Wednesday, 13 June 2012

Volatility update - VIX closes above the key 24 level

A choppy Wednesday in market land, yet the VIX closed up an impressive 9.5% in the low 24s.


VIX, daily

VIX, weekly


Near term trend is somewhat uncertain now. The close above 24 was unexpected, so I will be curious as to how we open tomorrow morning. The next key level is 26/27.

If the Sp' can't hold over 1305/00 tomorrow/Friday, then VIX could explode at the Monday open - with more 'moodiness' due to fears over Greece.

I'm still guessing we have not seen the peak in the indexes yet, and that wave'C is still due..with a target in the 1350/60 range. Right now, that seems unlikely until the middle of next week. As a Permabear, its difficult to be patient when it comes to re-shorting, but so far...I'm holding back from hitting buttons pretty well ;)

The weekly chart is of course hyper-bullish VIX, and I still expect 30/40s sometime in July.

Closing Brief - down..up...down

A real mixed day. Early morning losses of 0.5% quickly reversed to minor gains of 0.25%...but closing down around 1%. With the VIX closing up almost 10%, this was certainly a victory for those bears who believe we've already maxed out wave'2.

A break of 1306, and then 1300 would violate the bull flags on the hourly cycles - which arguably still form wave'b.

The closing hourly charts...





Market picked up just a touch in the closing few minutes, but still, thats mere noise, bears won Wednesday.

I'm still looking to short from higher levels though, we are still dealing with bull flags, and they are likely to offer a few days of upside. That of course now seems likely to take us into the middle of next week - when the Fed might extend QE-twist.

*there is also the issue that we have a giant inverse H/S formation on the hourly charts, which would be bullish for next week.

More across the evening...

3pm update - holding the VIX at 24 ?

The VIX is showing more strength than I was looking for today. Partly its understandable, they are ramping up the prices of near term options puts/calls in anticipation of the Greek election weekend. Yet..we are getting real close to the important 24 level. A close in the 24s would be a real problem for the bulls.




When VIX was this high we had sp'1306. Its something to watch VERY closely in this closing hour.

I'm still guessing they hold the VIX < really is right on the edge of breaking.

*the indexes could easily be floored on the 15min cycle though...if we're going to see recovery/ramp into the close..its going to occur right now!


More after the close.

Update 3.08pm...well, they broke above VIX '24, things are starting to get messy for the bulls. Anyone long..should have bailed now. A break of 1305' would be the next target for the bears tomorrow.

2pm update - the moon rocket malfunction zone

The bull maniacs will again be emboldened by this mornings reversal. Even though in the background the Greek election bomb ticks ever closer to zero, the market seems very content to ignore this critical event, at least for another trading day.

Primary target remains sp'1350/60. However, if we get stuck around the 1340/45 zone tomorrow, I will sure be tempted to launch a major re-short.

sp' daily, Fib levels



The current moon-rocket is set to suffer a malfunction real soon. The two fib levels - covering the wave'1 down, of 50% and 61.8% retracement - sp'1344/63 add some extra natural resistance to what is probably the final C' wave of this wave'2 UP.

So, tomorrow, if we get stuck around 1345 - on any gap open - and then I start seeing black fail candles on IWM, with hollow red reversal candles on the VIX, I'm probably going to short this market.

There is of course a risk the market will decide to 'like' the Greek results, and the danger of a final move to 1370/80 next week - not least if the Fed decides to take the minor action of extending QE-twist.

A close around 1335 is still just about viable with two hours still to go.

More later!

1pm update - just so we're clear...

Market holding up..further moderate gains expected in the latter part of the day. The VIX is up 5% though, things are certainly a little cautious out there ahead of the important Greek election weekend.

Sp' daily, wave'3 outlook


Little wave'B completed at 1306 yesterday, and we're probably halfway done with C.

I'm not sure if we'll actually get stuck around 1340/45 tomorrow, that might be as high as we get. Just have to mindful of the intra-day action, and a few other issues - not least how Mr VIX is doing.

Of course, the bullish maniacs won't agree with that, they are looking for new index highs this summer. Its all fixed in Europe, the Spanish bailout solved all those problems, yeah?

12pm update - on track

Early morning losses all reversed, a little morning chop to confuse many..but the underlying hourly trend remains UP. Target remains 1335 for the close.



Choppy hour...but underlying trend remains upward.

*interesting stock to note today...

Patriol Coal (PCX). -95% or so in the last year. The company does not make money..and worthless.

That is probably still a radical philosophy to many these days, the notion that if a company does not make a profit, its simply worthless. Where will it floor? How about 0.00 ?

Ohh...that reminds me....AMZN....

back later!

11am update - frustrated bears

Those bears chasing the open and adding to new short positions will clearly be getting real mad this hour. Not only have those index declines reversed, but we're now already green on all indexes. My earlier target of 1335 by the close is now easily within range.


sp,daily, 4month


Not much else to add...everything remains on track. VIX failed to break 24..again, and so the bears can forget about today being any good.

The hourly cycle is clear, and we are due to go positive cycle on MACD at the start of this hour...and thus further gains are likely...we could easily be dow +50 by lunch time.

*not many people around this morning, I guess most of you are engrossed with your Dimon TV entertainment.
Time for my early lunch :)

10am update - buy the Dimon dip ?

Moderate early weakness is probably just a little cruel tease to the bears. The hourly index cycles show underlying pressure to the does the daily cycle of course.




I'm guessing these initial index declines will reverse fully by late morning, and a reasonably strong latter day rally will close the market in the mid 1330s.

*it will be important to the bulls that VIX does not break over 24, otherwise there is the small threat that sp'1306 might yet fail - although I strongly doubt that's viable today.

Facebook (FB) is green so far...I guess we are going to the moon after all ;)

Holding to original target of sp'1350s

Pre-Market Brief -its Dimon day

Good morning! JPM CEO Dimon talks to the Senate banking committee at 10am. It will doubtless get blanket coverage on all the clown channels, so that's something to keep them distracted today from the 'Europe thing'.

Retail Sales:  -0.2%  vs -0.2% expected   - so, market will be able to tolerate that as 'okay'.

Target for today is sp'1335/40 by the close, which will open up the target zone of 1350s by late tomorrow.



We have a very nice bull flag (pink) on the hourly index charts, we are due to go positive MACD cycle (see blue bar histogram) this morning, so..underlying market pressure is UP.

I remain a watcher from the sidelines. The move from 1266 to where we are now is significant enough to qualify as a very straightforward wave'2. A fair number of chartists out there are suggesting this wave'2 will last into mid July..or even August. I can only assume they are then assuming new index which case they are suggesting the monthly cycles are going to reverse their present downward trend.

I can't imagine that, quite the contrary in fact. The monthly cycles are saying '1350' further.

sp, monthly, simple version

As for Mr Dimon...I can't even imagine how anyone in the US Govt' has the guile to have called him to explain himself. So much for 'private business'.

 Good wishes for Wednesday trading

Monthly charts still warning of critical problems

To close tonight, another update of the bigger picture. First, lets consider the SP' monthly chart...

Sp'monthly - count'2


First, ignore the noise..look at the indicators under the main chart...they are ALL showing a very clear rollover. We even have a very nice little 'bliue tower' (MACD, blue bar histogram) - that forms the RS of what I believe is a giant head and shoulders formation. It remains a central theory to my overall viewpoint right now.

It is amusing to see how the bulls are getting hysterical again about the rest of 2012. They have been touting end year targets of 1450, 1500..a few are still looking for even higher levels.

Primary target to the downside remains the lower channel line, somewhere in the low sp'1100s, which should be hit within the next month or so.

A closing reminder on the grand world index overview, via the VEU chart....

VEU, weekly, 4yr

VEU near term target remains 40.5/41.0...and then a rollover across this summer...breaking the critical 35.0 level.

Goodnight from London

Daily Index Cycles - wave'C underway

With the important sp'1306 level holding this morning, the main market managed to hold together, and the closing hour was very good action for the bulls. The VIX confirmed the index gains.

Assuming the retail data comes in 'acceptable' tomorrow, the market looks set to hit 1335/40, which opens up my 1350s target zone by late Thursday.

IWM, bearish





This mornings floor of sp'1306 was surely the floor of wave'b. So...just wave c' to go in this main wave'2 corrective wave. The completion of wave2....leads to the destructive wave'3 - which should by definition be more intense and deeper than wave'1 (150pts), I hold to my original target of sp'1150/00 by end July.

Its a bold prediction, but all the monthly charts support it.

So I'm standing by to short in the sp'1350s.

A little more later.