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Tuesday, February 21, 2012

$SPX - This Rally is Not a New Bull

It has certainly been a strong rally, but it is not a new bull run.  The reasons are clear.  The Nasdaq 100 has been underperforming SPX since the October bottom.  NDX is a leading index, and the underperformance is an important confirmation that this rally should not be trusted.   

A major SPX decline is necessary to reconfigure these daily charts so that the NDX and DAX are actually outperforming.  The tape tells the tale. 

The 15min chart shows the weakening performance of a number of leaders since February 3rd, and the comparison suggests the rally is nearly complete.

Daily Chart















The DAX is still underperforming since summer 2011.  In the summer of 2010, the DAX was leading up. 

Daily Chart















Since February 3rd, the Dow Transports have struggled with lower highs.  The Russell 2000, and the Financials have been weakening relative to SPX.

15min Chart

92 comments:

  1. What are you thoughts on credit Suisse suspending tvix stock creation

    How will this effect the price short term over next week

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  2. http://finance.yahoo.com/news/Credit-Suisse-Temporarily-prnews-3084612990.html?x=0

    "NEW YORK, Feb. 21, 2012 /PRNewswire/ -- Credit Suisse announced today that it has temporarily suspended further issuances of the VelocityShares Daily 2x VIX Short-Term ETNs (Ticker Symbol: "TVIX") due to internal limits on the size of the ETNs. This suspension does not affect the Early Redemption rights of noteholders as described in the pricing supplement. Other ETNs issued by Credit Suisse are not affected by this suspension.

    As disclosed in the pricing supplement relating to the ETNs under the heading "Risk Factors—The Market Price of Your ETNs May Be Influenced By Many Unpredictable Factors," the market value of the ETNs may be influenced by, among other things, the levels of supply and demand for the ETNs. It is possible that the suspension, as described above, may influence the market value of the ETNs. Credit Suisse believes it is possible that the temporary suspension of further issuances may cause an imbalance of supply and demand in the secondary market for the ETNs, which may cause the ETNs to trade at a premium or discount in relation to their indicative value. Therefore, any purchase of the ETNs in the secondary market may be at a purchase price significantly different from their indicative value."

    It seems they had a limit on the size of the ETN - which was reached. There has been strong demand as evidenced by the volume lately. Perhaps the units could trade at a slight premium provided the demand continues to be strong though I doubt there will be too much impact.

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  3. So your targets are the same for next week

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  4. DOW $TRAN continues to negatively diverge. Not a good sign for the general market. TVIX strong today in the face of a rising market.
    Bulls are getting VERY cocky and talk of DOW 14K is becoming more common place.

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  5. It's a bubble. It has been persistent, but the red flags are there.

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  6. SC, are you still short on silver for this week?

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    Replies
    1. Silver may dip somewhat but the overall picture is quite bullish for Silver up to $38.

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  7. TVIX is trading with a 50 cent premium right now. I'm going to monitor this to see if it continues.

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    Replies
    1. http://vixandmore.blogspot.com/2012/02/ups-and-downs-of-new-premium-in-tvix.html

      Delete
  8. Hi SC

    Do you have any target for TVIX now that CS has stop printing it for the rest of this week, especially with the weak days ahead in your map?

    Question about HVU as well, it going down same as VXX today, do you foresee they follow TVIX for the rest of this week and the weak days ahead in your map?



    Thanks!

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    Replies
    1. Potentially the target for TVIX could move up by 50 cents. The unknown is whether this premium will persist, remain constant, or is just a temporary situation. So I'm going to monitor this closely, and see if any adjustments need to be made or not. At this point it is not a major consideration.

      VXX and others don't have the premium, but they would still follow the basic pattern of TVIX. This is a bit of a nuisance.

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  9. Is that a small inverse head and shoulders on daily TVIX chart?

    Lsft shoulder print Jan 27th, Head Feb 7th, RS yesterday Feb 22nd.
    I know at first glance it's a little obscure but it sure looks good to me.

    http://stockcharts.com/h-sc/ui?s=TVIX&p=D&b=5&g=0&id=p27575833870

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    Replies
    1. Upward sloping neckline(usually more bullish)currently around high 24's.
      A break above(would expect a pullback off the neckline first) would propel this much higher

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    2. Looks good, and the obscure ones are often the best patterns. The too perfect patterns are the ones to be generally cautious about.

      Agree that a pullback from the neckline would be likely first.

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  10. I don't mind this TVIX premium at the moment, but it does create some uncertainty. Under different market circumstances the premium could turn into a discount. Also, if Credit Suisse is applying to increase the limit, then the premium could disappear at any time.

    If it ends up being an issue, then on subsequent trades I may consider UVXY as an alternative.

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  11. Interesting analysis.

    http://www.youtube.com/watch?feature=player_embedded&v=MezUk53BX0k

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  12. This TVIX premium is growing, now 85 cents. It could be indicating a problem coming for the markets...

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  13. SC

    what do you mean by problem for market? can you please detail more?

    Thanks

    silver is not moving with gold which is surprise!

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  14. Well basically the demand for TVIX seems strong as evidenced by the premium. So that makes one consider that a market decline could be imminent.

    Gold surging is another factor to consider. It looks like safe haven demand.

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  15. Silver has more of a tendency to move with the S&P, but that is not always the case. Gold can act inversely more readily.

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  16. Do you still think that gold and silver will dip this week or not ?

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  17. Silver has better odds for a dip imo, and if the mkts do decline tomorrow Silver can decline initially also. Gold looks firmer.

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  18. SC, Couldn't the indicators you mentioned just be a signal that a significant correction is imminent, and not that this is still a Bear market? I still see a very distinct possibility of much higher highs later this year based on money printing and stimulus.

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  19. SC, do you still like $23.35 as price target for TVIX in near future? Thanks so much. Wow, I am learning soooooo much, and I appreciate you and everyone else I've learned tidbits from. Amazing stuff.

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    Replies
    1. Yes, that is still the plan for TVIX. Tomorrow, Fri, and Monday look weaker in my cycle analysis for SPX so I've had patience for TVIX. We'll see how it goes. Thanks very much.

      Delete
  20. Chris,

    I generally agree.

    The requirement for a new bull would be for the DAX and Nasdaq to improve to a state where they are outperforming. To do this SPX needs to decline. However, when SPX declines, so too will the DAX and Nasdaq. This is why it takes a major decline and many months to reconfigure this situation. It'll take time.

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  21. Replies
    1. Especially in silver/gold. Wish I was more invested in that than TVIX. Don't see a crash anytime soon unfortunately.

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  22. Anyone can post what is 200 moving average for silver currently stands at?

    Thanks

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  23. The 200 daily MA for Silver is at $34.94.

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  24. So my guess was $ 35 will be huge resistance for silver to cross but if it did then no looking back....it did hit 200 MA and returned...but same for Gold?

    Thanks

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  25. Silver crossed $ 35...wow...looks like no turning back here now

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  26. Replies
    1. The volume is way lower than it has been. Getting a little concerned all that premium stuff messed it up for now.

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  27. SC, where is fear trade? lol

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  28. Bears are running their tail between their legs....this is insane and crazy...anyone has any information why market is surging? of course need to understand PM trade and why they are going up....

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    Replies
    1. Stockboom,

      It doesn't look crazy to me. The market made lower lows and lower highs since Tuesday's high. It just bounced off pitchfork and harmonic support around 1350. It's normal for the market to test support and bounce a few times before falling through in the early stages of a decline. (I'm not saying necessarily that there cannot be a new high, just that if the market has begun a decline, this is normal behavior).

      Here's a chart... http://screencast.com/t/Jb8pchmxJjR

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    2. Spudthrope,

      Excellent chart, thank you

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    3. Spudthorpe, do you think it will be two digit sharp decline or just 3~5% correcion

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    4. If we assume SPX is making a double top with May 2011 (so that the high of this rally is already in, or will be with one more peak in the 1368-1380 range) then this chart shows some possible support levels. (Hope it's not too cluttered to make sense).

      http://screencast.com/t/Td3NGuKtaFfo

      At a bare minimum we should test the blue trendline connecting the Nov & Dec bottoms, in the neighborhood of the 23.6% retrace around 1330.

      In my view, given the market's overbought and overbullish status, a much deeper retrace would be appropriate - there are other support levels clustered within a few points of 1300; around the low 1280s; and around 1260.

      Remember we don't have any proof the high is in yet, so at this point we are just speculating about possible targets for a decline.

      Delete
  29. Hi SC

    Are you still holding your TVIX position?


    Thanks!

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  30. Sc
    What do you think.
    Up from here

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  31. I would think so. Apple tried today, but failed to run. The VIX futures are down but the VIX itself has held well for the last 4 days. The premium on TVIX is huge now.

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  32. Will the premium be in our Faber

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    Replies
    1. It has been so far, and the demand seems strong, so that bodes well for the trade.

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  33. SC, where you think Silver will end it's run up? are going straight to 38 from here?

    Thanks

    ReplyDelete
    Replies
    1. Silver may pause here, small dip possible, but the chance of a dip below $33 is probably out. It'll be choppy.

      Delete
  34. Hi SC

    would you consider switching to UVXY today out of your TVIX? which one you think will be better once we start to drop?


    Thanks!

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  35. That is something I am debating switching only because it is more predictable, and also it is mucking up my charts.

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  36. SC, so we can safely assume that your big bear pattern has failed?

    Oil, metals, commodities complex are breaking out. Liquidity runs high in the system. Libor rates are dropping.

    Did not you expect a healthy bounce and move higher from that low anyway?

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    Replies
    1. However, crude is still quite a bit lower than last May, and Silver is even more of a dfference. My target for Silver is $38.

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    2. what are you thoughts on tvix
      r we in for more pain
      or are you gonna keep hold

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    3. Planning to hold for Feb 27th.

      Delete
  37. I think the rubber band snapped.. If this doesn't go to 15.50 or less I'll be surprised. Wish my timing was better. Just waiting it out hopefully now.

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  38. Someone bought 1 million shares of tvix at 16.21 after hour. Something big to come?

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    Replies
    1. is that a order to short
      that cant be a buy order thats 16 million thats nuts

      Delete
  39. SC, what about HVU. It is getting absolutely hammered

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  40. Today was supposed to be weak right? :-)
    Thought TVIX would print 15's as I said the other day...........no one here seems to listen however. Oh well..........
    Most likely one more pop to 1372-1376............that being said what i think would surprise most is a reversal from right about here so I am keeping an eye out for that. The surprise on the bullish side would be a ripper to 1400 (give that one about a 30% chance).
    Either way keep an eye out for reversal............I think it's close.

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  41. You had a $14 prediction on HVU for tomorrow.....now what?

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  42. The cycle analysis was weak for today, tomorrow, and Monday. Today we did see weakness in the morning for SPX with a lower low. Still a lower high is in place from Tues.

    The 27th is the day I have suggested for a low in SPX. The VIX still has a higher low from early Feb. The VIX should pop into the 27th. How much is the question. The 50 day ma for VIX has been resistance and that is just over 20.

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    Replies
    1. All due respect.............come on! So if it goes slightly negative at any point during the day your call is right? Even if it rips into the close and finishes up? That's a bit misleading. Does the target of 1328 still hold for Monday?

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    2. I said weakness could start today and carry on into Monday. So far we have a lower low today though it closed up. We'll have to wait and see on Monday.

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    3. Fair enough...............is 1328 still the target for monday?

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  43. Ripping after hours............SPY at 137 as I type.

    We either rip tomorrow or the finish it tonight and we get the reversal I spoke of earlier tomorrow.

    Be alert here.

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  44. I am in LOTS of shares of TVIX @ $17.35 from the other day. I'm shi**ing my pants but hanging on for the high $23's!! ;)

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    Replies
    1. Let's see how it goes tomorrow/Monday. The question for TVIX is how this premium persists or resolves. So we'll have to consider that going forward.

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    2. SC, how about HVU which is decoupled from TVIX. What is your target price now?

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    3. I would like to see how things shape up tomorrow and Monday and review. The first spot to watch would be the 38.2% retracement to the Feb 10th high which is around $10. Ultimately it can go much higher but let's see how it acts tomorrow/Monday first.

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    4. Pretty tough to be charting TVIX right now SC since the news from CS yesterday clearly has thrown off those numbers. I think HVU though since it still trends without any influence with your charting analysis, is the one to watch.

      Now, you had stated that HVU should be at $14 by Friday, however its almost half that right now. That is a big descrepancy SC, what has gone wrong? From your last post, it looks like you have now revised to $10 for tomorrow, but that is a far cry from $14. So if $14 was your original call for tomorrow, where did/do you see HVU on the 27th when the SPX hits its cycle low?

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    5. The date always to watch has been Feb 27th. SPX should drop into the date imo. So then the question is what that means for the VIX. As we saw back on Feb 10th, the VIX can spike without SPX even moving much. I do think the VIX should see a good sized pop in any case. I'm going to do some review on the targets. Basic fib targets are $10 to $11 range.

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    6. Sorry, you saying $10 - $11 tomorrow, or on the 27th? Also, you keep talking about the VIX, however I assume you are speaking about VIX futures?

      Yes, I agree the VIX futures can pop and pop big, question is will they and what will prompt it. The opposite in a bad way has been happening where even with a negative S&P performance the VIX futures were down also......opposite to a week ago with the Greece mess as a backdrop where S&P was rising while the VIX futures were also rising....at the time, that was a good sign, but now it appears with the opposite being true, that this is a bad sign?

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    7. I think that $10-11 is at least a spot to watch on the 27th. This will be more apparent tomorrow and Monday as to how much.

      Well put it this way the volatility was a nice trade earlier in Feb. At that time there wasn't much happening in the S&P, or Silver or anything else. I agree that the action lately has been much less appealing. It can pick up, but there are also other opportunities I am waiting for to setup. I'll have those charts coming soon.

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  45. Can't you all see, this is another rally that can't be shorted? Like the last QE, no cycles or indicators work, it's relentless buying that ignores all bad news.

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  46. SC, in your opinion, are precious metals going to consolidate a little bit today ?
    Thank you very much

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  47. ZIGZAG

    What is your take now that your mirror image has obviously taken a turn................tx, jon

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  48. What scares me is how the SPX keeps flirting for an extended period with 1370, similar to how it did with 1290. Now, at least at 1290 it pulled back to 1240, hoping here that 1330 is tested on the downside at best. I don't see 1300 however that is possible if some real bad news on something were to come out.

    I just fear that HVU is going to be at $5 rather than $14.

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  49. Yes, probably see Silver consolidate today/Monday. I have a detailed update coming out on the weekend for Silver.

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  50. There is a possibility of strength continuing into march 8th with target of 1425 on the SpX. lets see. 65 handles higher would be pretty bold.

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    Replies
    1. March 16th is next major Bradley turning point. So strength all the way into MArch 16th would not surprise me.

      12/28/2011 was previous major Bradley turning point and we rallied out of it.

      So 1425 SPX? Why not.

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  51. As long as the Eur/USD keeps rising (usdx lowering), I don't see the S&P going down much at all. Stupid correlation.

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  52. You buying more TVIX at these levels SC? I want to bail so bad, but trying to hold in there. If it doesn't hold here I see it going to 14.

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  53. Hi SC

    Curious

    isnt today suppose to be weak? what happened? any idea?

    wont today action affect your monday direction with the market being weak on Monday?


    Thanks!

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    Replies
    1. So far it is another quiet day, we'll see on Monday.

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  54. This is the pop I was talking about that was most likely to happen.

    SC..........40 points down by Monday is the call..........we shall see and you can judge for yourself

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  55. ckorey- Your actual comment was drop or pop...you took both sides. It is easy to be right when your bet is either up or down.

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    Replies
    1. Said most likely a pop and be mindful of a reversal which i think is near.

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  56. Interesting close here............

    A big move is about to be unleashed in the next two days.

    You can place your bets as to up or down.

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