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Thursday, May 23, 2013

$SPX - Reversal and Expanding Cycle Update

SPX overshot the upper red line by time and price practically identical to the Cycle expanding formation.  Yesterday, there was a significant reversal and SPX is currently testing near the red line.  The key levels to watch in the Cycle are both the red lines, especially the horizontal red line.

SPX is trading in an expanding formation as predicted by the Deja Vu Cycle. In the Cycle, it does overshoot the red line to reach point A. Horizontal support held in April, and the Cycle accounts for that horizontal.

This is the 10th week that VIX has been trending up, and that is a serious warning. The behaviour of VIX is also evidence in support of the large Cycle continuing.  However, for VIX to hit an extreme level of complacency it may still reach closer to the mid-March bottom.

60min Chart
















The Deja Vu Cycle expanding formation is shown with the red lines. Notice that there is an overshoot at point A.


 
Deja Vu Cycle on a larger scale:



















115 comments:

  1. SPX is at the key red line level. The question is whether that is ready to break. We'll have the answer soon, and need to see lower for confirmation but it's a start.

    Once the red line breaks convincingly then nearer to the red horizontal around 1550 to 1570 SPX is the level to watch in this Cycle.

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  2. SPX is currently trading slightly below the red line. Watching to see if SPX is ready or not to break convincingly below the red line.

    We'll have the answer soon.

    That was a pretty serious failure and reversal yesterday for SPX. Therefore even if the market bounces there is now tremendous resistance overhead the high at 1687.

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  3. Please SC, tell us when you think that that SPX is ready to break. Thanks

    ReplyDelete
  4. Will do. Let's see how things shape up here.

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  5. Looks to me like after the overshoot at A, then its straight down to P....so shouldnt VIX be spiking straight UP during the move to P?

    what would account for another VIX drop under 12? Unless point A isnt complete yet?

    ReplyDelete
    Replies
    1. It is early, but once we have confirmation of A then the next step is to test near the horizontal red line in the Cycle. 1550-1570 SPX.

      In the Cycle there is a bounce from the horizontal red line and I expect it can be quite a solid bounce. So the VIX should dip on that.

      Delete
  6. Well I sold out at 6.51....up $33,000.

    Long weekend so happy with my lot.....good luck boys.

    ReplyDelete
    Replies
    1. Well done Phil! Good point about long weekend too. Action may slow down. The market may just churn and consolidate until next week with the long weekend coming.

      Delete
  7. SPX currently right at the red line 1652.

    ReplyDelete
  8. Here we are half a year later. Did the impossible. So the cycle continued to be wrong ... and it is somehow still trusted. I dont understand the logic.


    AM January 14, 2013 at 9:07 AM

    SC,

    Do you see huge megaphone pattern from late 90s on the SnP500, targeting 1600-1650?

    Do you have a hard stop for your plan, which if hit would mean that your plan is not working?

    >1500 on the SnP will do?

    SCJanuary 14, 2013 at 9:20 AM

    Yes, I see that pattern.

    The market would have to prove it to me that it can escape the "Cycle" for me to exit the trade. At this point the evidence is overwhelmingly in support of the Cycle continuing.

    AM January 14, 2013 at 10:39 AM

    What would the market have to do to prove that?
    SC January 14, 2013 at 11:05 AM

    It is a large scale Cycle, and so sufficient time and price must be given. I think people can compare the current market to the Cycle and make their own judgements.

    I think there are reasonable limitations in time, price and other factors.

    ReplyDelete
    Replies
    1. It is a large scale Cycle. The Cycle correctly predicted that the sharp rally phase would begin in November.

      The Cycle correctly predicted the V-dip in February.

      The Cycle correctly predicted the formation to form with the red lines. SPX has formed an identical pattern to the Cycle.

      The Cycle predicts that the rally ends....

      Delete
  9. SC,
    VIX is now 14.07. If it drops below 12, it would be a 15% drop. UVXY could move towards low 5's. Then, will that be the last bottom for UVXY and it will be on fire to the high teens if SPX is to fall from Point A to Point P? as said before, such drop in SPX will last for 6 weeks to 2 months?

    ReplyDelete
    Replies
    1. We do need to let this play out for VIX. Let's see how VIX acts next. That will be helpful in determining the pricing for UVXY.

      Once the horizontal red line for SPX breaks, then the models predict VIX and UVXY surge up.

      Delete
  10. Prechter said the top is in. Not good for the bears!

    I am not sure what his agenda is, im starting to think that because of his enormous following he may be on a payroll of some entity playing for the dark side, double agent so to speak. Lure in the bears while the boys press buy buttons.



    Market commentators typically postulate that the stock market needs a "trigger" or "catalyst" of bearish news to start down. But the opposite is true. It often likes a shot of great news to top out. This morning, Ben Bernanke testified before Congress. The Magic Man was on the job for all to see. Traders rushed to the buy side to celebrate. This supposed good news marked the high of the day.

    Robert Prechter, May 22, 2013

    ReplyDelete
    Replies
    1. Lol. Thank you for the quote.

      Delete
    2. Prechter is right twice per day like a broken clock... I do believe markets close to correcting...if Prechter says so its a coincidence.

      He called gold TOP at 900, 1200, 1800 & 1900....looks like 1900 was the right one!

      Delete
  11. SC If we stay below the red line today 1652 Spx and head towards 1550 the vix would rise. Would that confirm that the bottom of VIX is in?? Thanks

    ReplyDelete
    Replies
    1. The key question right now is if SPX is sliding down to that level or not ready yet. SPX is trading slightly under the 1652 red line but not enough to confirm a move lower.

      If we see 1610 to 1620 that should be enough.

      Once the slide is confirmed, I am expecting the slide down to be gradual so the VIX would rise but only moderately as SPX declines to near the red horizontal.

      I am also expecting a bounce from near the red horizontal. So the VIX would cool again. SPX should put in a lower high on that move but the VIX may actually bottom on that move.

      So VIX needs to play out for a while before we can confirm a bottom.

      Delete
    2. UVXY target is only $7.50 to $8 when SPX is around the red horizontal. Then cool again. UVXY won't rise dramatically until the red horizontal for SPX breaks imo.

      Delete
    3. Are you still looking to take positions on Gold/Silver? When do you see Gold/Silver bottom out before the rise you mentioned, also when SPX put in a lower high?

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    4. Yes, still waiting to take Silver/Gold positions. They are churning here so I'll give some time to see if they can come down and finish a bottoming process.

      For SPX it is early and just waiting to see if it can confirm a decline to near the horizontal red line. I expect a bounce and lower high to form from that level in June.

      Delete
    5. UVXY to the $8, that's still 30% gain from here, do you plan to take on any positions on UVXY for the drop to the horizontal line or you only interested when VIX below 12?

      Delete
    6. For UVXY I'm going to wait and let things line up some more. I think the most attractive spot will come in June so still early.

      Delete
  12. We should see better indications of short term direction from the market over the next couple of trading days.

    ReplyDelete
  13. VIX found resistance at the 200dma at 14.90 yesterday, and I noticed VXX found resistance at it's 50dma.

    ReplyDelete
  14. Hi SC

    you plan to get in more over weight on this next bounce? or you plan to sell soon and get in overweight again on the next bounce? or you plan to hold from now on and not worry about the next bounce?

    Like to hear your game plan.


    Thanks!

    ReplyDelete
    Replies
    1. I'm staying overweight short SPX and would consider covering some shorts near the red horizontal line 1550 area.

      Then would reshort on a bounce from that level.

      Delete
  15. SC when do you think SPX will hit 1300 ? And do you really think it will hit 1300 ? Thnaks

    ReplyDelete
    Replies
    1. In the Cycle, Point N is the 1343 SPX November low. The Cycle chart shows a decline for SPX to point P, then a bounce, then a slide down to levels around point N.

      That should be low 1300's. That will take many months since there are many steps in the Cycle to reach that level.

      From that level the decline to point Z begins.

      Delete
    2. SC, your timing for projected targets is way off again.

      Delete
    3. I feel the best approach has been to keep it simple and look at each phase individually. The current phase is to confirm Point A and a turn down. Then can focus on decline to P as another phase etc....

      We can roughly gauge timing estimates as to when things occur looking at the Cycle. However, this is a large scale Cycle. Each phase takes months.

      Delete
  16. Really hope that the drop is coming, but right now just 1580 seems an impossible target, even with down days like today and yesterday still feel like keep going up

    ReplyDelete
  17. Another 1:10 RS for UVXY.... Funny how XIV hasnt has a single split in 2 yrs and UVXY on its 3rd in 14 months! Lol

    SC...looks like you'll be needing to change your UVXY targets....

    ReplyDelete
    Replies
    1. Thank you. Price levels will be adjusted by a factor of 10.

      Delete
  18. I think we are going to 1700++.....I wouldn't be buying UVXY at this price.

    The mkt has had every opportunity to put in a 3rd wave down the past couple of days but it didn't happen.

    More frustrated bears ahead.

    ReplyDelete
    Replies
    1. I agree, 1750 looks interesting for next target upstairs.

      We still have a lot of over leveraged bears out there.

      Delete
    2. You might be right and we could go higher but don't talk about over leveraged bears when margin debt is now at a all time high. It is actually over leveraged greedy bulls so that argument is rubbish sorry to say. Link below

      http://www.triwealth.com/greed-achieves-new-all-time-high/

      Delete
  19. Interesting chart on twitter of a 1996 analog with todays market. Does this fit your senerio SC?


    https://twitter.com/RoryHandyside/status/338133191678382080/photo/1

    ReplyDelete
    Replies
    1. Thank you! Interesting fractal.

      Currently we are testing the red line in my Cycle, and remember it is a large scale Cycle. Because it is large scale, it is difficult to see the minute details at this point around the red line.

      If it does manage to firm up around this red line then that fractal could be quite helpful going forward. On the other hand if the red line breaks down...

      Anyway, we are at "make or break" on the short term.

      I will look into that further.

      Delete
  20. EMINI.............

    http://traderjoed.blogspot.com/

    ReplyDelete
  21. SC, do you take positions in UVXY prior to a reverse split or after? I'm thinking one of the other ETF's may be better to use now.

    ReplyDelete
    Replies
    1. For me the split is a non-issue. For etfs I've never seen any impact going forward on performance as a result of a split.

      I've been waiting to take positions in UVXY. When the VIX reaches ideally around 11.50 then I'll get aggressive and load up on UVXY.

      Delete
    2. http://www.investingdaily.com/11203/avoid-leveraged-etfs-that-undergo-reverse-stock-splits/

      ..studies have found that companies that engage in reverse stock splits on average underperform the overall market going forward. A 2005 paper by professors at City University of New York (CUNY) concluded that “reverse stock splits tend to be strong indicators of poor performance afterward.” Interestingly, underperformance didn’t start until 30 trading days after the reverse split and the maximum underperformance occurred in the 50th trading day after the reverse split.

      Delete
    3. The study states clearly that companies (stocks) underperform after reverse splits. I agree with that. It is a different situation for etfs based on indexes rather than individual stocks.

      Delete
    4. In the long run UVXY underperformed after every reverse split. We are about to have another one.

      I go with - it wont be different this time around - thesis.

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    5. The split will have no bearing on performance going forward. The performance of UVXY will be directly related to performance of VIX futures as always.

      Ultimately VIX futures will move in accordance with the markets, and turning points. Cycles.

      Delete
  22. SPX clearly is back above the red line which today is at 1656 SPX.

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    Replies
    1. That red line SPX level is the bull/bear line in the Cycle. I would like to see VIX around 11.50 ultimately. If there was a clear breakdown of that red SPX line then I would consider a position in UVXY even if the VIX wasn't down in that range.

      Delete
  23. Agreed....mkt needs to break 1676 to set up a break out, then its off to 1700++.

    Bears getting screwed yet again...perhaps the charts that pointed to a crash were upside down...LOL



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  24. Interestingly the VIX is still holding fairly well today.

    ReplyDelete
  25. The trend is your friend until it isn't, my friend.

    ReplyDelete
    Replies
    1. DeMark.
      Sell signal on Monthly, Weekly, and Daily as of last Friday.

      Delete
    2. David, can you please provide ref? i cant seem to find anything on google

      Delete
  26. SPX testing the red line 1657 again.

    ReplyDelete
    Replies
    1. Hi SC

      what does it mean testing the red line again? are you thinking it will break or not?


      Thanks!

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    2. The red SPX line is the bull/bear line in the Cycle model. It bounced above the line yesterday but today futures are trading below again.

      Delete
    3. Once the line is broken convincingly then the next level of support in the model is around the horizontal line 1560.

      Delete
  27. So are you adding to your shorts here SC or are you fully loaded?

    I will wait for a break of 1636 to confirm a wave C down before shorting. Not to sure how relevant 1657 actually is?

    ReplyDelete
    Replies
    1. I'm fully loaded short SPX, but will wait to add UVXY.

      Delete
  28. SC, what constitutes a convincing break of the SPX red line you're watching? A close below the line? A close then retest? Multiple/consecutive closes below?

    Thanks

    ReplyDelete
    Replies
    1. 1620's may be enough. Also the longer time that SPX spends under 1660, the weaker and more likely to follow through lower. Closes below 1650 are also a sign of weakness.

      We could churn for a while before the market confirms.

      Delete
  29. Sc, your previous UVXY point Z target was around $100....will the target be $1000 post split or will you be adjusting it lower?

    ReplyDelete
    Replies
    1. $145.00 is a level of interest for Z though it is early in the Cycle, and it is better to estimate later in the Cycle. For P the level of interest is in the high teens.

      Due to the proposed reverse split all target levels will be adjusted 10X higher.

      Delete
    2. I'll have charts coming for UVXY and also update the Mount Everest Cycle.

      Delete
    3. What's your next short term target for UVXY? Is it still around 8?

      Delete
    4. UVXY has resistance in the $7.50 to $8 range. I believe that would be tested when SPX is testing around 1560.

      We can't really say that the market has broken down convincingly yet. Though there are initial signs of weakness clearly for SPX.

      Delete
  30. SC, are you buying he metals?........GDX beginning to show strength in the face of market weakness. I have gold and silver rising into September

    ReplyDelete
    Replies
    1. My Silver Cycle is in the zone to look for that low and turn up. I like Gold especially. I have not yet, but plan to build positions soon. Probably in June.

      Delete
  31. Looks like VIX cooling off to test 13's support. Then it would be positioned to pop again.

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  32. When the frak is the VIX run up thru point P already? So many false starts.... Getting tired of waiting....

    ReplyDelete
    Replies
    1. Yes, it is a slow grinding process. Markets are bouncing around right now, but VIX is steadily firming. This is the 11th week VIX has been rising from mid-March.

      Once SPX breaks down below the horizontal red line I am anticipating VIX to move up much more rapidly.

      Delete
  33. Sc,

    Where is your stop in your fully loaded S&P short?

    ReplyDelete
    Replies
    1. The Cycle is the stop. The middle chart is the Cycle and shows SPX stalling and declining below the red line. So I'm positiond short SPX and I'll hold short provided that SPX stalls and declines below the red line within a reasonable amount of time - early June. SPX is bouncing around the red line currently, and indications are that it is weakening.

      As well, this is the 11th week that VIX has been rising since mid-March. VIX seems to agree with my Cycle that SPX is in the late stages. I am looking to get aggressive with UVXY soon and probably load up next week. I think time is running out.

      Delete
    2. Yes, but you are also anticipatiing a VIX low under 12s, so wouldnt that negate all of the higher lows VIX has been making for the past several weeks? As well as portend a UVXY in the low 5's?

      I'll tell you what I see...XIV forming a potential H&S top on the daily chart. Finishing up the Right shoulder now....any drop under 21 will confirm the R shoulder complete...19 is the neckline. under that...watch out!

      Delete
    3. VIX looks to me that there is support in the 13's now. I think VIX tests that level and then pops. After that then VIX can cool off again.

      Yes, agree with that XIV pattern.

      Delete
  34. The red line for SPX today is 1660. It rises about 2 points a day.

    ReplyDelete
  35. Is the the beginning of the silver POP or another bear flag? Doesnt look like bottom finished but DUST has finished paraboliic rise

    ReplyDelete
    Replies
    1. Still might be a little early. Let's see how things shape up next week for Silver/Gold.

      Delete
    2. SC, I think the reversal in Au and Ag was last week. GDX led the way down and is now leading the way back up. Higher highs, increasing volume in both AU and GDX on up days and GDX outperforming Gold 2:1.

      It doesn't get any clearer than this IMO.

      Delete
    3. i could see gold losing another 100 pts short term.

      Delete
    4. Gold looks good on the hourly....looks HORRIBLE on the monthly! Silver same thing....

      Any weakness in SPX will drive PM stocks down even more....but they will bottom first.

      Delete
  36. SC Could you comment on the performance of the UVXY vs Vix? Since the March bottom on the VIX, the VIX has outperformed the UVXY. I realize that the UVXY is based on futures and has more decay factors but I'm starting to wonder if your going to get the outperformance you expect from using UVXY instead of VIX?
    Maybe our expectations should be the same as to the performance of VIX? and I don't expect the VIX to meet your expectations of Mt Everest, do you ? Thanks

    ReplyDelete
  37. Sc, so SPX broke upward red line....now move to horizontal red.... Is this THE POINT P MOVE or more churning & bouncing within the 2 trend lines?

    ReplyDelete
    Replies
    1. The market looked "heavier" with each day, and looked weak on Friday close.

      Yet, I suspect there could still be some churning this coming week before it is ready to decline more seriously.

      Delete
  38. UVXY most closely tracks the XIV (2x inverse xiv) XIV down 3% UVXY up 6% etc.
    xIV has been forming H&S top since January...in the midst of VIX strength. This means contango weakening. Right shoulder almost complete. When XIV neckline breaks at 19, then we will see the move to POINT P SC is taling about , and rapid rise in UVXY to high teens. XIV & UVXY should hit 1:1 ratio (currently 3.5:1).

    Then swap into XIV for a rise back to 19 neckline in July?,...backwardation will set in and UVXY will make move to 40 on the next drop in SPX.

    100+ uvxy wont start until SPX breaks 1350....later near dec/jan...at least how i hope it turns out

    ReplyDelete
  39. SC doing his victory dance with the bears.

    https://twitter.com/NorthmanTrader/status/340542887244754944/photo/1

    ReplyDelete
    Replies
    1. Well, we will see. The market really hasn't declined much.

      Delete
  40. The best example for the behaviour of the VIX futures etfs during a serious decline is the summer 2011 decline. During that period the VIX rose from 14 to 48. TVIX which has the same structure of VIX futures as UVXY rose from $15 to $109.

    TVIX was initially very sluggish to rise in 2011. VIX moved fast intially then TVIX caught up and kept rising for months after VIX had already topped. Mathematically these etfs compound as they rise. For example UVXY rises 50% from current level of $6 to $9. That is a $3 move. Then, UVXY rises 50% from $10 to $15. That is a $5 move. UVXY rises 50% from $50 to $75. That is a $25 move. In all these examples, the VIX futures rise by the same percentage, but the dollar amount gained by UVXY increases dramatically. This is the compounding effect.

    What this means is that during a large and sustained rising period for VIX, UVXY performance should be expected to start slowly and increase dramatically due to the compounding effect.

    What is intriguing is that the 2011 decline for the markets, while serious, was just a correction not a bear market. VIX futures etfs did not exist the last time we had a bear market. During a bear market, one would expect the VIX futures etfs to make a massive move up over a period of many months.

    ReplyDelete
    Replies
    1. Thanks for the example, that helps and we'll see that the UVXY price action will act different as the VIX rises

      Delete
    2. Yes, the history from 2011 shows that VIX futures etf performance increases when VIX is at higher levels - in the upper part of it's range.

      I can probably show some performance comparison charts to visually show this compounding effect.

      Delete
  41. It is best to approach these markets one step at a time. These large Cycles are negative overall, but there are also quiet and positive periods as well. So it makes sense to approach it each phase at a time.

    ReplyDelete
  42. Well more validation that the bottom is in for gold and gold stocks. Aussie gold stocks, many majors, currently up over 10% on volume despite gold being down 1.7% Friday.

    They are on fire in Oz today with the broader market lower. Capital flows into the gold sector could be massive if things get ugly in the broader market.

    ReplyDelete
  43. SC,
    is it still possible that VIX will go down to 11-12? if not, does it mean that VIX is about to shoot up from here until Point P in S&P is reached?

    ReplyDelete
    Replies
    1. Let's wait and see how things unfold early this week.

      Delete
    2. Any short term targets for VIX here?

      Delete
    3. Around 20 VIX has been resistance going back for months.

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    4. I think there is resistance for VIX low 20's.

      Delete
    5. SC,
      Are you about to load up UVXY or still awaiting the next entry point?

      Delete
    6. I'm short SPX, but will wait for UVXY. There is no rush imo. Yes, I think there will be other entry points that are attractive.

      Delete
  44. Will UVXY hit $8 on this run?

    Too many false starts....hard to get excited.

    Watching XIV closely for break under 21

    ReplyDelete
    Replies
    1. Market did follow through on the downside, and so probably UVXY can test around $8 which has been resistance.

      Delete
  45. We did see near 12 for VIX. That might have been the low. When SPX rallied in May, VIX just simply didn't come down much.

    In the Cycle model it shows a decent bounce for SPX from near the horizontal red line ~1560 SPX or so to put in a lower high. I expect VIX to cool off a lot on that move which would present a good spot for UVXY.

    So if UVXY does follow through and pop here, then there should be resistance around $8 range, and can see $6's again afterwards.

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  46. Might see some chop around this level.

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  47. Probably a lot of support for VIX around 15 now. It might settle to test that level then rise more.

    ReplyDelete
  48. Interestingly the lunar Cycle was quite accurate. The market topped on May 22. The full moon was May 25th:

    "The tendency has been for the markets to peak a few days ahead of the full moon, move flat to slightly lower --waiting for the full moon to pass. Then on the day of the full moon or slightly after, the brunt of the crash hits the marketplace"


    SCMay 13, 2013 at 8:12 AM
    Solar eclipse was May 10th, and lunar eclipse full moon is May 25th.

    "Puetz attempted to discover if eclipses and market crashes were somehow connected. He emphasized that he is not contending that full moons close to solar eclipses cause market crashes. But he does conclude that a full moon in general and a lunar (eclipse) full moon close to solar eclipses, in particular, seem to be the triggering device that allows for the rapid transformation of investor psychology from manic greed to paranoia. He asks what the odds are that eight of the greatest market crashes in history would accidentally fall within a time period of six days before to three days after a full moon that occurred within six weeks of a solar eclipse? His answer is that for all eight crashes to accidentally fall within the required intervals would be .23 raised to the eighth power less than one chance in 127,000."

    ". . .Puetz) used eight previous crashes in various markets from the Holland Tulip Mania in 1637 through the Tokyo crash in 1990. He noted that market crashes tend to be lumped near the full moons that are also lunar eclipses. In fact, he states, the greatest number of crashes start after the first full moon after a solar eclipse when that full moon is also a lunar eclipse . . Once the panic starts, Puetz notes, it generally lasts from two to four weeks. The tendency has been for the markets to peak a few days ahead of the full moon, move flat to slightly lower --waiting for the full moon to pass. Then on the day of the full moon or slightly after, the brunt of the crash hits the marketplace."

    ReplyDelete
    Replies
    1. SPX hasn't dropped enough yet to be called a crash obviously, but the Nikkei has fallen 19% from May 22.

      That is significant.

      Delete
    2. "Once the panic starts, Puetz notes, it generally lasts from two to four weeks."

      Delete
    3. There is panic in Nikkei but no panic in the S&P. The horizontal red line is the most important in S&P. No panic until that breaks for S&P.

      Delete
    4. SC, Puetz has been short market for last 2 years.

      Delete
    5. I'm not familiar with him, just thought it was interesting that the dates lined up with historical events.

      Delete
  49. Lovely bounce of the lows yesterday, looks like we are finally in a corrective 4 & I'm looking for new highs at some point.

    Short UVXY at 6.90.

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  50. Bounce was due but I think SPX heading lower next week.

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  51. New chart update posted.

    ReplyDelete