The bulls wanted to rain on the bear parade this morning and got off to a great start bouncing CRB higher back into the bull camp. The dollar is weaker so the bulls smile. Copper, however, measured by the JJC, is now printing 48.35 remaining below Keystone's critical 48.80 level today, thus, the bears have strength. Minutes ago, the CRB and oil spike wildly higher. Iranian oil exports are falling so sanctions are tightening supply so price moves up, then the oil shorts jump in to add the short-covering rocket fuel to propel the oil price higher. The markets remain highly erratic and unstable.
The housing data this week ends with New Home Sales that were not impressive; all the housing data this week can be summarized as slightly bearish. KBH reported this morning and threw a wrench into the housing recovery works. Great news was expected but instead KBH sees lackluster sales and cancellations increased. Housing is the foundation, figuratively and literally, of a strong economy, and the path forward is troubled with weaker housing data.
The SPX lost the 1389 level so lower numbers are expected today. The LOD thus far is 1386.87. A back kiss of the rupture at the 1389-1390 level is now printing. If the bears are successful, SPX will drop from here. The bulls need to fight hard if they want to prevent the day from getting away from them. SPX S/R is 1394, 1391, 1389, 1386, 1378, 1372 and strong support at 1371. A test of the 20-day MA at 1380.73 is likely moving forward. Continue watching CRB 312.40, JJC 48.80 and the SPX S/R. JJC now coming up to 48.59. The bears are cruising.
Note Added 3/23/12 at 10:51 AM: The bears could not defend the back kiss at 1389-ish, so the bulls press higher. The key today is JJC 48.80, that will tell you the story. If JJC moves over 48.80, the HOD thus far 48.63, the bulls will muster some upside juice, if the JJC stays under 48.80, weakness will reenter the broad markets and send them lower, back down thru SPX 1389 and lower. Markets bulls are holding up due to volatility remaining low; when you see the down move in the markets with the spike up in volatilty that will signal trouble for markets. JJC now printing 48.76, here it is folks, four pennies away, either the bears spank it down now, or the bulls punch up thru, and the broad markets will follow along.
Note Added 3/23/12 at 10:59 AM: JJC printing 48.79, here it is, who is stronger bulls or bears? High drama that is now determining today's market outcome.
Note Added 3/23/12 at 11:01 AM: Circuit breakers trigger for AAPL halting the stock. A trade supposedly went off at 342 which is an error. Regardless, this type of thing displays the erratic and unstable nature of markets now. Hang on. JJC punches up thru 48.80, see if the bulls can hold it for seven to ten minutes, or not. AAPL is trading again.
Note Added 3/23/12 at 12:22 PM: The market shenanigans continue centered around the BATS Exchange. An alert on their website says open orders in the symbol range A - BFZZZ (think Apple, AAPL) will be cancelled at 12:40 PM and trading will resume for this symbol range at 12:50 PM. http://www.batstrading.com/alerts/ JJC remains above 48.80 for an hour now and note the buoyancy in the broad indexes.
JJC now printing
Note Added 3/23/12 at 12:48 PM: JJC now printing 48.81, the bulls are hanging on by a fingernail. The bears need to see JJC sub 48.80, if so, the broad markets will weaken substantially again.
Note Added 3/23/12 at 1:03 PM: JJC printing 48.84........high drama today especially with the BATS problems affecting AAPL stock, drastic bounce in oil on Iranian lower exports and copper theatrics. Keystone's algo, Keybot the Quant, is in a mode to go long currently but is held back due to internal programming rules. The quant probably wants to see the SPX above 1402 before recommitting to the long side, otherwise, it will likely remain short. Of course, if JJC fails 48.80, that will confirm the short side moving forward. Note that tech (Nasdaq) is leading to the downside so the upside in the markets should be limited.
Note Added 3/23/12 at 3:30 PM: One-half hour of trading remaining and JJC is printing 48.83 barely hanging on to the bull side. SPX HOD is 1399.18 so far today, now printing 1398. The beat goes on. Looks like the fight for JJC 48.80 will continue into next week. Utilities are up today so the bulls are keeping that sector propped up. VIX is at 15 allowing complacency to rule into the weekend. Traders continue to fully believe in the bull rally. JJC remains at 48.83, bears too weak to push back under 48.80, and bulls too weak to take it higher, both sides must be looking forward to happy hour.
What are your thoughts on the TVIX?
ReplyDeleteIs it a buy at 7.25-7.50? Or can it fall even further?
Hello Anon, do not even consider it, avoid it like the plague.
ReplyDeleteKS, Do you think UVXY will pop up in the next week?
DeleteThanks!
Hello Chester, the TVIX problem is hitting all VIX-based products hard. Both VXX and UVXY remain possible long volatility trades but VXX was slapped 7% and UVXY 14%, printing all-time lows, as the TVIX stink affects all the products.
DeleteThe TVIX is likely forever tarnished and should be avoided. VXX and UVXY will soldier on but anyone that enters has to understand that they can lose a substantial portion of their money. They represent the highest level of risk-reward where the risk is uber high, but the reward may be as well since if the market downturn continues, especially early in the new week ahead, volatility should spike wildly higher likely taking VXX and UVXY with it. Keystone remains in VXX currently but these products are probably best avoided and only used for the very short term if at all.
KS, what do you think will happen to TVIX?
ReplyDeleteBrian
hey KS, haven't been posting much on your blog lately, as I've been really busy with other stuff. Funny to see that "fat finger" excuse again, which was also used during the early March decline. Let's see if this puppy can break 1400. if she does, then ~1425 should be in the cards IMHO
ReplyDeleteHello Brian, that is a good question, and it applies to all those trading vehicles, VXX, XIV, etc... TVIX is different in the fact that the news came out yesterday about the creation of shares, which is what these vehicles do to maintain a market in the issues. It appears that TVIX will probably be tainted here on out, and this separates it slightly from the other volatility derivatives.
ReplyDeleteThat is a headache for TVIX since if you have less and less, or very little buyers, then the price will obviously drift lower, more and more holders will try and exit. But, if it can stabilize itself, and then the broad markets continue to roll over, or at least take a spike downwards, one would think that it could actually take a wild pop back up and recover. In addition, Credit Suisse is addressing the creation issue, but you will have to google for news on this.
So, it is a tough call. VXX is dropping and Keystone will probably start to sell it next week and start taking losses on the trade. With individual stocks that announce accounting issues it is always smart to sell first and ask questions later, so this is a similar situation. So perhaps it will stabilize here, if not say as next week begins it is probably time to exit and scale out, even scale out partially today as it appears some traders are.
Keystone was lucky since he just finished a trade in TVIX and was looking to reenter. Sometimes in trading it is better to be lucky than good although VXX will be a loser as well.
As far as TVIX goes, perhaps it will weather the storm, the next few days will tell a lot. It is probably a situation that they could remedy but it is all too up in the air now and no one knows all the details yet.
Hello Arnie, yes, that gap fill at 1425 should come at some point but when is the question. Since the downside only began over the last day, the markets need to move into next week to sort out how far down they want to go. The key is copper, JJC, if it goes up so will the broad indexes, if it goes down so will the markets.
ReplyDeleteThe odd market behavior this week brings back memories of the Flash Crash. Perhaps all the complacency and lack of fear in the markets will manifest itself in an ugly way at anytime.
If JJC and CRB move up the SPX will likely venture up to the gap fill at 1425, if they weaken and head lower so will the markets adn the 1425 could potentially be placed on hold for quite a while.