Tuesday, 8 May 2012

Volatility update

VIX came real close to breaking the key 21 level today, as is often the case..it failed. The close was weak, and for a few seconds in after hours trading (VIX updates for 20 minutes post close), the algo-bots kicked the VIX much lower - and it hit precisely on my lower channel line. Interesting!

VIX, 60min

VIX, daily

VIX, weekly


In the short term, VIX looks to break lower again, first target would be 18.25, then 16.75. The weekly cycle remains very bullish though, and I believe VIX will likely explode into the 30s..if not much higher no later than mid June.

Closing Brief

A good day. A really good day. The target zone of 1340/50 was met, and was a great place to exit short positions. A few hours of chop, the floor was formed, and it was a good time and price to go long. The H/S formation that I believe I have identified - if it occurs, will be extremely useful in the days ahead.

From a cycle perspective, it appears we have a clear minor fifth wave lower which concluded today, and the first main wave up (a) has very quickly developed. 

If the Pink count is correct, then sometime next week we will level out, a little chop..and then snap lower...on a journey via the elevator to hell.

SP' H/S formation - NEW chart

SP'60min - standard chart




The bulls have a close better than any could have hoped for. A close above the important 10MA of 1360   With the VIX closing almost flat, bulls have what is a pretty secure floor of sp'1347. Upside target tomorrow will be around 1375/80.

I would expect some swings between 1355/80 for a few days, before making a final peak in the RS early next week. Such swings will likely confuse those not aware of..what might be the RS of a H/S that is the last stage before the monster wave to 1270...or lower.

More later, focusing on those daily cycles

3pm update - something new to share

I think some of you might like this! I was just browsing the hourly cycles...and oh yes...what do I see...I see a new H/S formation setting up! I was so pleased to spot the mini H/S last week, maybe I've just found another one.

If I'm right, it'll make for a good exit for those longs (myself included)..and it'll clarify the broad levels for those looking to re-short.

SP'60min - NEW H/S formation chart

This looks pretty good I think. The top of the RS, would indeed be suggestive of a re-short level in the 1380/90 zone.

SP'60min - standard chart

I do think there is a fair chance I'm right, and if so...the next few weeks are going to be real good.

More after the close.

2pm update - Permabear...long

As I was writing the title for the last post, the thought occurred to me '..just why are you not going long?' Yes, the daily/weekly cycles do suggest against a trade, but for a 1-3 day trade..it should be okay. Despite my somewhat sickening feeling (the Permabear that I am), I did hit the button, and I am long from the equivalent sp'1351. Looking for at least 1375/80...preferably 1385/95..no later than next Tuesday morning.


First target for the bulls will be a break - and a close over the 10MA - currently still a fair bit higher at 1361

Right now, Bulls won't know conclusively if we are seeing the minor wave'2 (pink count)..probably until late Wednesday.

Time to cook..more later.

1pm update - market forming a floor

Well, I'm doing the unthinkable..I'm hitting the.long button.



More later...

12pm update - main target zone met

A good morning it has been. Having re-shorted at sp'1373 yesterday, I just earlier exited at 1351. That makes for a great move across just 3 trading hours. I am back to all cash..and will now sit back, and let the algo-bots ramp this nonsense back to 1385/95 before redeploying the heavy artillery next week.



So, I'm done hitting buttons today, and right now, I'm guessing I won't trade again until later next week. I can't go long for 2 reasons. 1. The daily/weekly cycle argue against it. 2. My stomach won't tolerate it.  ;)

I would guess we do indeed have a multi-day bounce now..into opex week. I will look to short around 1385/95. I can't guess what day that might be right now...if its as early as next Tuesday, I'd probably short then regardless.

For anyone taking long positions, the stop levels are clear..todays low of 1347..or a loser 1340/35. Anyone short..should have bailed/stopped out this past hour.

More later...

11am update - looking to get stopped out

A good day in the bunker. Soft target 1350 almost met already....primary targat of 1340 very viable by the close.


*Holding short, but with a tight stop of 0.05%....looking to cash in some gains, and watch a multi-day bounce from 1340 to 1385/95 into opex.

10am update - looking for 1340/50..today

Underlying market weakness continues. Primary target remains 1340.




Holding to earlier notes, looking for an exit from short position near end today. I 'hope' for 1340..although anything under 1350 would merit a good exit for the bears I'd argue.

Pre-Market Brief

Good morning. An important day ahead. The broad outlook remains downward, with both the weekly and daily charts putting considerable pressure on the market to fall across May and into June. Futures were -0.5% earlier, but are back to flat/a touch red. Bears will want to see that -0.5% fall attained again by 10am


Sp'daily count'2


On the 60min cycle, look back to April 9/10'th. Main' wave'1 (black count) completed Tue' April 10'th at the close of trading. It was a pretty clear 5 waves lower. Now, look at what we've seen in the past 5 trading days. Was yesterday the minor wave'4 ?

If that is the case, then we should expect a fifth wave - that may have started yesterday 3pm. The target would be to take out the 1357 low today. So, that is a 13pts fall today.

However, the daily chart really would suggest a test of the 1340 level. Could we get to 1340 today or early tomorrow? The fifth wave of April 9/10 was around 30pts...so...1369 -30, that would get us to the 1340 level!

So right now, I am looking for a straight down trend day, declining to at least the mid 1350s today. If we look like we are levelling out near the end of the day, I'll close my short position, even though we could briefly drop again early Wednesday to 1340. I'm feeling cautious right now, and want maximum funds for the next wave lower - which could be a monster.

Good wishes for Tuesday trading...updates across the day.

SPY/VIX ratio - still suggesting a giant H/S

The SPY/VIX ratio remains very high, but on the shorter time frame, we do still have some signs of a bearish rollover  Whether this is indeed the right shoulder of a giant head and shoulders formation, we'll just have to wait and see across this coming summer.

SPY/VIX, 1yr

SPY/VIX, 10yr

SPY/VIX, 3yr


The bigger 10yr chart certainly is something to consider. With the VIX itself a mere 18.94, there is a lot of upside, and only marginal downside. Besides, the weekly VIX cycle is still trending higher.

I realise these 3 charts are arguably more of an academic curiosity than for trading purposes (certainly short term swing trades!), but still..I think its paramount to have an idea of where we are in the grander cycle.

Goodnight from London

Euro - awaiting a close under 1.30

The Sunday night futures showed a break of 1.30 for the Euro/$ rate. Near term target remains a close under 1.30..and that will open the door to 1.25/24 within a week or two. Some chartists are looking for 1.20/19, I would guess that's viable too, but more likely in late June or July - when perhaps the main US and European indexes will have floored.

Euro, daily

Euro, weekly


The long term chart speaks for itself, the long term demise of the Euro remains on track for parity to the dollar. Probably not this year, but certainly sometime in 2013. Interestingly of course, that would mean the $ strengthens. One piece of dirty paper..vs other dirty pieces of paper. Urghh, its all nonsense of course.

Keep stacking whatever 'physical' assets you like most, whether its bricks, wood, silver, or...cows. Anything other than paper would seem....a good long term idea.