With US equity indexes closing significantly higher, the VIX was naturally in cooling mode, settling -7.8% @ 20.95. Near term outlook offers threat of a very brief equity flash lower, but with highly probable renewed upside to the sp'2100s, and that will likely equate to VIX cooling to the low teens before end year.
VIX'60min
VIX'daily3
Summary
Suffice to add, the market remains naturally a little anxious ahead of the final FOMC announcement of 2015.
Once the rate hike is done..the uncertainty will be out of the way... and market volatility should melt lower into year end.
In my view.. the only issue is whether 2015 ends with a VIX in the low teens... or 12/11s.
US equities closed significantly higher, sp +21pts @ 2043 (intra high 2053). The two leaders - Trans/R2K, settled higher by 0.8% and 1.4% respectively. Near term outlook offers a very brief post-FOMC flash down to the 2020s.. before soaring upward. The sp'2100s look due in the near term, the core issue is whether 2134 can be broken
sp'60min
Summary
*closing hour action: choppy.. with a little weakness into the close.
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So.. a second net daily gain... with the sp' having become (naturally) stuck at gap zone resistance in the sp'2050s.
Best guess.... one of two scenarios tomorrow...
1. market soars on a better than expected FOMC policy announcement
2. market initially drops... to the 2020s.. but then recovers into the close.
The lower gap zone of sp'1950s looks well out of range, not least as Oil is threatening a short term floor.
If Oil can claw to the $40 threshold within the next few days.... we could be looking at a weekly close in the sp'2100s.. which would be pretty incredible, considering yesterdays low of 1993.
US equities are set to close positive for the second consecutive day. Regardless of any initial post-FOMC negative reaction... it would seem we have a clear floor of sp'1993, and look set for the 2100s. Equity bulls should look to Oil as an added upward pressure, so long as the next set of inventories come in 'reasonable'.
sp'daily5
Summary
I've not noted it yet.. but the 50 and 200 day MAs are very close.. and at the current rate, we'll see a golden cross this Thursday.
Any daily closes >2070 will give high confidence the market is set for broad upside into year end.
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notable strength...
Oil/gas drillers... RIG, daily
An interesting gain of almost 6%, but clearly, the broader trend remains extremely bearish. A valid question for 2016 will be which of the mid-tier names will have to disappear to help industry capitulation? Is RIG vulnerable?
US equities are on the high side of the hourly cycle, ahead of the FOMC announcement. There remains clear threat of a very brief (as in an hour.. if not minutes) flash lower to the 2025/22 gap zone, before surging powerfully higher. First upside target is the 2080/85 zone.. then 2100.. with ultimate target of the historic May high of 2134.
sp'60min
Summary
Regardless of ANY immediate post-FOMC drop... it surely won't last long.. and the sp'2100s are now back on the menu in the immediate term.
For now.. any thoughts of mega downside should be on hold.
Eyes on the next set of Oil inventory reports... if those both show net declines... it'll really help market sentiment tomorrow and into next week.
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notable weakness...
TWTR, daily
Pure horror for this once prime momo stock. It has never recovered since the earnings were leaked in the 3pm hour on a Thursday afternoon in late April.
With Oil seeing another strong wave higher in the 12pm hour, currently +3.8% to the $37s, the equity market have jumped from the cooling low of sp'2039 to 2053. VIX is naturally weak, -7% in the low 21s. The daily cycles are all swinging back toward the equity bulls.. ahead of the FOMC.
USO'daily2
sp'60min
Summary
So.. Oil helps halt the cooling, and we're back in the 2050s.
The more 'hyper' scenario would be 2080/85 tomorrow.. then a brief flash down.
It remains highly important to note that underlying price momentum on the bigger daily/weekly charts is swinging back toward the bulls... ahead of the FOMC.
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notable strength....
DIS +3.4%, a daily close in the $113s look due... with 117s by the Friday close
APC +2.1%
RIG +5.8%
SDRL +4.6%
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weakness: TWTR -3.9%.. the momo chasers sure aren't interested in that one.
US equities continue to cool from the early high of sp'2050. A retrace to 2025/22 remains very possible in the Wed' 2pm hour.. before pushing powerfully back upward. Oil continues to help the market mood, +2.2% in the $36s.. ahead of the next pair of inventory reports.
sp'daily5
USO'daily2
Summary
Little to add.
To be clear... there is HIGH threat of retracing to the 2025/22 zone tomorrow with the FOMC annoucement... but then still closing higher.
Market mood is increasingly positive, with indirect confirmation as Mr Contrarian.. aka Gartman, is now bearish.
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US equities remain significantly higher, but have seen an initial pull back from gap zone resistance. Indeed, the opening jump higher, offers the bears a brief post-FOMC flash lower to a new gap zone of 2025/22, before resuming higher. Oil is +1.4% in the $36s, and that is certainly helping energy stocks.
sp'60min
USO'daily2
Summary
*a second net draw down in oil inventories would really help the broader market. Look to the EIA report tomorrow.. anything -2 million or more would probably be enough.
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Not much to add.
I'd like to be at the big table at PRINT HQ this morning. I'm sure the discussions are rather interesting...
'So... is it 25 beeps... 13 or 12... or maybe just 10 ?'
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notable strength....
RIG, daily
Even a move to the $16/17s won't negate what has been a disastrous year.
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US equities open significantly higher, and are already in the gap zone around sp'2050. There is very strong resistance here, and a touch of weakness ahead of the FOMC Wed' 2pm announcement is probable. What is increasingly clear, 1993 is likely a key low for the remainder of the year.
sp'60min
VIX'60min
Summary
*note the VIX, filling the price gap.... with equities mirroring.
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So.. opening gains.. much stronger than expected... and we're clearly seeing a fair few of the bears spooked.
I can understand if some want to short here.. with a downside target of 1950... but I can't see that as likely.
Right now.. the Fed look set to raise rates.. but probably by just a tenth (10bps) and that will give the market the excuse to rally into early 2016.
*ultimate issue remains.... the equity bulls MUST break new highs in the next multi-week up cycle.
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notable strength...
DIS, daily
A second net daily gain looks due... just a matter of days before 115/117... as the Star Wars hysteria goes into hyperspace.
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Good morning. US equity futures are moderately higher, sp +12pts, we're set to open around 2033. USD is broadly flat in the DXY 97.50s. Metals are flat. Oil is battling for a second consecutive daily gain, +1.2% in the $36s.
sp'60min
WTIC oil, daily
Summary
*awaiting CPI data..
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There is a clear upside gap around sp'2050... although that looks out of range today.
On the downside.. there is a gap around 1950... but that looks really difficult.. as the market has already seen a significant cooling of almost 6%.
Best guess.. churn in the 2040/20 zone today.
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re: interest rates
Right now, I'm increasingly suspicous the Fed officials at PRINT HQ will do a compromise.. and hike rates by either a tenth (the ECB moves in tenths).. or 12/13bps.. aka.. an eighth of a full point.
If that is the case... the market would probably rally on the notion that even if rates are hiked by 10bps at EVERY FOMC meeting in 2016.. .we won't see 1% until spring 2017.
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Overnight Asia action...
Japan: -1.7% in the 18500s.... the big 20K threshold is now a long way up.
China: -0.3% @ 3510. A December close above the monthly 10MA (3734) looks difficult.
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Have a good Tuesday
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8.38am... CPI... 0.0%.. m/m
y/y (less food/energy)... 2.0%... Hmm
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Empire state -4.6.. (prior -10).. still a lousy number.. but above market expectations.. so its 'fine'.. right?
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notable movers...
DIS +1.7% in the $111s
GDX +1.1%.. as metals are stablising (if briefly)
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Watching clown finance TV.... Valeant CEO... not the bounciest of guest... stock is +5%.
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9.00am.. sp +19pts.. that makes for 2040... 10pts from gap zone.
Whilst the sp'500 broke a new cycle low of 1993, before settling +9pts @ 2021, there was notable weakness in the 'old leader' - Transports, which hit 7406, the lowest level since April 2014. For now, the Transports continues to warn of longer term trouble for the broader market.
Trans, weekly
Trans, monthly
Summary
Last week confirmed a very large bear flag... and today merely adds to the continuing train wreck that is the Transports index. For now... there is ZERO sign of a turn/floor.
In any bounce into early 2016, first upside target is the 8K threshold, but that is a full 500pts (6% higher), and looks very difficult considering the current bearish rate of trend.
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**Bonus chart
WTIC oil, monthly2
An outright bearish red candle on the monthly chart, having broken a new multi-year low of $34.53. Keep in mind that the Feb' 2009 low was $33.55... so we're real close to testing a core low. Energy bulls really can't get confident until the first green candle above the monthly 10MA.. and right now.. that looks out of range until next summer.. at the earliest.
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Update from Oscar
I realise some of you can't stand Oscar and get annoyed I highlight him on my pages... but do watch this !
I certainly think the '20 month issue' is interesting, although I'd place far more emphasis on the issue of the next rally.
I am entirely in agreement with Oscar on the notion that the next rally MUST break new historic highs in at least the headline indexes (Dow, sp, Nasdaq). If not... it will be a major failure, and we'll be looking at severe downside in 2016.
I'm reminded of a number of market commentators who continue to believe QE4 is inevitable. Notably... Dalio, whom Bloomberg gave extensive exposure to a few months ago.
How about sp'1500s.... and the Fed spool up the printers again? As an aside, if Gold was around $900.... that would also make for a near perfect multi-year low (inc' for the related mining stocks).
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Looking ahead
Tuesday will see the latest CPI data, Empire State, and housing market data.
In terms of price action.... best guess... early morning strength... then a lot of chop for rest of the day, as the market moves into a holding pattern ahead of the Wed' afternoon announcement/press conf'.
US equities closed moderately mixed, sp +9pts @ 2021 (intra
low 1993). The two leaders - Trans/R2K, settled lower by -0.5% and
-0.7% respectively. Near term outlook is for the market to stabilise
ahead of the FOMC announcement, and then push higher. First soft targets are sp'2050s, then 2080/85.
sp'daily5
Trans
Summary
It is highly notable that the Transports broke a new multi-year low of 7406... which is 11.4% below the high from late November.
As for the sp'500... we have a provisional pre-FOMC spike low of 1993. That would fit as a key low, with the sp'2K stops now triggered.
Tuesday looks set for a little upside... but mostly chop, as the market will want to enter a holding pattern ahead of the Wed' 2pm FOMC announcement.
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