How would 2015 end for SPX?

I thought I would post today cause the market appears to be at an interesting position. First, below are the daily charts for SPX, NYMO and VIX.

SPX is testing a support area of 2000-1993, and on friday closed below the short term support 2019. The MACD(d)  is pushing lower after the zero crossing, this is quite bearish and it looks like a big move lower is on the cards. A break below 1993 and the 1870 are comes into play, its a pretty bad scenario from the market perspective though.

VIX is at 24.39, a clear breakout bar, which tends to push it higher next stop is 30 and it could easily test the 53 high we say in August. but its a sentiment indicator and is fickle. Here id say together with SPX the outlook is quite bearish and sets up a nice bear trap

NYMO closed at a very oversold -80 on Friday and as can be seen that is a rather rare event. The sharp move we saw in August was the most recent spike below 80 and continued lower to 104, from where the heavy btfd bots pushed it higher. This is what makes the situation interesting, whether the bears can be confident about their shorts or will they get squeezed as in the past 7 years

Fundamentally, I think the HYG vs SPY spread for me is a clear indication that the market needs to pull lower. But the FOMC meeting begins Tue 15, is announcement is on Wed Dec 16, usually bullish, and quadruple witching on Friday the 19th.

So Scenario#1 that comes to mind is, we see a drop into Monday open, test 1993 and then the bots start buying given where NYMO is. we see a spike higher into FOMC anticipation, market likes what they say, rally continues into Friday and pull us above 2075 and the Santa Claus rally kicks in into EOY. who knows where it takes us, prolly back above 2100.

On the other hand we could see 1993 tested, chops Tuesday and Fed raises rates and market doesn't like it, SPX sells off aggressively towards 1870, starting a down trend, will need to see if there is a target area below that.

To remember this week is that it took just 3 days in August for SPX to drop 2075 down to 1867, -208pts being cautious is really important here.

VIX suggesting increase in downside risk for SPX

VIX pattern suggesting market turn lower might not be too far away, volatility compression usually resolves with a breakout. You could play VIX seasonality with calls to hedge porfolio or take outright short positions among other things. In any case something to keep an eye on.

Near term top or just a contract roll adjustment?

Friday sold off from $NYMO reading at overbought 86.76 on Thursday, its a good indicator to look at for short term setups. While the open was weak, most expected a bounce back given the recent Fed zero taper, the $TICK didn't hint at the eventual sharp decline either. Also, the declines were not broad based as Mid caps and tech didn't follow along with SPX/INDU.

SPX -12.43 -0.72%
INDU -185.46 -1.19%
RUT  -2.44 -0.23%
COMPQ -14.65 -0.39%

The Fed surprising the market with zero tapering sent us higher but triple witching on Friday, and the markets distrust of this move up took us down erasing all the gains made. Whats useful to look at is that the peak on Friday seems to be approx 0.618 measured move of the recent move up. Along with the House vote on Obamacare and possible Govt shutdown (again!) may lead to some bear action in the coming few days. For the bulls, while we have closed below Aug peak we still are within range for a bounce here, and as always the Fed's got your back :)

(for the conspiracy folks, the PPT usually kicks in at critical levels unless they want to apply some political pressure by a crashing market to get the House in order ;).. enjoy the week

Emerging markets first casualties of Fed policy talk of taper

Most of the time its easy to make fun of the economic collapse brigade out there and other times its really obvious how unstable the world economy is and has been since the financial crisis. Was reading up on how emerging markets and their currencies were collapsing and it seems all too obvious how the Fed taper talk may have been the reason for that.

Sometime in May the Fed started talking about taper and emerging market equities (EEM) began to tank lower, see red line. As the very mention of taper meant bond yields in the US would rally and investing at home becomes more profitable. FDI pulled out of the EM markets led to the slide and their currencies. The FDI pullout has left their markets lower by 13% while their currencies continue to slide. Some of that repatriated dollar fled back into equities and led to the 10% spike in equities on relatively no volume.

Seems indicative of some serious challenges ahead, I mean these are relatively decent size economies (India is the 3rd largest in PPP terms) and yet the impact of US policy is just beyond their management capabilities. What is more of concern is what happens to the US economy when Fed does begin to taper. If equities can move 10% in two weeks what woulds stop from a larger slide down, when everybody is a seller!

Recap 8/22/2013 - Choppy ahead

It's been interesting since the last post, we had a declined on talk of QE taper then ramp up sharply on the Fed calming the markets on tapering. Then bulls seemed exhausted and the SPY moved sideways for a while until the exhaustion played out. In a rather sharp move lower. Seems like price lately is about jumping levels and then consolidation at those levels. We did the grind near the all time highs above the 5/22 peak the jumped lower and for the last four days price has just hugged the 6/18 high. Also, look at the measured move targets, price almost exactly matches.

I posted this chart on TV earlier, price broke 0.38 fib and has bounced higher. Its at an interesting level near the 6/18 high and if tomorrows open isn't higher the bounce gets cancelled and we should move lower towards the 162 target on my chart, we'll find out.

Recap 6/17/2013 - Consolidation looking to resolve

Looking at daily candles for hints into the week ahead. Two short term levels are important here. One is around 1634.8 near the market open on Friday, its same as breakout level "A" market on chart. The other level is near 1646.87 which was the doji reversal level and the break down marked "B" on chart. You can see that prices failed at "A" and must break above it to continue higher. The index closed lower on Friday, confirming a higher low up trend. We are consolidating here in a triangle looking to break out. Two scenarios seem possible -

First is that the rebound continues higher and prices break level "B" tomorrow, I have a preference for this outcome. On the day trading side breakout of "A" would make a good entry for a long position, to close near "B". Break above should give us the second entry as sellers might try to test the bulls resolve near "B". Breakout should also take us further to retest the recent high in the days to come. Failure would create a wedge reversal.

Second scenario is bearish in which case the red close on Friday continues with a break down below, would require a 30pt move or so, now thats possible as volatility is back. But would require some bearish news unless we are reading the price action incorrectly and the bears are charged up. Two news items to watch is the developing story from Syria which could throw us a surprise and off course Economic data, although the latter isn't all that interesting tomorrow.

6/4/2013 - Muni's in focus again, sell off round the corner?

6/4/2013 - "Jefferson County, Ala., took a big step toward resolving its historic bankruptcy case .." reports  NY Times (http://dealbook.nytimes.com/2013/06/04/a-county-in-alabama-strikes-a-bankruptcy-deal/?hp) prompted a look at some Muni bond ETF's. The theme is quite clear on all of them and very bearish, a precedent might set off a bunch of others counties to get out of their situations.

Here is a look at the weekly chart for CMF, – iShares S&P California Municipal ETF. It broke support and has ways to go before the next decent support is tested..