Stock Market All the "greater fools" are in. No one left to BuyStock-Markets / Stock Markets 2012 Dec 26, 2012 - 11:25 AM GMT
Last Thursday’s mini-flashcrash in the overnight market was a wake-up call for the longs. The reason is that it took the sale of only 700,000 ES contracts to force a “limit down” in the futures. Of course, there was quite a scurry to get the ES back above support before the open. Nevertheless, the selling in the first hour of the 21st brought the trading volume above any full day’s volume in the past year.
Possibly we can blame it on Quadruple Witching last Friday. Had the market crashed then, the “House” would have had hell to pay in the options market. Sadly, the selling stopped after the first hour on Friday. If it had continued, trendline support would have been broken and the 50-day moving average at 1413.89 would have been challenged.
Today’s agenda is playing out with a break of the trading channel trendline and hourly mid-Cycle support at 1423.00. Interestingly, traders have been content with hedging and not selling, as the January SPX put options are becoming more populated. This is a clear sell signal. Speculative traders are at their highest net long positions since early 2007.
The VIX is heading for yet another breakout. This time it is the lip of the Cup with Handle that may be overcome, giving the VIX it’s next target for this rally. Remember, the risk profile of VIX is already elevated, having passed daily mid-Cycle support and its 200-day moving average at 17.65.
Sadly, elevated risk in the VIX may not be recognized by many until it exceeds 25.00 and challenges a Head & Shoulders scenario with a minimum target in the low 40’s.
GLD is revisiting the underside of its Orthodox Broadening Top trendline this morning. This marks the start of a panic decline in GLD to a minimum target at 127.00 and a possible target as low as 93.00 in this decline.
Best wishes to you and yours for the Holiday Season.
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