Wednesday 21 May 2014

VIX breaks into the 11s

With equities building gains in the early morning, the VIX snapped lower (intraday low 11.80), but settling -8.1% @ 11.91. Near term outlook is for the VIX to remain within the 14/11 zone into early June. VIX 20s look unlikely for at least another 3-4 weeks.



It remains bizarre how the VIX spike highs continue to get lower and lower.

At this rate, in 2015, the cycle highs will be in the 10s..or 9s.

Seriously though, VIX remains very low, but I don't expect it to last much beyond early June. VIX has a high probability of the 19/21 zone by late June...whether the VIX can break..AND hold the 20s..that is the real issue.

If the main market does see a multi-month down wave this summer - with sp'1625/1575 (best bear case), then I'd expect VIX to at least briefly break into the 30s.

Right now, I will be looking to pick up a VIX call block, in early June.

more later...on the indexes

Closing Brief

US equities saw an effective full reversal of the Tuesday declines, with sp +15pts @ 1888. The two leaders - Trans/R2K, settled higher by 0.6% and 0.5% respectively. Near term outlook is moderately bullish into the 3 day weekend, although the bigger outlook still offers major downside this summer.



*I realise, for those on the short side, after the Tuesday declines, today has been an utter disappointment.. you have my sympathies.

From a purely cyclical perspective, today gains were not particularly surprising. For me, the morning gains in the R2K were good, but the weakness was STILL there, and I was stopped out this morning.

So...where now?

A long 3 day weekend looms, and more likely than not, the market will churn quietly into the Friday close. There is a fair bit of data tomorrow, so Mr Market will likely find an excuse to break into the 1890s.

Bigger picture still looks okay for the bears, but it just remains a case of waiting for the bigger monthly cycles to conclusively break lower. The monthly 10MA on the sp' is around 1800, so we're almost 5% away from even testing the key rising trend.

Right now, I'm looking ahead, to the FOMC of June'18, although it is entirely possible we'll be breaking lower before then.

What about the recent GDP reading of 0.1%. What if that is revised marginally negative? I have to believe this market is highly vulnerable to a major multi month fall.

*having exited my index longs this morning, I am more than content to sit on the sidelines until next week.

more later..on the VIX

3pm update - tricksy market

US indexes are holding gains, with the sp' still battling to break above key resistance of 1887. Any break, and the door will be open to the low 1900s. Metals are somewhat weak, with Gold having swung (post FOMC minutes) from -$11 to -$3.   



So...a little post FOMC chop, and we have an interesting closing hour ahead.

Many are agreed that the market will hold up, ahead of the 3 day weekend, only to slip lower. Perhaps that is how it will work out.

Regardless, I am just not in the mood to take any new positions..either way until next week. I am simply tired! Right now, the only decent 'chase it lower' level would be a break of the weekly 10MA, which next week will be around 1868/70 - around yesterdays low.

So..I might take a short position next week..if the setup is there.

Notable strength, NFLX, +4.3%..and if the main market can keep pushing upward..$410/420 by mid June looks very easy..before the next down wave. More on that later..on my fair value page.

3.07pm... Equity bears seem absent....and VIX is back in melt lower mode.

Oh well....a long weekend is ahead...and I'm more than content to sit it out until next Tuesday. After all, there is no hurry..right?

3.14pm.. and there goes VIX..back in the 11s, with sp'1888 seemingly imminent.

3.34pm.. sp'1888.80.... yeah.. a lot of 8s..for those into numerology.

With VIX being ground into the 11s....truly bizarre.

Did everyone forget about Q1 GDP of 0.1%...and the Ukraine?

Bears....need some patience...across the long weekend.

2pm update - time for some fedspeak

US indexes are holding moderate gains, with the sp' a touch below key resistance of 1885/87. The FOMC minutes are due at 2pm, and that will give Mr Market another excuse to way or another. For those listening, there remain underlying tremors out there.



A break >1887..and a daily close in the tomorrow will be the target.

A note on the VIX

VIX remains bizarrely low. On any basis. I have to believe VIX will be comfortably trading in the mid/upper 20s this summer

So..I am most certainly wanting to pick up a VIX call block at some point. Yet...there seems little point in the immediate term...not least ahead of a 3 day weekend.

Ohh..and here is the wiki for 'fedspeak'. is a real word ;)

2.03pm.. more nonsense...and the market looks stuck under 1885...

Metals slipping, Gold -$11...

2.05pm... market clawing higher..and day-trading bears are getting kicked out...

R2K making a play to take out the morning high, hmmm

2.11pm.. hourly candle turning red.....and it is a spiky one, peaking at sp'1887.

Bulls beware!

2.14pm.. Hourly MACD cycle rolling over....if we close this hour <1882....could fall 8-10pts in the closing hour..which would make for a very bearish daily candle.

I'd almost be tempted to pick up a short position...

2.28pm.. chop chop....1884...closing hour should at least be entertaining to watch.

Lots of data tomorrow..and for the QE to worry about until next Tuesday.

1pm update - interesting afternoon ahead

The broader market is holding moderate gains, with the sp' seeing a secondary minor up wave..but still...stuck under the recent high of 1886 - a potential double top. There remains distinct weakness in the R2K, and even the Trans/Nasdaq are somewhat below their earlier highs.



*FOMC minutes are due at 2pm..and no doubt..we'll see some kind of reaction from that.

Considering the continued weakness in the R2K..I'd be inclined to look for renewed downside this afternoon, but with the Fed press release due, I'd be wary of taking on a short position.

I am on the sidelines, and right now..have little inclination to get involved ahead of the 3 day weekend. I'm kinda tired!

1.19pm.. a lot of resistance in this sp'1885/87 zone. A daily close above it would bode for upside into next week..with new highs very viable.

Flip side...another rollover..<1860..and we fall hard to 1800/1780......

Best guess..we go up.....which having exited longs somewhat ironic to say.

awaiting the fed press release......

12pm update - the weak weak weak... R2K

Whilst the headline indexes are holding much of the morning gains, there is (yet again) notable weakness in the R2K, which has already turned negative. If the market has maxed out in this hourly up cycle...this afternoon could be a real train wreck.

R2K, daily



*I was stopped out of my R2K index longs, at IWM 109.30. Frankly, I'm glad to be out. Price action has been a real disappointment.

I suppose there is still a chance that the recent spike-floor candles are indicative of a renewed push 1170/ many chances do the equity bulls get?

Right now...a break under the hourly 10MA of sp'1877 or so..would bode for a 'bad' afternoon for the bulls.

VIX update from Mr T.

time for icy the storm clouds approach the city.

11am update - on the edge of breaking up

US equities are on the threshold of being able to push much higher. Bulls just need to break and hold 1885/ open up the low 1900s..which (bizarrely) would be viable as soon as this Friday. For the bears..this morning is turning out to be pretty rough.



Suffice to is a crucial few hours.

Bulls just need to push a little higher...whilst bears should be desperate for an intraday reversal.

Hourly cycles offer 'potential' upside all way across tomorrow...but...things still feel shaky.

I have raised my long-stops to the equiv' of sp'1872 or so...and will look to raise them again tomorrow...if we keep pushing higher.

11.13am... KICKED from my index longs....urghh. oh well...

Since a 3 day  weekend ahead.. I will take no new positions ahead of'm done until next week.

11.21am... black-fail candle on the R2K daily chart....not pretty...with the sp/dow still holding gains.

11.27am.. the R2K stinks of weakness...still slipping..and I'm glad to be out of that mess.

R2K about to turn red !

11.31am... and red it turns.

Rest of the market though...holding most of the gains.

Notable strength, UAL +3.4%

11.39am.. I could understand some equity bears are re-shorting here..with stops at the morning high.

Certainly, the weakness in the R2K is suggestive the main market will not be able to hold these gains.

11.46am.. for me..the line is now.... sp'1877..If we slip under there.....train wreck afternoon.

yours...more comfortable...on the sidelines

10am update - opening gains

US indexes are building gains, with the sp' back in the 1880s, and the weekly cycles have flipped back to a bullish outlook. However, the R2K and Nasdaq still look vulnerable, and are yet to break down trends that stretch back 12 weeks!

Nasdaq Comp', daily

R2K, daily


*I have tightened my long-R2K positions, raising stops from 106.90 to 108.40. In the scheme of things, it does make me more vulnerable to getting kicked, but...with yesterdays declines, I'm just trying to reduce my potential losses.

So..we're higher..but I won't start to relax until R2K breaks the recent high of 1116, along with sp'1886.

VIX getting the smack down for May opex...11.80.... the 10s really aren't far away..and will be hit, if sp'1910/20s.

Long day ahead....

10.01am.. price action sure is least that is how I perceive it.

Bulls need to push hard now...or this will just unravel again.

Next hour or so....pretty critical.

10.05am.. in many ways..bulls need a daily close in the 1890s to make a large enough turn this all around.

So...I'm still long..with stops just under yesterdays low...equiv' to sp'1868 or so.

10.15am.. Raised long-stops again, equiv' of sp'1872.   If this nonsense does reverse today..I want out...quick!

10.42am.. This is the big moment for the bulls...sp'1884....another 1 pt...and the 1890s will occur.

For those short,  I realise right now, it is starting to really burn..yet the hourly cycle was warning of a floor yesterday.

Pre-Market Brief

Good morning. Futures are a little higher, sp +3pts, we're set to open around 1875. Today could be pivotal. If equity bulls can't hold the sp'1860s (along with R2K 1080s), then the bigger picture would turn very bearish. Precious metals are weak, Gold -$6



*I highlight the bigger weekly cycle, since it really illustrates the importance of the 10MA, currently in the mid 1860s. Any daily close <1860..would be more than my view.

What about today?

Well, there is no sig' QE to help the bulls today, and if the next hourly up wave does not break the previous high of sp'1886 (R2K 1116), then it will simply make for yet another lower high.

For me then, I want to see a full reversal of yesterday's declines, but I realise that will be very difficult.

If today unravels..and I get long-stopped out (R2K <1080), then I will merely seek to pick up a short position, with a near term downside target of sp'1800/1780.

Video update from a bearish Oscar

With yesterday's drop on the Dow and R2K, Mr C' is turning bearish. Gods help us all!

9.45am.. I have raised my IWM 108.40.. that is 1.50 higher..

Opening gains..I am somewhat suspicious of..although cyclically..they were due.

Market still twitchy

It was a day for the equity bears, with a few aspects of support being broken, not least the Dow 50 day MA, and rising trend of 16400. If the bulls can't hold the sp'1860s, it bodes for renewed downside in the broader market into early June.


R2K, weekly'4, rainbow


*the weekly 'rainbow' candle for the sp'500 has indeed turned blue, and even if equity bulls can hold the 1860s across the rest of the week, unless we close Friday >1880, the weekly charts will be flashing a 'provisional warning of trouble'.

So...a day for the bears..but...taken together, I am still holding to the original outlook, of broad upside into the next FOMC of June'18.

If we break under sp'1860..along with R2K 1080, then I'll drop the upside scenario.

..and if we do break...where to?

Based on previous cycles, first downside target for the headline sp'500 would be the lower weekly bollnger, currently in the 1780s.


If 1800/1780 zone is hit in the coming weeks...then a be followed by some form of 2-3 week collapse wave to the 1625/1575 zone. Indeed, the 'big short' trade would be on the bounce, that would be the safer short side trade..and the most profitable.

My greatest concern for this summer/autumn would be a HUGE response from the central banks, not least from the ECB and the JCB. Frankly, I'd not be confident of calling a multi-year top unless we see Dow in the low 13000s.

Looking ahead

There isn't any econ-data tomorrow of note. In addition to Yellen, there are three other fed officials on the loose, and as ever..Mr Market will probably be paying some attention to them.

The FOMC minutes are due at 2pm..and that will likely be the major market moving event of the day.

*next sig' QE-pomo is not until next Tuesday.

Still trying

Yours truly does indeed still remain on the long side. I have 'last line in the sand' stops, IWM <106.90, a touch under the February low - roughly R2K 1078. If I get the kick, it will be damn annoying, but from there, I would look to pick up a short side trade. As the rest of you...I am trying.

Goodnight from London

Video update from SMF

Mario from SMF is not one to get overly bearish, so...his outlook on the longer term is one to at least reflect upon.

Daily Index Cycle update

US indexes closed weak, with the sp -12pts @ 1872 (intraday low - 1868). The two leaders - Trans/R2K, settled lower by a significant -0.9% and -1.5% respectively. Near term outlook is somewhat borderline, with key support in the sp'1865/60 zone.





Well, today certainly did not go as I had expected.

We saw some minor opening weakness which slowly spiralled...a minor bounce in mid morning, but then renewed weakness across the afternoon. The minor rally into the close was 'something' for the bulls, but..until we see the 1890s..this remains a tricky market to trade on the long side.

For me, the R2K chart is still indicative of bears having had plenty of chances to show 'all they got'..and so far..the Feb' low of 1082 is still holding.

So...right now, my line in the sand is R2K 1080..with sp'1860. If we see any daily closes under will bode badly for the broader market into June.

Closing update from Riley

a little more later...