Friday, 21 October 2016

TVIX, UVXY - a rough week with new historic lows

Whilst equities saw a great deal of chop this week, the VIX broadly cooled to the low teens. The 2x lev' bullish instruments of TVIX and UVXY saw net weekly declines of -18.6% and -19.1% respectively. Near term outlook offers a strong rebound, as VIX is set to challenge the key 20 threshold.

TVIX, daily

UVXY, daily


First, an update on the VIX, which saw a net weekly decline of -17.2%

As for TVIX and UVXY.... the net weekly declines are especially harsh, as equities saw a broad failure to continue pushing upward from last week's low of sp'2114.

Considering the looming election, the VIX remains bizarrely subdued. Some degree of rebound looks due next week.

It is hard to see the VIX not making at least one or two attempts to reach the key 20 threshold into early November. The weekly VIX chart is offering the 20/22 zone, which would likely equate to sp'2080/70.

As ever, the issue of statistical decay makes holding such leveraged instruments across multiple days... or weeks... increasingly problematic.

Thursday, 20 October 2016

GDX - miners starting to cool

After three days of rather significant gains, the mining stocks are back under some pressure - notably via the strong USD. The ETF of GDX settled -0.3% @ $24.80. There remains a serious threat of renewed downside all the way to the $21/19s.

GDX, daily

GDX, monthly


Suffice to add.. things only turn bullish on a break above declining trend... where the 50dma is lurking in the mid $26s. Otherwise... we have an arguable gap fill, and are now set to break new multi-month lows.

The bigger monthly chart is threatening a large multi-month bull flag. That will only be provisionally confirmed though with a monthly close in the mid/upper $26s.

As ever... the USD will be a key variable. The metals would be under severe downward pressure if DXY >100. For now.. its an increasingly borderline situation.

Wednesday, 19 October 2016

INTC - big break lower

Whilst the broader market managed moderate gains, there was severe weakness in Intel (INTC), which snapped lower on earnings in Tuesday AH, and settling Wednesday lower by -5.8% @ $35.56 - the lowest level since early September.

INTC, daily

INTC, monthly


*its notable that today's big drop was after yesterday's closing black-fail candle. Those are never to be dismissed lightly.

Unadjusted EPS was 80 cents - well above market consensus of 73... but that was not enough to satisfy the mainstream. With a slightly lowered forecast for Q4, the market duly whacked INTC stock.

There is a clear break of first support of 50dma in the $36.40s. Next big price-cluster support is in the $34.40s.

Those equity bears seeking massively lower levels in the broader US equity market, are going to need to see stocks like INTC, break below core rising trend. In Intel's case.. that is in the low $33s.

So... it can be safely said things only turn 'decisively bearish', if INTC is trading in the $32s in November.. or any time after.

Tuesday, 18 October 2016

NFLX - the upside down

Whilst the broader market closed moderately higher, there was extremely powerful strength in Netflix (NFLX), which settled +19.1% @ $118.87, the best daily close since late Dec'2015. Next term outlook is bearish, as the broader market looks highly vulnerable to a brief foray <sp'2100.

NFLX, monthly (inv), 16yr, rainbow

*if you have never seen 'Stranger Things', you're missing out, and you probably will not get the reference via the above kooky chart.

NFLX, daily

NFLX, monthly


Earnings certainly impressed the market, as subscriber growth was good in both the US and elsewhere.

The problem - as many recognise, is that NFLX is a cash burner. Its kinda ironic that despite such great numbers, NFLX noted it will still need to raise new funds - via debt, in the near term, to keep funding the production of original content.

The recent move back above the $100 threshold was significant. Today's move wasn't exactly a surprise.

In the mid/long term, NFLX will be highly vulnerable to competition. Further, what happens when the next recession hits? Such subscriptions will be the first to get cancelled by the recently unemployed.

An expensive stock

With quarterly earnings of 12 cents, if you round that up to 50 cents a year, that gives a PE of around 240. Such a ludicrous valuation belongs in the upside down.

As I'll keep saying, I personally think Netflix is now producing some of the most innovative and best shows ever made. Whether its the Marvel universe of Daredevil, Jessica Jones, or the recent Luke Cage, or the ground breaking Sense8 or nostalgia of Stranger Things, its pretty incredible how bold Netflix has been.

NFLX just need to keep building their customer base and raising those subscription prices for long term survivability. That is easier said than done of course.

yours truly...
                   in London.. which after sundown, can feel like living in the upside down.

Monday, 17 October 2016

BAC - earnings were... reasonable

Whilst the broader market closed moderately weak, Bank of America saw a day of swings, settling +0.4% @ $16.06. Near term outlook offers the mid $16s, but if the main market weakens <sp'2100, BAC will cool to the 15.50/00 zone. Broadly, the $18 threshold remains powerful multi-year resistance.

BAC, daily

BAC, monthly


Suffice to add... earnings were reasonable, in what remains one of the better US financials.

Higher rates would really help the financials. A Fed rate rise at the Dec' FOMC remains on the menu.

However, it should be clear that 'data dependency' at the Federal Reserve is primarily based on equity prices. If the broader market ends October on a bad note, that'd bode for a rough November.

Any break to even the low sp'1900s would effectively take a rate hike off the menu, and that would wreck the remainder of the year for BAC, and almost all other financials.

Seen on the giant monthly cycle, the $18 threshold remains massively important. The more conservative 'bullish chasers' will remain waiting until a monthly close >18.