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Sunday, March 27, 2011

$SPX Freefall and VIX Symmetry

The SPX 1317 target as shown on my previous medium term updated chart was hit on Friday.  Next, a severe decline to SPX 1222 is targeted.

Cycle analysis indicates that a selloff would initially start with a moderate decline.  Many will call for a bottom as the market consolidates prior to a severe decline.  Don't be fooled in the consolidation phase - a freefall is to follow!

2-Hour Chart



















The following VIX chart shows the cycle with excellent symmetry.  Initially, I am looking for a triangle to form with a breakout and spike up.  Notice that a move up to 31 would be a slight lower high, near double top with the recent top.  This would be an approximately 82% rise in the VIX from the low on Friday, March 25th.

The lower high would hint at the coming strong proposed rally to SPX 1352.

30min Chart

48 comments:

  1. Hi there

    Good work on the call last weeks contra trend rally.

    I have some interesting charts this weekend with a possible top already in on monhtly charts - and remain short at the moment.

    Keep up the good work

    www.sqwiitrader.blogspot.com

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  2. SC-thanks for your work-it's a great road map for those of us that are not as cycle/chart literate as yourself. Something tells me this is going to become a very popular blog. Remember your original people when it does!

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  3. VIX just had a record 7-day drop over this last week. The elastic band has stretched...

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  4. As a rule Id wait for that VIX to get back in the 15's here,which would put the S@P at 1330 or so I'd guess but I think you might be right,this could be it.

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  5. SC-no matter what happens from here-you've made a believer in your charts out of me. Thank you.

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  6. So do we close below SPX 1300 tmrw...and stay there for now ?

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  7. What happened with you target of 1352?
    Thanks!

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  8. Yes, the 1352 target is still in place after this coming bottom. This chart was a zoom-in as I wanted to show some detail of how the shape of the decline should look.

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  10. Financials are substantially weaker than SPX this morning, and I think that signals a breakdown coming for the mkt.

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  11. Likely one last test 1317, and then the bottom falls out later today.

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  12. crazy action. Lots of uncertainty in traders lately

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  13. Seems like we must have a bad event for the market to go down. Technical indicators are not enough. Bulls are uber strong!

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  14. SC,
    first of all thanks for your blog and your work.

    I use cyclical analisys to try forecasting the markets, but i see that my method is a bit different from yours. You seems to have a lot of trust in simmetry patterns, where i rely more on shifted simple averages difference and crosses.

    Where did you learn your method and is this derivated in some part from the Hurst tecnique?

    BTW, my cycle count give me an IT bottom just passed, with the today bottom being the one of the fisrt week, first 15d, first monthly cycle of the new IT. which will be the last of a bigger yearly and 2yrs cycles. So i see a double top, or maybe marginal new highs, at the end of April, and then a drop of 15-20 percent for at least a month.

    Sorry for my bad english.

    R.

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  15. Both financials and VIX are signalling that we are about to drop.

    One event to watch this week are the European bank stress tests. I believe results are coming Thursday.

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  16. GGuy,

    I developed these techniques myself over the years. There is an art and science to it. The "art" makes it difficult to explain sometimes. I haven't shown the best cycles here yet because they are more complicated. I think I have multiple cycles in agreement.

    I believe we can always see what direction the mkt will move if we interpret the cycle data correctly. Cycles are most important in my work.

    Thank you for your info, very interesting. I think we go down first, but also see a marginal new high coming. Also agree a large decline looms after that.

    Please keep us up to date on what you see. Thanks.

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  17. This blog is getting very interesting and informative.Glad i found it. Thank you.

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  18. Thanks John.

    Well we are grinding our way up here as I suggested this morning but rather slowly instead. Do we need a token touch of 1320 to finish this off?

    Definitely weaker financials and VIX suggesting that this mkt rolls over.

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  19. this topping pattern looks really similar to the one in april. just viewing the snp on google finance, we hit a high of ~1217, then massive decline of about ~100 points, and then a ~60 point rally. Looks like we did just the same. 1340 to 1250. almost 100 points. then back up to 1317. Next up another ~100 point decline just like in May to put us near your 1222 target!?

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  20. Let me take a closer look at that. Thank you for pointing that out!

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  21. looking pretty strong. these trend up days don't usually reverse

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  22. I agree, it's been slower than I thought today, tomorrow starting to look pretty interesting.

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  23. Going to need a very hard reversal to make your chart come true.

    Strong upside at the moment.

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  24. Guess it all comes down to 1320 either becoming support or resistance tomorrow. One thing for sure,regardless of whether you're a bull or a bear...that was a very bullish close today.

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  25. As a bear I would much rather see this close than what we had yesterday. It was too obvious. Anyone who chased the short side this morning was stung, and won't be likely to try again tomorrow.

    This kind of mechanism with some building up of intensity is what I like to see at the time of an important reversal.

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  26. SC-we're really not very far off on your call as of yet. Remember at Xtrends-Atilla closed his short at 1285 saying a top was near and it went to 1340 after he said that before plunging as he predicted-so it's really the end result that matters-all the rest is noise.

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  27. I think we pull back to 1300ish by the end of the week then move higher to make a lower high.

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  28. After hours is up as well. SC, where is your line in the sand to close out shorts? My April puts took a big hit today.

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  29. Trying to delve into your ideas. Thanks for the blog.

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  30. I still think we reverse today. A while back I mentioned that from the cycle there should be a powerful spike up right at the end to finish. I think this may be what I am looking for.

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  31. still looking pretty strong this morning. sitting on some intraday support right here

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  32. I have not had a sell signal in two weeks so just letting it run.

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  33. The top pink line on this SPX chart is around 1333. That should be a brick wall. These charts will need to be tweaked but the big down move is still intact according to the cycle.

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  34. Most likely we cool off to test the gap at 1320. After that we could test that line around 1333.

    So the potential upside is about 5 points. The downside is at least 90 points, maybe more. The downside is going to really surprise people here.

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  35. Thinking the surprise may be on the upside blow off.

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  36. My top estimate was slightly low, but that is independant of the overall cycle which is clear - we are going to go hard down, and soon.

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  37. It's 12:40 EST and we're sitting right at SPX 1330. Our recent 2 yr high was 1344...so I guess we'll find out what's what here very soon. For a downturn scenario...we sure don't want to blow thru that and turn 1345 into support. Then SPX 1400 becomes a real possibility.'End of Qutr' is tmrw...so who knows(?) about "this" week...but we need to be below 1300 by this time next week. It wouldn't hurt to have AAPL trading below 320 either,and have the VIX up to at least 25. I would say those are "musts" to get a good selloff going. We shall see.

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  38. One thing of note is that copper is selling off. Bears watching.

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  39. It looks like it could go to 1342 or so before coming down very hard as SC has been saying,who knows if it will even get there-if you're going to short-this is close enough I'd say.

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  40. This is the second best shorting opportunity of this year in my opinion. The best one comes later. I expect at the pink line around 1333 is the optimal spot to short.

    This rally from 1249 is mild compared to the selloff coming next. This isn't even my opinion - it is per the cycle as shown in the yellow box on the left of the chart.

    This rally has been slightly stronger than I thought with the 1317 target breached. That may indicate that my 1222 target is actually too high. I am looking at this very closely now.

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  41. Don't see the set up yet. Would have to pull back below 1315.
    Right now I see a pullback to 1320ish and then a strong move higher before any meaningful sell off.

    That would also complete a large invs head and shoulder formation to about 1355-1365.

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  42. I agree with you in some ways ckorey. Tomorrow morning selloff to low 1320's probable, but then test 1333 after that. I am not seeing anything higher than that at at this time.

    I'll have new charts tonight.

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  43. SC,
    i will be glad to share our opinions on cycles. I'm starting a blog about it, with the main purpose of kepping track of my view and how they change when market make them change.

    Anyway, your impressive record made me reconsider my cycle count. I now give 50/50 to mine or your pattern. So i did just 10 minutes ago what a trader should do in that case: sold my long on S&P.

    What other markets do you follow? I'm going to write about S&P, Gold, EurUsd and maybe sometimes Natgas (still trying to overcome that wild beast^^)

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  44. That sounds great GGuy. I'm interested to learn how your timing cycles work. Thanks very much.

    I follow a number of markets, and the cycles work on everything. My time is the limiting factor, and I find that if I try to keep track of too many things at once it becomes less effective. So I generally try to keep things simple if possible.

    Having said that, I am working on gold and oil since they are interesting. I am often rambling about financials as I consider that they give important signals in advance of S&P etc....

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  45. BTW, I believe I figured out the math. My near term SPX target is moving down from 1222 for sure. I'm doing the calculations and will post later. I will have a target date for the bottom as well.

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  46. SC-The RUT pushed to new highs today as you know I'm sure. Does that mean anything for your cycle work?? Thanks in advance. J.

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  47. @ John Smith

    Yes and the QQQ's have also just gone to new all time highs. The $TRAN are close,and have been an important leading indicator for years.Anyway,we'll have to see if some of these bellweather stocks like AAPL can break hard here soon. If we're going to get back to...and under 1250... I would think many stocks are going to have to get some big haircuts quickly. I'll look forward to the next post.Believe me, I would like to see an 8 to 10% correction as much as anybody.

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