest.

VIX update from a returning Mr T.

time for tea.

11am update - Transports warning of problems?

Whilst the broader market is seeing continued minor chop, there is some notable weakness in the Transports, -1.2%. A break <7000 would be a initial warning of broader market weakness. Precious metals are trying to build gains, Gold +$4

Trans, daily

GLD, daily


To be clear, the drop in the trans is interesting, but I can't take it seriously.

We have 2 significant QE this week, the price action is NOT at all bearish in the broader market.

stay tuned!

11.34am... same old nonsense..right?  Slow motion melt..after a brief tease to the bears at the open.

..only another 4/5 weeks to go...I'm guessing.

10am update - you already had the retracement

The market opens with some minor mixed chop, but underlying upside pressure is there for anyone to see. Sp'500 looks set to break new historic highs, whether today, tomorrow..or later this week, does it matter? Weekly charts are absolutely clear, we're still broadly pushing upward.




*note the lower bollinger on the weekly, now at 1724. Next week it'll be 1740s, we ain't breaking <1737 for some months.

All the talk of a retracement..we have already seen it...1826/1809.

This market remains fuelled by QE..and this morning will see $2-3bn of pomo fuel...bears have no excuse to note be side stepping this. The fact there is HEAVY QE of 4-5bn on Thursday...should make anyone considering the short side just walk away for the entire week.

VIX +4.8%, but still, we're only in the 14.20s. A red close today would be the 8th daily decline.


Over in the Ukraine..its getting rowdy as the sun sets. LIVE feed

10.06am.. micro down wave.. should find support around 1833/32.

No real downside pressure, QE money is going to be a problem ALL this week.  

10.30am... minor chop...and the bears lack any real downside power.

Anyone still doubt 1850s coming?

notable strength: UGAZ +12%

Pre-Market Brief

Good morning. Futures are a touch higher, sp +2pts, we're set to open at 1840. Metals are a little lower, after swinging around form initial gains, Gold -$2. With two sig' QEs in this shortened trading week, bears face the usual problems.



*awaiting Empire state, and housing data.

Considering the QE and the recent price action from the sp'1737 floor, I'm guessing we'll soon be trading in the 1850/60s..likely by the end of this week.

Upside momentum is just so strong right now.

Many are again talking about a retracement, but hey, didn't we get one..remember the 0.9% drop from 1826-1809?

Notable early movers...
TSLA +3% @ $204 - earnings are due this week, possibly later today
UGAZ +12% @ $30

Another year... or two

Regardless of any significant retracement this summer, the broader trend in US equities, looks set to remain strongly bullish. With Yellen likely to ramp the printing on almost any sign of economic weakness, US equities will probably be much higher by late 2015/early 2016.

sp'monthly6b - hyper bullish outlook


The above monthly chart links in with the weekly and daily charts that I have been highlighting since last summer.

Regardless of how you want to label the price action since the 2009 low, we are unquestionably overbought, having ramped from sp'1074 to 1850 since Oct'2011. The US equity market is more than due a sig' correction, not 10%, but something on the order of 15/20%, perhaps even a little more.

Frankly, I'll be utterly bemused if we don't at least trade down to the low 1600s this summer.

US t-bonds - another clue

The following chart sure is a kooky one. It is a mere extrapolation of the 2003/2006 MACD cycle climb, onto the 2012 low. That gives a cycle target of late 2015, which is interestingly where Armstrong's ECM cycle also maxes out.

10yr yield, monthly

Yes, all cycles are unique, but on any basis, we're well on the way to completing the current multi-year climb in rates. With the break >2.75, I'm resigned to an 'easy' upside target of 3.75/4.00. However, that might not be until next year. First, there is viable retracement to 2.25/00 - which might equate to where the equity market might be flooring this summer/early autumn. Sub 2% does not look viable, even if Yellen ramps the printing later this year.

Looking ahead

*see weekend post. Suffice to say, with sig' QE Tue/Thursday, bears face the usual problems.

Goodnight from London