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- Monday higher, high confidence. Bull-bear ratio is 2:5.
- ES pivot 1157.83. Holding higher is bullish.
- Rest of week bias uncertain, lower possible by Friday.
- Monthly outlook: bias up, on technicals
- ES Fantasy Trader went long at 1169.25.
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| Dow weekly |
One observation I can make is that the pattern over the last few months is starting to remind me a lot of the action we saw last year, May through August. If that holds true, then we're in the middle of a complex bottoming process. Going into the fourth quarter, this should provide some encouragement to stocks.
But first, let's see how things sort out for Monday.
The technicals
The Dow: Last Friday ended with a doji indicating that last week's rally may indeed have run out of gas. Oversold indicators, particularly a peak in OBV tend to support this idea. On that basis, this is +1 bears, but just (wait for it), barely.
The VIX: Took a big weekly drop last week. Recently, that alone has been good enough for a rise the next week. The daily chart formed a green inverted hammer, which is not a particularly powerful reversal sign but looks more convincing coupled with indicators just reaching oversold level. So +1 bears.
VIX futures: Also oversold now, the futures put in a bullish piercing pattern on Friday. With now oversold indicators, this makes a good case for the VIX going higher, implying stocks going lower. Another +1 bears.
Market index futures: All three futures are up sharply at 12:35 AM EDT, all by more than a percent apparently on news today that France and Germany have a plan to save Europe, only they're not telling anyone what it is just yet. Uh, OK, whatever. That was good for a 19 point jump, so far. And with no particular resistance until 1192, no real reversal pattern on the charts, and remaining well inside a rising regression trend channel there is nothing to stop the futures until then so it's +1 bulls.
ES daily pivot: Now 1157.83. Although the pivot has risen today, prices have also gone up to keep us more than 10 points above it right now. That's a good sign, so +1 bulls.
Dollar index: On Friday the dollar put in a big hammer right at the lower edge of its rising regression trend channel. Along with indicators at levels that have marked prior reversals, I'd say it looks good for the dollar to go higher Monday. That would be bad for stocks, so +1 bears.
Oil: Oil put in a doji on Friday but not at any real resistance level. With indicators near but not quite really overbought, this one is too tough to call for Monday, so no points.
Morningstar Market Fair Value Index: N/A on a Sunday night, no points.
History: According to The Stock Traders Almanac,the first two days of this week underperform historically, so +1 bears.
And the winner is...
The bears, by a bull-bear ratio of 2:5. However, with the VIX still in the mid-30's and the market still totally driven by news (and/or rumors) out of Europe, tonight's story about some kind of bank plan over there trumps the technicals, so the Night Owl is going out on a limb and calling Monday higher, despite some poor-looking technicals.
ES Fantasy Trader
Last Friday's trade was a wash. By the time I exited just before lunch, my earlier profit had evaporated and I decided to get out while the getting was good. Of course later on ES rose briefly back into profit position, but such is the stuff of day trading and that's not what I do. I'll take break-even over a loss any day.
Portfolio stats: the account is still $151.625 after 24 trades (17 wins, 6 losses, 1 wash) since inception on 8/18 with $100K.
BOT 10 ES false DEC11 Futures 1158.00 USD GLOBEX OCT 7 00:50:28
SLD 10 ES false DEC11 Futures 1158.00 USD GLOBEX OCT 7 11:31:17
Tonight we go long at 1169.25.
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