Wednesday, 16 August 2017

Gap talk

US equity indexes closed fractionally mixed, sp +3pts at 2468 (intra high 2474). The two leaders - Trans/R2K, settled +0.1% and u/c respectively. VIX settled -2.5% at 11.74. Near term outlook offers a swing lower to at least 2454 before the weekend. It remains notable that the gap zone of sp'2435/25 is yet to be tagged.


sp'daily5



VIX'daily3



Summary

US equities opened a little higher, and battled upward, becoming stuck at upper gap resistance of sp'2474. There was a rollover, helped by more 'Trump drama', and a pretty uninspiring press release from the Fed. The close was somewhat weak, and note the settling black-fail doji candle.

Market volatility remains rather subdued, with the VIX settling in the 11s. However, another spike to the 15s seems probable, not least as the gap zone of sp'2535/25 is yet to be tagged. A divergent lower VIX high (<16.66) - relative to last Friday, would give high confidence of a floor.
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Gap talk

Anyone who has watched, or directly traded equities for as little as a few months, should have come to recognise that opening price gaps - whether up or down, are (almost always) filled.

Just consider the opening price gap from April 24th, leaving a gap of 2348/70. After some weeks of chop, the market saw a one day washout on May 17th, with a slightly lower low on May 18th of 2352. So, it wasn't a 100% fill.. but it was close enough.

July 12th saw a new gap of 2425/35. Last Thursday saw a washout to 2437, but that was notably 2pts shy of the minimum target of the upper end of the gap.


Not all indexes are the same...

In terms of the July 12th gap... consider this..

SPX - not even partly filled
COMPQ - partly filled
INDU - not even partly filled
NYSE - partly filled, with a notable reversal candle
RUT - fully filled (Aug 2nd)
TRAN - fully filled (July 19th)

So.. of the six main indexes: 2 are yet to even be partly filled, 2 partly filled, 2 fully filled.

The sp'500 is arguably the most representative of the US equity market, as most would agree. Until that index at least partly fills the gap, I consider this 'technical issue' unresolved. The fact the two leaders - Trans/R2K, have both filled the gap, lends credence to the notion that the sp' and dow will eventually follow.

Clearly, the primary trend remains bullish, but there will always be sporadic drops, and those will (usually) fill any recent opening gaps. To me, there is zero reason why sp'2435/25 won't at least be partly filled, before resuming upward to the 2500s in September.

I hope that gives clarity to the basis for some of my recent reasoning.
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Mixed skies.. somewhat appropriate

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Goodnight from London
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Tuesday, 15 August 2017

A tedious day

US equity indexes closed moderately mixed, sp -1pt at 2464. The two leaders - Trans/R2K, settled +0.2% and -0.8% respectively. VIX settled -2.3% at 12.04. Near term outlook offers minimum target of sp'2454, and more broadly.. a tag of 2435, but with a notably divergent lower VIX high (<16.66).


sp'daily5



VIX'daily3



Summary

US equities opened a little higher, there was a clear opening reversal, but neither were the equity bears able to manage anything of even a moderate degree. The day soon became one of tedious minor chop.

Market volatility opened in the 11s, saw a brief spike to fractionally positive, but then cooled back into the 11s. If sp'2435 - as remains technically due, the VIX should see the 15s again, and that would make for a notably divergent lower high - relative to last Friday (VIX 16.66), when sp'2437.
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Monday, 14 August 2017

2435 remains a minimum target

US equity indexes closed broadly higher, sp +24pts at 2465. The two leaders - Trans/R2K, settled higher by 1.6% and 1.5% respectively. VIX settled -20.5% at 12.33. Near term outlook offers a retrace to at least sp'2454, but more broadly, prime target of 2435 is yet to be tagged.


sp'daily5



VIX'daily3



Summary

US equities began the week on a positive note, with indexes quickly building sig' gains into late morning. Price action was pretty choppy in the afternoon though, with short term price structure of a baby bull flag. At most, the bulls look like they could manage to hit 2474, before another swing lower to at least 2454.

With equities opening higher, the VIX was duly whacked, settling in the 12s. If another swing lower to sp'2435 - as is due, the VIX should see the 15/16s... but a divergent lower high to last Friday's intra high of 16.66.
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Ambulance for the London equity bears?
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Goodnight from London
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