Wednesday 2 December 2015

VIX back on the rise

Whilst equity indexes closed significantly lower, the VIX was naturally back on the rise, settling +8.4% @ 15.91 (intra high 16.49). Near term outlook is for renewed equity upside to the sp'2115/20 zone, and that should equate to VIX 13/12s.




Little to add.

Despite a net daily gain, the VIX remains relatively low, and there is low probability we'll see sustained action above the 20 threshold for the remainder of the year.

more later... on the indexes

Closing Brief

US equity indexes closed significantly weak, sp -23pts @ 2079 (intra range 2104-2077). The two leaders - Trans/R2K, settled lower by -2.1% and -1.0% respectively. Near term outlook remains unchanged, with further upside to the 2115/20 zone... whether on the excuse of the ECB or the monthly jobs data.



*closing hour action: new intraday lows... no doubt, partly due to the San Ber' event.

Clearly, the afternoon weakness was surprising, but then we had two key excuses.. Oil losing the $40 threshold, and then the latest media shooting event.

Weak bulls have been washed out from the recent low of sp'2080.

It is notable that the daily sp'500 candle was of the bearish engulfing type, and that does bode in favour of the equity bears for tomorrow.

However, would Draghi dare disappoint the EU markets tomorrow?

Best guess remains unchanged... renewed upside to the 2115/20 zone, and it remains entirely viable for a straight run higher into the FOMC... at which time we could be in the 2150/70 zone.

more later... on the VIX

3pm update - increasingly weak

US equity indexes are significantly lower, as market mood is increasingly spooked, as WTIC Oil failed to hold the key $40 threshold, currently -4.0% in the $39s. VIX has jumped 11%... but remains relatively low in the 16s. The big 20 threshold looks well out of range.




*the ongoing story about some incident in San Bernadino is clearly setting the mood for the closing hour.

Clearly, a second daily close in the sp'2100s is well out of range.

Now its a case of whether Draghi can inspire tomorrow... and then if OPEC wants to support oil prices this Friday.

3.14pm.. sp'2077... to 82... hmm.  Overall market mood ain't pretty though...

notable weakness: copper miners, FCX/TCK, both lower by around -5.6%... as commodities are under USD pressure.

strength: CREE +2.0%.. but more on that one.. after the close.

DIS -1.2%... following the broader market.

3.29pm.. Gold -$15... having broken a new multi-year low of $1049.. but hey.. does anyone else notice?

Oil is trying to recover from the lows, but still -3.4%... around the $40 threshold.

3.41pm.. Transports remains very weak.. despite the lower energy/fuel prices...

Not bullish. The weekly close will be rather important.

3.45pm.. chop.. around sp'2080... with VIX 16s.

In the scheme of things...its only borderline interesting... aside from the Transports.

back at the close.

2pm update - remaining weak

US equity indexes remain moderately weak, but highly vulnerable to renewed upside to the 2115/20 zone before the weekend. Equity bulls have two excuses for another wave higher, the ECB (Thursday), and the monthly jobs data (Friday). Oil remains very weak, -3.8%, close to the key $40.00 threshold.




Not much to add.

Equities are arguably just seeing a day of consolidation ahead of the next push higher.

notable strength:

NFLX, daily

A new historic high in the $130s. Jessica Jones was a superb series, although even I don't believe it merits a P/E ratio well into the 100s.

2.19pm.. With Oil losing the $40 threshold...  equities continue to slowly unravel, sp -17pts @ 2084.

Next support is the recent low of 2080. A daily close in the 2070s would be a real surprise.

VIX +8%.. but still only in the 15s.

1pm update - a new low for Gold

As the Yellen continues to deliver her latest appraisal of the economy, the equity market has likely seen an intraday floor of sp'2093. A daily close in the 2100s looks probable. With the USD +0.4% in the DXY 100.20s, Gold has broken a new multi-year low of $1049. Oil remains similarly weak, -3.0% in the $40s.


GLD, monthly


*gold bugs are facing the same old problems, higher USD... and threat of higher rates.. pressuring down the price of the precious metals.

Naturally, the related mining stocks are under pressure, the ETF of GDX -3.2%

So... the 2090s are holding, and the market is arguably just consolidating before the next lurch higher. Tomorrow's ECB would be a valid excuse. If not.. there is always the monthly jobs data.

A weekly close in the 2110/20s looks probable.

meanwhile... the Yellen continues...

stay tuned

12pm update - tea time with Yellen

US equities are seeing a minor down cycle, first support is sp'2090. Meanwhile, Fed chair Yellen is set for some polite chat at the Economic club of Washington. Mr Market will most certainly be listening for any excuse to rally this afternoon. Oil is continuing to cool, -2.7% in the mid $40s.




Seriously, how could any equity bear get excited about this mornings cool down, after the sp'2100 threshold was closed above yesterday?

Whilst first target remains 2115/20 zone... even that makes little sense as a high in the near term.... a straight run to the 2150/70s is almost as equally probable... with 10 trading days until the day the fed finally (they had better!) raise int' rates.

VIX update from Mr T.

time for tea.... with Yellen set to appear at 12.25pm.

11am update - sunshine ahead of the Yellen

US equities are seeing continued minor chop ahead of Yellen, whom is due to have a polite little chat at the Economic club of Washington. Mr Market will most certainly be listening. With the USD +0.5% in the DXY 100.30s, commodities under pressure, Gold -$12, whilst Oil is trying to rally off the lows, -1.2%

GLD, daily

USO, daily2


It is certainly no surprise to see commodities under USD pressure.

Cyclically, metals/oil are both due an up cycle.

For oil, the OPEC meeting this Friday will offer a viable excuse to break upward.

meanwhile.. here in London city....

A very reasonable late afternoon for early December.

back at 12pm... for the Yellen, whom I believe will get live coverage on clown finance TV.

10am update - opening chop

US equities open with very minor chop, around the sp'2100 threshold. A move to 2115/20 zone looks very probable, more viable early Thursday.. than late today. With the USD +0.4% in the DXY 100.10s, commodities are under pressure. Gold -$10, whilst Oil is -1.6%, ahead of the EIA report.




So, ADP jobs data came in fine.

Next up, the EIA oil report (10.30am)

Equity bulls could do with a whipsaw higher in Oil...  back into the $42/43s.

notable strength...

QCOM, daily

There is some kind of China deal news. The previous two days of trading were certainly suggestive of a move higher, with the MACD cycle turning positive.

time to shop... back soon.

10.31am.. Oil inventory surplus.. 1.8 million barrels.... not great.... but neither apocalyptic.

Oil is holding -1.6%.. but with bad news out of the way.. the threat is now of a whipsaw higher.

Pre-Market Brief

Good morning. US equity futures are broadly flat, we're set to open at sp'2102...  mere 32pts (1.6%) from breaking a new historic high. USD is back on the rise, +0.3% in the DXY 100.00s. Metals are flat. Oil is -0.8% in the $41s.



A little chop seems likely this morning, but with underlying upward pressure.

We've a fair bit of data/events today.. and on balance, the sp'2110s look due late today/early tomorrow.

Update from Mr C.


Doomer chat, Hunter with Denniger

As ever, make of that, what you will.

Overnight Asia action

Japan: minor weak chop, -0.4%

China: minor weak chop, but then battling strongly higher into the close, +2.3% @ 3536. First target remains the monthly 10MA in the upper 3700s. A Dec/Jan' close in the 3800s would bode for 6K by end 2016.

The implications for other world markets would be very important.

Have a good Wednesday

8.15am ADP jobs: 217k, a rather bullish number, and is highly suggestive the Friday monthly jobs data will be 'fine'. It is notable that the Oct' data was revised higher.

Equities remain broadly flat.

Metals unraveling though, Gold -$6 @ $1062

Oil is breaking recent lows, -1.3%. Now its a case of how the market copes with the EIA report.. and then OPEC meeting this Friday. I'm guessing Oil whipsaws UP.

The idiocracy of UK housing

The UK has always been a country particularly obsessed with owning property. The current Government continues to operate housing schemes that provide financial incentives for young people to buy a brand new home, via huge debt, all of it, government backstopped.

Ellie and Rory think they own a house

An early interest

House prices caught my attention from a very early age. Back in the mid 1980s, a typical 3 bed house in the southern English suburbs would cost around £30,000 ($45k). I noticed that the prices always seemed to rise

How could the price of a house rise, if the number of bricks, the amount of roof beams, and copper piping remained the same? Further, a house is a depreciating asset, things wear out, roof tiles, paving, it all has to be maintained/replaced.

Of course, I was later to understand that regardless of housing supply/demand issues, long term house price inflation was primarily due to underlying currency depreciation.

To close today, I wanted to highlight the latest 'happy housing story' from mainstream news, in this case, from the BBC.

Original story: see 'I'm 20 and I own a £250,000 four-bed house'

First... I can't help but note this generally overlooked, but key issue...

If you have a mortgage on your property, you do NOT own the property. 

I find it laughable to see how the 22 year old guy is claiming he owns the house.

Err.. no. The bank/lender holds the deed/note... Rory and Ellie are mere joint tenants until the debt is paid in full, which I'm guessing is probably not until the 2040s!


Couple, aged 20/22... buy a house

4 bed detached, £250,000 ($375,000).

Deposit 5%: £12,500  ($18,750)    .. I'll ignore the other miscell' fees/taxes.

The other 95% is via a mortgage/property loan of £237,500. This amount is FULLY backed/guaranteed by the UK Govt', and helps persuade the banking sector to offer such loans to people who would normally get turned down.

Key issues...

Ultimate moral hazard: risk moves from the buyer to the taxpayer

In the event of default, the couple will be evicted, with the house then sold. All proceeds would then go to UK treasury, who would then have to fund the difference if the sale revenue does not fully cover the outstanding debt to the given bank/lender.

... and that naturally leads to....

The UK government wants, and needs higher prices more than ever

Now that the UK govt' is backstopping the debt for the purchase of new homes, it will want house prices to rise.. and FOREVER rise.

After all, if tens of thousands - or even more, such loans were defaulted upon in the next recession, the taxpayer is going to be liable for a rather vast amount.

This policy is madness of course, as higher prices exclude even more people from ever have the opportunity to purchase a property.

I guess I could go on a wild rant about how this is a classic example of just how intellectually dumb socialists often are, but suffice to say....  everyone involved in developing, operating, and making use of the scheme are IDIOTS.

If you can't afford something, you should not be purchasing it via debt.

Of course, in these crazy times, perhaps this kind of talk is heresy.. almost borderline illegal to say?

How dare I suggest that a couple barely out of college are financially idiotic to take on such a large debt, for a house with not one bedroom, but FOUR !

When the next recession hits... as is inevitable, one or both of the couple might lose their job. Then it'll be a case of whether they can still meet repayments.

I guess I should not be surprised though, as most things are cyclical, and this couple (understandably) have ZERO experience of how bad times can get in a recession. Just consider that Ellie was a mere thirteen years of age when the economy/housing market last floored.

I'd wonder what she'd say if I suggested house prices might actually fall from current levels. Have either of them even heard of negative equity?

Anyway... I could go on, but clearly, not much has changed since the last housing bubble popped in 2007.

Looking ahead

Wed' is packed full of data and events...

Data: ADP jobs, EIA oil report, productivity/costs, Fed beige book (2pm).

Events: 4 Fed officials... inc' the Yellen, speaking at the 'economic club of Washington'.

Yours truly and housing

I'm sure not in my 20s anymore... but then, neither do I owe $356,250 to a bank. In fact, I'm debt free.. and I never borrow for anything.

I'd love a nice detached house.. 2 bedrooms would be fine. Or perhaps I should aim for a castle on the cliff tops overlooking the Atlantic ocean?  Right now, I can't afford such a home, and I'll sure as hell not take on a mountain of debt to fund such a purchase.

I guess I remain a financial anomaly in the 'new world economy' that so many speak of.

Goodnight from London

Daily Index Cycle update

US equity indexes closed significantly higher, sp +22pts @ 2102. The two leaders - Trans/R2K, settled higher by 1.3% and 0.5% respectively. Near term outlook offers the sp'2115/20 zone, with a broader target of 2150/70 by year end.




*first target for the 'old leader' - Trans, remains the 200dma, currently @ 8384.

The sp'500 looks on track for the 2115/20 zone... where there are multiple aspects of resistance.

Any sustained trading >2120 would offer a straight run to 2150/70 by the next FOMC.

a little more later...