The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Thursday higher, low confidence. Bull-bear ratio is 4:3. All hangs on German vote.
- ES pivot 1158.00. In play: break above is bullish.
- Friday bias lower on volatility and Europe.
- Monthly outlook: bias up on technicals.
- ES Fantasy Trader standing aside on German uncertainty.
Last night I called for the rally to end today even though the bull-bear ratio was essentially neutral. And although the Dow gave it the old college try right out of the gate, it then choked and ended losing 180 points. Tonight we're faced with an interesting situation. Let's put the usual suspects on the 5:20 to Glendale and see where they get off.
The Kodak hits the fan
After I wrote my obituary on Eastman Kodak Sunday (here), their stock tanked 26%. Today it went even lower to close at a pitiful $1.55, and sinking further to $1.50 in after hours on its inexorable march to the pink sheets. The blogosphere was all abuzz over this today and amazingly there are still some people who claim that this parrot is not dead but merely pining for the fjords. Delusion is a wonderful thing.
The technicals
The Dow: In addition to just losing money, the Dow put in a bearish engulfing pattern and closed outside its rising regression trend channel today. Therefore I changed the swing trend arrow from up to "X". Also, the indicators have rolled over without even reaching overbought levels. OBV in particular is now the highest it's been all year. That all adds up to +1 bears.
The VIX: As I suspected last night, the VIX did indeed run up today, punching through its 40 resistance level and closing at 41.08 back in the Zone of Total Psychosis (the area around 40) which you will recall comes just above the Region of Complete Lunacy. With two green candles in a row, above resistance and a bit more room to run (its upper Bollinger band is at 42.55, its not at all clear that the VIX is done going up just yet, so +1 bears for that.
VIX futures: On the other hand, the futures do look to be at a resistance point and are quite overbought now. They look about ready to start coming down. Lower futures -> lower VIX -> higher stocks -> +1 bulls.
Market index futures: The good news is that all three are up at :30 AM by about half a percent. The bad news is that they're in the Twilight Zone, that region near the midpoint between Bollinger bands and OBV is running quite high and the stochastic is about to execute a bearish crossover. So that all pretty much cancels out - no points.
ES daily pivot: Now 1158.00, ES is running just below that at 1156.000. That puts the pivot very much in play for Thursday. ES has already made one attempt to break though at 12:20 AM and was rejected. It looks to be gearing up for a second try right now at 1:35 AM. Another rejection would be bearish. With no evidence to the contrary yet, it's +1 bears. Watch this number before the open. A break above would definitely be a bullish sign.
Dollar index: OK, I got this one wrong last night. I thought the dollar had room to run lower but instead it staged a comeback retracing half its loss yesterday. However, today it traded outside its last rising regression trend channel, a bearish trigger. With its indicators all still coming off overbought, I once again have to call for a lower $ tomorrow, so that's +1 bulls.
Oil: Wrong again. I thought oil was going higher today but it sank instead. Tonight this one is too tough to call, so no points.
Morningstar Market Fair Value Index: Increased from 0.81 to 0.83 today, so that's definitely +1 bulls.
History: Once again, I mention that while the week as a whole performs poorly, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give again +1 bulls.
And the winner is...
The bulls, by only weakly with a 4:3 bull-bear ratio. But all this is really irrelevant since the only thing that is going to move the market on Thursday is the results of the upcoming German vote on the Greek TARP (the GARP?).
I just talked to my good friend Angela Merkel on the phone and she says the deal is done. (No, just kidding, I don't even know her - I just flipped a coin. With the VIX in Psycholand again, that's as good as anything). So the Night Owl is moving further out on her usual limb tonight and cautiously calling the market higher on Thursday. Prosit!
ES Fantasy Trader
Covered our short position today at 1156.00 for an 8.5 point gain. The portfolio stats: the account is now $135,375 after 19 trades (13 wins, 6 losses) since inception on 8/18 with $100K.
BOT 10 ES false DEC11 Futures 1156.00 USD GLOBEX SEP 29 00:32:44
SLD 10 ES false DEC11 Futures 1164.50 USD GLOBEX SEP 28 01:45:47
Tonight we're standing aside - too much uncertainty related to Deutschland.
CNBC Million Dollar Portfolio Challenge stats: Now ranked 98.72%, 7,520th position.
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