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BofA Warns: VIX Spells Trouble

Tyler Durden's picture




 

Markets are showing increased signs of investor anxiety, warns BofA's Macneil Curry. The Friday breakout in the VIX Index says that this anxiety will likely persist into next week. Indeed, Curry adds, the VIX has based from its highest levels in over a year suggesting that investors are more susceptible to bad news and defensive behavior than at any time in the past 12 months. Several markets look particularly susceptible to this change in sentiment.

From an equity perspective, the Nikkei stands out. Its breakdown from 5 week Flag support says its medium term downtrend has resumed, targeting last summer’s range lows between 12,400/13,400.

In FX, the Japanese ¥ is particularly well placed to benefit. The bearish weekly reversal in $/¥ and close through 101.40 says it is resuming its medium term downtrend for 99.06 and eventually the 92/94 area. Finally, regardless of the larger outlook for risk assets stay bearish CNH.

Via BofAML's Macneil Curry,

Chart of the week: VIX BASE POINTS TO SENTIMENT SHIFT

The VIX broke sharply higher on Friday, completing a month long base/Double Bottom. This formation targets the 20 area and says that investor anxiety will persist in the week ahead. More troubling is that this base developed from above the 14m range lows at 12/13. It warns that sentiment is undergoing a regime shift to higher levels of uncertainty and that the range highs at 21/22 are vulnerable. BEWARE.

The Nikkei seems set to suffer

In an environment of heightened investor anxiety, the Nikkei is particularly vulnerable. The breakdown through 5wk Bear Flag support (14,657) says its medium term bear trend has resumed. Target the Summer’13 lows of 13,388/12,415 before renewed basing.

$/¥ resumes its downtrend

The bearish weekly reversal and close below 101.40 says that $/¥ has resumed its medium term downtrend. The initial target is 99.06 (measured move), but eventually we target 93.79/92.57 (Jun & Apr’13 lows) before greater signs of basing emerge.

$/CNH is in a long term uptrend.

Regardless of the risk environment, evidence says that one most stay bullish $/CNH. The impulsive gains from the Jan-14 low and break of 20m trendline resistance says the long term trend has turned. While momentum warns of a near term pullback, CNH strength should not exceed the pivotal 200d (now 6.0945). Bigger picture, we target 6.2692/6.2510 and potentially beyond.

 

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Sun, 03/16/2014 - 14:56 | 4555663 yellencrash
yellencrash's picture

Just in time for Yellen to backpedal on Wednesday? Or to say taper's on an drive a stake into this zombie.

Mon, 03/17/2014 - 02:42 | 4557524 MeelionDollerBogus
MeelionDollerBogus's picture

Don't be preposterous, Yellen will clearly use tapering to cut QE to only 300 billion per month.

Sun, 03/16/2014 - 14:59 | 4555671 Al Huxley
Al Huxley's picture

'VIX Spells Trouble'?  Maybe, but I think the 'truce until options expiry' in the Ukraine, coupled with the constant flood of FED money will be enough to keep the party going.  The good times will end when the FED turns off the tap, everything else is just noise.

Sun, 03/16/2014 - 15:04 | 4555698 Dr. Engali
Dr. Engali's picture

The vix is hardly a telling signal. The fed has shown they can slam it down at will.

Sun, 03/16/2014 - 15:07 | 4555710 fonzannoon
fonzannoon's picture

I raised a decent amount of cash last week so expect the biggest rally of the year starting tomorrow.

Sun, 03/16/2014 - 15:25 | 4555772 Al Huxley
Al Huxley's picture

I'm long Facebook and DDD via a few March options, so you have that going for you.

Sun, 03/16/2014 - 17:38 | 4556220 Market Rage
Market Rage's picture

Last week's decline was orderly and the volume was unimpressive, so you're probably right.  First they'll give you a weak open to suck more shorts in though.

Sun, 03/16/2014 - 15:38 | 4555816 chistletoe
chistletoe's picture

no kidding.  The VIX comes down just as fast as it goes up.  Especially when the folks at 33 Liberty St. WANT it to come down.  I sold my VIX calls friday afternoon ...not to say that I am psychic, but these days it makes more sense to grab what profits I can than to trust the market to do what it "ought" to do given the outlook today ....

Sun, 03/16/2014 - 15:42 | 4555838 fonzannoon
fonzannoon's picture

I junked you because you made a very reasonable comment and the rest of us got junked so i did not want u to feel left out.

Sun, 03/16/2014 - 16:27 | 4555971 saints51
saints51's picture

I am also out of all positions. Waiting to see how this shit show plays out.

Sun, 03/16/2014 - 15:10 | 4555724 buzzsaw99
buzzsaw99's picture

Markets, lulz.

Sun, 03/16/2014 - 17:00 | 4556063 mvsjcl
mvsjcl's picture

Precisely. This whole stupid post presumes that there is actually something called a "market." If one actually exists, it's a bazaar one.

Sun, 03/16/2014 - 15:31 | 4555787 Spungo
Spungo's picture

Yep, it's not the possibility of global warfare and skyrocketing oil price that drives the market. It's the VIX. Thanks for the tip you stupid tea leaf reading fuckhead.

Sun, 03/16/2014 - 15:50 | 4555863 Winston Churchill
Winston Churchill's picture

He has his head up his analysis,

Sun, 03/16/2014 - 16:04 | 4555901 Oxygen
Oxygen's picture

Look at the evil close of the Dow for
the last week.
16 065.67
I think it's a signal of market top.

Remember the SPX bottom at 666
Gold was 1 666 before falling to 1200
Apple was 666 then start falling.

Sun, 03/16/2014 - 16:14 | 4555939 the question
the question's picture

Interesting observation. First, you have the three 6's. Then you have the 1 and the 5 make 6. Then you have the 7 and the 1 make 6 (subtract).

Sun, 03/16/2014 - 16:36 | 4555996 SweetDoug
SweetDoug's picture

'

'

And you have a 5 & a 7 which makes 12, and inbetween 5 and 7? A 6!

12 /2 (The two numbers 5 +7…) makes… 6!

 

And then you…

 

•?•
V-V

Mon, 03/17/2014 - 02:39 | 4557519 MeelionDollerBogus
MeelionDollerBogus's picture

and then 6 is 2 x 3 and 2 and 3 form 23 and then...

Sun, 03/16/2014 - 16:36 | 4555993 pragmatic hobo
pragmatic hobo's picture

technical analysis does not work when the fed is injecting 55 billion dollars a month into the market ...

Sun, 03/16/2014 - 16:39 | 4556001 Winston Churchill
Winston Churchill's picture

You get that from their audit ?

Oh wait......

Mon, 03/17/2014 - 03:01 | 4557512 MeelionDollerBogus
MeelionDollerBogus's picture

Of course it works, that's how you measure the response of the printed currency.

Just don't get confused about what is technical analysis.

This is:

This is not:

Those things never worked ever, and linear support/resistance on non-linear graphs is the most annoying. They don't even correct for inflation much less curvature of prices that can be exponential, and silver is twice exponential of the linear input factors to the gold fiat price. It's nonsensical at all times.

Sun, 03/16/2014 - 17:17 | 4556131 syntaxterror
syntaxterror's picture

Hmmmm... Stox at all-time highs, gold at $1350/oz, bubble real estate or bonds yielding 0.5%. Tough choice.

Sun, 03/16/2014 - 21:06 | 4556921 yellowsub
yellowsub's picture

Wait, there was good news?

Mon, 03/17/2014 - 02:32 | 4557507 MeelionDollerBogus
MeelionDollerBogus's picture

http://flic.kr/p/ikyjpz

there is for me.

uvxy & hvu are 11x inverse to the s&p500 market index & the Dow.

The trend I plotted follows the curvature 219 = hvu 1/11 x spy but last I checked it's 224 which means hvu is overperforming by (224/219)11 = 1.28x or 28%

Do NOT follow this link or you will be banned from the site!