- Weak bias for Tuesday going lower, bull-bear ratio (below) now 1:1.
- ES pivot 1196.33. Going under is bearish.
- Rest of week uncertain, market looking toppy.
- Monthly outlook: bias up, all depends on Fed action in September
- ES Fantasy Trader going short at 1207.00 at 1:10 AM
Last night I was pretty sure we were going higher and indeed we did with the Dow advancing a healthy 255 points. I also thought that increased gold margins would weigh on the metal and GLD did fall 2% today. I was also right about oil going higher, but wrong that that implied lower stocks. Tonight we look at the bull and bear cases for Tuesday. And I'm going to try to make this a bit more quantitative from now on by assigning points to each factor I look at.
The Dow today completed its double bottom, the one that looked off the table just three days ago, by breaking out above 11,530 (upper horizontal blue line). With today's close at 11,539, there is no more resistance all the way to 11,896. Extra points for the fact that the second bottom of the "W" is higher than the first. Total: +3.
The Dow also remains solidly inside its current rising regression trend channel. +1.
Then we have the VIX futures (the VIX itself is in the Bear Case below). They gapped down big today without hitting any support level suggesting that there is room for the VIX to run lower on Tuesday. +1 for that.
The bear case
Exhibit A for the bears has to be the VIX. Here's the daily chart. Notice how we have fallen back to a strong support level at 32.27 (blue horizontal line). The last time we were here, on 8/17, the VIX rocketed higher the next day. Also note how we are on the right edge of a descending regression trend channel, just as we were on 8/17. Even the indicators are at the same oversold levels. This all suggests the VIX going higher in a day or two at the most. Total: 2 points.
Not much to add to this from the market futures tonight at 1:10 AM. ES, NQ, and YM are all essentially flat. ES indicators are all at oversold levels though, with the stochastic (which is the best of the bunch) at the same level the last two big drops came from. 1 for that.
Finally, the dollar index put in a hammer at the bottom of its recent range suggesting it may go higher tomorrow. That would be bad for stocks. Another 1.
And the winner is ...
It's a tie! It was bulls 5, bears 5 for a bull-bear ratio of 1:1. I'm going to call this weakly bearish though, simply because the recent advance looks to me to be running out of steam. I would not be surprised to see the market teeter on the edge tomorrow before going lower on Wednesday instead. Either way, I'm not looking for any big gains Tuesday like we saw today but tonight is still a tough call.
The latest Ticker Sense blogger sentiment poll (see sidebar) came out today and not unexpectedly, the prevailing sentiment has swung bullish by 43% to 29%. My guess is that this is due to whatever it was that Bernanke said last Friday. People are counting on the September Fed meeting to pump up the markets, if not the economy. I think the SPX will be pretty much marking time until then, possibly drifting slowly higher into that.
ES Fantasy Trader
Today's trade was up 10.25 points overnight for a $5125 gain. Total now $121,125. 6 trades, 4 wins, 2 losses since inception.
Here are the details. Again, I enter a trade any time after the close and exit it at some point the next day before the close trying to capture overnight price movement.
BOT 10 ES false SEP11 Futures 1187.25 USD GLOBEX 00:41:05
SLD 10 ES false SEP11 Futures 1197.50 USD GLOBEX 11:46:29