Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, medium confidence. Bull-bear ratio is 4:5.
- ES pivot 1229.83. Holding below is bearish.
- Friday bias higher, short term oversold...
- Monthly outlook: bias up on technicals.
- ES Fantasy Trader went short at 1219.25...
Last night I called for a higher close today and hey presto that's just what we got. But the past few days I've been noticing something odd. Almost all the stocks I watch are looking bullish on the daily charts but bearish on the weekly charts. Hmmm. Gives you (bear) paws for thought, eh? (Pun alert). So can today's recovery carry on into Thursday? Let's drop a quarter in the machine, pull the lever and see if we can come up with three 7's.
The technicals
The Dow: Today's 178 point gain retraced just over half of yesterday's loss and left us with mixed indicators. RSI, momentum, and money flow all ticked up today which is nominally bullish but OBV moved to a highly overbought state and the stochastic continued its decline without showing any signs of a bullish crossover yet. And today's volume was lower than yesterday's. I'm searching this chart for a reason to be bullish and not finding one so I have to give this one +1 bears.
The VIX: Hey last night I wrote "The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday" and darned if it didn't do just that, dropping nearly 6% today. But the gap remains less than half filled and while a gap half full might seem ambiguous to some, this one looks ready for more downside action so +1 bulls.
VIX futures: After yesterday's stratospheric doji, the futures indeed came down today but this gap still has a big way to go so I'm betting they go down again tomorrow and that's +1 bulls.
Market index futures: Tonight all three are in the red and ES is down 1.28% at 12:50 AM EDT. A loss that size at this hour is enough to warrant a bearish outlook. But that's also already enough to form a bearish engulfing pattern over Wednesday's green candle. ES also broke support at 1223 today and has no further support til 1211, then 1194. Indicators are still falling but have yet to show signs of a reversal so all in all this chart looks like +1 bears.
ES daily pivot: Rose to 1229.83 for Thursday. ES actually went under the pivot just before 8 PM and has been drifting lower since 6. With ES already 10 points under the pivot, it ain't looking good, so another +1 bears.
Dollar index: After yesterday's big run-up, the buck today put in a hanging man at the top of the range. This inability to push forward makes me suspect it might be going lower Thursday and that would be good for stocks, so +1 bulls.
Oil: Has clearly peaked and is headed lower in the short term, so +1 bears.
Copper: Took a bump up today despite indicators not having reached oversold levels. This sort of action reminds me of the abortive rally attempts we had last summer that kept getting cut off at the knees, only the other way around. With today's green candle following Tuesday's doji, it look s like copper might go higher from here so that's +1 bulls.
Morningstar Market Fair Value Index: Today the index dropped again, from 0.89 to 0.87, so that's +1 bears.
History: According to The Stock Traders Almanac,Thursday has just a slight positive edge, but not enough to warrant awarding any points.
And the winner is...
The bears, who just squeak one out with a 4:5 bull-bear ratio. Overall though, the market is feeling to me more negative than this close ratio would indicate. With the VIX bouncing around like popcorn and back again over 30 and that utterly incomprehensible European Kabuki Theatre of the Absurd now in it's, what, seems like at least the 275th act with no end in sight, I'm voting Thursday lower.
ES Fantasy Trader
Today we took a profit of 8.25 points. The market had already put in one peak in the morning and I figured discretion was the better part of valor particular with Bernanke scheduled to talk this afternoon. Didn't turn out badly at that. Portfolio stats: the account is now $176.625 after 32 trades (24 wins, 8 losses) since inception on 8/18 with $100K
BOT 10 ES false DEC11 Futures 1227.00 USD GLOBEX 01:13:12
SLD 10 ES false DEC11 Futures 1235.25 USD GLOBEX 11:45:14
Tonight we go short at 1219.25.
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