Friday, 4 October 2013

Pre-Market Brief

Good morning. Futures are a touch higher, sp +2pts, we're set to open around 1680. Metals are flat, whilst Oil is around 1% higher. USD is +0.2%, but still below the big 80 threshold. Equity bears should be seeking a weekly close in the 1660/50s, on continued market concern of the debt ceiling.


sp'60min


Summary

So we're set to open a bit higher, but a return into the 1690s looks very unlikely today.

There would seem little reason why the market will end the week on an upbeat note.

The obvious question is why would anyone want to hold long across the weekend?
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We have an interesting day ahead..lets see if we can break into the 1660s later today, which would really start to spook the bulls.

*key levels to watch on the dow ...  14760...and 14400, although the latter looks highly unlikely, even if nothing is resolved on Capitol Hill for another week.

Bears finally showing strength

For the first time since June, equity bears are finally starting to show some downside power, with an early morning break under the 1675 Monday low, and a daily close just under the 50 day MA of 1679. How we close the week will be vitally important, for both bears..and bulls alike.


sp'weekly7 - bearish outlook



sp'weekly9 - fib levels (assumes 1729 key multi-month top)


Summary

Now, lets get this clear, I'm always suspicious..and have little more than contempt for the political maniacs. We have seen them play endless little 'crisis' games in the past five years. The current shutdown/debt ceiling arguments are more than likely just another situation that will be resolved with a 'last minute agreement'.

Right now, the notion of the debt ceiling not being raised still looks very unlikely, not least if the market falls another 2-3% across Friday/early next week. Any further market downside will put significant pressure on Boehner/Obama to at least form a short term compromise.


The weekly charts

Re: weekly7. This assumes 1729 was a key multi-month high, and arguably we'll have initial confirmation with a break of 1627. The lower weekly bollinger is currently 1594 - a very significant 85pts lower, so that's going to be very difficult to hit, even if the market trends lower for another 4-6 days.

Re: weekly9. Again, this assumes 1729 is a key top. If that were the case, then the obvious target is the 38% fib (sp'1479) - which was (roughly) the fib level we hit in the multi-month down wave of 2011. 1479 is a clear 200pts lower, which would make for a very severe drop, and negate the majority of the yearly gains to date.


The first lower low in two years?

There is one really important thing I wanted to note in this closing post of the day. Since the Oct'2011 low of sp'1074..we have been putting in relentless higher highs..and higher lows. Now, take the Dow..which as many realise..has been the weakest index lately...



For those seeking severe autumnal downside, the key level to break is the weekly low from late August of 14760. That is 226pts lower from current levels, and is certainly within range for tomorrow/early next week.

ANY daily/weekly close in the 14600s will be decisive enough to break the pattern of higher highs..and higher lows..that has endured for almost two full years*. There is trend support from Oct'2011 around Dow 14400. So, the bulls still have around 600pts of buffer zone before any 'critical' damage is done.

*indeed, tomorrow, Friday, Oct'4, is the two year anniversary since the market floored


Looking ahead

The monthly jobs report is on hold, due to the Govt. shutdown. There are some fed people talking though, so...Mr Market could again get swung around on any sporadic news headlines.

*there is no sig' QE-pomo until next Monday.
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*I am SHORT the main indexes as of Thursday afternoon, from sp'1681. I would prefer an exit into the weekend, preferably somewhere in the low 1660s..if not the 1650s, which would ramp the VIX into the low 20s.

Goodnight from London

Daily Index Cycle update

The main indexes all closed lower, with the sp -15pts @ 1678. The close below the 50 day MA is especially bearish, and the price action was arguably the most bearish we have seen since June. The VIX confirmed the increasingly unstable market, with a close in the mid 17s.


sp'daily5


Dow


Trans


Summary

So...today we had the first decent bit of downside power in the current down wave - from the sp'1729 FOMC high.

The close under the 50 day MA is important, but most important of all..we saw the 1674.99 low decisively taken out.

As for Friday? Suffice to say, I'm looking for much lower levels, the 1660/50s look viable tomorrow, with a bigger target of 1630/20s next week.

a little more later...