Pages

Tuesday, February 5, 2013

$SPX - Bear Market Ahead!

SPX is struggling at the broadening formation line (turquoise).  The topping process will likely be characterized by weeks of sideways and choppy trading with a scary dip in the middle.

The Deja Vu Cycle specifically predicted the surge up in January.  The next major move in the Deja Vu Cycle in the coming months is a plunge to test the red trendline. 

The Deja Vu Cycle clearly shows a bear market ahead with initial measured target at approximately 1025 SPX.  As well, the Cycle suggests lower lows after that target is reached.   

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
















Larger view of the Deja Vu Cycle:

Daily Chart















Current Deja Vu Cycle for SPY:

Weekly Chart















Exact Geometry suggested a low for UVXY which has held.  UVXY has been climbing up along the yellow fork.  Both UVXY and VIX have started to trend higher in recent weeks. 

2hour Chart














80 comments:

  1. I've been really busy over this last week.

    Obviously, due to the large scale Cycle, I am much more interested in the development of large trends than in daily fluctuations.

    ReplyDelete
  2. While SPX is struggling at resistance, UVXY is heating up, getting ready to spike up through the pink line imo.

    ReplyDelete
  3. SC interesting TA.
    Are you familiar with Cowans work?

    His 17 year bear market cycle which began in 2000 ends in 2017 with the GFC in 08/09 marking the mid-cycle panic.
    If I am getting it correctly 2017 lows should take out the lows of 09 with the final sell-off commencing in May and lasting into 2017.

    That would seem to mesh very well with your analysis.

    Cheers

    ReplyDelete
    Replies
    1. I'm not familiar with his work. I can tell you that according to my Cycle, this particular bear market should last a couple of years. Not as deep as the 2008 drop, but still a serious drop.

      Delete
    2. Beelejuice; Could you give us reference to Cowan's work?

      Delete
  4. SC, Is there a reason you prefer UVXY over TVIX and any others?

    ReplyDelete
    Replies
    1. With a bear market ahead in the Cycle, volatility becomes interesting.

      VXX is the standard. It has less leverage than UVXY, but is also not as time sensitive. TVIX has a similar structure as UVXY, but last year had a problem with issuance, and still does not trade properly. So that is why I prefer UVXY.

      Volatility etfs did not exist the last time a real bear market occurred in 2007. According to the Cycle this will be the first time to trade a volatility etf during a bear market. I think the return will be outstanding. During a moderate correction in 2011, TVIX trended 700% higher over several months.

      The bear market ahead is much larger than that correction in my work.

      Delete
    2. So SC, to put it bluntly, what is your utlimate target for UVXY ? Thanks

      Delete
    3. At the end of a bear market $400 maximum.

      Delete
    4. Maybe it is better to look at it in terms of the VIX. 70-80 is the area I have outlined previously for VIX. If VIX breaches 100 though then 120 to 130 could be possible.

      Delete
  5. This UP DOWN UP DOWN this week is certainly frustrating.... I would imagine if VIX broke 100 then it is certainly possible for UVXY to trade multiples of that when backwardation sets in. Remember last down cycle has VIX topping in 40's...yet TVIX moved to $110.

    Patiently waiting for VIX to break 30 though first....tick tock tick tock

    ReplyDelete
  6. UVXY only down 10% getting ready to spike !!!!

    ReplyDelete
  7. UVXY did find some resistance at the pink trendline, but next pop should be a real breakout and continue higher.

    ReplyDelete
  8. SC, Is the label P Midpoint 4075 in the white chart the scary dip in the middle you refer to?

    ReplyDelete
    Replies
    1. In the Cycle, SPX is likely at point C. There should be a dip in February that tests the white/orange trendline on the SPX chart, bounces back up, then collapses on the way down to point P.

      Yes, a drop to point P in the Cycle would be a drop to the red trendline around 1380 SPX. A reasonable estimate for point P is around 1380 SPX in my view.

      Delete
    2. Thanks for clarifying, SC. Plenty of action to come - eventually.

      Delete
    3. The market is right at the tipping point in the Cycle. It is a large cycle so for sure it will take time to fully unfold.

      Delete
  9. SC, Typically the maximum bullish sentiment occurs a few months before the highs in the market averages. Would top around may-june be consistent with your model?

    I do not see market tanking just yet, perhaps in the summer - late summer. No sell signals here, it feels like we are a few months away.

    Thanks for the blog.

    ReplyDelete
    Replies
    1. Generally agree, it will take time for this Cycle to play out.

      After point P is reached, this model does show another lower high.

      This should be the high here according to this Cycle, but a lower high does show up in this Cycle. As you can see the lower high after point P comes up relatively close again. Therefore, a higher high is not out of the question, but lower high may be more likely (or double top possibly).

      Thank you.

      Delete
    2. Yes, higher high - something around 1600 on the SnP around may - june 2013 would put us up against long term resistance lines.

      Just my opinion - your title may mislead some folks into premature short scenario. There is still money to be made on the buy side in the blow of top. I do have a weak spot in first part of the summer then another push higher.

      Delete
    3. Important to say that each phase I approach distinctly in this Cycle. Short is the place to focus next in the Cycle.

      The main emphasis at this point in the Cycle next is a drop down to the red trendline around 1380 SPX.



      Delete
    4. I would say after 1550 on S&P, we could potentially touch that red trendline for 1370 to 1385 on the S&P. I would think the S&P then can go for another run (major 5 in OEW terms) to 1600+; this could be in July. Then what I would say is a bullshit ride of a decline and rise again until beginning of October. I will look for declines going forward thereafter. I would also look for a spectacular rise in metals July onwards. Long until July and then ride PMs. This would be my roadmap for 2013. I wish you all lots of luck!

      Delete
    5. Thank you Tushar, all the best!

      Delete
  10. I can't see 1515 that I called on Jan 27th as a cieling being taken out on this run. I've posted my downside targets. Timethetrade.blogspot.CA

    I think you'll find that Sc's vision and mine align quite well.

    ReplyDelete
    Replies
    1. SPX finally lost momentum at the turquoise line, and yes, should be down moderately for 2-3 weeks next in my model.

      I have a detailed forecast coming soon with short term target areas for Feb through April.

      Delete
  11. Hi SC

    Thanks for the updates, glad you back.


    Thanks!

    ReplyDelete
    Replies
    1. Thank you. I think UVXY should pop next to $13.50 to $14 to start with next few days.

      SCFebruary 5, 2013 at 10:35 AM

      "UVXY did find some resistance at the pink trendline, but next pop should be a real breakout and continue higher."

      SCFebruary 5, 2013 at 5:18 AM

      "While SPX is struggling at resistance, UVXY is heating up, getting ready to spike up through the pink line imo."

      Delete
    2. Hi SC

      you plan to hold then if we reach those 13.5 to 14 price in the next few days and let it go in a later dates?


      Thanks!

      Delete
    3. It could cool off from there back to $11's then up higher $16 to $17 later Feb.

      Delete
  12. The ECB decision tomorrow morning should give us a short term direction. Depending if Draghi says he's willing to devalue the EURO or not

    ReplyDelete
  13. RUT close to hitting my target 918. Expecting to happen this week or early next week. Initial downside target would be 876.

    IF RUT violates above 918.00 and retrace back to 876, look for another rally towards 930 area before the real sell off.

    Mark this post...

    ReplyDelete
  14. EMINI

    http://traderjoed.blogspot.com/

    ReplyDelete
  15. Looks like UVXY breaking out. Confirmation will happen if we close above 11.52. Initial stop would be 16.00.. Lets see if it can close above 11.52

    ReplyDelete
  16. Yes, I think this is a real breakout for UVXY. It probably will spend a couple days around the pink trendline around $12, then imo by Tues $13.50 to $14. Cool from there, then spike again.

    ReplyDelete
  17. Most of my charts lately have been big picture, which is more important, but I have short term charts coming to show a projection of what the Cycle suggests over the next 2 months.

    ReplyDelete
  18. SPX about 1480-1485 on this dip.

    ReplyDelete
  19. We need to get a break below 1496 to get this dip.. cross fingers..

    ReplyDelete
    Replies
    1. I think we are done with that yo-yoing up/down.

      Steady grind up next for UVXY, and down for SPX.

      Delete
    2. I opened the position today @ 10.85 and have a stoploss below 10.40. If we do not close above 11.52, I'll close and reopen again tomorrow based on intraday chart.

      Delete
  20. UVXY another "breakout" this has had like 10 false breakout in past month alone. Must be hard holding losing positions for 5 weeks hoping to break even or cut your losses, if proper stops were utilized you could have been going short from much higher levels... no stops = NO GAINS

    ReplyDelete
  21. The trend has been well defined and mildly up for UVXY for 2 weeks already. All trends start this way. Simple - higher highs and higher lows. For those with patience the profits will come this month imo.

    ReplyDelete
  22. If we close below 11.00, we might see 9.60 level..

    ReplyDelete
  23. "For those with patience the profits will come this month"....being down 30-40% is just madness no matter what the stock or mkt!

    Look for a new low in UVXY is my call....the mkt is going to 1550 over the next month. Even if it stayed here, UVXY would be down 10% due to decay anyway!!!

    ReplyDelete
  24. I could not agree more Phil. Wishful thinking does not move the stock market or VIX.

    ReplyDelete
  25. I think we are done with that yo-yoing up/down.

    Steady grind up next for UVXY, and down for SPX

    OR NOT

    ReplyDelete
  26. Operation "Bear annihilation" continues... until morale improves.

    SC, this is not funny anymore... More than 1 month OFF and market moved 50 points in the opposite direction..

    http://i1266.photobucket.com/albums/jj536/charts101/scsSPXpDyr2mn0dy0ip32370625066a2808_zpsd2865072.png

    ReplyDelete
    Replies
    1. Looks like you answered your own issue. Hopefully you have your own risk parameters in place.

      Delete
    2. i am not shorting this beast. Waiting to go long actually.

      Delete
  27. SC... what if your wrong, or should I say VERY wrong. You are short 50 spy handles lower yet sit and hold, as a trader I don't get your strategy.

    ReplyDelete
  28. Every morning, I get up and look at my screen..the first words in my mind are "F U BERNAKE!" and all the other central bankers pumping up this phoney fiat market. 90%of all the ramp ups happen overnite. Whenever I see the SPX sitting at critical support deciding will it break up or down...of course it will ALWAYS be UP...they cant afford to let it go down.

    In the meantime, I keep waiting for my XIV stop at 20 to get triggered. So far no dice. If/when it does happen, will be a good time to roll nto UVXY

    ReplyDelete
  29. The Cycle specifically predicted a strong surge up in January, and that is what has occurred, as predicted. The Cycle has predicted all the major turning points for years. The Cycle shows a bear market with a crash and 500 point drop. It is straightforward.

    I'll be trading the swings in tune with the large Cycle. On this particular trade, the target is around 1380 SPX.

    VIX has been in an uptrend for 3 weeks already.

    ReplyDelete
    Replies
    1. I have short term target areas and charts coming this weekend for the next several months projection of the Cycle.

      Delete
  30. LOL...Yet you made the same call a year ago.

    ReplyDelete
  31. The Cycle specifically predicted a strong surge up in January, and that is what has occurred, as predicted

    SO WHY DID YOU GET SHORT ON JANUARY 10 ???

    ReplyDelete
    Replies
    1. Exactly!!! SO WHY DID YOU GET SHORT ON JANUARY 10 ???

      Delete
  32. I did short early. Yes the entry could have been better. Yet still in a good position to take profit this month as my weekend outlook will show.

    ReplyDelete
  33. Two types of traders:

    "I was was early, it will come back"
    or
    "I am wrong I better get out now "

    Guess whick one is successful

    ReplyDelete
  34. UVXY up steadily for a week next imo.

    ReplyDelete
  35. SPX back down to 1490 next week imo.

    ReplyDelete
    Replies
    1. The chart is coming on the weekend.

      Delete
  36. Third kind of trader:

    "Shit its down...I better sell....oh shit! Now its back up... Better buy....crap....down...sell...doh....back up....buying....down again....sellllllllll!"

    Who can make money in this manipulated F up markets?

    ReplyDelete
    Replies
    1. Actually the market has been up for about 40 straight days... so being LONG is the play, trade what you see

      Delete
  37. Agreed....mkt broke out on Friday, I'm long with a tight stop....my prediction is 1550 before this thing turns.

    If I'm wrong it will cost me 1%, if you're wrong it will cost you 50%+++....expect moves up in EURO, GBP...USD has got another leg down until this mkt is done draining the bears.

    Don't buy UVXY until the turn is in, you might miss the first 20% but who cares.

    TOO MANY BEARS OUT THERE

    ReplyDelete
  38. One more reason to be bullish....

    "Prechter told his clients to go MAX BEARISH with a stop at 1560".

    He's always wrong!!!!

    ReplyDelete
    Replies
    1. great, I guess I'm screwed, lol.

      timethetrade.blogspot.ca

      Certainly have to be open to the possibilities and as a bear, I am feeling crushed, which is precisely why I don't think I should sell.

      Delete
  39. 1550 before SPX turns?...I can wait 30 more points...2% upside vs 40% downside...

    As for VIX... 12 pt downside (more like 2-4 pts max!) vs 80-100 pt upside

    ReplyDelete
    Replies
    1. Maybe it will just be an orderly correction back to 1490...have you thought about that scenario?

      There's no guarantee this mkt will correct 40% & with the money printers at the helm, without a major geopolitical event, I just can't see that happening.

      Meanwhile...back in the real world...mkt heading up, bears who are already locked in to UVXY 30% higher are getting screwed.

      Have stops, don't follow blindly websites which have a poor track record.

      Delete
    2. The VIX spent around 6 months below 10 in 2007. Six months in UVXY would be ...

      Also, on the VIX itself... I have heard something to the effect that because of compounding and other factors a vix of 13 today is about the equivalent of a vix of 25 back in 2007 based on how it was then calculated... so it has huge downside potential here.

      Not saying I know which way it could go from here ... just saying these VIX instruments are complicated and not as straighforward as they sound. [Other than if you look at a buy and hold profile for UVXY ... that is pretty straight forward]. :)

      Delete
    3. Perfectly content with my XIV and UVXY hedges...move into uvxy all in when XIV breaks 20.

      Delete
  40. That was the funny thing about 2007. Anyone with half a brain could see the whole subprime mess was due to fall and the stock market had no business being near all time highs. It was all smoke and mirrors. It was built on liars loans and toxic Credit Default Swaps. Yet stocks defied sanity all year and it wasn't until October 2008 that things started to unravel. They burned the shorts for two years before it all fell into a heap.

    I don't think we'll come out of it this time as well as we did in 2008 but when will reality descend on the markets? Tomorrow? 2015? 2018?

    ReplyDelete
  41. Another reason a low VIX reading today has no relationship to a low VIX reading in the past is because the VIX volatility involves trading volumes. Trading volumes since 2009 have collapsed.

    HFT [High Frequency Trading][scalping]computers making up 80% of the stock market volume. HFT's don't buy stock options to hedge their positions.

    A collapse in stock market volume also means a collapse in volatility. With actual stock market pariticipation so low a VIX reading of 13 may actually be high.

    Also because when the VIX is low, the farther term month tends to be high so even if there is a huge drop in the stock market the contango roll can remove any chance of a meaning spike in the VIX.

    To quote Lee from the page
    http://vixandmore.blogspot.ie/2012/08/how-can-vix-be-14-and-lower-than-vin.html:
    "...when the VIX is near its 4 month lows (within 5%), shorting VXX still makes money, if you can believe my backtests (the inevitable increases in fear, just like today (8/14) just can't seem to overcome contango, at least not in general since VX futures started trading)..."

    ReplyDelete
  42. Steve, Phil...if you are so confident in collapsing VIX...then buy XIV....should reach 50 by year end and dow up to 16,000....

    Yes, dow up 120% in 4 years and SPX up 7% for the year...no more 40% corrections...new paradigm...old rules dont apply...up up UP...until it doesnt.

    ReplyDelete
  43. I think you are missing the point Pay Day, these instruments are full of decay...I wouldn't hold either of them.

    I trade stocks & currencies & always with tight stops.

    I have never held anything that fell 30 or 40%!!

    ReplyDelete
  44. There are many types of traders and strategies. People complained about my long SPX entry at 1378 in November when the Cycle predicted a sharp rally phase was about to begin. I did not get the long entry perfect since SPX fell to 1343 first. Obviously "sharp rally phase" proved to be an appropriate name.

    For me it is simple, I am trading a large Cycle which correctly predicted the sharp rally into January, and predicts a fall to the red trendline for SPX next.

    I'm not interested in chasing after a top, my goal is to be positioned for the next major turn in the Cycle to the downside.

    ReplyDelete
  45. Phil, XIV up 400% last 14 months...what kind of decay are you talking about?

    ReplyDelete
    Replies
    1. Payday,there is no decay in XIV. But XIV can lose 50% in a month.
      The very first rule of trading is, "Protect your principal." Why would you open yourself to the chance of a 50% loss in a month?

      The very best traders are right about 60-70% of the time. I am talking about the best. Most of the good ones find a trend and get stopped out when the trend is violated.

      If you are betting 1% of your portfolio on UVXY it may be kind of fun ... I think that is the sort of thing SC is doing here. If you bet 80% of your portfolio on UVXY and are right only 60% of the time ... well let's just say that is a good opportunity to connect with your anger, fear, and hurt side. That is a great opportunity too ... do it with your eyes wide open.

      Delete
    2. XIV up 400%, how is your UVXY position doing?

      Delete
  46. Steve if XIV dropped 50% in a month, then that would mean the SPX was dropping over 30% in a month...a scenario you claim is unlikely in this Vix compression environment.

    A crashing XIV = crashing SPX = crashing stocks (including large cap, small cap, mid cap, commodities,...all these "safe" investments you mentioned)

    There is no risk free anything in this market. I hedge with UVXY and ride XIV until its time to swap them out.

    Nothing goes up forever, and that includes SPX and XIV.

    ReplyDelete