Rally coming if not Monday then Tuesday

Daily VIX

 My weekend reading of the blogosphere leads me to conclude that opinion is still pretty well evenly divided between the bulls and the bears, as borne out in last week's Ticker Sense Blogger Sentiment Poll. 

The VIX

For my money (or at least what's left of it), the most interesting chart last week was the VIX. Here's the VIX daily chart. Although the VIX closed on Friday just a hair above the day before, it formed a pretty good bearish hanging man candle in the process.

While one should wait for confirmation of a hanging man the following day, I do find this development encouraging. The other interesting thing is that the VIX appears to be putting in a double top. Bill Luby in Vix and More nicely points it out in his latest post. The gist is that if this is in fact a top, then we should be looking for the VIX to decline this coming week. And as we know, lower VIX implies higher stocks.

And although the daily indicators on the VIX are not oversold, the indicators for the weekly VIX definitely are.  We also note that for two weeks now, the VIX has found resistance around 45, corresponding to the highs of May of last year, when the Greece hit the fan (the first time).  Tomorrow will tell the tale, but it's sure looking like the VIX is ready to go lower.

The futures

The market futures, however, aren't buying it, at least not just yet.  ES, for example, enjoys some pretty good support around 1110.  Right now, at 8 PM EDT Sunday night we are running at 1117.50, down just over half a percent.  With the daily pivot at 1153.92 completely out of the running, it's not at all clear that a rally is in the cards for Monday.

I'm not even going to try to call the entire upcoming week this time.  There's just too much global uncertainty and a whole bunch of fundamental newsmakers out there coming up, from Jackson's Hole to Libya.

ES Fantasy Trader

I lost my nerve and covered Thursday night's short at 1138.50 on Friday just before noon for a 1.5 point loss.  As it turns out, had I closed either earlier or later, I would have turned a profit.  But that's how it goes.  We lost 750 Obamabucks on that one but that still leaves the account at a respectable $117,875 after two sessions, not too shabby. I'll post tonight's trade in my late-nite update (below).

The bottom line

It's looking like we're overdue for some sort of rally, if not tomorrow, then even more likely Tuesday.  Watch here for my late-nite update.  The longer term picture is a bit more complex - we'll get into that tomorrow night.

The late-nite update

At 2:30 AM EDT it appears that the futures are slowly gaining ground.  Therefore, given the current state of the VIX and the fact that both the Dow and SPX are very near some good support levels, I am going to gingerly put on my long hat for Monday.  If that doesn't pan out, I expect it will on Tuesday.  And accordingly I just went long ES.  Here's the trade:

BOT    10    ES    false    SEP11 Futures     1,121.750    USD    GLOBEX    02:27:11