Wednesday, 9 April 2014

Volatility lower for a second day

With the US indexes climbing into the afternoon, the VIX was in melt mode, hitting an intraday low of 13.70, but settling -7.2% @ 13.82. If the main market rolls over again - taking out the Tuesday low of sp'1837, then VIX should spike into the high teens.




So, a second day lower for the VIX, and for many equity bears out there, it seems to be a case of 'oh index highs imminent'.

Yet..a bounce from the sp'1837 low was expected. My target was 1865/75..which was hit today. I would only get concerned on a daily closing in the 1880s, which frankly..looks..difficult.

For me, the issue is not whether the VIX will spike..of course it will, but whether it can break the big 20 threshold. Considering it has already done that this year - in the late Jan' down wave, I see absolutely no reason why we won't see VIX 20s this spring. Whether that is within the next 2-7 trading days..that is hard to say.

On any basis though, the VIX is currently very low, and there is certainly more threat of upside..than downside.

I am short the market from sp'1866, and VIX 13.90s...would seek a provisional VIX exit in the 15s..if that is achieved before the Friday close.

more later...on the indexes

Closing Brief

US indexes closed significantly higher, with the sp' settling +20pts @ 1872.  The two leaders - Trans/R2K, closed +1.6% and +1.4% respectively. If the wave from 1837 was a mere 'bounce', then the remainder of this week could be rather interesting.



*I hold overnight short, from sp'1866, and VIX in the 13.90s. Seeking a provisional exit at sp'1850/45.

So..we closed with significant gains, but really, this was expected (target zone was 1865/75), not least with the Fed press release. We've seen this kind of nonsense a hundred times before, and no doubt...another hundred times to come.

Personally, I'd like to at least see a break into the low 1850s tomorrow, which will be more than enough to give the bull maniacs the concern that 'ohoh, was it just a bounce?'.

more later..on the VIX

3pm update - closing hour reversal?

The market has somewhat naturally spiked higher on the latest piece of Fedspeak nonsense, with a mini surge from 1859 to 1869. In the scheme of things, this still doesn't rank as 'strong gains'. Equity bears should be content with any daily close <1864/62 or so.



*I am 'moderately' short, via an index, and a VIX call block (first VIX since last summer), will hold overnight, and see how we trade Thurs/Friday.

So...a fed spike..and now the issue is do we close at the highs..or see some sort of sell down.

If can break the little up trend - currently 1862 at the close of today, then there is no reason why we won't be trading in the 1850/45 zone tomorrow.


VIX has currently hit and trying to floor on my somewhat arbitrary upward line.

3.02pm.. provisional rollover on the 15min cycle....hourly probably won't be clear until early tomorrow.

Interesting spike on the 2pm hourly candle though. A 'stupid' fed spike, I'd call it. Someone in Elliot wave land needs to have an official category for anomalous 'stupid fed spikes'.. the SFS candle

3.17pm.. who wants to go long here? Post Fed spike, after a wave from 1869 across just under 2 days? Anyone?

Micro cycles remain burnt out, we're due for a down wave, the only issue is how far....will it be lower than the start point of 1837?

USD  - 0.3%..and that is no doubt helping the metals.. Gold +$2...from -5

3.30pm.. minor chop....'toppy' chop?  

Best case close right now.. 1866/64, with VIX 14.20/30s.

3.35pm...the sp'1870s....hmm..  Well, original target zone 1865/75... so long as we don't go much above there, I ain't concerned.

Unless you think new highs will occur on 'magical earnings', this remains a bounce to short.

3.54pm.. I smell toppy chop. Bull maniacs had a good bounce of the week..should be a battle into the take out the 50 day MA again.   back at the close!

2pm update - time for some fedspeak

US equities are holding moderate gains ahead of the Fed minutes. Certainly, its not a policy decision announcement, but still. the algo-bots will be ready to interpret the words of those in control of the PRINT key.  Indexes look prone to getting stuck..and rolling over in the 1860/65 zone.



*I'd like to give the market 5-15 mins to churn around a bit....and see if we break >1862/63.. a level which many are watching.

VIX looks close to being floored...


A brief drop to 14.10/00..and then a turn?

2.01pm.. micro spike....still <1863....... hmmmmm

2.07pm.. bears getting short-stopped.. no doubt.

I like the setup..right now.. especially the VIX.

...standing by....

2.11pm.. we're in the target zone of 1865......... eyes on the 5min cycle...

2.13pm.. SHORT from sp'1865

2.16pm.. LONG VIX.. .from 13.90s.

I'm done...will now sit back..hold overnight..and see how we trade tomorrow and Friday.

Initial downside target is 1830/20 zone.

2.28pm...we're now at the typical turn time of the day.  Bull maniacs have had a good run from 1837 to 1869.

No doubt, this Fed spike is REALLY rattling many, not least those who have been holding short since the break of the 50 day MA .

*for a break of the current wave...bears need a daily close/Thursday open <1862.

2.41pm.. We're surely going to get stuck in this 1865/75 zone. Micro cycles all look burnt....

A daily close < the target... won't be easy...I'd settle for 1864 right now!

1pm update - is it a bounce?

The big question the current wave from sp'1837 just a natural bounce, with more downside to come (1830/20s minimum) a key floor in, and the market set for new highs? Considering price action and structure, best guess remains....a bounce.



We're fast approaching the lower end of the target zone.

I don't expect the 1870s today.

With VIX in the low 14s, this is not exactly a bad level to re-short.

Lets see how the market reacts to the Fedspeak at 2pm.

1.21pm.. I see a lot of obsessive chat about the sp'1863 threshold..middle daily bol'''...actually 1862 right now.

Market in a holding pattern..ahead of the press release.

With VIX in the low 14s...we are surely pretty close to a floor.

12pm update - battling higher

US indexes are continuing to battle higher, but the price action sure is a little fragile. The Fed minutes press release is due at 2pm, and that should be enough to kick the market to around 1865. Right now, the 1870s look out of range for the bulls on what is very likely...a bounce.




So..we're still pushing upward..if somewhat slowly.

I remain on the sidelines, will strongly consider picking up an index short and maybe a VIX call block just after 2pm.

VIX update from Mr T

stay tuned :)

12.36pm.. upper bol now 1866... ...and vix headed for 14.10/00

11am update - daily 10MA resistance

Equities are still holding moderate gains. One particular level of resistance is the daily 10MA, currently @ sp'1866. Indeed, a daily close in the 1870s looks very difficult. Metals remain weak, Gold -$5, with Silver -1.1%, which is not helping the miners.



It sure is a bit choppy, and the bulls are struggling.

I'd like to at least give the market a good 10/15mins after 2pm..for the FOMC press release to be churned through. I am in no hurry.

Miners are weak...

GDX, daily

Will get ugly if metals roll over again...

10am update - opening.. shaky gains

US equities open with some minor gains. Underlying pressure looks bullish into the early afternoon. Whether the market rolls over after the Fed press release...that is the question. VIX is naturally a little lower, should find a floor in the low 14s today. Metals are weak, Gold -$6




*note the upper @ 1876..and falling fast. Bulls will face strong resistance in the 1865/75 zone today.

Opening reversal (hollow red) candle on the VIX, but..considering we're only in the sp'1850s...I ain't getting involved this morning.

A long day ahead, even though the only event due is a press release from the Fed.

10.09am... minor chop..but the upside pressure IS there.

I should again note, I am somewhat cautious..since Thur/Friday there is QE. Now, it ain't 'huge' $5bn..those days are currently over...but I'm still a bit twitchy about holding short across 2-3bn of QE.

10.35am.. bulls pushing.....the 1860s are a'coming

Pre-Market Brief

Good morning. Futures are moderately higher, sp +2pts, we're set to open around 1854. Precious metals are weak, Gold -$5, with Silver -0.8%. Equity bulls look set for a continued bounce, which will likely get stuck in the 1865/75 zone.



*note the upper bollinger band on the hourly cycle, which is now collapsing. That will be primary resistance today, and might end the day in the low 1860s.

A daily close in the 1870s looks...out of range.

The big question is how will the market deal with the fed press release at 2pm? Any mention of higher interest rates would really upset the market.

*I remain on the sidelines, but will look to pick up a few market shorts today, preferably >sp'1865, with VIX in the low 14s. That would seem a reasonable level to get involved.

8.40am.. sp +4pts, so..that will open us at 1856.

9.25am... sp 1857...

So..the 1860s look a given..this morning..the only issue is whether the market can keep on pushing to the 1870s.

I will keep a close eye on the VIX, for me, that might be a more useful indicator of a turn...later today.

Weekly charts remain ugly

Despite moderate index gains, the equity bears continue to inflict significant technical damage to the market. With the sp' taking out the recent 1842 low, along with the 50 day MA, price momentum continues to swing towards the bearish side.


Dow, weekly


*Indeed, equity bears should seek a weekly close <1838.

The above chart lacks the 'best case summer doom' of weekly7b, but still, the bears do have some things to tout today, most notably - the break into the 1830s.

We have the second consecutive blue candle, and this morning, as the 50 day MA was broken, the weekly 'rainbow' candle  A closing red candle this week -in my view, would really open the door to the 1770s next week.

A hit of the lower weekly bollinger would give a strong initial confirmation of weakness into the late spring/summer. Primary downside target remains sp'1625/1575..before another hyper wave to the upside.

Video update from Gordon T Long, With Charles Hugh Smith

As ever, for those interested in the bigger macro picture, well worth giving some time to.

Looking ahead

Tomorrow will be all about the FOMC minutes, due at 2pm.

*next sig' QE-pomo is not until Thursday.

I remain on the sidelines, and will consider an index re-short/ VIX long, on any continued bounce. If the market can't rally hard on the Fed press release...a reversal will be likely - not that it is absolutely necessary tomorrow afternoon.

Goodnight from London

Daily Index Cycle update

US indexes managed to hold moderate gains into the close, sp +6pts @ 1851. However, the morning  break of the 50 day MA was significant, and the current bounce is indeed most likely that, just a bounce. Best case downside for the equity bears remains the sp'1780/60 zone.



Suffice to say, the break below the 50 day MA of 1839 was very significant, and bodes for lower levels later this week.

A continued minor bounce into the sp'1865/75 zone seems viable tomorrow, before another reversal.

a little more later.