Thursday 20 February 2014

Volatility resumes melting lower

With equities rebounding from an early low of sp'1824, the VIX slipped back into melt down mode, falling across the day, closing -4.6% @ 14.79. Near term outlook is for the VIX to remain in the tight 15/12 zone. VIX 20s look unlikely until at least late March/early April.




Little to add. VIX looks set for a few more weeks of general melt lower.

Whether we floor in the 12s..or even 11s..we'll just have to see when we are in mid/late March.

I've no doubt that we'll see VIX 20s, which right now seems possible in April. The really exciting unknown is whether VIX 30s or even 40s are viable this summer.

more later, on the indexes

Closing Brief

After a touch of early morning weakness, US equities floored at sp'1824, and battled back into the 1840s, sp' settling +11pts @ 1839. The two leaders - Trans/R2K, closed higher by 1.6% and 1.1% respectively. New highs look viable in the days ahead.



For those bears who were getting overly excited at the Wednesday closing hour, today was indeed another disappointment.

Equity bears failed to see a second down day, and frankly...I sure am not surprised. The setup was always lousy, and despite breaking (briefly) 1826...we saw a classic reversal candle in the 10am hour.

I'm holding to the general outlook of broader upside into the next FOMC of March'19. From there...things should get real 'entertaining'.

We're almost there bears!
more later..on the VIX


For those watching..some rather crazy action in GRPN. Earnings were better than expected, with the stock soaring..but has seen a very sharp reversal, from +11% to -7% or so.

Those crazy hysteria tech stocks....urghhh.

3pm update - underlying upside pressure

Yesterday saw a somewhat weak closing hour, yet today, with the morning reversal, we're likely to see underlying upward pressure into the close as equity bears continue to bail. Metals are holding moderate gains, Gold +$7. VIX is merely melting lower -5.3% in the 14.60s.



*ignoring the smaller cycles...and eyes on the bigger prize. A key inter'3 top...around the time of the next FOMC. Viable upside to 1880/1920...although that might even be a slight under-estimate.

Anyway, we'll see where we are..when Yellen next appears.

Considering the Wednesday weakness, equity bulls should be content with ANY close above the hourly 10MA of 1835.

3.07pm.. Gold starting to another wave....Gold +$11, the $1400s look viable, but I'm certainly not one of the 'Gold $2000 by end 2014' people.

3.33pm.. Gold +$13....which is really helping the miners, GDX +3.6%

3.52pm.... market on the edge of a key break....a gap straight into the 1850s is viable tomorrow...but more likely...Monday.

Regardless..bears didn't manage two consecutive down days.   back at the close.

2pm update - holding the gains

US equities are holding gains, with the sp'500 set to fully negate the Wednesday decline. The two leaders - Trans/R2K, are higher by 1.4% and 0.8% respectively. VIX is melting lower, -4.8% in the 14.70s. Metals are slowly building gains, Gold +$8


R2K, daily


With the trans holding above the big 7000, ..and pulling back upward..the market looks set for new highs.

Aside from that, there isn't much else to note this hour.

Strength: UAL +5.2%....and set for much higher levels.

2.16pm.. kinda quiet out there today in chart land (or maybe its just me).

I'm just staring at the daily/weekly charts...all point to a key inter'3 top...just 4 weeks away.

Been a long wait...8 months...1 to go...more on that later though.

1pm update - back to the 1840s

The morning low of sp'1824 now looks a fair way lower, and a test of the 50 day MA of 1813..appears off the table. The market remains strong, and the door is wide open to new historic highs into end month. If this is sub' micro'3, then we're set for the 1890/1910 zone.


Summary we are...and all those touting much lower levels in the immediate term will probably be on radio silent for the rest of the week..if not the month.

Whilst the news from the Ukraine is bleak..and outright horrible, the US..and most world markets simply don't care. For now...thoughts are turning to the 'green shoots of spring'.

*something the bears should keep in mind..there are 3 sig' QE-pomo next week.

Notable strength..

UAL, daily

A clear bullish pennant...a up wave well underway. Bodes well for the Transports.

12pm update - holding moderate gains

Equities are comfortably holding moderate gains after a brtief break lower. A daily close in the sp'1840s would be very decisive for next week, and suggest the 1900s - still unthinkable to some, are viable within the the near term. Metals holding gains, Gold +$5



I realise some will be looking for much lower levels in the days ahead, but price action is not bearish. At best, despite some lousy econ-data, the market looks pretty strong.

The daily chart count is my best guess, and links with the bigger weekly outlook...


Best guess...we see a key inter'3 the next FOMC, when taper'3 will probably be announced. From there, market gets trashed for a few months.

VIX update from Mr T (due)

*oh well, I guess the guys at optionmonster are not posting today.

time for tea!

Notable mover: UAL +4%..more on that this afternoon. 

12.23pm.. The two leaders - Trans/R2K, both look okay on the daily charts. Sp' daily chart now looking very strong.

Holding to all original targets..that stretch back to last summer. 

...just a few more weeks...

11am update - morning reversal

Weak phil' fed data was momentarily enough to break the market <sp'1826...but we have since seen a very clear reversal candle on the smaller index cycles. With heavy QE today, bears look to be in serious trouble of facing equity upside into the Friday close. VIX confirms a generally fearless market.



As I noted last night, the setup was never very good for the bears. Despite the closing hour weakness, the smaller cycles already looked floored.

This mornings reversal candle..and that IS what it probably is, is the strongest hourly candle we've seen since the sp'1737 low.

There can be no excuse for those bears not exiting in the mid 1820s this morning. None!

Notable movers...

TSLA, holding 7% gains..after earnings.
FB -2.5%, after spending 16bn on a web app..when it could have bought any number of multi-billion 'real companies' for a fraction.

Q. Have you noticed the 'THEY KNOW NOTHING!' advert for Cramer on clown finance TV ?

What I'd like to see CNBC play is the clip where Cramer recommends people take out funds from the US market for five years...that was back in late 2008/early 2009.. Its on youtube somewhere..maybe I'll go find it....

found it !


11.36am...minor chop..but market is holding moderate gains. A daily close in the 1840s would be pretty decisive, and setup next week.

*thanks to a poster who pointed out today was NOT 4-5bn QE, that was Tuesday. Today was still significant though, at $2-3bn.

Next week has 3 sig' QE-pomos..bears..beware!

10am update - opening minor chop

US indexes open a touch higher after overnight futures were sp -8pts. First key level remains sp'1826, then the 50 day MA of 1813. However, with heavy QE today, bears face real problems, not least with the hourly index cycles already arguably floored.




*awaiting phil' fed survey and leading indicators at 10am

Yesterdays daily candle sure was pretty bearish, but down day doesn't negate a trend where we ramped 110pts across 10 trading days.

Bears really should be afraid of the QE today, it is very significant at $4-5bn, and will probably be more than enough to at least hold this market above the big 50 day MA.

Interesting day ahead....

Just looking at the 5min index looks extremely vulnerable to breaking higher from here.

10.01am..lousy phil' fed.... market fails to hold 1826, but still, from a cycle perspective...this doesn't look good for equity bears...

10.02am..woah...reversal candle...its a strong one...bears in trouble now!

10.12am.. Well, the 5/15/60min cycles ALL look floored. Anyone still short..getting the opportunity to bail in the mid 1820s.

VIX turns red....

10.17am... sp'1831...and the mid 1820s are slipping away.  A break into the 1840s..and the bears can understandably feel...dismayed.

Hourly cycle offers upside for rest of the week.

10.33am.. we're 8pts off the low already...not looking good for the bears, is it?

Weekly charts..are what I remain focused on though..more on that later...

Powerful hourly candle..strongest we've seen in over 2 weeks, since the turn from the sp'1730s.

Pre-Market Brief

Good morning. Futures are moderately lower, sp -2pts, we're set to open at 1826. Metals have swung higher, Gold +$6, with Silver +1.2%. Equity bears should be gunning for a test of the 50 day MA this morning, but that will be difficult.



So..we've broken lower overnight, but it is nothing significant.

With the small high of sp'1826 being broken, next target is obvious..the 50 day MA, currently 1813.

There is VERY heavy QE this morning of $4-5bn...bears face a massive wall to break through.

Notable mover: TSLA +12% @ $217 on 'disneyland earnings'.

Update from Mr C.

It is always a little bizarre when Mr Permabull is more bearish than yours truly.

9.00am markets flip higher.. with better than expected PMI of 56.   sp +3pts,...1831.

*especially amusing to see FB -2%...on news of spending 16bn for an app.  

9.33am... well, we're a mere 1% from breaking a new historic high.

With heavy QE this morning..bears face too tough a task.

All thats left now..10am...leading indicators and phil' fed survey.

Just a few more weeks

The daily/weekly charts are still offering another few weeks of upside, before this giant (if not monstrous) wave from Oct'2011 is complete. There are deeply serious geo-political rumblings in both the Ukraine and between China/Japan. The coming summer could be somewhat scary.

sp'weekly4 - broader bullish outlook

sp'daily3b - fib levels


So..equities closed lower. Equity bulls can claim new highs in the current rally, but then the equity bears can equally tout a rather bearish daily candle - a 'bearish engulfing' one, with a spike top no less!

Overall, the weekly charts are still outright bullish, and so I will hold to the original outlook of a key high around the time of the next FOMC (March'19).

**Bonus chart

Trans, weekly

In conversation with a poster just earlier, the issue of the transports. Clearly, the 7000 level is key, and if lost, would also be a rather decisive break of the larger up trend. So..bulls have 2% of buffer zone on the Trans, and had better hold that tomorrow.

Looking ahead

There is a wide array of data tomorrow, jobs, PMI, CPI, Phil' Fed, and leading indicators. There is also the Oil and Nat' gas reports. Certainly, some of that will help to give the market a kick one way or another.

*there is VERY heavy QE, $4-5bn, bears...beware, even if we open somewhat lower!

The Ukraine and other 'minor issues'.

The live TV coverage in the Ukraine has been rather disturbing to see, but even more so..there is increasing chatter about a summer conflict (however brief) between China and Japan. Of course, such chatter has been ongoing for some considerable time, but this does feel like the rumblings will turn into a major 'conflict' quake.

It has been my assertion for many months that the next major correction (call it a wave 4, D, or whatever), would be a result of geo-political issues, rather than underlying economic problems (not that there aren't a truck load of those). Considering the past few days of trouble in the Ukraine... I hold to that outlook.

As for the near term in market land, it sure will be interesting to see how the market deals with taper'3 at the March'19 FOMC. Again, it remains ironic that the Fed should be afraid to not taper, for fear of looking weak. Oh well, at least the months ahead won't be boring!

Goodnight from London

update 11pm EST.

Futures are sp -7pts, which would make for an open at 1821 - breaking initial soft support zone 1830/26. Next level would be the 50 day MA @ 1813.

So...Thursday morning..if we are -16pts or more..then bears have a chance to wreak some havoc. As it is, with the QE..and from an hourly MACD cycle that is already low, I still think the setup is lousy from the bearish perspective.

Daily Index Cycle update

US indexes saw mixed chop across the day, with the sp -12pts @ 1828. The two leaders - Trans/R2K, settled -1.3% and -1.1% respectively. Near term outlook is for renewed upside, breaking the Jan' high of 1850, with an initial target of 1865/75 by end month.





The most notable move of the past two days has been the weakness in the old leader - Transports. Today, we saw that backed up by general weakness in the wider market.

However, equity bears need to take out the recent sub' wave top of sp'1826, before any hopes of significant downside can be considered viable.

Equity bulls must see Trans 7000 hold...or it will be a 'problem'.

Closing update from Mr TopStep

a little more later...