Friday, January 30, 2015

Jan 30 - Major correction possibility back into play

In a strange way, the fact that we went up then reversed gains today was more bearish than if we had gone down straight.  Slowly but surely, buyers are beginning to evaporate from the market as the bounces are being burned off on a daily and most noticeably on an intraday basis.  SPY registered increasing volume and is close to exiting its consolidation zone.  Today was particularly ugly because the market struggled all day to fill the gap and upon doing so gave up the filled gap and more very quickly.

VIX has potential to reach 30+ and VXX could match November highs in the mid 40's.  Based on comparative volume, the market could fall an entire week before it reaches a bottom.  This puts VIX/ VXX at such levels.

$NYUD printed a major distribution day and these events are often followed by roughly a week of intense selling.  It is possible the market hangs on for another week, but if and when it corrects, I am looking for about a week of heavy selling to bring us to 1900 level in SPX.

Jan 30 - Bounce burned off

After lots of whippiness today, reestablished Weds short positions that were closed yesterday.  We are getting much closer to breaking support and looks like we will see it happen soon if not next week.  Some levels in the indexes were slightly breached today.  If we get that breach, 1900 in SPX is not out of the question.  More to post later...

Thursday, January 29, 2015

Jan 29 - Longs hanging in there

Unloaded VXX and some longs.  We might get some more bouncing and thrashing around.  Will post more later...

Wednesday, January 28, 2015

Jan 29 - Potential breakdown

Toward was set up for a bounce day but instead got a heavy distribution day, the first since December.  It is looking more probable we retest lows from December and possibly below.  Going into next week there is a pretty strong chance of continued downside.

DIA broke down out of its consolidation while SPY/ QQQ while still within their respective zones, are threatening to challenge them bottom levels soon.  After multiple tests they often fail.

Tuesday, January 27, 2015

Jan 27 - Welcome to the blender

Looks like the market is going to inflict as much pain on both the bulls and bears as possible.  The market has been incredibly whippy making me rethink my XIV position more than a few times in the last few days.  An unusually large gap down did not come close to filling but on fairly low/moderate volume.  After hours the market jumped up quite a bit following AAPL announcements.  Whether the move was to be attributed to that who knows but for most indexes we are sitting right in the middle of consolidation.

I am leaning bullish for tomorrow and intermediate term considering the size of that gap down in SPY.

IWM's daily chart is a mess and today the small caps showed strength, recovering fairly strongly on a large gap down.

HYG (higher risk bonds) once again held fairly strong over its trendline so I am more inclined to see whether a bullish case materializes.  

Saturday, January 24, 2015

Jan 24 - Weekend update, more bullishness ahead or continued consolidation?

Looks like we are at a bit of a crossroads in the indexes sitting at the upper end of consolidation ranges.  It will interesting to see if we continue moving up, if so this will probably mean breaking previous highs in many of them.  What happens for the long term in upcoming months is a different story as the volatility has ramped up quite a bit and from a much larger time frame one might want to start looking for extended weakness as the chop and froth bubble further.  Given that the economic recovery has been a very gradual and slow building one, I am more inclined from a fundamental standpoint, much of this is priced into the market.  If one believes that is the case, the currently fairly high relative historical valuations and the increase of much more capital from both the debt and equity side entering the market makes me believe a longer term correction is not unwarranted, technicals aside.

As of now the indexes could be ready to break out this week or retest their bottom end of consolidation zones before making decisive moves in either direction.  I am currently inclined to think we will go north of where we are sooner than later based on the recent burnout in VIX.  Below is a study from 2011 from
Rob Hanna's studies referencing such events.

Urban Carmel's the Fat Pitch also mentions seasonality in his post this weekend amongst other factors.  It also includes quite a good review of top forming churn at the last long term cycles going back to 2000.

As for the indexes, the most promising is the QQQ which managed to finish in the black and is poised to break out.  Given, however, how whippy it has been we could see a pullback before retesting the upper trendline.

SPY and DIA get dinged on Friday but the selling volume was less than intense as you can see on the daily volume bar being well below normal.  Even if the markets dips a bit, I would be surprised to see aggressive selling volume to appear.

Thursday, January 22, 2015

Jan 22 - Strong upmove in indexes, VXX makes big drop

ECB as expected delivered and also added additional language of an undetermined end date to QE which was viewed favorably by the markets.  My XIV position is +10% and will watch carefully in near future to see if we continue this up and down consolidation that we have been doing for the last month or whether we retest highs.  So far, NYUD and VIX are supportive of this move.  HYG also cracked its descending trendline which is a plus.

Wednesday, January 21, 2015

Jan 21 - VXX sell signal confirmed

Although VXX is selling off nicely and normally would mean a multi-week sell, the ECB announcement could either reinforce or reverse current activity.  Buying pressure wasn't strong but enough to make VIX move down and lot and lead to moderate gains in the indexes.

Based on the limited sell volume ratios on NYSE on the last 2 downturns, the bigger correction still hasn't occured yet.

Tuesday, January 20, 2015

Jan 20 - Weak bounce

VXX issued a sell signal but not terribly strong.  After selling off the gap up, the market stage a comeback albeit a weaker one.  Still decent possibility of the bounce continuing but longs should exercise caution as we wait to see if this triple bottom like formation comes into play.

Monday, January 19, 2015

Jan 19 - Bounce time?

VIX/ SPY could be due for a bounce this week.  How much is uncertain but selling pressure was not ramping up last week despite the down move.  However the increasing volatility does not bode well long term for the markets and a deeper correction may be around the corner.

Further arguments for a bounce here courtesy of Fat Pitch

Thursday, January 15, 2015

Jan 15 - long XIV/ potential bear trap

Looking for a short/intermediate term bounce as VIX looks to be tiring out.  Will post more after close.

Thursday, January 8, 2015

Jan 8 - Big follow through

Strong gap up and solid follow through today.  The up/down volume ratio confirmed and it is looking likely we retest highs.  The strong up volume spikes on the daily usually mark reversals.  Conversely, the lack of big selling volume ratio on this downturn was apparent unlike the previous 2 downturns.

Wednesday, January 7, 2015

Jan 7 - Will the bullish reversal follow through?

Today was marked by a very large gap up and choppy but significant move up through the day and stalled out after FOMC minutes were released.  Although bullish and at the moment futures are up big which will probably mean a gap tomorrow also.  This move could mirror the rebound in mid Dec although it is a bit odd it didn't top out any indicators including the Bollingers.

A bit unclear how the indexes will respond in intermediate term.  Could be a 1-3 day oversold bounce or heading towards retest of highs.  Today's reversal came at a slightly odd location for an intermediate downturn.  In the last 2 years we haven't seen VIX not enter overbought territory in stochs and/or CCI for multiple day downturns.  In addition, on the indexes like SPY not even on an 60 min time frame was there any froth or re-tests of lows which is extremely common before a reversal.  Although we need to respect price action, where the market turned is a bit unusual and from a cyclical standpoint seems a bit incomplete which leaves the market to turn down again quickly not unlike post-Christmas if this sharp up move runs out of steam.

Either way, there isn't much of an edge in either direction and the next couple days should reveal the market's hand more clearly.

Saturday, January 3, 2015

Jan 3 update - Intermediate downside potential

Right now the short term bullish case has been threatened and it is very possible that January begins with corrective activity.  The market had every reason to post a Christmas rally but failed to do so and was marked by end of the day weakness which concluded on a fairly solid selloff the last trading day of the month.

The $RUT index posted a sell signal on the daily and $VIX also is showing strength and has room to move above before it is tested by its upper Bollinger range.

Seasonality aside, the recent early Dec bounce seemed to have been too exaggerated off the bottom with not enough follow through.  These strong bounces that flare out quickly often are followed by even stronger downturns.  As a recent bull, I would have preferred to see a more steady move up.  Even if we recover here, I would be cautious given the awkwardness of this bounce in Dec.

On a short term time scale (60 min), the indexes posted buy signals so this gives some reason to those short to be cautious as dip buyers could easily move in on Monday when the market opens in earnest.

July 11 - GLD sucks

stopped out of GLD yesterday for -25%.  Holding off on reentry and maybe will enter if we drop another level. SPY on the other hand is crus...