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- Tuesday uncertain, no confidence. Bull-bear ratio is 4:4.
- ES pivot 1255.58. Holding below is bearish.
- Rest of week bias uncertain, depends entirely on Europe.
- Monthly outlook: bias up on technicals and seasonality.
- ES Fantasy Trader remains long from last Thursday.
Once again, the 12,180 barrier proved too tough a nut for the Dow to crack today, ending with a 75 point loss. My call last night was indeed derailed by Italian bond yields, or maybe it was Spain - at this point it doesn't really matter much. I can only point out that I did mention Europe would be the deciding factor, as it's been for quite some time now. We'll run down the technicals again tonight, though I'm afraid it's getting to be little more than a, ahem, technical exercise.
The technicals
The Dow: Today's 75 point drop made a pretty non-descript candle, not quite hanging man, not quite dark cloud cover. I'm not really sure what to make of this. My instinct though is that this could easily get pulled either way depending on, that's right, Europe. Sorry to be a broken record here but that's just the reality of it. Accordingly, I can't really award any points here though my personal bias is down on this chart.
The VIX: For the second day in a row, the VIX moved in gap fashion, this time gaining 3.6% to form a tall inverted hammer. While this pattern isn't the greatest reversal indicator, I note that the stochastic made a bearish crossover today and that is a good indicator. The whole configuration of this chart really reflects the mood of the market, jumping about every which way every time some news flash or another comes out. Technically, I'd say the VIX has a shot at going lower from here on Tuesday but being as we're still stuck in the Twilight Zone between the BB's, I'm not real confident about it. I will though give it +1 bulls anyway.
VIX futures: A similar story to the VIX itself here. I do see though that often when the futures put in an inverted hammer, the next day is lower. On that basis, I'll give this one +1 bulls.
Market index futures: All three are in the red at 1:25 AM EST with ES down 0.28%. Today's action formed a classical dark cloud cover that failed to break over the 200 day MA. That's not a good sign, so I'm afraid this chart is +1 bears.
ES daily pivot: Actually rose to 1255.58 tonight. After bumping into the old pivot at 1253.33 at 7:30 this evening, ES has just been drifting around vaguely lower. It's looking like it's rather lacking in conviction. As long as ES is unable to mount an effective run on the pivot, that's going to be bearish for Tuesday, so +1 bears as of now.
Dollar index: The dollar continues its herky-jerky ways, rising today almost as much as it fell on Friday, all for no apparent technical reason. I said it last night and I'll say it again - I'm not touching this one. No points for you.
Oil: Last night I wrote "I can only assume oil will go higher again on Monday." and so it did. Only this time it was not good for stocks. Oil went up, the market went down. We may be reaching the price level where rising oil is bad for stocks and it goes into a negative correlation with the market. In any case, the same factors are in play tonight, so I'm going to look for another rise tomorrow which if my conjecture is correct would now be bad for stocks, so +1 bears.
Copper: Cu continued narrowing its range today, going along with my theory of a symmetrical triangle. If this triangle is going to pop, it's going to happen soon. My guess is by Wednesday. On that basis, it's +1 bulls.
Morningstar Market Fair Value Index: On Friday the index rose from 0.88 to 0.89, so +1 bulls.
History: According to The Stock Traders Almanac,Tuesday has a negative bias, so +1 bears.
And the winner is...
A tie - with a bull-bear ratio of 4:4. And that really sums up my feelings about the market right now. I do note that J-Trader is calling for a strong buy for Tuesday - I'm just not seeing it. It isn't often that I don't make a market call for the next day but this is going to be one of those times. This one is just too tough for me.
My best advice is to watch the pivots. If you like the Dow, that one will be a bit under 12,075. The SPX somewhere around 1252. If the market can break above these numbers, we have a shot at a higher close. If we bounce off, we're closing lower. And as usual, did I mention that news from Europe is controlling everything right now?
ES Fantasy Trader
We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.
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Looking at the NYSE Composite Index ($NYA), a broad measure of stock market activity, I note that the high today was about 7550. Glancing back at the prior 7 daily candles, this level of 7550 would have fallen within the total range of 6 of the prior daily candlesticks.
ReplyDeleteYou are not just whistling Dixie, Michele, when you say that this is feeling more like guesswork than analytical work. If you were to think of these past 8 daily price candles as blocks of wood, and were to rearrange them in any order-- but with the close of today as the one fixed point-- you would have been right and wrong as often as you were over that stretch, just in a different order!
How is that for 3 Stooges Logic?
In other words, there are times when even in picking the very bark off the tree, trying to find clues, we find nothing under the bark. Even sector analysis is not helping much, since basket-buying and high cross-correlations are causing everything to skew toward a broad RISK ON/OFF type pattern. Sector rotation is seeming as random as general index movements.
I'm fairly confident the resolution will be to the upside, for two reasons.
Once everyone stops gabbling about it and thereby somewhat negating it, the upward Seasonal skew of this time of the year is like the gravity of a large planet. It is one very big tiebreaker, to all kinds of patterns, and the onus is on the bears to show they have the thrusters to escape that gravitational field.
Also, several of the Accumulation type indicators (such as CMF) seem to be showing steady bullish accumulation patterns in the main indexes and ETFs. And market breadth has been strong. These are sometimes early warning signals of decay in buying strength and they have not been sounding alarms.
I have listened to wise experts, in interviews, and tried to discern from them exactly what Italian and Spanish Government bonds yielding over 7% really will mean for US Markets in coming days and weeks. The answer seems to be that it is very complex. However, accumulation and Seasonality are not complex, and they are happening now, and speculation regarding Central Bank actions only serves to give me a headache, so I am going with the charts and trying to just ride out the daily europhobias.
Even the best prognosticators have to be prevaricators, when the situation is appropriately waffly.
Exactly. I try to stay away from what I can't figure out. That's one reason I never mention Elliot waves here. I'm sure there's something going on there, but I'll be darned if I can figure it out. That about sums up how I feel about Europe lately and the whole macroeconomic picture too for that matter. I leave that sort of commentary to others more skilled than me.
ReplyDeleteIt's really all I can to to wrap my feeble brain around the daily gyrations in the charts Mr. Market has been delivering since the summer.