Friday, 24 October 2014

TVIX, UVXY - naturally on the slide

With VIX seeing a net weekly decline of -26.4%, the bullish VIX instruments were badly impacted. TVIX and UVXY saw net weekly declines of  -27.5% and -28.4% respectively. Near term outlook is for minor chop ahead of the next FOMC.. before renewed upside.

TVIX, daily

UVXY, daily


*first, an update on the VIX, weekly


The TVIX/UVXY holders had plenty of warning last week, with TWO black-fail daily candles. The two stocks are lower by around 45% since the highs... and it is another reminder of just how dynamic these instruments can be.

Best guess... VIX to floor in the 15/14s next week... before another major equity wave lower.

If VIX explodes into the 40s.. then TVIX/UVXY will increase in value by a factor of 3-4 times.

As ever though, such instruments are for short term trading only, not least because of the inherent 'statistical decay' problem.

Thursday, 23 October 2014

AMZN - earnings miss

Amazon (AMZN) posted EPS of ($0.95), and the stock is duly reacting very negatively in early AH trading, -$21, around the $290 level. Next support is the May low of $284, if that fails.. then $260.

AMZN, daily


Suffice to say.... a pretty lousy earnings report.. and outlook is not pretty.

All things considered, if the May low fails to hold, AMZN longs should be very concerned of much lower levels ahead.

If the main market falls into the sp'1600s (best bear case)... then AMZN downside target would be $200/180, no later than spring 2015.

Wednesday, 22 October 2014

CREE - lights out

With earnings missing market expectations, Cree (CREE) opened sharply lower, settling lower by a very severe -17.7% @ $27.26. Broader trend remains weak, with next support around $25, but $20 looks viable within 2-3 mths.

CREE, daily


Little to add.

CREE is a company I like, who can't like light bulbs, right?

However, the company is having real problems, although remains 'reasonably' profitable with good sales revenue. It is simply just not enough to please Mr Market.

CREE looks headed for $25 (as I noted some months ago), and if the main market slips <sp'1800, then CREE will likely test the Dec'2011 low of $20.25

A fine company for the long term... but I ain't interested until another 40% lower.

Tuesday, 21 October 2014

XIV - bearish volatility instrument on the rise

With US equities continuing to climb for the fourth consecutive day, the VIX was knocked significantly lower once again. The non-leveraged bearish VIX ETN of XIV settled higher by  8.0% @ $32.92.

XIV, daily


With the VIX getting smashed back lower from a cycle peak of 31.06 to the 16s, it is no surprise to see XIV rallying strongly from the recent 24s.

Indeed, there are two classic floor 'hollow red' reversal candles, the first with a very powerful spike, highly indicative of a cyclical floor.. aka.. a peak in volatility.

Like the bullish VIX instruments of TVIX and UVXY, there are serious issues of long term decay for XIV.. although to a far lesser extent.. due to not being 2x leveraged.

Near term outlook is for VIX to continue sliding lower, to the 15/14s... which will likely offer another 2-3 days of upside for XIV.. along with the broader equity market.

Monday, 20 October 2014

UNG - Natural gas fails to hold support

Despite the main US capital markets starting the week in a moderately bullish mood, Natural gas opened sharply lower, taking out the key support of $3.70, settling -2.4% @ $3.67. The ETF of UNG closed lower by -2.5% @ $19.73. Outlook is bearish.

UNG, weekly


*first a look at Nat' Gas, weekly cycle

We have a very large multi-month bear flag that stretches all the way back to June. With the break into the $3.60s, there is no support until 3.30/20.

I do not expect the $2s... not least with winter not far off for the northern hemisphere.