Thursday 31 July 2014

Volatility builds powerful gains

With equities sliding across the day, the VIX built gains, settling a powerful 27.2% higher @ 16.95 - the highest daily close since mid April. Near term outlook offers a minor pull back, but the bigger issue is whether a close above the weekly 200 MA is possible in August.





It has been a long day.. so I will be brief...

With the spike high of July'17 taken out, VIX is on the climb. There is however massive resistance in the 17s, where the weekly 200 MA is lurking. The VIX has never been able to attain a weekly close above it since Nov' 2011.

Those equity bears seeking much lower levels should indeed be looking for VIX to attain such a weekly close, whether tomorrow..or in the weeks ahead.

more later... on the indexes

Closing Brief

US equities ended the month sharply lower, sp -39pts (-2.0%) @ 1930. The two leaders - Trans/R2K, settled -1.6% and -2.3% respectively. Friday offers a very possible rebound, but there will be massive resistance in the 1955/65 zone.



*earnings due from GPRO, will be one to watch.

....and that concludes July, a month of general chop - 1991/52 zone... but breaking lower on the last day.

What to make of today? Difficult to say, although we now have a great many ugly daily charts, and some of the weekly cycles are also problematic (in terms of the broader upward trend).

Thanks for all the comments today.... its helped keep me awake.

Have a good evening

more later... on the VIX

3pm update - ending the month badly

Equities are set to end the month on an especially weak note, and with today's sig' declines, most (if not all) indexes will have net monthly declines. Despite the geo-pol concerns, metals are weak, Gold -$14. VIX is holding powerful gains of 22% .


GLD' daily


*I wanted to highlight Gold, since it is somewhat surprisingly weak today - considering a number of geo-pol issues. Perhaps it is partly due to another Fed taper... reducing interest in the metal?

From a pure technical perspective however.. the break under the 200dma is a real bad sign.. and this has major bearish implications for the miners.

Its been a very long day.. I'm running on vapour fumes....are we closed yet?

3.01pm... ugly afternoon..... with Dow -270pts.... VIX +24% in the 16.50s.

Critical level in the Dow... - via the monthly charts... 16300s.

If we see Dow 16200s at ANY point in the weeks ahead.. the mid term trend will have decisively broken.

3.15pm.. just ever more nasty... Dow -290... VIX +25%.... pretty wild end to the month.

I see a few bears closing out trades... ahead of Friday jobs...and I'd be highly supportive of that.

3.23pm.. a -2% daily decline, really?  Last seen... February...feels like years.

3.30pm.. Dow is breaking below an old key level...

The 200 dma would be a real target after the next rebound.

3.40pm... This is one hell of a way to end the month. A month that was largely 4 weeks of chop within the 1950/90 zone...but failing on the very last day.

VIX intra peak so far.. 16.99... getting close to the weekly 200MA..which remains a major level since late 2011.

3.50pm.. so... what ya think?  A particularly bearish end to the month, but.... we're still only 2.75% from the historic high of just last week.

What remains laughable is that people are getting mildly hysterical over a VIX that is still only in the mid teens. That used to be the typical cyclical low!

Short memories....most.

3.52pm.. rats selling into the monthly close.......  a rare day indeed.

2pm update - bears in full control

US equities remain significantly lower, with the sp' -1.5% @ 1941 (intra low so far... 1937). VIX is holding powerful gains of 20% in the 16s.. a weekly close in the 18/19s would be a preliminary warning of a mid term trend change.




A rebound is no doubt due at some point.. and with jobs data tomorrow, equity bears are at 'some' risk if holding overnight.

Regardless of that though, bears are ending the month with a pretty strong down day.

Just reflect on this... a mere week ago... we were making a new historic high of sp'1991.
54pts down.. across 5 trading days... but it doesn't justify any bearish hysteria...yet.

Notable strength: GPRO, +4.1%.. ahead of earnings at the close.

2.07pm... a vain attempt at a rally, but there is going to huge resistance on a back test of the low 1960s.. .whether tomorrow.. or next week.

I could understand if many will be wanting to re-short into that.

2.40pm.. chop chop... a floor of 1937 looks 'reasonable', with a natural bounce to perhaps 1960/65... but that seems unlikely to be hit until early next week.

Interesting closing hour ahead...last one of the month!

1pm update - its been a while

It has been a fair few months since we've seen a day with this type of price action. There is provisional technical damage to the daily/weekly cycles, but certainly.. nothing 'critical' yet. What is clear though, equity bears are currently in full control, with a VIX in the 16s.



I wanted to highlight the weekly VIX.

The key aspect for a very long time has been how the VIX always fails to get a weekly close above the 200 weekly MA.

Currently, that is in the 17s.

On any basis, a weekly close in the 19s would really make things 'interesting', although I'd argue that is unlikely, even with price momentum as it is.

Notable strength: GPRO, +3.7%.. ahead of earnings.

1.14pm Last hourly candle was somewhat spiky.. but really...even if we rally 10/15pts today, it still makes for a strong day for the bears.

Best case for the bears... a back test of 1960/65 next week..and then a much stronger down wave.

First things first though....still a few hours left of the trading month.

1.36pm.. VIX starting to look a bit toppy.. and it sure is overbought on the RSI

Equity bulls have a chance at starting a rebound...  but the day will still be a major victory for the bears.. even if 1950s.

12pm update - bears should be very satisfied

With the sp'500 slipping to the low 1940s, the equity bears should be very satisfied with how July is ending. Even if there is a latter day recovery... the sp' looks unlikely to close much above 1950/55. Weekly cycles...starting to look ugly.



Suffice to say... still no red candle.. but we have a clear break of the recent 4 weeks of chop.

Hourly cycles will be offering some degree of afternoon recovery... but... the month will end (surprisingly) in favour of the bears.

VIX update from Mr T.

time for lunch

12.04pm... With the break into the 1930s, weekly8... candle turns RED, first time since early April.

12.14pm.. one of those rare days when the declines...just keep being sold into.

VIX +19% in the 15.90s..... strong resistance in the 16/17 zone.

A weekly close >19... would change the mid term outlook to bearish.

12.34pm.. VIX just keeps on pushing +22% in the 16s.... 

11am update - rough morning for the bulls

US indexes have continued to slip, with significant declines, sp -1.2%, having taken out the July 10'th low, along with the 50 dma. Metals are weak, Gold -$10. VIX is building gains, +12% in the low 15s.




*a fair bit of technical damage done this morning, including to the bigger weekly cycles, which I will highlight later.

Today sure is a messy end to the month. As things are... we're now at a typical turn time... but so far.. there is ZERO sign of the declines levelling out.

I realise there are a fair few individual issues - not least the Argentinian 'technical default', but still...the break under 1950 is a real surprise.

We're set for the first monthly net decline since January.

11.07am.. market attempting a spike floor from sp'1942... at what is a typical turn time.

Bears...beware!     VIX cooling .. a touch... but it did take out the July'17 geo-pol (plane/Israel) spike.

11.13am.. RSI is 73 on the VIX hourly.... it rarely stays that high for long.

I realise I said it yesterday, but I merely see this as another opportunity for the bears to close out.

I sure am curious to see what others make of this....  I'm trying to refrain from clown finance TV though..and Zerohedge. I'm guessing ZH have gone into emotional euphoria at this 'catastrophic market collapse' .... yes?

11.26am.. all indexes.. and the VIX offering a TINY sign of a turn.... on any basis... anyone short... should be careful here.

How many times in the past few years have we seen a big down Thursday...and then a crazy ramp on Friday?  I can think of at least a dozen or so occasions.

10am update - eyes on the VIX

US equities open lower with borderline significant declines of around 0.8%. The VIX is 8% higher in the 14.50s.. but well below the geo-pol spike high from July'18. With the Chicago PMI coming in at only 52... equity bulls are really struggling.




*VIX hourly candle did flip black at the open... and is offering the first sign of a reversal...

As ever.. on such an opening drop... typically...its a case of 'lets see if we level out around 11am'.

Notable weakness: Gold -$10... which is kinda surprising, considering some of the issues the market is not happy about are geo-pol ones, and Gold would normally benefit.

10.01am.. VIX closes the opening a bullish manner.... so...probably at least another hour for the equity bears.

10.05am... Really,  I think the VIX is critically important to watch today, lets see if we can get a spike top by 11am.

10.14am.. R2K holding the recent lows...

Bulls should be seeking a close back in the 1140s, which would make for another spike floor.

10.18am.. sp'500 trying to spike off the 50dma ...

10.29pm... R2K fails to hold....-1.4%... next level.. 1120... another 10pts lower.

10.39am.. Pretty ugly out there... a lot of stops getting hit now... with VIX +12% in the 15s.

Pre-Market Brief

Good morning. Futures are somewhat lower, sp -11pts, we're set to open at 1959 - a clear break of yesterdays low. Any close <1960 would be a net monthly decline, and also break the rather important weekly 10MA.




*awaiting jobless data (8.30am) and Chicago PMI (9.45am)

So... it looks like we'll open under yesterdays low of 1962. Whats the reason? Hard to say, but looking at the BBC news site, Israel seems intent on continuing to bomb Gaza, and maybe we're back to a market being spooked by sporadic geo-pol stories.

Next key support zone is 1952/50... the low from July 10th, and also where the 50dma is lurking.

The smaller equity cycles are already pretty low, I would merely see the open as another opportunity for equity bears to exit.

Indeed, in the opening 30-90 minutes, equity bears need to keep a watch out for a black-fail candle (VIX), and hollow red reversals (indexes).

What about the VIX?

The 14.50/15.00 zone looks a given early this morning, a move into the 16s would surprise me, and be suggestive of 'something new going on'.

** I didn't sleep much last night for a number of reasons, I will endeavour to be here across the day, best I can.

Good wishes for Thursday trading.

9.32am.. well, we're off and running.. and I'm surprisingly awake again.

VIX 14.50s.... eyes on the VIX for a reversal in the opening 30mins.

PMI number at 9.45am... that is kinda important...

Notable weakness, WFM, -6% in the $36s on lousy earnings.

9.38am... VIX candle turns BLACK

Equity bears should be VERY careful here.... if this black candle holds until 10am.

9.40am.. Interesting that the July 10'th low still holding....

VERY high risk of a reversal here.. hourly cycles were floored yesterday afternoon... and on a pure cyclical basis, we're due to go UP.

9.45am.. black VIX candle... flips back.... equities resume lower.  Oh well, next natural opportunity for a floor is around 11am.

9.48am.. PMI... 52.6.. .. ugly number... borderline recessionary

9.53am... VIX candle.... BLACK... again, how it closes this opening 30mins.. pretty important.

Seeking the 1980s to end July

US equities have seen a fair bit of chop this month, but overall price action remains the same. Most indexes look set for net monthly gains, which would make for an extremely impressive sixth consecutive monthly gain. August will be offering the sp'2020/30s



Despite all the chop.. all the bearish chatter... it is highly notable that the sp'500 is currently 0.5% higher on the month.

The hourly cycles are VERY bullish for Thursday.. and it would not surprise me if the market ends July in the 1980s, which would make for a gain of around 1.25%.

Looking ahead

Thursday will see the usual jobless claims, but more importantly, the Chicago PMI, market is expecting a very non-recessionary 63.

*the QE schedule for August is released at 3pm

Goodnight from London

Daily Index Cycle update

Most US indexes closed with minor gains, sp +0.1pts @ 1970 (Intraday range 1962/78). The two leaders - Trans/R2K, settled higher by 0.7% and 0.4% respectively. Near term outlook is for renewed upside to new highs.. sp'1990/2000s.





So..the two leaders managed to close moderately higher, after what was a pretty choppy day.. but then.. it was a fed day.

Overall... it would seem we have a high chance of having floored at sp'1962.

A break to new historic highs >1991, by Friday afternoon is a very viable outlook, with 2000s arguably a given in August.

Closing update from Riley

a little more later..