Actionable ideas for the busy trader delivered daily right up front
- Friday higher, medium-low confidence. Bull-bear ratio is 8:1.
- ES pivot 1149.00. Falling below would be bearish..
- Next week bias lower, on technicals.
- Monthly outlook: bias up, on technicals
- ES Fantasy Trader going long at 1158.00.
Last night I called the market higher again today and that's what we got. Today's action was pretty much a slow and steady uphill march with no big pop off the open, unlike many recent sessions. Interestingly, the bears refused to come out to play at all today and the market put in a final push higher into the close, exactly as it did the past two days.
The technicals
The Dow: Put in another strong performance today, gaining 183 points and busting right through the resistance at 11K like butter to close at 11,123 on a good short-wick green candle. We're now nearing a band of resistance from 11,190 to 11,315 that proved unbreakable last month. Can we push through this time? I don't think so. It looks to me like there's less gas left in the tank now than during the last attempt in September. In particular, note that volume has been declining the past three days even as the market has been advancing. However, there's still no reversal pattern on the chart just yet so it has to go to the bulls, +1.
The VIX: Continued lower today, as I called last night for the third day in a row, though the rate of decline is slowing. The VIX is now down to halfway between Bollinger bands but has no real support there. Its indicators are all now closer to oversold than overbought, but there is still more downside possible here Friday, so +1 bulls.
VIX futures: Once again, this chart mirrors the VIX itself, though the decline seems to be nearing an end. I'd say we may reach a turning point early next week at this rate. But for now, it's still +1 bulls.
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| ES daily |
On Tuesday ES closed outside of its descending daily regression trend channel (see chart at right). That was the bullish setup. Today ES traded entirely outside the channel. According to this trading technique, that is a bullish trigger, meaning Friday should run higher once again.
Supporting this idea is that while the indicators are now approaching overbought levels, none has yet peaked. And importantly, ES has no resistance until 1170 (blue line). That still leaves about a dozen points to go. All of this nets +1 bulls.
ES daily pivot: With the raising of the pivot to 1149.00, we're now considerably closer, though still above. With ES at 1157.50, the pivot is close to being in play. I'd watch this number carefully throughout the day tomorrow for clues to the close. Holding above or bouncing off is bullish, falling through, bearish. Since we're above right now, it goes to the bulls, +1.
Dollar index: The dollar continued the downward move it started on Tuesday, slicing through initial support. Now at the bottom edge of its rising regression trend channel, its still overbought indicators suggest more downside to come. Should the dollar fall again tomorrow, watch for it to drop even further next week. +1 bulls.
Oil: Last night I wrote that "oil will continue higher on Thursday" and so it did, with its biggest gain in a month. But even this tall green candle neither brought oil to overbought levels nor to any resistance point, so with oil in sync with the market that's another +1 bulls.
Morningstar Market Fair Value Index: Today the index rose, for the first time since 9.29, to 0.81. That's +1 bulls.
History: According to The Stock Traders Almanac,the first week of October underperforms. And tomorrow we "celebrate" the week of 10./10/08, the worst week in the history of Wall St. So +1 bears.
And the winner is...
The bulls again, by a bull-bear ratio of 8:1. While this all sounds positive enough I'm getting the feeling that this rally is getting long in the tooth. There may be enough gas left in the tank for one more push higher, but the high may be intraday followed by some profit taking into the close as traders want to book some of the nice profits they made the past few days and don't want to be long into the weekend with the European situation still rumbling.
So I'm looking for a bit more upside Friday but not necessarily a higher close. With the charts approaching overbought levels, that's getting too tough to call. I'd exercise caution Friday and pay close attention to the ES pivot. If we drop below it and don't come back quickly, I'm changing my call to a lower finish.
ES Fantasy Trader
Today we took a profit of 10.5 points. Left some on the table again, but such is life.
Portfolio stats: the account is now $151.625 after 23 trades (17 wins, 6 losses) since inception on 8/18 with $100K.
BOT 10 ES false DEC11 Futures 1134.25 USD GLOBEX 00:46:12
SLD 10 ES false DEC11 Futures 1144.75 USD GLOBEX 10:39:09
Tonight we're going long at 1158.00
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