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- Monday higher, high confidence. Bull-bear ratio is 8:1.
- ES pivot 1226.33. Holding above is bullish.
- Rest of week bias higher, top possible by Friday.
- Monthly outlook: bias up on technicals.
- ES Fantasy Trader went long at 1238.75.
Last week's dramatic symmetrical triangle that resolved to the upside on Friday triggered a number of important changes in a lot of charts, as we'll detail below. This should be an interesting week ahead.
The technicals
Starting this week, thanks to an excellent suggestion from a valued reader who is way smarter than me, we are going to add copper to the daily mix I use to computer the bull-bear ratio. Thanks, and a tip of the Hatlo hat to Daniel. For the record, I'll be watching $ISC, the ISC Global Copper Index.
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| Dow weekly |
And note on this weekly chart how it's looking like a double bottom now. You can see how both legs of the "W" found support right at the 200 week moving average (dashed orange line). The inability of the bears to force the Dow under this is bullish in and of itself, so +1 bulls.
The VIX: On Friday the VIX gapped down big time to close down 10%. That also caused its stochastic to make a bearish crossover. That's a highly reliable indicator. The VIX does have some support at 30.50, but that still leaves a bit lower to go even if that holds, so +1 bulls.
VIX futures: A big gap down on Friday took the futures right to the lower edge of their recent rising regression trend channel for a bearish setup. Nothing here suggests they might go higher Monday, so +1 bulls.
Market index futures: All three are up at 1:20 AM, with ES rising 0.24%. Friday's gain took ES above its October resistance. ES has no further resistance until 1260, which is right where its upper Bollinger band and 200 day MA are currently located, so there's still room to run. The fact that we're seeing follow-through in the overnight even in the face of mixed and confusing weekend news from Europe is bullish, so I'm inclined to give this one +1 bulls.
ES daily pivot: Even though the pivot jumped tonight to1226.33 we remain comfortably above it. Unless there's some sort of awful news early Monday morning, I don't think the pivot should be a factor, although we always want to keep an eye on it. Anyway, this configuration merits +1 bulls.
Dollar index: In another significant chart, the dollar on Friday put in a big red candle that not only broke its recent support but also sliced through its 200 day MA. This action short-circuited the rise of its indicators and the stochastic is in fact now about to make a bearish crossover. With still a bit to go to reach its lower Bollinger band, the dollar could definitely still go lower Monday and that's +1 bulls.
Oil: Oil is right in the middle of its recent trading range but its indicators suggest it could go higher Monday and it is indeed advancing at least a bit in the overnight, so +1 bulls.
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| Copper $ISC, daily |
Also its stochastic is just about to execute a bullish crossover (see bottom row, blue line cutting up over red line). Copper therefore looks set yo go higher Monday and given its correlation with the market, that's +1 bulls.
Morningstar Market Fair Value Index: No update on a Sunday night, so no points.
History: According to The Stock Traders Almanac,the first three days of the last week of October all underperform historically, so +1 bears.
And the winner is...
The bulls with a bull-bear shut-out of 8:1. With J-Trader holding onto his long signal and my mentor Daniel offering subtle hints of further upside, this is not a night I'm going to override the B-B ratio, so I will call for a higher market close on Monday.
ES Fantasy Trader
On Friday we took a profit of 17.25 points. Portfolio stats: the account now stands at $138,375. after 26 trades (18 wins, 8 losses) since inception on 8/18 with $100K.
BOT 10 ES false DEC11 Futures 1214.00 USD GLOBEX OCT 21 02:16:11
SLD 10 ES false DEC11 Futures 1231.25 USD GLOBEX OCT 21 11:26:16
Tonight we again go long at 1238.75.
Posts
I've never forgotten the stern admonition of legendary trader J.M. Hurst, one of many electrical engineers who has gone on to be an innovative technical analyst, and one of the first to apply Fourier analysis to smooth out signal to noise in financial markets. He repeated it often and with emphasis in his writings.
ReplyDelete"Never pass up an opportunity to examine a triangle!"
Ah yes, there is a veritable smorgasbord of yummy looking tools in Matlab's DSP toolbox that I've got big plans for - if I can ever find the time. Just last week I started playing around with some wavelets to see if they had anything to do with anything :-)
ReplyDeleteMy own experience with such quantum esoterica is that they do gradually enhance one's understanding of Einstein's Underlying Field Theory, but do nothing to clarify the movements of the stock market.
ReplyDeleteEven folks who CAN find the time to dabble, might want to spend it elsewhere, imo; like on thorough analysis of what is already known for sure to work for them.
With standard trend analysis methods one can easily be wrong, but at least there's some frame of reference to determine that. Waves, cycles, solar flares, all may in fact be influences on human psychology--but if so, they're so subjective that a trader can't prove to him or herself that they're wrong; and so it becomes tempting to "explain it away" when a movement adverse to one's position is happening.
Green Light/Red Light signals can never be explained away in such fashion.