The FED didn't seem to be able to keep the bulls interested today and the bears got the win today.
What positive event(s) will be able to push the VIX back down???
Until then the market may chop here a while.
CBOE VIX:
Michigan Consumer Price Index:
Wednesday, April 30, 2008
VIX Levels
The VIX chart has created some bottoming tails on the daily (double bottom?)
The FED didn't seem to be able to keep the bulls interested today and the bears got the win today.
What positive event(s) will be able to push the VIX back down???
Until then the market may chop here a while.
CBOE VIX:
Michigan Consumer Price Index:
The FED didn't seem to be able to keep the bulls interested today and the bears got the win today.
What positive event(s) will be able to push the VIX back down???
Until then the market may chop here a while.
CBOE VIX:
Michigan Consumer Price Index:
SPX - Text Book
The SPX has decided to pause where the downward trendline and horizontal resistance intersected.
Today's price action created topping tail on the SPX daily, further confirming the Low Close Doji (LCD) on the daily chart (short term bearish).
If the price action is lower tomorrow I'll be looking for support at the 100MA on the daily which is at about 1377.
The short term uptrend is still intact so lets watch to see if this is just a minor pullback or if the sellers really step in to resume the longer term downtrend.
... The intermediate downtrend is still intact too! (conflicting trends on different time frames may create some battles that create another area of consolidation)
SPX Daily Chart:
Today's price action created topping tail on the SPX daily, further confirming the Low Close Doji (LCD) on the daily chart (short term bearish).
If the price action is lower tomorrow I'll be looking for support at the 100MA on the daily which is at about 1377.
The short term uptrend is still intact so lets watch to see if this is just a minor pullback or if the sellers really step in to resume the longer term downtrend.
... The intermediate downtrend is still intact too! (conflicting trends on different time frames may create some battles that create another area of consolidation)
SPX Daily Chart:
Wednesday, April 23, 2008
VIX - I LIke this Range
I've been staring at the VIX chart for about a half hour tonight trying to be at "one" with it and seeing if it would give me a sense of where it wants to go.
The opposing tails on the daily chart over the past few days are showing continued indecision, but by staying up at these levels it seems to be more of a bullish sign.
What concerns me is what the charts are telling me about the ability for the VIX to potentially STAY at these lower areas. As you can see on the chart, over the past 8 months, the VIX has been in constant flux moving higher and higher every time it formed a new higher low. It could certainly be argued that the VIX is forming a new lower low and could continue lower, but given the current world economic climate, I am looking more for an unsustainable low on the VIX at an extreme area like 19 or 18 that would signal for me an extreme overbought condition similar to what we saw in late December. Fortunately I saw that December move for what it was and was able to take advantage of it with so low risk entries on some bearish trades. I see the same low risk scenario setting up here. An exhaustion gap down to 18 or 17.50 would be even better.
As for the bulls, if the VIX is able to stay below 21 and settle in the 19 to 16 range it could pave the way for a sustainable rally.
I will keep an open mind and trade the charts, but the pattern here so far suggests that the VIX could easily move back up to the 24 range (bearish). Note the bottoming tail on Monday's candle.
VIX Daily Chart: (BLUE area is my estimate on May's VIX range)
The opposing tails on the daily chart over the past few days are showing continued indecision, but by staying up at these levels it seems to be more of a bullish sign.
What concerns me is what the charts are telling me about the ability for the VIX to potentially STAY at these lower areas. As you can see on the chart, over the past 8 months, the VIX has been in constant flux moving higher and higher every time it formed a new higher low. It could certainly be argued that the VIX is forming a new lower low and could continue lower, but given the current world economic climate, I am looking more for an unsustainable low on the VIX at an extreme area like 19 or 18 that would signal for me an extreme overbought condition similar to what we saw in late December. Fortunately I saw that December move for what it was and was able to take advantage of it with so low risk entries on some bearish trades. I see the same low risk scenario setting up here. An exhaustion gap down to 18 or 17.50 would be even better.
As for the bulls, if the VIX is able to stay below 21 and settle in the 19 to 16 range it could pave the way for a sustainable rally.
I will keep an open mind and trade the charts, but the pattern here so far suggests that the VIX could easily move back up to the 24 range (bearish). Note the bottoming tail on Monday's candle.
VIX Daily Chart: (BLUE area is my estimate on May's VIX range)
SPX Consolidation
The S&P 500 continues to consolidate in the 1360 to 1390 range. With the FOMC rate cut announcement coming up next Wednesday (estimated at a .25%), the index may decide to continue trading in this range until the announcement.
Unlike the high anticipation of some of the last announcements, I get the feeling that this one just doesn't matter as much as the past 5 or 6 did. The feverish buildup of what they're going to cut seems absent from this one so far. The streets seems to be pricing in a .25% and we'll just have to wait and see how the announcement affects the market.
From a pure technical standpoint, The SPX is still in an intermediate downward trend with a short term upward trend still in progress.
The price is currently below the intermediate downtrend and above the short term up trend. As long as the price stays within that range my stance will remain neutral.
Should the SPX break to the upside, I would look for 1406 (horizontal resistance) and 1417 (fib resistance) to be very strong resistance areas. To confirm a bullish bias I would need to see the SPX cross above, retest and create another higher high and higher low above the 1406 area.
The SPX closed today with a doji at the 38.2% fib level so still lots of indecision.
AMZN, AAPL and SBUX all reported after hours today and despite mixed reports and guidance, they ALL traded lower in after hours trading. We'll have to watch futures tomorrow morning to see if the hangover lingers our if the street gets some more good news to counter the bad.
I have hedged my SPY Iron Condor positions with some SPX Butterflies in case we continue the short term uptrend, but I am also fishing for a cheap price on some SPX Put Butterfiles with 1300 guts to hedge my bottom IC positions in case the downtrend continues.
In summary, I am neutral with a slightly bullish short term bias based on the higher highs and higher lows I see on the daily chart. However, I also see resistance dead ahead at those 1406 and 1416 levels so I wouldn't be surprised if we saw some bull/bear fighting in those areas that might lead to some more consolidation instead of outright bulltardness.
Bulltard (bool-tard') n. 1. Trader or investor who buys and buys and buys and buys... driving equities, commodities and other instrument prices to unsustainable price levels.
SPX Daily Chart: Note: Since November of 2007, the SPX has never spent more then 9 days ABOVE the 30MA without needed to retest it. As of today (Wednesday) it has been above it 8 days. We are either going to equal the record of 9 tomorrow or fall back down to retest it again.
Unlike the high anticipation of some of the last announcements, I get the feeling that this one just doesn't matter as much as the past 5 or 6 did. The feverish buildup of what they're going to cut seems absent from this one so far. The streets seems to be pricing in a .25% and we'll just have to wait and see how the announcement affects the market.
From a pure technical standpoint, The SPX is still in an intermediate downward trend with a short term upward trend still in progress.
The price is currently below the intermediate downtrend and above the short term up trend. As long as the price stays within that range my stance will remain neutral.
Should the SPX break to the upside, I would look for 1406 (horizontal resistance) and 1417 (fib resistance) to be very strong resistance areas. To confirm a bullish bias I would need to see the SPX cross above, retest and create another higher high and higher low above the 1406 area.
The SPX closed today with a doji at the 38.2% fib level so still lots of indecision.
AMZN, AAPL and SBUX all reported after hours today and despite mixed reports and guidance, they ALL traded lower in after hours trading. We'll have to watch futures tomorrow morning to see if the hangover lingers our if the street gets some more good news to counter the bad.
I have hedged my SPY Iron Condor positions with some SPX Butterflies in case we continue the short term uptrend, but I am also fishing for a cheap price on some SPX Put Butterfiles with 1300 guts to hedge my bottom IC positions in case the downtrend continues.
In summary, I am neutral with a slightly bullish short term bias based on the higher highs and higher lows I see on the daily chart. However, I also see resistance dead ahead at those 1406 and 1416 levels so I wouldn't be surprised if we saw some bull/bear fighting in those areas that might lead to some more consolidation instead of outright bulltardness.
Bulltard (bool-tard') n. 1. Trader or investor who buys and buys and buys and buys... driving equities, commodities and other instrument prices to unsustainable price levels.
SPX Daily Chart: Note: Since November of 2007, the SPX has never spent more then 9 days ABOVE the 30MA without needed to retest it. As of today (Wednesday) it has been above it 8 days. We are either going to equal the record of 9 tomorrow or fall back down to retest it again.
Thursday, April 17, 2008
VIX revisited - Fear gives way to Greed
The VIX has finally broken the long standing trendline on the daily chart to make new 3 month lows. This indicating that fear is at a several month low.
So, despite terrible econmic data, poor housing numbers and GE missing for the first time in 20 years, the market is shrugging it off (at least temporarily).
The interesting part of this chart to me though is the huge and sustained sell offs that have occured after the LOW spikes in the VIX, notably OCT, DEC and FEB.
The break of the trend may break this spell, but extremes are often met with extremes to the other side. We'll see.
At this point, with the bullish sentiment in the air, the chart seems to show us that a VIX in the 18 range is a likely level before bouncing up again. We may see that early next week if the rally continues.
I don't foresee a VIX below 18 with the current economic conditions, but we must remember that anything is possible and we must trade what the charts are telling us.
CBOE Volatility Index ($VIX) The Fear Gauge
So, despite terrible econmic data, poor housing numbers and GE missing for the first time in 20 years, the market is shrugging it off (at least temporarily).
The interesting part of this chart to me though is the huge and sustained sell offs that have occured after the LOW spikes in the VIX, notably OCT, DEC and FEB.
The break of the trend may break this spell, but extremes are often met with extremes to the other side. We'll see.
At this point, with the bullish sentiment in the air, the chart seems to show us that a VIX in the 18 range is a likely level before bouncing up again. We may see that early next week if the rally continues.
I don't foresee a VIX below 18 with the current economic conditions, but we must remember that anything is possible and we must trade what the charts are telling us.
CBOE Volatility Index ($VIX) The Fear Gauge
NDX Levels (Pre-Google Earnings)
The NDX got a MAJOR boost in the arm after market closed today with Google earnings coming in very favorably to the market. Google closed up $76.42 to $25.96 (17%) in after hours trading. NDX futures shot up and are holding at 1875 at the time of this posting.
The Internet Index ($DJUSNS) will be interesting to watch as it may get some strength to set about testing the 38.2% fib level up at 420. This will likely require Google to lead the charge.
The Software Index (DJUSSW) is at resistance, but will likely break through on Friday with the Google strength. (riding the internet coat tails)
The SemiConductor Index ($SOX) got some needed strength with the Intel earnings news earlier this weak, but still sits below some overhead resistance at 380. Like the others, we'll see if Google can lead them up and over the 380 level.
The Biotech Index Sector ($BTK) has shown some incredible relative strength and may give us some clues chartwise on how the other sectors might play out once they break out above resistance. Notice that once resistance was broken it didn't take long to retest the downward trendline. Now we watch over the next few weeks to see if it can break and hold above the downward trendline. If so it would be good news for the NDX.
The key to any sustained rally will be the need for some more good news! The market has a VERY short term memory, and by next Wednesday everyone will have likely forgotten about Google earnings and will be looking for the next bit of news to confirm their bullish stance. If bad news spooks the market they'll sell and we'll have to wait for more good news to drive it back up.
If more companies can beat expectations it should keep the market moving up.
This is the same chart we looked at 2 weeks ago when we talked about the importance of the 1860 and 1825 level. Notice that we closed in the dead center of that range today. It took some trips out of that range over the last 2 weeks (forming a bull flag) and tomorrow it will likely open in the 1860-1875 range. The next fib target to the upside is 38.2% - 1886.08
We'll be watching carefully to see if Google can save the day "all day" by staying positive for the entire day and closing above 1860 again.
An 1890 close would create a higher high for the NDX.
NDX Daily Chart:
The Internet Index ($DJUSNS) will be interesting to watch as it may get some strength to set about testing the 38.2% fib level up at 420. This will likely require Google to lead the charge.
The Software Index (DJUSSW) is at resistance, but will likely break through on Friday with the Google strength. (riding the internet coat tails)
The SemiConductor Index ($SOX) got some needed strength with the Intel earnings news earlier this weak, but still sits below some overhead resistance at 380. Like the others, we'll see if Google can lead them up and over the 380 level.
The Biotech Index Sector ($BTK) has shown some incredible relative strength and may give us some clues chartwise on how the other sectors might play out once they break out above resistance. Notice that once resistance was broken it didn't take long to retest the downward trendline. Now we watch over the next few weeks to see if it can break and hold above the downward trendline. If so it would be good news for the NDX.
The key to any sustained rally will be the need for some more good news! The market has a VERY short term memory, and by next Wednesday everyone will have likely forgotten about Google earnings and will be looking for the next bit of news to confirm their bullish stance. If bad news spooks the market they'll sell and we'll have to wait for more good news to drive it back up.
If more companies can beat expectations it should keep the market moving up.
This is the same chart we looked at 2 weeks ago when we talked about the importance of the 1860 and 1825 level. Notice that we closed in the dead center of that range today. It took some trips out of that range over the last 2 weeks (forming a bull flag) and tomorrow it will likely open in the 1860-1875 range. The next fib target to the upside is 38.2% - 1886.08
We'll be watching carefully to see if Google can save the day "all day" by staying positive for the entire day and closing above 1860 again.
An 1890 close would create a higher high for the NDX.
NDX Daily Chart:
SPX Levels
The SPX gets another chance over the next few days to attempt a higher high on the daily charts. An earlier attempt this month failed. A close above 1396 would do the trick.
There's been a lot of talk about bullishness and it seems technically feasible to get a rally back up to retest the 100MA at 1383. The real test will be to make it up to and over the 1400 area. Once it makes it up and over it would make technical sense for it to consolidate in the 1380 to 1440 area for a while before either moving up or falling back down.
Keep in mind that the intermediate trend is still DOWN (as illustrated by Downward Trendline)
Looking at the chart, one is reminded about the extremely short term memory of the market. Somewhere on that chart is the fear brought on by the weak GE earnings, the exuberance of the Intel earnings, and countless other news items that continue to keep the market extremely volatile.
With weak economic data and questionable earnings to come, the market is likely to do what it always does -- go up and down. Enjoy the uncertainty, take risks but avoid danger.
Can you spot the potential Bear Flag on the SPX Daily Chart below?
SPX Levels:
There's been a lot of talk about bullishness and it seems technically feasible to get a rally back up to retest the 100MA at 1383. The real test will be to make it up to and over the 1400 area. Once it makes it up and over it would make technical sense for it to consolidate in the 1380 to 1440 area for a while before either moving up or falling back down.
Keep in mind that the intermediate trend is still DOWN (as illustrated by Downward Trendline)
Looking at the chart, one is reminded about the extremely short term memory of the market. Somewhere on that chart is the fear brought on by the weak GE earnings, the exuberance of the Intel earnings, and countless other news items that continue to keep the market extremely volatile.
With weak economic data and questionable earnings to come, the market is likely to do what it always does -- go up and down. Enjoy the uncertainty, take risks but avoid danger.
Can you spot the potential Bear Flag on the SPX Daily Chart below?
SPX Levels:
RUT Levels
The RUT has continued to set lower highs as the last peak resisted right at 720 (just under the 100MA). The 100MA is sitting at 715.99, and may be tested on Friday if the Google exuberance can spark a expiry day rally. It will be very interesting to see where the index settles Friday AM.
Key resistance levels up top are 720, 730 and 740. A short term rally could easily put RUT up to 740 if the spigot of bad news is shut off for a week or so.
Notice how the todays prices found support at the halfway point of yesterday's large white candle. (same level as Monday's open)
RUT Daily Chart:
Key resistance levels up top are 720, 730 and 740. A short term rally could easily put RUT up to 740 if the spigot of bad news is shut off for a week or so.
Notice how the todays prices found support at the halfway point of yesterday's large white candle. (same level as Monday's open)
RUT Daily Chart:
Dow Levels
The DOW continues to move toward 12,750 resistance. Maybe the Google earnings hull-a-balu will stroke some more buyers in the DOW to retest that level.
DOW Daily Chart:
DOW Daily Chart:
Paper Trade Ideas - RUT Tight Iron Condor
Tonights Paper Trade Idea (for Educational Purposes ONLY, NOT a recommendation)
Looking at the RUT Chart it appears that it might have a possibility of closing in the 730 to 740 area in May.
To cap risk, create a good risk/reward ratio and a large break-even zone we're going to look at selling a tight Iron Condor on the RUT. This is a position we will put on and not make any adjustments to.
In this paper trade idea we will sell 1 contract of the MAY RUT 740/730/720/710 Iron Condor for a credit of $8.20. Our total risk on this trade is $10.00 - $8.20 = $1.80 + commissions.
Our breakeven at May expiry (5/15) is between 711.80 and 738.19 giving us a profit range of 26 points. Our breakeven on 5/14 is between 706.14 and 743.21 which gives us a 37 point profit range.
Hypothetically if we end up at 710 the day before expiry, you can close the trade out for a $131.00 profit (less commissions).
Since you risked $180 on the trade and made $131, your return is close to a 72% return in 4 weeks. Closing out at 710 was actually below our "expiry" break even level but we are still able to profit by closing out a day before expiry -- they are very forgiving.
Max profit is acheived if you let the IC expire worthless between 720 and 730. I wouldn't expect that to happen but if it did you get to keep the entire $820.
If the RUT ends up at 725 the day before expiry you can close out the trade for about $500 and avoid any settlement day surprises.
Analyze Tab View of MAY RUT 740/730/720/710 Tight Iron Condor
Looking at the RUT Chart it appears that it might have a possibility of closing in the 730 to 740 area in May.
To cap risk, create a good risk/reward ratio and a large break-even zone we're going to look at selling a tight Iron Condor on the RUT. This is a position we will put on and not make any adjustments to.
In this paper trade idea we will sell 1 contract of the MAY RUT 740/730/720/710 Iron Condor for a credit of $8.20. Our total risk on this trade is $10.00 - $8.20 = $1.80 + commissions.
Our breakeven at May expiry (5/15) is between 711.80 and 738.19 giving us a profit range of 26 points. Our breakeven on 5/14 is between 706.14 and 743.21 which gives us a 37 point profit range.
Hypothetically if we end up at 710 the day before expiry, you can close the trade out for a $131.00 profit (less commissions).
Since you risked $180 on the trade and made $131, your return is close to a 72% return in 4 weeks. Closing out at 710 was actually below our "expiry" break even level but we are still able to profit by closing out a day before expiry -- they are very forgiving.
Max profit is acheived if you let the IC expire worthless between 720 and 730. I wouldn't expect that to happen but if it did you get to keep the entire $820.
If the RUT ends up at 725 the day before expiry you can close out the trade for about $500 and avoid any settlement day surprises.
Analyze Tab View of MAY RUT 740/730/720/710 Tight Iron Condor
Thursday, April 3, 2008
VIX - Where is the Fear?
Tonight we'll discuss the VIX 1 year chart and possible ideas for where it's headed.
VIX 1 Year Chart:
VIX 1 Year Chart:
SPX 20 Year / Monthly Chart
The 20 Year Chart shows some interesting candle data, we'll discuss that tonight.
SPX 20 Year / Monthly Chart:
SPX 20 Year / Monthly Chart:
SPX Levels
The SPX found resistance today at the 38.2% fib level after blasting through the 23.6% level on Tuesday. Tomorrows jobs data will likely create some good movement... we just don't know the direction. Target on the upside might be the 100MA at 1392 and the downside target for support might be around 1340.
SPX Daily Chart:
SPX Daily Chart:
NDX Levels
The NDX has really picked up some steam after getting a much needed lift from the Semiconductor Index and Biotech Index. Strength from AAPL and RIMM have helped to prop up both the NDX and the Semiconductor Index. The Software and Internet Indices are currently at resistance levels so time will tell if they can break above like we see below on the Biotech Chart.
NDX Daily Chart:
Biotech Index Chart:
Semiconductor Index:
NDX Daily Chart:
Biotech Index Chart:
Semiconductor Index:
DOW Daily Chart
The DOW Daily Chart is creeping up to the 12750 resistance area as indicated by the red dotted line. Look for the DOW to consolidate in triangle being formed with a breakout possibly giving us some hints as to the next direction.
DOW Daily Chart:
DOW Daily Chart:
RUT Levels
The RUT hopped up to the next fib level after breaking above the secondary downward trend line. Next level up top to test is around 723 where the 38.2% fib, 100MA and horizontal resistance collide. To the downside, first support area should be around 700 which is half way down the large white Apr 1 candle.
RUT Daily Chart:
RUT Daily Chart:
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