Wednesday 16 December 2015

VIX collapses as uncertainty removed

With the Fed raising rates, the great uncertainty that caused equity havoc in Aug/September has been removed. As equities closed broadly higher, the VIX naturally collapsed, settling -14.7% @ 17.86. Near term outlook is for equities to continue to push higher into early 2016.. with the VIX set to go sub-teens.




It would seem we have clarity that the VIX maxed out before year end in the 26s, and we're now headed broadly lower, with VIX set for the low teens.. if not 12/11s, as sp' will make a serious attempt to break new historic highs (>2134) within the next few weeks.

*I have ZERO interest in being long the VIX.

more later... on the indexes

Closing Brief

US equities closed broadly higher, sp +29pts @ 2073. The two leaders - Trans/R2K, settled higher by 1.8% and 1.5% respectively. Near term outlook is bullish, first target is the 2080/85 resistance zone, then the 2100 threshold... with the May high of 2134 still in range before year end.



*closing hour action: naturally.. a little choppy.. but favouring the equity bulls.

It was a rather remakable day in market land. Not because rates were finally raised, but because all aspects of the US capital markets were so very stable.

For those looking for a QUAD-OPEX market crash.. well.... err... no. That was always 'crazy talk'.... almost as much as those suggesting rates would not... and could NEVER be raised again.

A third consecutive day for the equity bulls... and now its a case of whether new historic highs (in the headline indexes - Dow, sp'500, Nasdaq) are achieved... or whether we see a major fail.

Right now.. it ain't looking good for those resolutely holding short.

more later... on the VIX

3pm update - a third net daily gain

US equities are battling for the third consecutive net daily gain, as the Yellen continues the press conf'. With the Fed raising rates by 25bps to a target range of 25/50bps, the uncertainty is out of the way... and broadly, the market should be able to rally into early 2016.




I would imagine there is still threat - but decreasing each hour, of a cool down to the sp'2025/20 zone (with VIX 20/21).

A daily close >2065.. will give strong clarity the 2100s are coming.

*more than anything is incredible how relatively stable all aspects of the capital market are right now... currencies, bonds, equities, are all trading very well, after what was a very key financial event.

As for Yellen....

Terminating ZIRP

So far she hasn't given the market an excuse to flash lower...  and as I type... sp'2065.... the bears are losing ALL reasonable hope.

2.59pm.. The 2pm hourly candle... POWERFUL.... breaking about declining trend/resistance.

Market could close around 2075...    and that would likely make 2025/20 out of range in the near term.

3.00pm....  Hey... look who is trying to pass himself off as a media hack...

Its a rather mediocre disguise...  the Ben Bernank is there to protest against end of ZIRP ?

ps.  Every time Yellen uses the word 'transitory'.. it adds 8pts to the Dow.

3.19pm... sp +22pts @ 2065... trading above the 50/200 day MAs.  . with VIX 17s.

Difficult to envision market selling down to 2020s now...  as Asia/EU markets will likely rally tomorrow.

3.24pm.. Two uses of 'transitory' in a single sentence.. so that is 16pts to be added to the Dow.

... and a third....  lol

Sp' is battling for a close >2070..

... a fourth transitory in 90 seconds.   Thats 32pts for the Dow

3.31pm.. Market is breaking UP and away... sp @ 2071.... as bears getting ground OUT.

3.34pm.. POWERFUL gains for the two leaders - Trans/R2K... 1.7% and 1.4%... confirming the market is headed UP.

3.37pm.. Yellen wraps up... sp'2073... with VIX 17s....   pretty clear now... isn't it?

2pm update - its time to raise rates

Its been seven full years.. to the very day, that the US federal reserve last changed rates, to a target range of 0-25bps. The FOMC announcement is set to announce a rate increase... somewhere between 10-25bps, almost as important though, will be the full policy statement, and how Yellen answers in the press conf'.



Okay.. time is about up....

Get set for some wild price swings.. we could jump strongly higher (2065 would be a major break)... or initially drop to 2025/20.

Best guess.. a rate hike of 10bps...  based on the notion the Fed wants to compromise with the equity market.

Fierce updates.... all the way into the close!

2.01pm.. Rates raised...  25bps to a fed funds rate of 0.25%, they raised the target range to 25/50bps

Equities naturally a little wild....

2.03pm.. ALL those who for years touted rates will NEVER rise again.... what have they got to say now?

sp +9pts.. back to the 2050s.

Things pretty okay so far for the bulls... still threat of 2025/20... but with each minute... probability is lessening.

2.04pm USD holding +0.3% in the DXY 98.50s.

VIX starting to rapidly cool, -10% in the 18s.       as sp'2060s are hit

2.06pm..  So.... dear readers..  ZIRP ends.. and the market is holding together very well.

Now its a case of whether we still see a brief drop to 2025/20... or close >2065.

In any case... bears look in dire trouble.. as the uncertainty has been TAKEN AWAY.

2.08pm    sp' +20pts @ 2063... testing the 50/200 day MAs...  if we can close >2065.. this really will be warning of a hyper-rally into 2016.

.. even AAPL is almost back to positive.

2.10pm.. I am surprised they went with a quarter point rather than a tenth, considering the recent market upset...    gotta wonder what Draghi and Kuroda are thinking of this.

In any case..  the Yellen is 15/20mins away....  as the capital markets are remarkably stable.

*bonds..  TLT.. trading flat.

 2.15pm.. watching clown finance TV.. its kinda funny to see a few of them get a little its finally been done!

So.. will Yellen give the market an excuse to briefly wash out to the 2025/20 zone... before surging upward? Maybe if she alludes to rate hike'2 at the next FOMC.

2.19pm... commodities. It is interesting that Gold and Oil are broadly trading u/c from earlier gains/losses.... most aspects of the capital markets are VERY stable.

sp +13pts.. 2056....    2065 remains the BREAK level to open the door to 2100s by Friday.

Yellen is due in 10'

2.22pm.. It is notable that the hourly upper bollinger will be around 2075 at the close.  Lower bol' will be around 2K.

On no reasonable near term outlook does the Monday low of 1993 look in jeopardy.

2.27pm. chop chop.... as market now awaits Yellen.. due in a few minutes.

STILL threat of sp'2025/20.. as a brief tease to the bears...before sustained market upside.

notable weakness, Oil -4.4%...

2.32pm.. The Yellen speaketh.... indexes remain choppy.

Cyclically.. we're due to cool to 2025/20.. no later than tomorrow 11am.  If that does happen, no doubt the mainstream would get rather twitchy about things.

As a trade though... overly risky.   With the uncertainly gone.... market should broadly climb.

*bonds.. TLT +0.5%... as yields are now cooling.

... I guess you could say... it was largely baked into the financial cake.

2.38pm... will be interesting to see how the Asia/EU markets trade...  considering the initial US market reaction... things should favour the bulls tomorrow.

USD -0.2% @ DXY 98.00.....    again... a rate hike was already baked in.

1pm update - quietly waiting

All aspects of the US capital markets remain in a holding pattern ahead of the 2pm announcement. Almost as important though.. the subsequent press conf', where Yellen will have around an hour to negate any initial post-FOMC sell down.



Little to add... ahead of the Fed.

From a pure cyclical perspective, momentum is swinging back toward the bears. Right now.. the 2025/20 zone would be briefly viable... post announcement.

notable weakness

AAPL, daily

Not great price action, with continued talk about lower than expected iphone sales.

12pm update - another hour closer

US equities continue to cool from the earlier high of sp'2059. A post FOMC flash down to the 2025/20 zone remains highly possible.. before surging back upward. Metals are holding gains, with Gold +$13. Oil continues to decline, -3.5% in the $35s... after a 4.8 million barrel inventory build.



Little to add.

Two hours away from what is rather important press release.. but don't forget the subsequent press conf'.. in which the market might surge on Yellen comments.

VIX update from Mr T.

time for tea

11am update - dusk for ZIRP

US equities are starting to cool from the early high of sp'2059.. which is notably just below the 50/200 day MAs. Price action is naturally going to become increasingly subdued across the next three hours. Metals are holding strong gains, Gold +$13, with Silver +2.8%. Oil has imploded on the latest inventory report, -2.7%.



There is clear threat of a post-FOMC flash drop to 2025/20 zone.. before surging back upward.

Equity bulls should be pushing for a daily close in the 2050s. Anything >2065 would be a bonus.

DIS is having problems...

The opening hourly candle was a stark black-fail... and indeed.. we've seen all of the gains lost.

Is this stock turning to the dark side?

Meanwhile in London city...

Its dusk for the metropolis... and for ZIRP.

time to cook

10am update - opening gains

US equities open broadly higher, with the sp +15pts @ 2058. VIX is naturally continuing to cool, -8% in the 19s. There are notable gains in the metals, Gold +$12, with Silver +2.8%. Oil is -1.0%, ahead of the EIA report.




It is notable that from a pure cyclical perspective, the hourly setup will favour the bears this afternoon.

Of course.. it is fed day, and arguably, normal rules could be over-ridden by the decision from PRINT HQ.

notable opening reversal

DIS, daily

The opening black-fail candle sure ain't pretty. Ironically, far from leading the market higher, DIS is warning of trouble right now. However, I continue to like X-wings. If the market breaks into the sp'2100s by late Friday, I would imagine $119/120 is just about possible.

Clearly though... a strong initial rejection from the gap zone of 115/117.

time for some sun... and to shop.

10.31am.. Oil inventory surplus 4.8 million....    Oil reacts.. -1.8%

Equities cooling... with DIS set to turn red.  Hmmm

Pre-Market Brief

Good morning. US equity futures are moderately higher, sp +11pts, we're set to open at 2054. Metals are bouncing, Gold +$4. Oil is -0.5% in the $37s, ahead of the latest EIA oil report.



After 7 years... here we are.... its Fed day, and we're set for an interest rate rise.

Market mood is increasingly positive, and once we're pass 2.15pm or so... we should have a fair idea of where we're headed for the rest of the year.

early movers...

BAC +1.1%... higher rates would be bullish financials
DIS +2.1% in the $114s... as Star Wars starts to arrive
RIG +0.5%... energy stocks inclined for further gains

Update from Riley

Update from Oscar

Overnight Asia action

Japan: +2.6%, back over 19k
China: +0.2% @ 3516

Have a great Wednesday

The end of ZIRP

Since interest rates were cut to zero as of Dec'16th 2008, many have argued that rates would never be raised again. Wednesday, Dec'16th 2015, will see Zero Interest Rate Policy (ZIRP) come to an end, with the first interest rate change in seven full years. For many traders... it will be a rather novel experience.

Fed int' rate, with sp'500, 20yr

US 10yr yield, monthly



First, it is important to recognise that the Fed fund rate has never technically been at zero. The actual aim since the last rate cut of Dec 16th 2008 was for a target range of 0-25bps.

So, if rates are raised tomorrow, the 'range' will be dropped, and instead, rates will once more be stated as a simple percentage.

As for equities..  it would seem we have a key low of sp'1993, with the 2100s viable within the immediate term. Price structure could be argued is a giant multi-week bull flag. If correct, it would be suggestive of a straight run to the 2200/300s by late spring/early summer 2016.

I realise some of you will roll your eyes at that, but if it is a bull flag, we'll break >2134, and keep clawing broadly higher into April/May.

Looking ahead

EIA report, housing starts, indust' prod', PMI manu'

The FOMC are set to announce at 2pm. There will be a Yellen press conf' around 2.30pm, and that will likely last a full hour.

Best guess for Fed day

-an interest rate increase of 10bps, aka.. 0.1%, to a level of 0.1%

-A somewhat dovish (easy/loose money) policy statement, one that will again threaten 'any measures necessary' to ensure the two remits of the fed are met.

If I am correct about the smaller than expected rate increase, the market would likely rally on it straight away.

Further, the market would then build multi-month gains, on the realisation that even if the FOMC increase rates at 10bps at each meeting in 2016, we'll not see 1% rates until spring 2017. The market would almost certainly soar.

Goodnight from London

Daily Index Cycle update

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




The second consecutive net daily gain for the sp'500, with all indexes making an attempt to break out of the short term downward trend.

Equity bulls should be seeking a daily close in the sp'2070s to give clarity that the market is headed for the 2100s before Christmas day.

a little more later...