More upside likely Tuesday

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

• Tuesday higher, medium confidence
• ES pivot 1185.50.  Current price is comfortably above that.
• Rest of week bias higher, oversold rally is here..
• Monthly outlook: bias down, on politics and technicals.
• ES Fantasy Trader stuck long..

Recap

Last night it looked like today was going to be up big and so it was, with the Dow up over 300 points for a while and finishing with a 2.59% gain on some positive numors (that's news and rumors) from Europe.  It was one of those days where almost all of the action was over in the first two minutes of trading.  Then it drifted lower most of the afternoon before finishing with another strange little 56 point burst in the final five minutes. 

The technicals

The Dow: Today's solid green candle was enough to propel us right out of the descending RTC from November 14th.  The losing streak is therefore snapped and I'm changing the swing trend arrow to "trend end".  This action signals a bullish setup on the daily chart.  If we close higher again tomorrow, that will be the trigger for even more gains.  Today's big move was eeven more impressive considering that it came on the highest volume of the entire month so far.

The VIX: Gapped down on a very tall doji that left it in the Twilight Zone, halfway between BB's with a 6.79% drop.  It's not clear to me what this means.  The VIX could honestly go either way from here.

VIX futures: While the futures also gapped down today on an odd green candle, there's a bit more clarity here.  They have now fallen out of a rising RTC and their indicators have peaked overbought.  This portends lower, implying a lower VIX and therefore higher stocks.

Market index futures: Once again we've got all three solidly in the green, though not as much as this time last night (1:20 AM EDT).  ES is up 0.6% which is still quite respectable.  We have the same bullish setup as the Dow, with ES trading out of its descending RTC today.  The new candle now forming is solid green indicating decent follow-through.  With its indicators finally coming off oversold levels, I'm liking this chart right here.

ES daily pivot: Now 1185.50.  Even though that's a big jump up from today, ES is still above that at 1198.  The next resistance isn't til 1213, so this is looking good too.

Sentiment: Once again, the new Ticker Sense Blogger Sentiment Poll came out today.  The number of bears is up to 48% while the bulls have decreased to 33%.  I'm sure at least some of this move has to do with last week's Europe mess and the Super Committee's public ritual suicide.  Unfortunately, these numbers aren't quite extreme enough to draw any sort of contrarian conclusions.

In any case, for the second week in a row I voted negative.  Since this is a poll of where the SPX will be 30 days from now, I use the monthly charts to make my decisions.  And what I'm seeing now is the tall green candle from October being overshadowed by a a November candle that's looking almost like a dark cloud cover in November.

That's going to set up an interesting battle in December, historically a strong month.  Santa may show up after all, but this is not the sort of monthly follow-through from October that I'd like to see heading into December.  But the charts may not count for much since out markets are still being controlled by the Europeans.

     And the winner is...

Once again, I have to hand it to the bulls.  The bears have apparently all gone into hibernation.  Right now, it's looking like more gains are in store Tuesday.  If that happens, then the rest of the week bodes well too.  There's been a lot of shorting going on in the broader market over the last few weeks, so I'm sure that there will be some short-covering helping push prices higher at least a bit longer.

ES Fantasy Trader

Nothing to see here - I'm still waiting for the SS Nautilus to come back to the surface.