A bit more room to run higher Tuesday, peak near

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Tuesday bias slightly up, low confidence.  Bull-bear ratio is 6:2.
• ES pivot 1179.92.  Current price is holding above that.
• Rest of week bias uncertain, but nearing resistance.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader standing aside - no trade.

Recap

Last night I executed my veto authority and called today higher despite a negative bull-bear ratio of 2:5, just because there were some encouraging words from Europe.  Well those words proved good enough for a 330 point spike in the Dow to celebrate Columbus Day.  The day concluded with a peculiar 100 point explosion in the final 20 minutes of trading.  Here, let me save everyone the trouble: "banksters", "fraudsters", "PPT", "Helicopter Ben", etc.  Hey, whatever, you can't fight the tape.

So let's run down the list of usual suspects as we do every night and see who leaves standing.

The technicals

The Dow: Today's monster run-up to 11,433 took us near but not quite to resistance at 11,500.  This puts us at a critical juncture here.  We've already put in a higher high compared to the previous peak late last month.  We're now close to the mid-September peak.  If we can break above that, it would lend support to the idea that the bottom is in.  For now, the Dow remains firmly in its rising regression trend channel.  Volume was low, but it was admittedly a semi-holiday.  With indicators up but sitll not oversold and a tall green candle today, I see no reversal signs here so +1 bulls

The VIX: Last night the VIX was starting to look oversold.  But on today's Europe news it dropped nearly 9% and is now looking even more oversold than Friday.  And it's getting close to its support from back to August and looks to have more room to run higher than lower from here - but maybe not quite just yet.  Support is at 31.13.  We closed at 33.02.  So in the absence of a reversal candlestick, I have to give this one +1 bulls.

VIX futures: Today the futures fell out of their rising regression trend channel from July.  This is a bearish setup.  If we do not trade higher tomorrow that would be the trigger.  But the indicators are now at oversold support levels.  So right now it looks like +1 bears.

Market index futures: Today's run took the futures up to overbought levels from which declines have begun in the recent past.  OBV in particular took a hook lower today and that's been particularly reliable recently.  That is bearish.  But the other indicators aren't quite ready to roll over.  If ES isn't lower Tuesday though, I'd look for lower by Wednesday.

In any case, in the overnight the futures have basically been trading flat to slightly negative after that crazy last minute run-up in the regular session, so there's not much guidance there.  All in all, it doesn't look really bullish, but it's also not quite bearish yet, so no points here.

ES daily pivot: Now 1179.92.  We continue to hold above the pivot by about 10 points, so that's +1 bulls.

Dollar index: Last night I wrote "it looks good for the dollar to go higher Monday".  Bzzzt!  The news from Europe obviously put the kabosh on that idea, with the dollar taking a monster dump today.  But that wasn't good enough to make it oversold and we're still not close to any support, so I'd say the dollar could go lower Tuesday and that's +1 bulls.

Oil: Ran higher today after some unclear readings last night. Today's big run brings us near an important resistance level.   And with indicators just reaching oversold levels it looks like oil is near a reversal.  It might not go lower tomorrow, but I'd be surprised if it didn't dip later this week.  However, since there are no immediate reversal signs here, it's still +1 bulls.

Morningstar Market Fair Value Index: Didn't update today, still showing 0.81 from Friday, so no points awarded.

History: As I mentioned last night, according to The Stock Traders Almanac,the first two days of this week underperform historically, so again +1 bears.

Sentiment: It's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  The bullish numbers for the previous two weeks were 14%, then 21%.  Then last week, the bullish number dropped back to 14.8%, with a 52% bearish reading.  But this week the poll did an abrupt 180 with the bulls now showing 56% and bears just 11%.

For the record, I joined the crowd and switched my vote back to bullish this week on the basis of  the recent news from Europe, home economic numbers coming in BTE, and monthly charts that are looking quite bullish technically.  Normally I'd use this as a contrarian indicator, but low bearish readings don't seme to have quite the predictive power that low bullish ones do (I'll have to look into this), so for now I'm giving this +1 bulls.

     And the winner is...

The bulls, by a bull-bear ratio of 6:2.  However,I 'm a bit concerned that we maybe ran too far too fast today and the market may need a day to catch its breath.  Or looking at it another way, we may be in for another doji day of indecision that could give us some swings as the trend tops out.  Right now I'm seeing the storm clouds gathering but I don't hear any thunder just yet.

The technical bias is still slightly up though, so the Night Owl will move way out to the end of the limb tonight and hoot for either a small gain Wednesday or an intraday peak.  In the latter case, I'd start looking for the exits.

ES Fantasy Trader

Today we took a profit of 13.75 points.  I kinda wish I'd held on to the bitter end, but who could have known that the market was going to take off in the final 20 minutes.  In any case, a win is a win; I'll take it.

Portfolio stats: the account is now $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1169.00    USD    GLOBEX    00:39:01
SLD    10    ES    false    DEC11 Futures     1182.75    USD    GLOBEX    11:35:09
 
I am sufficiently ambivalent that I'm not putting on any ES trade tonight.  The ESFT is "fantasy" only in the sense that I can't afford to put on trades of such size for real.  I give very careful thought to when and where to pull the trigger and on which side.