Tuesday, December 6, 2011

Tuesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday lower, medium confidence
  • ES pivot 1256.42.  Holding under is bearish.
  • Rest of week bias higher if 200 MA breached..
  • Monthly outlook: bias up, on politics and technicals.
  • ES Fantasy Trader went short at 1249.00.

Today was another great example of how news-driven this market is.  Good news out of Europe this morning and the Dow shot up.  Bad news from S&P about Europe after lunch and back down we went.  Then at 3:30, a little mini-rally set in for some unknown reason.  But we did hold on for a positive finish, as I had expected last night.  Where next?  Let's see.

The technicals

The Dow: The Dow made another run at the 12,165 resistance line today for the second day in a row, and once again was rejected.  On the other hand, the 12,000 support held nicely, so we remain wedged between these two barriers for the time being.  If you ignore the last two days of small range action, what we saw today is a shooting star.  While that's a reversal indicator, it's not a particularly good one and it really requires confirmation.

The VIX: After three days of tickling its lower BB, the VIX finally came off it with a 1.16% gain today.  And its oversold indicators portend a higher VIX to come, and that's bad for stocks.  Whenever the VIX comes off the lower BB, it usually begins a march back to the other end.  There's clearly more upside to this chart than further downside right now.

Market index futures: Fortunately, the futures trade all the time so we can look for some confirmation there.  And right now they're guiding lower.  All three are in the red and ES is down nearly half a percent at 1:45 AM EST.  Just as the Dow was unable to clear its resistance today, so ES was unable to clear its 200 day MA at 1254.44.

This failure after two doji days and an inverted hammer today makes me think the market may need to back off a bit and get a running start for its next attempt at cracking 1254.  We're also right on the edge of the rising RTC.  Falling out of that would be bearish.

ES daily pivot: Took a jump from 1249.42 to 1256.42 today and that means that we're now below the pivot.  We need to see ES cross back over this level and right now it's not doing it, so that's not encouraging.

     And the winner is...

Hmmm, another tough call but I'm going to give this one to the bears.  After last week's big gains, we've not put in three sessions of mostly wheel-spinning and tonight we're actually seeing some declines fairly late in the overnight.  I'm just not feeling the love here so I'm calling Tuesday lower.  I think there's still more upside to come in December, but just not on Tuesday.

And the usual Europe/news/rumor disclaimer remains in force.

ES Fantasy Trader

Today we took a profit of exactly 10 points.  Just before noon it looked like the getting was good, and after the latest S&P Europe downgrade news hit right after lunch, I was glad I did.  Another good reminder that it never pays to be too greedy.

Portfolio stats: the account is now $167,125 after 38 trades (28 wins, 10 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 go short at 1249.00.

BOT    10    ES    false    DEC11 Futures     1253.25    USD    GLOBEX    01:09:03
SLD    10    ES    false    DEC11 Futures     1263.25    USD    GLOBEX    11:11:59


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