Tuesday 20 May 2014

Volatility moderately higher

With equities showing some distinct weakness across the day, the VIX managed to hold moderate gains into the close, settling +4.3% @ 12.96 (intraday high 13.30). What is clear though, VIX is still lacking any 'significant' upside power/kick.




*it is probably important to note that VIX opex is at the Wednesday open.

So..equities broke lower today, with the dow -160pts at one point, yet..the VIX never really showed any significant upside kick. This is the SAME price action in equities and the VIX that we've been seeing for weeks..if not so far this year.

Overall, I have to hold to renewed equity upside (unless sp'1850s, with R2K <1080), with the VIX remaining low into mid June.

For the moment, I'm still content to wait, although I will most certainly be seeking to pick up a large VIX call block in June...with first upside target of 19/21. 

more later..on the indexes

Closing Brief

US indexes closed with somewhat significant declines, sp -12pts @ 1872. The two leaders - Trans/R2K, settled lower by -0.9% and -1.5% respectively. Near term outlook remains 'on the edge', with equity bulls needing to hold the sp'1860s, with R2K 1080s.



Something of a recovery rally into the close, but still..it was a day for the bears.

From a pure cyclical perspective, we were due a down wave today..but I sure didn't expect it quite this strong, with even the Dow -160pts or so at the low.

As it is..cyclically..we're now due an up wave..and in theory..it could last across tomorrow and much of Thursday.

I should note, I am thankful to hear from some of you today, it is nice to know someone is out there reading my semi-coherent ramblings.

*I hold long overnight..line in the sand is around R2K 1080.

more later..on the VIX

3pm update - just another tease?

Mr Market has seen some borderline significant weakness today, with the sp' slipping to 1868, but is that it? Price action remains weak, but the broader upward trends are largely intact. So far..even the battered R2K is holding above last Thursdays low.


R2K, daily


*I remain long, but yes..it is getting pretty close to the edge now.

It is notable that the bears have been in control of the R2K..and Nasdaq for around TEN weeks. Sure, it has been choppy on the way down...but still..we've not seen that kind of decline since summer 2012.

As it is. from a pure technical perspective..the cycle is low...and we're STILL due another up wave.

So..for now..unless R2K <1080...along with sp'1850s...I hold to the original outlook.

3.11pm.. VIX cooling down.. hourly MACD cycle...rolling over....

If today was just a tease...then we have a floor of sp'1868, with VIX 13.30.

3.14pm.. interesting chat with Santelli on CNBC....talk of recession...hmm

Hourly equity cycles offer upside across Wed/Thursday....'potential'....as ever..but from a pure cyclical perspective...bears should be bailing into the close.

3.28pm... market creeping back upward....still net declines..but the early signs are there for tomorrow.

3.39pm.. clear turns on ALL indexes...

Could be a bear bloodbath tomorrow...and that is speaking purely from a 'cyclical' perspective.

..and yes...I am fully biased..with the R2K at 1100....seeking the 1140s, and that is 3.7% higher...

3.45pm... clown finance TV mystified as to why the market is rallying.

I guess they never heard of cycles.  Oh well...bears had a good day, but that looks to be it.

2pm update - 1860s or bust

Equity bulls are so far unable to turn this around, and Mr Market is in danger of breaking key support in the sp'1860s. Any daily close in the 1850s will cause real problems for the market into end month.



*most notable...the weekly candle has turned blue..and even if we hold the 1860s this Friday, it would still make for a provisional warning of trouble for next week.

Regardless of whether you are long, short..or on the sidelines, the 1860s are clearly important.

Yellen..and the FOMC minutes are due tomorrow...and if Mr Market doesn't much like either of those, then...it will likely be bye bye 1860s.

As it is...my best guess is that it WILL hold..but then..I'm currently underwater on the long side, so..what do I know?
Even AAPL is red..-0.5%..the humanity!

Dow, daily

Clear break of rising trend.. with the 200 day a further 450pts or so lower.

2.10pm.. Early sign of an afternoon turn...sp'1868/70 zone...but then..there was a similar sign in the morning..and that failed.

I'm still guessing it will HOLD together..despite today's weakness.

A fair few yesterday were indeed seeking the 1870/65 zone today..so..congrats to those day-trading shorts...   I wonder how many are cashing out right now.

2.26pm.. hourly MACD cycle looks about done...so...that is probably it.

I remain split on today...we have a few breaks..dow 50 day...with break of trend. The R2K looks a real mess...but the bigger trends are STILL holding.

If Mr Market is just trying to confuse the max number of traders..it is doing a fine job today!

1pm update - another wave lower

Equity bears have achieved another minor push lower..to the low sp'1870s. What is clear, any break into the 1850s would break a great many aspects of support, but that still seems...unlikely.



*it is notable that despite the equity weakness, the VIX is only +2%..and remains in the 12s.

As ever..how we close is far more important than much of what comes before.

I can't yet take the declines seriously, unless we see a weekly close in the 1850s..and we've still a long week ahead.

1.40pm.. 50 day MA on the dow taken out.....and we're a mere 5pts from breaking the weekly 10MA of sp'1865.

However, this remains the same price action we've seen for weeks..if not months.

Until the primary upward trends are broken..i'm holding to original outlook.

12pm update -marginal declines

Most US indexes are already pretty close to achieving a full reversal of the early morning weakness. A daily close in the sp'1890s is still viable. Metals are holding minor gains, with Gold +$1.



Little to add. There remains plenty of time today for the broader market to turn positive.

VIX update from Mr T

time to cook

12.10pm.  Dow/SP break new lows...hmm.  I suppose some might call it a sub'c or 3... , but still...it is a problem. R2K remains under real pressure..not far from the Thursday spike lows.

11am update - morning washout

US indexes are moderately lower, with the sp' battling to retake the 1880 threshold. A daily close in the 1890s remains a valid target, with a VIX that continues to reflect an effectively fearless market. Metals are fractionally higher, after opening weakness.



There is little to add.

It is merely a case of whether the underlying upward pressure continues. Today's sig' QE-pomo of $2-3bn will no doubt help to a large extent.

The R2K was particularly knocked lower in the opening hour,..-1.5%, but is similarly attempting to rebound..a daily close >1110 is...sought. Clearly though..the 1120s are no longer viable until tomorrow..at the earliest.

10am update - opening a can of QE fuel

US indexes open moderately lower, with the sp' losing the 1880s. There is notable weakness in the retail sector, which is no doubt confusing those who believed in the 'blame the weather' theory for Q1 weakness. VIX is holding minor gains of 3%...still in the 12s.


Dow, daily


*Equity bulls need to hold the Dow 16400s..where the 50 day MA lurks

Well, lets see if we can level out by 11am...at which time the QE fuel - of $2-3bn, should be enough to kick everything back positive.

A daily close, around sp'1895 remains a very valid target.

Notable weakness...URBN, -5%...seemingly headed for $30.

10.03am... smaller 15/60min cycles offering first sign of a turn.... ahead of the QE fuel.

No doubt, there will be a whole lot of whining and bitching on Zerohedge if we close significantly higher by the close, but then..those maniacs haven't learnt a damn thing since 2009.

Pre-Market Brief

Good morning. Equity futures are flat, we're set to open around sp'1885. Metals are similarly flat, but with the potential for downside across the day. Equity bulls have another can of QE fuel today to help push the market higher, next upside target is the sp'1895/98 zone.



Well, considering the QE, I'd be surprised if we don't see price action similar to yesterday.

Perhaps most important. If the R2K and Nasdaq can push just another 1% higher, they'll be on the border of breaking out of the key downward trend, and that would trigger all manner of buy signals.

First major support for the bulls is the weekly 10MA, which is in the mid 1860s. Unless that is taken out, along with the 1850 cycle low, there is zero reason to be short.

9.24am.. market set to open sp -2pts or so....

Just like yesterday..look for an opening reversal...with a black candle on the VIX hourly cycle.

Considering the QE fuel...bears face the usual problem across today.

9.40am... so..the retail stocks are getting whacked now...I guess it makes a change from the momo/bio stocks.

QE money will be kicking in after 10am... bears....beware!

H&S for the R2K this summer?

Whilst the broader market is still broadly pushing higher, the somewhat battered R2K index is offering what might be a very important multi-month H/S formation. Primary downside this summer would be the big 1000 threshold, but if Mr Market is spooked..then the 900s are 'briefly' viable.

R2K, weekly'3

R2K, weekly'4, rainbow


*forgive me if I am somewhat focused on the R2K at the moment, it is after all, the index that I am currently trading...on the long side.

Nasdaq Comp' has somewhat the same formation, although slightly stronger.

So...what about a H/S formation? Certainly, it would be particularly appealing to the equity bears out there. Of course, the Dow/SP/Trans, simply don't have the same formation, with the Trans even breaking a new historic high today.

Considering the 4 spike-floor candles on the R2K daily (see earlier post), I think there is very reasonable opportunity for 1140/50 in the near term, with 1170/80 in early/mid June. I would be surprised if we see the 1200s again this side of the summer.

Video update from Gordon T Long, with guest Rubino

As ever, for those interested in the bigger picture..this is good viewing.

Looking ahead

There really isn't much lined up tomorrow.

*there is sig' QE-pomo of $2-3bn, equity bears...beware!
Goodnight from London

Daily Index Cycle update

US indexes closed moderately higher, sp +7pts @ 1885. The two leaders - Trans/R2K, settled higher by 0.8% and 1.0% respectively, with a new historic high for the Trans of 7919. Near term outlook is moderately bullish, with the sp'1910s viable later this week.





It is most notable that the Transports broke a new historic high today in the 7900s, and this certainly bodes well for the equity bulls..at least in the near term.

The R2K and Nasdaq both look set to break higher tomorrow..and it could be a pretty important break, which will open the door to a further 3-4 weeks of upside into the next FOMC of June'18.

Best case upside for the bulls is probably sp'1940/50 by mid June, but yes..that won't be 'easy'.

a little more later...