Wednesday, December 21, 2011

A bit more upside possible Wednesday

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, low confidence.
  • ES pivot 1224.00.  Holding above is bullish.
  • Rest of week bias higher
  • Monthly outlook: bias down, on technicals.
  • ES Fantasy Trader standing aside.

On Dollar, on VIXen!
Ho ho ho!  Just as I was thinking he'd forgotten to set his alarm, Santa Claus finally showed up on Wall St. today and distributed an early Christmas present to all the good little traders in the form of a nearly 3% gain in the Dow and SPX, instantly erasing an entire week's worth of losses in just one day.

The technicals

Dow daily
The Dow: Last night I said "we closed outside the right edge of the descending RTC from December 12.  That is a bullish setup."  And today we got the trigger in a big way.  You can see this in the last descending set of line sin this chart (click on the image to enlarge it).  This marks the end of the downtrend that began on 12/12 and sets the stage for further gains.

Do you see what I see?  No, it's not a star shining in the east, it's a cup & handle formation.  Check it out on this Dow daily chart.  The cup goes from 11/14 to 12/08 and the handle is just finishing up now.

If we can stay even or even advance a bit tomorrow, that will make the case even better.  The cup and handle is one of the better classical (ie. non-candlestick) technical indicators.

In addition, the Dow provides us with the pretty picture of my fave five indicators (top to bottom: RSI, momentum, money flow, stochastic, and OBV) all having bottomed and hooked up, another bullish sign.  And last but not least, today the Dow not only reclaimed the 12K support level but also blew right back through its 200 day MA at 11,936.  Both of these numbers now once again become support.  I'm liking it.

Market index futures: All three futures are running in the green at 1:15 AM EST with ES up 0.18%.  Pretty much everything I said about the Dow applies to ES too: the RTC breakout and the indicators bottoming out on oversold levels.  ES is now just 7 points from its 200 day MA at 1245 and I expect that to provide some resistance just as it did earlier this month.  Also, whenever we have these tall green candle days, they're often followed by small doji days.  I see no reason why that won't happen again on Wednesday.

ES daily pivot: Takes a big jump from 1204.75 to 1224 even tonight.  But ES is still way over that at 1238 providing a good cushion going into Wednesday.

Copper: Copper also broke out of its descending RTC today as well as a four day trading range.  With oversold indicators also turning up, it looks poised to go higher.

Morningstar Market Fair Value Index: Yesterday the index dropped again to 0.83.  Unfortunately, Morningstar gives these numbers one day late.  I'm betting anything that today's number will be higher.  A move up in this index is bullish.

History: According to The Stock Traders Almanac, the rest of this week is considered historically quite positive, being the days of the traditional Santa Claus rally.

     And the winner is...

Tonight I'm giving it to the bulls.  The futures have been drifting slowly higher all evening suggesting that there's still at least some more upside left for tomorrow.  I think we may close a bit higher but overall it should be a small range doji day.  A good day to take off and go do some Christmas shopping.  I find today's developments encouraging for the next few days, in fact.

ES Fantasy Trader

Holding my long from the 16th took a bit of nerve but patience paid off in the end.  Santa's timely arrival today got me out of that hole and today we took a 9.75 point profit shortly before lunch.  I know I left some money on the table, but that doesn't make me feel nearly as bad as holding on and watching a winner turn into a loser.  And we never want to be too piggy, oink oink.

Portfolio stats: the account now stands at $139,250 after 45 trades (30 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier     Tonight we're standing aside with the expectation that there's not going to be much action on Wednesday.

SLD    10    ES    false    MAR12 Futures     1230.00    USD    GLOBEX    11:53:06
BOT    10    ES    false    MAR12 Futures     1220.25    USD    GLOBEX    DEC 16 01:56:34


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