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- Friday lower, high confidence. Bull-bear ratio is 2:6..
- ES pivot 1269.75. Breaking below is bearish..
- Next week bias up on technicals and economic news.
- Monthly outlook: bias up on technicals.
- ES Fantasy Trader went short at 1276.25
Well it seems that just as the market spent most of the summer pricing in a Europe-induced recession, it is now spending October un-pricing it. Today's spectacular 340 point rocket in the Dow broke a bunch of barriers all at once and positioned us well for further gains going into November, but maybe not tomorrow. Let's take a Delphic journey to consult the Oracle for clues to Friday's direction.
The technicals
The Dow: Today's close at 12,209 was very important for three reasons: first it blasted right through the 200 day MA at 11,971 in convincing fashion, second, it broke the psychological 12K barrier equally easily, and third it broke the 0.618 Fibonacci retracement of the decline that began on July 22nd. There is now no resistance until 12,400.
That said, one might reasonably expect a pause after one day gain of such magnitude, especially with a Friday coming up, on which traders might be more inclined to lock in gains before the weekend.. Today also brought us to the upper Bollinger band. And OBV is now running off the map at 24.4B, a number I've never seen before and far above the point at which previous tops have been put in. The other indicators are similarly overbought. While I think we still have room to go higher in November, this chart is looking a bit overextended, so +1 bears.
The VIX: The all-important VIX lost almost 15% today on a big gap-down forming an inverted hammer. that took it clear to its lower Bollinger band and almost to its 200 day MA at 23.55. The VIX generally tends to bounce right off its lower BB whenever it reaches it and its stochastic is jsut about to execute a bullish crossover. On that basis it's looking like +1 bears.
VIX futures: Pretty much the same story here as the VIX itself. These sorts of big gaps cry out to be refilled, so that would also be bad for stocks. Another +1 bears.
Market index futures: All three are down this evening with ES down nearly half a percent at 1:10 AM EDT. Today's tall green candle gives me the impression of being overextended. However, since ES also crossed well over its own 200 day MA at 1262.5 today, that becomes a good support level. But I think we may revisit that area before the next push upward, so +1 bears.
ES daily pivot: Now 1269.75. With ES at 1276.50, the pivot is making its magnetic attraction felt. Since ES has been drifting lower since 8 PM, I'd expect it to hit the pivot around 7 AM Friday. If we bounce off, that's bullish. Breaking under, bearish. However, I can't give any points for that right now. I'll be sleeping when it happens, so a word to the wise: see where ES is before the market open on Friday.
Dollar index: The dollar took a massive dump today that brought it clear to its lower Bollinger band at 52.7 (remember I'm looking at $USDPX, not $DXY). What's not clear is if that will mark a stopping point. While the indicators have entered oversold territory, there's no support until the summer lows around 52.11. However, such large downward moves in the past tend to be followed by a dead cat bounce the next day, so I'm going to call the dollar a bit higher tomorrow and that's bad for stocks, so +1 bears.
Oil: Went back up today. The oil chart is confused here as is its relationship with the rest of the market, so I'm going to take a pass on this one tonight.
Copper: Today, copper took a big gap-up pop to its upper Bollinger band and beyond. I've been kicking myself for forgetting to buy some FCX earlier this week. But now the indicators are all oversold and the stochastic just made a bearish crossover so tonight it's +1 bears. Tomorrow might be the day to grab that FCX.
Morningstar Market Fair Value Index: Today the index rose from 0.87 to 0.88, so that's +1 bulls.
History: According to The Stock Traders Almanac,the last two days of this week tend to outperform historically and Friday is easily the strongest day of the week, so +1 bulls.
And the winner is...
The bears, with a bull-bear ratio of 2:6. And that's about how I'm feeling too. I note also that J-Trader is bearish on Friday and I agree. I think we'll see Friday go lower.
ES Fantasy Trader
Today we took a profit of 14.5 points. Portfolio stats: the account remains at $154,750 after 29 trades (21wins, 8 losses) since inception on 8/18 with $100K. .
Portfolio stats: the account is now $151.625 after 29 trades (21 wins, 8 losses) since inception on 8/18 with $100K.
BOT 10 ES false DEC11 Futures 1256.25 USD GLOBEX 01:40:31
SLD 10 ES false DEC11 Futures 1270.75 USD GLOBEX 11:57:01
Tonight we go short at 1276.25..
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