Wednesday 16 March 2016

VIX crushed to the low teens

With equities breaking a new cycle of sp'2032, the VIX was under strong downward pressure (intra low 14.89) across the day, settling -11.0% @ 14.99.  Near term outlook threatens the sp'2038/43 zone.. before a key top is in, and then cooling into end month. VIX looks set to begin a push to first key resistance of the 20 threshold


VIX'60min



VIX'daily3



Summary

On any fair basis, the VIX is now on the extremely low end of the trading cycle, having been cut in half from the 30s to the 14s.

A key turn looks due. First upside target is the key 20 threshold.. with the 25/30 zone just about viable by end month if some 'spooky news'.

VIX 40/50s look out of range until May... but they do look VERY probable.. if sp' 1700s or lower.

--
more later... on the indexes

Closing Brief

US equity indexes closed broadly higher, sp +11pts @ 2027. The two leaders - Trans/R2K, settled higher by 1.1% and 0.7% respectively. Near term outlook threatens a Thursday gap higher to the price gap zone of sp'2038/43.. before a key top is put in. Sustained action >2040 looks extremely unlikely. First soft downside target is the 1940/30 zone.


sp'60min



Summary

*closing hour action: moderate chop.. leaning on the upside, with a new cycle high of 2032.

The 2pm and 3pm hourly candles are somewhat spiky.. typically indicative of a top. 
--

... and now we have the FOMC out of the way.

The window is now wide open to the equity bears for the rest of the month.
-

Best guess.. Thursday gap higher... to sp'2038/43... but then maxing out... and rolling lower into the Friday close.

In theory... given just 1 or 2 pieces of negative news.. we could be sp'1940/30 next week.. and that is certainly a down wave I'd like to be part of.

*I'll seek to short equities and be heavy long VIX tomorrow morning.

--
more later... on the VIX

3pm update - due a key turn

After a fair bit of twitchy price action, equities are pushing upward, as another tranche of equity bears are short-stopped out. No doubt, some truly bizarre bull maniacs are now chasing the market higher, as the Fed have said 'hey.. the economy is improving, but we only need two rate hikes'.


sp'15min cycle



sp'60min



VIX'60min



Summary

*note the hourly MACD cycle now positive, but set to rollover.. whether into the close.. or after a viable Thursday moderate gap higher.
--


Q. What am I doing? Well, once Yellen fades away around 3.30pm.. the equity bears finally have an open window into end month.

I might short into the close... but I'm inclined to wait for early tomorrow, as I'm still seeing a key gap fill of sp'2038/43.. with Dow 17405/425.
--

On any fair basis.. we're now set for a retrace to the 50dma... as early as next week.. to the sp'1940/30 zone... and that certainly merits a short-trade... with the ECB and FOMC out of the way.

............updates into the close.
-

3.04pm.. It is notable that the upper bollinger on the daily is currently @ sp'2045. I don't expect the market to make it quite that high.. but clearly... 2038/43 remains an obvious target before some heavy sellers might start to appear.

Gold +$24.  GDX +5.1%...  those daily candles sure are starting to look crazy strong... and inversely bode in favour of equity bears.
-


3.10pm.. chop chop.. but holding moderate gains.. sp'2027... the 2038/43 zone VERY viable early tomorrow.

VIX remains crushed... -9% @ 15.30.... having hit the 14s.

notable weakness.. TVIX -6% @ $5.80...  I'd like an entry in the $5.60/30 zone tomorrow.
-


3.17pm.. I can understand if some equity bears are getting real frustrated right now... but we're getting damn close!

Yours truly remains content to wait overnight.... seeking to be short the indexes via SPY... and long volatility via TVIX....

Frankly.. the setup looks rather good (for the bears) after today.
-


3.23pm.. so.. now its just a case of whether we open a little higher tomorrow.   I'd imagine Asia/EU markets will rally in sympathy.. at least initially.

sp'2038/43 gap zone..remains viable.. but I'd agree.. time is almost up for this rally from Feb'11th.
-

3.31pm.. Yellen being asked by Bloomberg 'Are you considering NIRP with QE?'...

.. of course not, lol.
--

3.37pm.. Market melting upward.. ..  headed to the gap zone.

A key turn looks due tomorrow....  ALL equity/VIX cycles will favour the equity bears by tomorrow 11am.


3.40pm.. sp'2031... new cycle high.. VIX 14s.....      we're just 7pts shy of the lower end of prime gap zone !
-


3.44pm.. Extremely powerful reversal.. GDX swinging from -2.4% to +6.6%

It'd seem the metals/miners are a leading warning of an equity turn - as they were in mid December.


3.48pm...  sp'2029... VIX 14s... regardless of the exact close... a Thursday gap higher looks probable... and that will be something I will look to short.. not least as the FOMC is now out of the way.

back at the close :)

2pm update - time for a press release

Its time for another press release from the maniacs at the HQ of Print Central. No doubt the algo-bots will get rather twitchy as some fedspeak is assimilated into prices. Yellen is due around 2.30pm.. .who will try to appear confident and in control. As things are.. the current equity setup is still leaning bullish for the remainder of today.


sp'15min


Summary

**frequent updates across this hour.. and into the close... as there should be some interesting price action.

I am indeed looking for a major short entry, but I'm still seeking the sp'2030/40s. It is notable that VIX has already hit the 15s, and on any 'fair basis' is already close to a core floor.
-

Eyes on how Gold/miners, and Oil react.

standing by.......................................


2.01pm... so.. the Fed now expect just TWO rate hikes this year.

Given a few months.. we'll surely be talking about looming NIRP in the US.

Market wants to surge.

... watching the SPY put chain.... puts getting smashed 15/20% lower.


2.02pm.. sp'2023... bears getting short-stopped out....   nasty market!


2.05pm.. hourly MACD cycle set to see a bullish cross late this hour.. or by 3pm.. and that does not favour the bears.

For the moment.. gap zone of 2038/43 remains  target.


2.06pm.. notable reversal in Gold, from -5 to +10.. as lower rates favour metals.. and miners.
-

It remains twistedly amusing in that the Fed tout economy as 'improving'.. but now we don't need more than 2 rate hikes. Yeah.. that makes sense. lol

Comedy gold from print HQ.


2.09pm notable weakness... financials, BAC -2%.. as int' rate hike hopes continue to fade.


2.14pm.. BAC -3.5%... not surprising. Broader downside target on BAC is a rounded $10... which is around 28% lower than current.

... awaiting Yellen................
-

2.18pm.. Seen on a 1yr time frame...  VIX



VIX sure is on the very low end. Note.. we've hit the lower bollinger just earlier at 15.00.


2.28pm... the nasty market breaks a new cycle high of sp'2025... we're getting pretty close.

2.30pm.. Here she comes!  All rise.

2.32pm... sp'2027...



So innocent !
-

2.35pm.. most notable reversal.... miners.. GDX swinging from -2.4% to +3.6%.... as Gold +$17 (from -5).


2.38pm.. First use of 'transitory'....  have some tea.. or something stronger :)

notable weakness.. TVIX -4.3% @ $5.90..


2.41pm... ALL equity cycles will be maxed out no later than tomorrow morning...  so.. its looking rather good for those who have been patient.

Now its a case of just fine tuning an entry.

Right now.. I'm inclined to wait until early tomorrow.. for an opening gap higher within the 2038/43 zone.


2.44pm.. sp'2028.... just 0.5% from the gap zone.

2.45pm. Hourly MACD cycle turning positive... 

2.46pm... sp'2030... with Yellen answer questions on life, the universe.. and how NIRP might save humanity.

1pm update - just another hour

US equities remain in churn mode, as the market awaits the 2pm press release.. with Yellen due to hold a press conf' around 2.30pm. No doubt, price action will get real twitchy.. real soon. Metals remain somewhat weak, Gold -$4, with Silver -0.3%.


sp'15min



VIX'60min



Summary

So..a minor wave lower... but its clearly still a case of broad chop ahead of the Fed.

Considering the underlying price pressure, a spike higher to the 2030/40s still looks viable later today.

--
Meanwhile... Parker of Morgan Stanley downgrades his end year target...



In the scheme of things though... its relatively minor.
--


1.17pm... sp -5pts... and the setup will favour the bulls once the press release appears.

Without question, bears want the market to be rising into the afternoon.. not lower!
-


1.28pm.. notable weakness.... miners, GDX -2.4%... as Gold is -$4...   Hmm

1.39pm.. sp -5pts..  VIX remains -3.5%....  kinda unusual !

12pm update - a little sun ahead of the Fed

US equities remain in minor churn mode, but as has been the case since the Feb'11th low of sp'1810, price action remains leaning on the upward side. The gap zone of 2038/43 is well within range this afternoon, but whether the market can keep on pushing beyond that seems highly doubtful.


sp'daily5



GLD, daily2



Summary

re: metals/miners. From a time perspective, they could easily continue to cool into early April. Price still hasn't even hit a basic retrace.

It remains a concern that if the metals/miners won't actually floor for another few weeks, that'd bode for further sustained equity gains.

Considering the bigger weekly/monthly equity cycles though, I find that difficult to envision.

Thoughts?

--
Here in London city...



... another day closer to spring.

--
time to cook

11am update - naturally churning

US equities remain in minor churn mode... as is to be expected, ahead of the FOMC announcement. It is notable that the VIX has already fallen into the 15s, and that didn't even require the sp'2030/40s. Another 3 hours of minor churn are due.


sp'60min



VIX'60min



Summary

*EIA report: weekly inventory surplus: 1.3 million barrels. Certainly, smaller than recently, but still.. the issue of over-supply remains entirely unresolved.

Sustained action above the $40 threshold looks out of range.

--
notable weakness...

TVIX, daily


Ideally, the lower bollinger... $5.50/5.20 zone, but that is a fair way lower from here.. and is more viable tomorrow.

--
time to shop.. .back soon

10am update - minor weakness

US equities open fractionally lower, and again, it should be clear, equity bears are still powerless ahead of the FOMC. Metals are notably weak, Gold -$5, with Silver -0.2%. Oil is +2.6% in the $37s, ahead of the EIA report.. due at 10.30am.


sp'60min



VIX'60min


Summary

*re: VIX. We're already seeing the 15s... its hard to say what is going on in that right now...  a capitulation low  four hours ahead of the Fed press release would be a little unusual.

TVIX -1.3% @ $6.10..  Hmm.... 
--

Well, as is almost always the case, the morning before the afternoon announcement is generally minor churn.. and that is what we're already seeing.

The hourly MACD cycle is offering another push higher.... but cyclically, there will be very high threat of a key reversal.. whether late today... or tomorrow.

--
notable weakness...

DB, daily


Big bear flag from the Feb' low? Despite the broader market rally, DB never got close the 200dma... and is clearly the biggest system threat to the EU. Cyclically, it is indeed already well in the process of rolling back lower.

--
stay tuned... long day ahead

Pre-Market Brief

Good morning. US equity futures are moderately lower, sp -7pts, we're set to open at 2008. USD is +0.3% in the DXY 96.90s. Metals are weak, Gold -$4, with Silver -0.2%. Oil is +1.2% in the $36s, ahead of the latest EIA report.


sp'60min


Summary

So.. much like the past two days, we're set to open a little lower, and again, we look set for a renewed upside in the latter half of the day.

Considering its a fed day... the bulls must certainly have high possibility of the sp'2030/40s this afternoon. Whether they can hold such levels for long... that is another matter entirely.

I hold to the view that we're due to max out.. and begin a major new down wave across the spring and into early summer.

--
Update from Oscar



I have a great deal to say on this.. but I'll try to deal with that.. some time today.

--


Update from Riley


--

Overnight action

Japan: -0.8% in the 16900s
China: +0.2% @ 2870
Germany: currently u/c at 9936.... 10K remains massive resistance.
--

notable weakness: DB -6% in the $18s... as it warns it won't be profitable this year. Credit Suisse (CS) is -7% in the $14s... likely in sympathy.
--

Have a good day !

WTIC oil - still stuck under resistance

Whilst the US equity market saw moderate weak chop across the day, there was notable weakness in the energy market. WTIC Oil saw a net daily decline of -$1.03 (2.8%) to $36.34. Declining resistance is now around the $40 threshold, and Oil still looks on track for new multi-decade lows this year.


WTIC, weekly



WTIC, monthly



Summary

The broader situation remains entirely unchanged. Demand remains somewhat weak, whilst the bigger issue is one of over-supply. Despite periodic chatter and various rumours, there is zero progress being made to halt the increase in supply.. never mind actual production cuts!

So... I would expect the recent low of $26.05 to be broken under within the next few months.. with WTIC Oil eventually falling into the teens.

To me, its not so much if we'll see the teens, but for how long might oil reside within the $15/25 zone? If its longer than a month or two, there are all sorts of grander implications for the energy sector.. and the broader economy.


--
Looking ahead

Wed' will see CPI, housing starts, indust' prod', and the latest EIA report.

The FOMC will issue a press release at 2pm, with Yellen set to hold a press conf' at 2.30pm.. and that will likely last around an hour.
-

Goodnight from London

Daily Index Cycle update

US equity indexes closed broadly weak, sp -3pts @ 2015. The two leaders - Trans/R2K, settled lower by -0.6% and -1.6% respectively. Near term outlook offers another push higher.. but then maxing out, before cooling across the latter half of the month.


sp'daily5



Dow



Summary

*the Dow was the notable exception today, managing a minor gain of 0.1%, making for a third consecutive net daily gain.. and holding above the 200dma.
-

As for the sp'500, and the rest of the market, we're almost certainly very close to a short/mid term top.

--
a little more later...