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Showing posts with label VIX. Show all posts
Showing posts with label VIX. Show all posts

Tuesday, February 5, 2013


Anyone that has been around the markets a while, will note the VIX tends to diverge at major turning points, at the last high on the SPX we got that divergence between the 2 markets

If you look back to the previous lows in the VIX, it shows a divergence (never makes a lower peak) between the SPX

The bulls would do well to head the signal as its a decent signal, although its far from confirmed, but the active trader, could have protected his/her portfolio with some cheap puts as the VIX was hitting extremes near 12.50

If the VIX rallies and we see a strong move lower in US stocks, protection is going to get a whole lot more expensive, but as usual not many will see any decline coming and it will only be when we see a serious decline will people take note and wake up

 When one looks at a daily chart of the SPX, we can clearly see an divergence on the last price, that couples with the VIX having seen a potential lower along with our working daily count suggests there could be strong evidence soon (if not completed already) of a serious decline setting up in US stocks

Sunday, January 13, 2013

The Case For a Major High

With the "almost" new high on the SPX we are slowly moving into my much awaited target zone of 1480-1500SPX. I have been tracking a potential ending diagonal on the SPX and with some of the other US markets showing similar patterns, I knew sooner or later the SPX would need to play catch up.

As usual those that forced 3 wave declines as 5 wave moves got run over as the markets have rallied back to test the Sept highs. For me it was a no brainer, the European markets had exceeded those highs some weeks back and one by one markets like the RUT, XLF, and NYSE exceeded those highs, it wasn’t going to be long before the major indexes in the US played "catch up".

The DOW and the COMPQ are still behind their respective 2012 September peaks, so with approx 200 DOW points needed to exceed that Sept 2012 peak, the SPX probably pushes a bit higher towards 1500SPX.

You don’t need to be an Elliottician to notice the bearish looking wedge shape seen in many US markets, just pull up a chart of any of the major markets such as RUT, XLF, NYSE etc to see this shape.

 I have been expecting a new low in the VIX as the SPX pushes to new high, it amazes me how many people simply ignore history and feel deflated, especially bearish traders, the very fact that many have been ran over trying to sell into this current rally from November 2012 only further supports my thesis that you need the majority to be bullish at a market peak looking higher before a substantial reversal can be seen.

Is this chart screaming a buy signal?  Do you really want to buy at the highs knowing what has happened prior to the VIX reaching these levels, or will you succumb to the media hype that is always seen at the top and whenever a market makes new highs.

The media is ALWAYS bullish at the top of a peak, in fact I would be troubled if I never saw bullish sentiment, but just like the prior peaks, it seems many traders and investors fail to look at history and use that information. At the very least the bulls should be cautious as if history is any guide, the prior times the VIX has seen these levels a significant peak has been seen.

I am not one to fight price, but when I see clues such as the VIX as multi-year lows and other markets making multi-year highs, my radar goes into caution mode.

Although I am not convinced a high is in place just yet, just based on the DOW needed to exceeded its Sept 2012 peak it would need a bit higher in some major indexes, which brings me to some other clues I want to share, which could be beneficial to some readers.

Although I understand the negativity towards Elliott wave, but like all skilled professionals, we are not the same; some Elliotticians don’t have some perma bear bias where we are looking for wave 3 to DOW 1000 at every peak, and the end of civilization.


I like this idea a lot; it looks like a potential ending diagonal (bearish wedge) and if my analysis is correct it needs to stay under $56.66, although I would like to see a rejection and reversal under the $55 area.

A strong move under $48 would suggest a high in place.


Since its IPO it appears to be a 5 wave advance which is important as I suspect its entering into a stage where it’s going to see a substantial correction and one that I think will take it back to the $45-50 area.
If you look closer you can see the bearish wedge shape which suggests a terminal phase that coupled with a 5 wave advance suggests the trend is nearing a termination point.


I have been monitoring this stock for a while and it’s still not pushed high enough to count it completed, as I would much prefer to see this stock hit a new all time high. If you look closer once again you can see the bearish wedge shape, which we Elliotticians call an ending diagonal.


Its partner in crime has a similar pattern and what looks like an ending diagonal as well (bearish wedge to non Elliotticians). A new high is needed and a new all time high would setup the stage for a substantial reversal expected to take prices back to the $55 area.

Those are just a few stocks of a list that I am watching and many others have similar topping patterns, which suggests that the major indexes in the US are in my opinion carving out a major top and the rally from March 2009 appears to be nearing a climax. Based on some major stocks, I am seeing broad range of stocks suggesting the same message, not to mention patterns in other indexes such as RUT and XLF.

So bulls do need to pay close attention, although judging from this chart it seems not, and I wonder if the bag holders have finally been found for Wall Street?

Source: http://www.businessinsider.com/historic-equity-fund-inflows-this-week-10-2013-1#ixzz2HhDbfd00

That's a nice way to end the top of a trend.

Until next time