pebblewriter

Tag: technical analysis

  • Update on VIX: Mar 10, 2020

    It’s been a while since we took a big picture look at VIX. Since it reached levels not seen since the GFC yesterday, this seemed like as good a time as any.

    VIX is an interesting instrument. Once a reliable measure of volatility in the market, it was used by many to hedge risk.  As equity corrections became an endangered species, however, fewer investors bothered.

    Eventually, VIX became a source of income for those willing to take a chance on selling vol. It might have seemed risky at times, but every one of the six times VIX exceeded 46 since 2010 was followed by a collapse to below 15.  Actually, make that 5 out of six times.On Feb 28, VIX shot up to 49.48, but it only dropped as low as 24.93 before bouncing up to yesterday’s high of 62.12. The price to which it rallied was significant.

    Eagle-eyed members will note it’s been one of the higher targets on our charts for years – but, one we seldom mention as VIX is always smacked down upon reaching a lesser Fib level and a price between 46 and 54.  From the post Market Timing, a Bad Thing? last October.

    The 25.50ish target represents the intersection of the .382 Fib, two red TLs and the midline of the white channel seen below. If 25.50 should ever be broken, things could get very interesting very quickly.

    The 62.12 high was very close to the .618 retracement (58.6) of the drop from 89.53 in 2008 to 8.56 in 2017.

    Now, it was no surprise that VIX stopped rising once ES had dropped to our 2728 target. But, the breakout begs the question: What do the charts say about the even higher targets?

    continued for members… (more…)

  • The Snoozefest Continues

    All the bullish factors which have kept stocks aloft the past two sessions are still going at it.  Hence, the futures’ snoozefest even as Trump is about to be impeached.The only potential fly in the ointment remains oil and gas, which have reached an important decision point.

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  • Deutsche Bank: Kann Dieses Schwein Pfeifen?

    There’s a lovely English figure of speech which suggests the ridiculousness of something happening: “when pigs fly.”  In German, the same sentiment can be expressed by the expression “ich glaub mein Schwein pfeift” which means “I believe my pig whistles.”  DB is surely trying, but it’s having a hell of a time whistling a happy tune.

    We last visited the stock on March 13 [see: When Push Comes to Shove] when it was threatening to break out of a small consolidating triangle after breaking down below our previous short signal at 11.  From the Mar 13 post:

    A breakdown from a falling channel is incredibly bearish, but a move back above the bottom of the falling channel (around 9.50) would be net positive. To get there, it will need to break above the red TL and will then face its SMA200, now at 10.32.

    A long position with very tight stops would make sense for those willing to roll the dice. However, if it can’t retake the channel bottom, then it remains a dead bank walking and a good short.Obviously, shorting it in the hopes that the ECB lets it fail would entail some risk. No doubt the ECB is trying to figure out a way to restructure it in such a way that it’ll survive and, ideally, not take the rest of the world down with it. Until then, I think it’ll remain on life support.

    As it turned out, the triangle broke down and not up.  The stock spent 6 weeks being propped up around $8/share before finally breaking down again and shedding 28% in a nifty little falling channel.

     * * *
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     * * *

    It finally bottomed at 6.49 in June and bounced back up above 8 where it collided with overhead resistance and is currently backing off in the wake of the latest restructuring news.

    Make no mistake about it, DB is in a world of hurt.  Given that it’s the 15th largest bank in the world with over $40 trillion in derivatives, its demise could devastate the financial system.  Can this pig whistle?  If so, is it just whistling past the graveyard?

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  • TSLA Skids Into an Important Target

    We started posting about TSLA a little over a year ago when it dipped below important horizontal support [see: Can Tesla Avoid a Crash?]

    We’ve updated the charts multiple times since then, working to stay ahead of Musk’s obvious attempts to manipulate the stock.  The harmonic picture has been tricky due to the presence of two Point X’s which produces two different grids – the purple and the white.

    TSLA dipped below the white .618 in March (and multiple times afterwards) bolstering the argument for the purple grid.  But at times it has appeared that the white grid aligned nicely with channel lines such as this chart from last September which officially triggered a short call at 289 [see: Crypto Carnage] which was reiterated at 291 on April 3 [See: Can TSLA Survive This Crash?] and targeted 202.29.

    The Better Late Than Never Department has notified me that TSLA just crashed into 202.29, nearing the completion of this particular leg of its journey.

    Given that OPEX is in the rear view mirror and the futures are about to break below support again, we have to wonder whether TSLA is done.continued for members… (more…)

  • Delay of Game

    Nothing much has changed since yesterday.  SPX bounced around in our target zone, coming within a few points of its SMA200 as VIX went nowhere.

    The one notable exception was AAPL, which after tagging our downside target on Jan 3 $from last November [see: AAPL Discovers Gravity] reached our upside target yesterday. We originally charted this upside target on Jan 3 [see: Update on AAPL, Jan 3] and the IH&S pattern reinforced it three weeks later.  Had AAPL not reversed, the additional downside potential was substantial.

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  • Currency Complications

    USDJPY reached our target at the SMA100/SMA200 overnight, at least temporarily bringing the pair back below the top of the falling white channel from which it broke out on July 10.  Readers will recall that breakout was instrumental in helping SPX break above its faux IH&S neckline 66 points ago.

    A USDJPY rebound here is all stocks might need to make new highs.  EURUSD, which is backtesting after a major channel breakdown, would certainly support a strengthening of the USD……as would DXY — which is the latest victim of “unpresidented” tweets.

    As central bankers have recently discovered, however, there are complications from continued dollar strength which would suggest that it will take a break here.  Will they heed those warnings, or are new all-time highs in equity markets more important?

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  • Drumroll Please…

    In our October 6 update on oil [see: Update on CL] I expressed skepticism regarding oil’s ability to continue rallying.  It had just popped 30% off the Aug 24 lows, and had broken out of a triangle formed while digesting those gains.  Still, I saw it declining rather than making new highs.

    …lower prices make sense.  And, they’re necessary — particularly in light of the critical yen carry trade.  Japan can’t very well devalue the yen against the dollar unless oil — which is denominated in USD — declines to offset the currency effect.

    Yes, it means that marginal players — like the entire shale industry — will be decimated.  But, that’s a sacrifice that central banks are willing to make.  The health of the oil industry versus the wealth effect of trillions in rising equities?  No contest.

    I was wrong about CL declining right away.  It didn’t start until October 9.  2015-12-29 CL 60 0600continued for members…

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