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Saturday, January 26, 2013

$SPX - Major Cycle Peaking

SPX surged up from late December as predicted by the Deja Vu Cycle.  The red target estimate outlined in late December was reached and slightly exceeded last week, which is fine. 

A major cycle peak for SPX is near according to the Deja Vu Cycle.  The topping process will likely be characterized by weeks of sideways and choppy trading with a scary dip in the middle.

In conclusion, SPX is currently testing a broadening top formation trendline.  The next major move in the Deja Vu Cycle in the coming months is a plunge to test, and probably undercut the red trendline.

2hour Chart















A detailed view of the topping process in the Deja Vu Cycle is shown below.  SPX is likely near point C in the Deja Vu Cycle.

The topping process will likely be characterized by weeks of sideways and choppy trading with a scary dip in the middle as shown on the chart below.
















UVXY is likely near a major cycle low and turning point.  Complacency is extremely and unusually high.  The Deja Vu Cycle indicates a dramatically falling market and aggressively rising volatility (VIX) in the months ahead.

Rising volatility should be particularly evident during a decline to the red trendline for SPX.

2hour Chart
 

67 comments:

  1. hmm

    My counter argument would be...

    'Having watched the transports (by definition, the markets 'old leader) spend 12 months in a sideways range..and now breaking out...

    Yet, you are claiming the Tranports its 12 months sideways, and we're to expect 1 month up..and maybe thats it?

    no way. The breakout is likely month'1 of what could be a 2-3 year surge to unthought of highs - fuelled by the Bernanke paper bubble.

    I just can't see how after the breakout has JUST started, that its now somehow going to end.

    That simply makes no sense.
    -

    Underlying fundamentals be damned, since when did they matter anyway in this new era of paper printing.
    -

    I would also note that a 100pt fall does not really count as 'scary drop'. Hell, even the November drop was bigger, and that felt like slow motion decline in many respects.

    With respect, go look at the Transports weekly/monthly charts..for 'some time'..and really ask yourself, how can the breakout which JUST started..be about to end?

    ReplyDelete
    Replies
    1. Transports have been strong recently, but still are not much higher than the 2011 peak either. Financials have been weak for years, and just finally exceeded the 2010 high slightly.

      The fact that RUT is finishing with a push, but the large caps have been weak since September is telling evidence in my view. I think this is strong evidence backing the Cycle. It suggests that the rally is ending.

      Then Apple of course...

      Delete
    2. Perma, my counter argument to that would be to look at GDX.

      If we are going to get a so called blow up then why are gold shares calling for a huge plunge just as they did in the lead up to the GFC?

      Delete
    3. As long as the Dow Industrial stays below its previous peak a big negative divergence can occur with Dow Transport...

      Delete
    4. Nice stuff on the transports here: http://rightsideofthechart.com/are-new-highs-bullish-or-bearish/
      and here: http://pebblewriter.blogspot.com/2013/01/the-dow-time-to-double-down_25.html
      and something I put up a while back here: http://highrevsopenhouse.blogspot.com/2012/10/throw-bulls-bone.html

      Delete
  2. The Deja Vu Cycle has accounted for every significant turn in the market for years. The Cycle predicted this strong surge up, and the surge is an ending move in the Cycle.

    The white chart shows what the topping process should look like according to the Cycle. SPX is near point C in the Cycle.

    Take a close look at the charts. Even the squiggles are nearly identical comparing the Deja Vu Cycle and SPX.

    In previous analysis a measured decline to 1025 SPX is shown next according to this Cycle. A serious decline is predicted in the months ahead.

    ReplyDelete
  3. I couldn't agree more. The complacency, certainty of a new high (CNBC has even put up a 'ticker' to countdown until the moment the high is reached) and one of history's largest negative divergences between the realities and market levels, certainly make a severe and 'shocking' drop quite likely.

    It's like it's deja vu all over again...!!

    Great Work..!!

    ReplyDelete
  4. The topping process will likely be characterized by weeks of sideways and choppy trading ...

    WEEKS of sideways action is not good for UVXY...

    ReplyDelete
  5. UVXY may rise but unfortunately with even a few weeks of sideways action it could trade down to 5 and reverse split again. To hold UVXY more than a few days is very damaging. Anyone following this blog please do not trade UVXY. The market can drop and volatility may not budge, the market and vix are NOT inversely related.

    ReplyDelete
  6. SC, your first target for UVXY on the chart is confusing...is it 15, 23 or 27?

    ReplyDelete
  7. I would say the UVXY would be under $5 if this cycle takes "months" to play out. You've got to be kidding me.

    I could come with 5 different scenarios and they would all work if I just waited long enough. Sorry SC but does it not seem that whenever your "cycle" doesn't work you just push it "week's and "months" forward ?

    ReplyDelete
    Replies
    1. The Cycle is working just fine. It was a slow grind up to the top of the red target estimate which was outlined in December.

      I expect that the market will see some dips and chop for a few weeks before large declines. VIX has been creeping higher for a week already.

      Delete
  8. I really don't care what the market does as long as the VIX spikes and UVXY holders make money. The last thing I would want to read is how the cycles worked and VIX lagged behind causing decay in UVXY.

    Good luck. I might join your short on SPX if the stars align

    ReplyDelete
    Replies
    1. UVXY should be lean and mean at this point in time imo. It will take patience to really see it fly though. I just don't expect too much too fast. I think it grinds up initially, and big spikes occur later Feb, March.

      Delete
  9. Someone made a big purchase to go long VIX on Thursday....Nice read.

    http://www.cnbc.com/id/100408154/Why_One_Big_Trader_Is_Getting_Into_the_VIX

    ReplyDelete
    Replies
    1. The key word is 'portfolio hedge' on that position.

      Delete
  10. Hi SC

    Your first target for UVXY at 25$ is around April?

    I remember you mention sometime before about 14-16 target for UVXY, wondering what target is that for then if was not the first target? Is that for Feb?

    you dont think decay or whatever they call it those contango thing will eat into those target at all with such long time period for your UVXY position if you plan to hold till April?


    Thanks!

    ReplyDelete
  11. The decay on UVXY between now & April will be approx $30...

    ReplyDelete
  12. UVXY may grind up initially to around $15 to $16, cool off, then rise more aggressively to that $25 area.

    The next move in the Deja Vu Cycle is a decline to the red trendline for SPX. VIX futures are likely to rise sharply during that event. As with any leveraged etf there is decay. The benefit is the high leverage and the cost is the decay. Provided that the VIX futures are rising, the benefit of the leverage far outweighs that cost. My goal is simply to indentify and hold the etf during periods of rising VIX futures.

    TVIX trended higher for months from July 2011 to October 2011, and rose 700% during this time period. People say that these etfs cannot be held for longer periods of time. However, the fact is that volatility etfs did not exist the last time we saw a trending bear market in 2007.

    ReplyDelete
    Replies
    1. Mathematically gains on leveraged etfs compound as they rise.

      Delete
  13. 1492 Support needs to be taken out before anything happens

    ReplyDelete
  14. I'm long SP500 at the open today

    ReplyDelete
    Replies
    1. very risky....

      my views are on my blog, so naturally I would disagree. We could see 1508 come Wednesday, but we could also drop from here. I don't see the risk reward of going long here. Make sure you have a stop.

      I think SC is going to be proven right here but of course a "scary dip" is relative to what you view as scary. 100 points is certainly on the cards.

      www.timethetrade.blogspot.ca

      Delete
    2. Good job, 1525 - 1485 - 1550

      Delete
  15. SC, thanks for clarifying your thoughts about your roadmanp; My question is the following : at wich price you will sell a part of your UVXY trade ?

    ReplyDelete
    Replies
    1. The main target for this trade in UVXY will be $25 or better with SPX dropping to test the red trendline. There may be a few smaller trades I would carefully consider along the way. We'll see. Mostly my strategy will be to trade in tune with the large Cycle.

      Delete
    2. Hi Sc,
      I think you're right on the money for the SPX target at red trendline. I would think that could be 1395 but do you have a timeline by which that has to be accomplished per cycles? If I were to target the fall, could it be from mid Feb to early March like March 8? I have a hard time seeing any bearishness for the next two weeks. Thanks for the wonderful work you do and share.

      Delete
  16. I got in at 1493 with 3 separate trades, and just closed all 3 at 1500....The point is I'm done trading for the day, and I'm not holding and hoping it goes higher (or lower).

    Quick trade in and out like a day trader...Just playing the support and resistance lines and watching the news, nothing mind blowing that anyone else can't do

    ReplyDelete
    Replies
    1. Ok, that strategy makes more sense. Markets holding up on FOMC hope, but once they realize that there will be more signs the FED may stop easing sooner, I think that the markets will drop.

      I think my lower target hits Feb 25 - Mar 4 timeframe, and probably overshoots.

      Delete
  17. Tushar,

    In the Cycle, I think we are close to point C. The white chart provides many clues as to how things are likely to play out next according to the Cycle. The topping process after point C should be relatively flat and choppy with a few decent sized dips, but little advancement.

    The process has been slow and could play out for weeks yet. Therefore, I think Feb start and March looks the most bearish.

    ReplyDelete
    Replies
    1. Okay SC, I take it as a high probability of six weeks of grind and decline ~10% and not a steep one that happens in two weeks. Is that true?

      Delete
    2. Probably a lot of chop next but generally grind sideways with a few decent dips during Feb. I'm not expecting too much lower during Feb. When it does finish this sideways period then it should plunge quickly to the red trendline.

      Delete
  18. hmm

    My counter argument would be...

    'Having watched the transports (by definition, the markets 'old leader) spend 12 months in a sideways range..and now breaking out...

    Yet, you are claiming the Tranports its 12 months sideways, and we're to expect 1 month up..and maybe thats it?

    no way. The breakout is likely month'1 of what could be a 2-3 year surge to unthought of highs - fuelled by the Bernanke paper bubble.

    I just can't see how after the breakout has JUST started, that its now somehow going to end.

    That simply makes no sense.
    -

    Underlying fundamentals be damned, since when did they matter anyway in this new era of paper printing.
    -

    I would also note that a 100pt fall does not really count as 'scary drop'. Hell, even the November drop was bigger, and that felt like slow motion decline in many respects.

    With respect, go look at the Transports weekly/monthly charts..for 'some time'..and really ask yourself, how can the breakout which JUST started..be about to end?

    ReplyDelete
    Replies
    1. Good luck to you Unknown if you are so bullish then throw the house on it and go all out long. It is just starting you think so go for it champ.

      Delete
  19. UVXY down over 6%....whoops!

    No stops = no shirt.

    Nice trade today Afshaikh! Buy em at 2 sell em at 3...its the only way!

    ReplyDelete
    Replies
    1. remember we are trading the BIG PICTURE. .

      Doesn't matter if UVXY goes to zero, SC will break even or get out at a small profit in the end.

      Delete
  20. Top target on SPX identified and hit on the nose, now looking ot see if trend channel is broken, and lower target is reached in my specified time frame:

    http://timethetrade.blogspot.ca/

    ReplyDelete
  21. SC, if I understand well, you forecast a sharp decline for SPX but until when ?
    Do you think that SPX will be up or down for 2013 ?
    Thanks

    ReplyDelete
    Replies
    1. The large cycle predicts a full blown crash and bear market this year lasting a couple years. Not as deep as 2008.

      A measured major target is approximately 1025 SPX, and the Cycle predicts lower lows after that as well.

      Delete
    2. By this Cycle, 2013 is likely to see a crash similar in size to 1987. 35 to 40% lower.

      Delete
  22. Interesting SC....back in 87 VIX piked to 150. I wonder if $100 UVXY would be realisic this cycle?

    ReplyDelete
    Replies
    1. The Cycle suggests a drop similar size to 1987 but I doubt it will come down that fast. In 1987 it occured over just a few days.

      So the VIX probably will not go quite as high this time around.

      I have UVXY targets and charts coming for the large cycle.

      Delete
    2. What could be the macroeconomic reasons of such a drop in the stock market ?

      Do you think it will be a "flight to quality" event where investors put their money in bonds. Or do you think it will be because people lack confidence in the dollar and want to pull out of dollar-denominated assets, causing a rise in interest rates ?

      Delete
    3. Mainly my work involves cycles. The main problems ahead I pointed out in January 12th analysis:

      http://cyclicalmarketanalysis.blogspot.com/2013/01/vix-cycles-suggest-high-volatility-in.html

      The US is in a major debt crisis currently. The debt ceiling has been reached and the US will need to face that in the months ahead.

      Confidence is deteriorating in the Fed and Government.

      The Cycle clearly shows a dramatically declining market.

      Delete
    4. Although my outlook is quite bearish I'm not in the financial armageddon camp either - not on this Cycle.

      I don't see any currency crisis on the horizon next few years. It is a confidence crisis.

      Delete
    5. US recession may have started July 2012 according to ECRI. I pointed this out also on January 12th.

      Delete
  23. Just bought some uvxy to protect my longs! I think a big correction that will turn everyone bearish is due.

    ReplyDelete
  24. UVXY should go another 10-20% from here. Market is on a tear and it will not stop until 1520 or even 1550.

    My Cycles say to go long and short UVXY

    Good luck to All.

    ReplyDelete
    Replies
    1. I'm with you on this one AFSHAIKH....long & making money with tight stops.

      Praying for a decaying stock to bounce is just wishful thinking.

      Delete
  25. RUT target would be 918.00.. TZA buy target @ 10.55

    ReplyDelete
  26. VIX range for FEB month

    12.12 - 14.48.. IF 14.48 takes out, 16.08 will be the immediate target..

    ReplyDelete
  27. Interesting...everywhere I read there is no fear of the market dropping. This is precisely when the "unexpected" happens. Israel threatening Iran, Israel bombs Syria, euro budget talk may fail this week, and Germany set to deny Cyprus aid preventing a default. Debt cieling anyone? Right.

    Updated post and charts if 1515 is the top:

    timethetrade.blogspot.com

    ReplyDelete
    Replies
    1. Feb 5 is 377 TDs from 3/6/09 low. I believe RBA entering the currency war will be the catalyst that no one anticipated. The Australian Dollar has been getting crushed due the Yen and Japan is Australia's 2nd largest trading partner. I anticipate they will enter QE and devalue the AUD and the US markets with it.

      Delete
    2. David I think you are right. The strong AUD is hurting the Aussie export industry and with a RBA board meeting tomorrow I think we get a reduction in Oz rates setting off the next round in the early stages of this currency war.

      Delete
    3. RBA did not ease so I was wrong on that one. I did not read minutes so I don't know what forward guidance they gave. Today still remains a big day for Fib time relationship with 3/6/09 low.

      Delete
  28. Arms Index: TRIN Signal Flashing Now on $SPX (pullback anyone?)

    http://www.traderplanet.com/commentaries/view/163355-arms-index-trin-signal-flashing-now-on-spx/

    ReplyDelete
  29. I love how none of you clowns are on here congratulating SC when the calls are going in his favor.

    SC, thanks for providing FREE content.

    ReplyDelete
    Replies
    1. Agreed. SC, nice job calling the turns over the last few months.

      Delete
    2. Ah, I dont see SC here these days at all...is this site still on-going?

      But we only have 1 day drop, let not break the out the beer can, see how it goes tomorrow.


      Thanks!

      Delete
    3. The clowns are those who bought UVXY & are now celebrating because its bounced 12%...

      But they are still down 20%++ on their investment...

      Mmmmmm.....let me see now:)

      Delete
  30. Updated charts and Cycle posted.

    ReplyDelete