Friday 21 March 2014

Volatility slightly higher

The VIX dropped into the 13s early morning, but with the market seeing an afternoon reversal, the VIX battled back, settling +3.5% @ 15.03. Near term outlook is offering upside to the 16/18 zone, whilst the 20s still look out of reach - barring any 'spooky news'.





*across the week, the VIX declined by a very significant -15.7%.

So..the VIX fell to the 13s for the second time this week, but closed marginally positive. As it is, I can't quite take the Friday equity reversal seriously, unless we see sp'<1850, along with VIX 16s.

more later...on the indexes

Closing Brief

Equities saw a somewhat significant afternoon reversal, with the sp -5pts at 1866. The two leaders - Trans/R2K, settled -0.4% and -0.5% respectively. Near term outlook is mixed, with the weekly charts back to bullish, whilst the smaller cycles are suggestive of weakness next Monday.



*I exited a small SPY put block in the closing 10 minutes (fractional loss), but remain HEAVY short the indexes, via SDS

..and another week at the world's most twisted casino comes to an end.


What to make of this week?

Bulls can tout a fractional new high in sp'500, with a notable swift claw back of half the declines from the FOMC snap lower to 1850.

Bears,  the Friday reversal is kinda interesting, but unless we see a break <1850 early next week, it counts for nothing.

I appreciate all those who did say hello this week, it makes a real difference, and I do like to be challenged, especially if I'm in a particularly bearish mood ;)

Have a good weekend everyone!
*the weekend update with be on the US weekly indexes

3pm update - weakness into the weekend

We have a clear reversal from the fractional new high of sp'1883. With the break back into the 1860s, the bulls are getting a touch spooked. VIX is making a play for the 15s, 16s look out of reach. Metals are holding moderate gains, Gold +$8.




*I really would like to see the VIX 15s, to be able to take this reversal seriously.

So..its quad-opex...expect some wild chop this closing hour, and as ever the question is....

'who wants to go long into the weekend?'....

I remain heavy short -via SDS (my core block came within 2 cents of getting hit at the open).

I may offload a secondary short block into the close, if we trade down to 1860/55, although that currently looks unlikely.

updates....into the close!

3.05pm... VIX 15s....finally!  Now. .can sp break <1860s....

Wild hour ahead.

3.13pm.. chop thing is for sure..we ain't closing in the 1880s, not that the 1860/70s are much good for those on the short side.

I guess bear hopes are now turning to how we trade next Monday.

*it remains notable, out of the 6 trading days left of March, 2 have sig' QE. Make of that..what you wish.

3.20pm.. right now, best bear case for the close is 1857....but it won't be easy!

3.30pm.. just who is buying here? We have two spike-floor candles on the hourly, and VIX has lost the 15s again...urghh

Oh well, still 30mins to go...closing at the low of day..would really help.

3.37pm.. here we go again..another push lower..... VIX 15s

3.45pm... best case remains a close of 1860/57....with VIX 15.25 or so.

3.50pm... EXITED secondary short block.. spy puts..fractional loss... I want OUT!

3.54pm... will hold SDS across the weekend, and that is now 2% above the earlier low.... so I'm still on the bear train, but i'm outta the crazy puts for the weekend.

Been one hell of a week to go start going short again..back at the close!

2pm update - quad-opex is getting interesting

Quad-opex can certainly be a reason for late Friday action, and Mr Market now looks primed for some wild moves in the last two hours of today. VIX has turned fractionally positive, with the sp' in danger of slipping all the way down to around 1860.




*I remain especially focused on the VIX. A push into the mid 15s would be a real turn around for the equity bears. However, I'd only take this afternoon seriously..if VIX takes out the FOMC spike high of 15.95.

So...we have an afternoon reversal...and hourly index/VIX cycles are primed for a major snap into the close.  Everyone should now be on full alert for some wild action!

Right now, best bear case looks to be sp'1860, with VIX 15.25/50

2.09pm.. VIX trying to push...14.50s...looks very viable...into the low 15s..before the close.

2.19pm.. the two leaders - Trans/R2K, both a touch lower...hmm

2.24pm.. welcome back to the sp'1860s..... we have a 14pt reversal...another 10pts looks viable.

2.30pm.. Eyes on the VIX...the mid 15s would bode for 1860.... if things the 16s..then we'll see the low 1850s... - much to the surprise of many, including yours truly.

2.47pm.. micro up cycle..and we're back to almost 1870....hmm

Still..the closing hour looks set for some weakness...and today does count as a reversal, although we close the week with the bigger weekly charts back to bullish.

So..its a bit mixed.

1pm update - equity bears need more considerable

It has turned into a tedious and annoying end to the week. Yes, the Trans/R2K are yet to break new highs, but they are very close, and the broader trend remains up anyway. Right now, the bears need Yellen to make an appearance, and start talking about 'considerable' things.



*minor down cycle underway, with first resistance at the hourly 10MA of 1873.

Minor toppy chop..but hey...its a new high..and we have a higher low of 1850..from Wednesday.

Equity bears have nothing to tout now, not least since the weekly cycles are going to close bullish - even if we drop to the sp'1860s by the close.

1.16pm.. market testing the hourly 10MA @ 1875.....   if only we can break through, then the mid 1860s are open by the close - not that would turn the weekly cycles back though.

VIX -2%...a green close would be...something.

1.18pm.. hourly 10MA...fails to hold.... kinda interesting..... at current rate, we'll get a bearish cross BEFORE the hour could be pretty wild...especially since its quad-opex.

Time for everyone to wake up ;)

1.23pm.. VIX trying to show some kick, -1.3%, and a green close ain't so far away now.

1.25pm.. bearish cross possible in the next hour....first downside target, lower hourly bollinger..currently 1860 or so.

1.30pm... VIX challenging the hourly 10MA...almost positive..with 2.5hrs to go.

Right case is sp'1860, with VIX 15.25/50

1.35pm.. update on the VIX....

You can see the clear break level..bears need 15s.

1.47pm..ohh the humanity...VIX green...sp' now 13pts below the earlier high.

12pm update - failed week for the bears

Even if the indexes slip back to the low sp'1870s in the latter part of today, it will still make for a lousy week for the bears. Not only have the bulls achieved a new high on the sp'500, but we've again seen a market that recovers losses far quicker than it takes to build them.



Lousy day huh? Well, except for those still buying the proverbial dip.

So much for the Wednesday hysteria, which seemed to last a mere 30 minutes or so, only to regain half the losses, and here we are..having fractionally broken a new high.

The weekly charts are now back to outright bullish...


time for lunch, which should consist of 3 servings of tranquilisers, and a bottle of red wine. yes?

12.30pm... Certainly, we seem stuck in the low 1880s (not that that is anything for the bears to be pleased about, urghh).

The last MACD down cycle was a low of 1850, and right now, even 1870/65 looks difficult for Monday.

Unless some stinky news appears over the weekend...bears look toast for next week.

Ohh, and in other 'good news' , Oil Is +1.3%.  Bullish US consumer for spring, yes?

11am update - morning chop

The indexes are mixed, sp'500 having fractionally broken a new high, but the R2K and Nasdaq both turned red. VIX has given an opening reversal candle, which is typically suggestive of a floor, but its opex, and with a new sp'500 high, the bulls are unquestionably in control.


Nasdaq, daily


A bit of a mixed mess. I guess the tech' bears are having a relatively okay morning, with declines of -0.2% or so.

The two leaders - Trans/R2K, certainly remain stuck as they have done for the past few weeks.

So...what now?

I remain primarily focused on the VIX, and that opening reversal, but VIX is back on the slide this hour...with indexes trying to push higher again.

Notable movers: BTU +2%, STX +3%,     whilst UGAZ -4.5%

11.24am.. so much for the opening VIX reversal..itself.. reversing back to the opening low.

Barring a latter day fall, with sp <1870...the weekly cycles will all close strongly.

No doubt, much of the serious short-side money got out at the open.

11.41am.. the opening VIX reversal..complete new lows.

Trans/R2K pushing upward, if those two break new highs today..then none of the serious bear money will be still in.

10am update - morning break through

After three days of trying, the equity bulls finally break the sp'1875 resistance, and with a truck load of short-stops getting hit, the market breaks a new historic high. VIX breaks back into the 13s, taking out the pre-FOMC low.  Metals are holding gains, Gold +$10




*the only thing equity bears have right now is an opening reversal candle on the VIX, but really, I don't have much faith in that with new index highs.

On balance, it'd seem the chances of these opening gains fully reversing, are less than 5%, and the door is now wide open to the sp'1900s in early April.

For those buying the FOMC Yellen drop...congrats, I guess you could say, 'normal service resumes'.

I am probably straw-clutching, but the R2K opens with a black-fail candle...

R2K, 60min

Hmm ?

10.02am.. so... an opening VIX reversal candle, and a R2K black-fail candle....

*for those wondering, my core short block (SDS) came within 2 cents of being kicked (its 2x lev, I keep a loose 2% stop loss). If I don't get kicked today, I'll be somewhat surprised.

10.11am.. VIX jumps...but I can't take any of this seriously unless 16s..and that sure is a long way up, and would be equiv' to sp'1850/45

10.27am.. Now the Trans' looks in danger of turning red.  Hmm

I'm entirely refraining from watching any clown finance TV this morning, but I can guess at what their cheer leader script is saying. 

Eyes...on the VIX.  Equity bears need a surge to the low 16s to negate this mornings train wreck.

10.32am.. Anyone know whats up with the Nasdaq, -0.6% ?

So... Trans, R2K, Tech'....somewhat weak.

Pre-Market Brief

Good morning. Futures are moderately higher, sp +5pts, we're set to open at 1877 - a mere 6pts shy of breaking a new historic high. Metals are sharply higher, Gold +$13, Silver +1.2%. Today is quad-opex, so expect some price swings, especially in the latter part of the day.



If we open >1875 - which now seems likely, then the H/S scenario gets trashed, and all those touting the sp'1900s for April can probably start celebrating.

The equity bears have two things in their favour today. First, no sig' QE, and second, the underlying issue of 'sell into the weekend'.

Yet, the break above 1875 is significant. It looks like the week is going to end with the weekly cycles flipping back to outright bullish. Urghh.

Seeking a weekly close under 1858

After almost three full trading days of a market flirting with breaking >sp'1875, the equity bears should be seeking a weekly close to confirm last weeks provisional 'warning of trouble'. A Friday close <1858 will offer some important confirmation that the broader upward trend is indeed... tired.



Barring a break >1875 (or at least >1883), I'll keep on posting the above scenario, which remains my 'best bearish scenario' for this year.

Threshold for green/blue candle is sp'1858, and that is partly why I am focusing on that number. After today's frustrating price action, I think most bears would gladly settle for a Friday close in the mid/low 1860s.

Japan sure looks bearish

The monthly chart of the Nikkei sure looks damn ugly, and we have the MACD (green bar histogram) warning of major trouble in April..and probably the summer.

First downside target remains 12k, with a secondary of 10k. Any monthly closes under 12k, and that would be a real problem. I realise some would argue 'Ohh, Asian or even the EU indexes are not important', but hey, if the Nikkei is at 12k in April/May, the Dow will at least be in the low 15000s.

Looking ahead

Friday is quad-opex, so expect some serious price chop, especially in late afternoon.

Fed official Bullard is speaking in the late morning, and as ever, the market might use any statement/comments as an excuse to move.

*next sig' QE-pomo is not until next Wednesday, so equity bears have a clear 3 day window to knock this market lower, at least to test the H/S neckline in the low sp'1840s.


Without question, the daily close of sp'1872 is way too close for comfort for those holding overnight on the short side. Any move >1875 will trigger a lot of short-stops, and then the mainstream talk would flip to 'when are the 1900s coming?'


The above H/S scenario is right on the edge, and frankly, if we don't at least close lower by 5-10pts tomorrow, It'll likely turn out to be a bust. As day at a time.

Goodnight from London

Daily Index Cycle update

US indexes closed moderately higher, sp +11pts @ 1872. The two leaders - Trans/R2K, settled -0.1% and +0.3% respectively. Near term outlook is for some 'selling into the weekend', which might equate to VIX breaking into the 17s.





Arguably, the most bearish aspect of the day was the 'old leader', Trans, which actually managed a fractionally red close, despite the mild hysteria in the headline indexes.

So..where now? Bulls have been trying for 3 days to break >1875 - which for me is the top end of a possible RS of a H/S formation.

All things considered, so long as we don't gap open >1875 tomorrow, equity bears should have opportunity to push the market lower into the Friday close. After all, who wants to be going long, with continuing geo-political rumblings?

a little more later...