Friday, September 16, 2011

More upside possible Friday

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, medium probability.
  • ES pivot 1201.67.  Current price reasonably above that.
  • Next week bias uncertain, short term top possible..
  • Monthly outlook: bias down, but may change pending Europe news.
  • ES Fantasy Trader going long at 1213.00.

The Dow put in an impressive 186 point gain today still without reaching overbought levels.

The technicals

Short version tonight.  Everything I look at is pointing to the possibility of still more short term upside, though we're approaching some important resistance levels, like 11,717 in the Dow and 1229 SPX.  So we still have a bit more room to run, and without seeing any oversold indicators I have to assume we're going back to take a look at those levels.  And note that tomorrow is historically strong.

So I'm looking for a positive close tomorrow.  That will make Monday a key day to determine what will happen regarding this resistance area.  My guess is we may encounter some trouble getting past it, but with every little news item affecting the market so much lately, anything's possible.

Thursday, September 15, 2011

Thursday higher if ES pivot holds

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday bias higher, low confidence.  Bull-bear ratio is 5:2.
  • ES pivot 1181.75.  Current price is far below that.
  • Friday bias uncertain..
  • Monthly outlook: bias down, but may change pending Europe news
  • ES Fantasy Trader standing aside.

Tuesday night I called Wednesday lower.  Clearly, the Night Owl laid a great big egg as the Dow ended with a 141 point gain instead.  Oh well - you can't win 'em all, especially with the VIX stubbornly stuck in the stratosphere.

Forget the technicals, today was completely news-driven out of Europe.  Bad at first, then good was all it took to power a big rally even allowing for last minute profit taking from the day traders.  And I'm guessing that more of the same is in store.  The market seems bent on following the Escher roadmap, walking sideways up the down staircase upside-down.

The technicals

The Dow: Put in a wide-range doji today, not really a good reversal indicator and since the indicators are all definitely headed up from oversold now, I have to give this as a +1 bulls.  Also, we exited the latest descending regression trend channel and that's also bullish.

The VIX: Fell under its near-term resistance for a 6 and a quarter percent drop.  Today's red candle plus indicators that are still just coming off overbought suggest a lower VIX tomorrow and that's bullish for stocks.

VIX futures:The futures tried again to go over their upper Bollinger band and again failed.  This chart looks like the VIX itself, so +1 bulls again.

Market index futures: All three are down at 1:20 AM with ES down by a non-trivial 0.38%.  At this point, the action suggests a dark cloud cover in the making, though it's risky making assumptions fro half-baked candles.  Still, +1 bears.

ES daily pivot: Now 1181.75.  We're just above this now at 1183.50, so the pivot is key.  Going under and staying under is bearish.  Bouncing off is bullish.  It's too early to make that call, so no points.

Dollar index: Dropped again today reflecting an improving euro on some calming news out of Europe.  Still oversold and looks to have room to run lower on Thursday.  +1 bulls.

Oil: Kind of wandering around lately, but since it's near the upper end of its recent trading range, the suggestion is for it to move lower.  Because of its current market correlation, that's +1 bears.

Morningstar Market Fair Value Index: Rose to 0.84 today.  +1 bulls.

History: Nothing in particular on the day before triple witching, so no points.

     And the winner is...

The bulls, with a bull-bear ratio of 5:2.  But my intuition is less positive than the numbers would suggest.  So I'm going to watch the pivot again.  If we hold above, that's bullish for the close.  Falling through will mean a lower close.  Keep an eye on ES 1181.75 before the open.

ES Fantasy Trader

Clearly, the ESFT was on the wrong side of this trade, dropping a whopping 21 points for a stinging loss.  The account is now $118,875 since inception on 8/18 after 14 trades, 9 wins, 5 losses.  When I'm that badly wrong, I like to stand aside for a day and figure out why.  When you start losing at the blackjack table, the best thing to do is always to get up and walk away.  ES is no different.

SLD    10    ES    false    SEP11 Futures     1159.25    USD    GLOBEX    SEP 14 00:56:24 
BOT    10    ES    false    SEP11 Futures     1180.25    USD    GLOBEX    SEP 14 12:50:46

Wednesday, September 14, 2011

Wednesday lower on futures, news

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, medium probability.  Bull-bear ratio is 3:6.
  • ES pivot 1164.42  Staying below is bearish..
  • Rest of week bias uncertain.
  • Monthly outlook: bias down, regardless of Fed action in September
  • ES Fantasy Trader opened new short position at 1159.25.

Last night I was calling for a higher Tuesday if ES could stay above its daily pivot.  Well ES did make one vain attempt to bust under around 4 AM but it was rebuffed and everything then just moved higher from there.  The Dow put in a 45 point gain after meandering around in the afternoon, largely on more rumors from Europe.

Escher's map of the debt crisis.
Lately it seems like the market is sent scurrying every time some new story comes out, confirmed or not.  I swear, if tomorrow the FT says that the Chinese basketball team is going to buy Venezualan sneakers, or that the ECB's secretary's dry cleaner has raised its rates, the market will tank.  (Feel free to repeat this important "news").

And a tip of the Hatlo hat to M.C. Escher for his brilliant analysis of the interconnections between the various players in the debt crisis.  This one is even better than the Lego people.  He is right on the money.

The Technicals

The Dow: Monday the Dow exited its descending regression trend channel, which was a bullish setup.  Yesterday traded entirely outside which was the trigger.  Today was the payoff.  Unfortunately, it came in the form of only a 45 point gain in a sort of doji-ish candle that came almost up against resistance at 11,150.  And the indicators are mixed.  RSI and the stochastic are oversold, but money flow, momentum, and OBV are not.  With less than convincing volume today, I'm inclined to give this a +1 bears.

The VIX: Put in another red candle today, as I expected last night,  dropping 4.35%.  But its indicators are just peaking now at overbought levels.  With no near-term resistance in sight, this suggests the VIX has lower to go tomorrow. +1 bulls.

VIX futures: Came down today as expected, though not a lot.  While there is still considerable downside from here and the indicators are oversold, the futures have gone up in the recent past from similar levels.    And today's drop left the futures right at support at 34.95.  I'm not convinced the futures are going lower tomorrow so +1 bears.

Market index futures: At 1:05 AM EDT all three futures are down.  ES in particular is down 1.25%.  The candle it's forming is a bearish engulfing pattern.  OTOH, the indicators are still oversold, although momentum and money flow are decreasing.  Overall this adds up to one for the bears here.

ES daily pivot: Now 1164.42.  Since ES started drifting lower earlier this evening, we are now below this level.  With the overnight trend down, this is bearish.

Dollar index: The other day I noted the exponential run-up in the dollar and said it couldn't go on forever.  It didn't.  Today the $ put in a big bearish engulfing pattern.  This one is high reliability and suggests the $ is going lower on Wednesday.  That's good for stocks.  +1 bulls.

Oil: Continues to edge higher and that's good for stocks lately (oddly enough).  So +1 bulls.

Morningstar Market Fair Value Index: Unchanged today at 0.83, so no points here.

History: Historically, this week is very bad for the Dow, though we sure haven't seen any evidence of that this week.  Since Wednesday is the weakest day of the week, I'm giving +1 bears for this.

News: There's bearish news coming out in the overnight around France and China.  Given how jumpy the market is over these two actors, this get a big +1 bears.

     And the winner is...

The bears.  The new bull-bear ratio is 3:6, suggesting a tip of the balance compared to yesterday.  I put particular weight on the breaking news and am looking for the market to resume it's downward march Wednesday.

ES Fantasy Trader

Today the ESFT closed out its long at 1168.50 for a small 1.75 point gain. The account is now $129,375 since inception on 8/18 after 13 trades, 9 wins, 4 losses.

BOT    10    ES    false    SEP11 Futures     1166.75    USD    GLOBEX    SEP 12 17:22:33
SLD    10    ES    false    SEP11 Futures     1168.50    USD    GLOBEX    13:02:45

Tonight we're going short again at 1159.25.

Tuesday, September 13, 2011

Tuesday looking higher if ES holds above pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, medium probability.  Bull-bear ratio is 3:1.
  • ES pivot 1152.25.  Falling below this becomes bearish..
  • Rest of week bias uncertain, end of week lower if Tuesday rallies.
  • Monthly outlook: bias down, regardless of Fed action in September
  • ES Fantasy Trader opened new long position at 1145.50.
We're going this way

Today's Wall St. tug of war featured a total of 14 zig-zags that had the day traders pulling their hair out.  It wasn't a bull market, it wasn't a bear market, it was a bullbear market.  (The BullBear of course is closely related to the species CatDog).

Sunday night I called for a lower close today and indeed we were in triple digit loss mode for most of the day, until the FT published some news, well some rumors more like it, about the Chinese devloping a sudden appetite for Italian bonds, of all things just before the close.  Mama mia, that was all it took to set off a rally that ended with the Dow actually gaining 69 points and reclaiming the 11K level.

The technicals

The Dow: The Dow put in a nice hammer today that just touched its lower Bollinger band which coincidentally is right around the August low support level at 10,800.  Its indicators are now more oversold than overbought and while they haven't yet bottomed, I'm more inclinded to give this pattern a +1 bulls.

The VIX: Today the VIX put in a big dark cloud cover that spanned the 40 level.  The other two times when the VIX had been over 40 and then closed under, it went lower the next day.  Combined with indicators that are now looking overbought, I'm inclined to think the VIX is ready to go lower, so I give +1 to the bulls.

VIX futures: Today saw the futures put in a bearish shooting star.  By itself the shooting star isn't the best reversal indicator, but this one is helped by the gap up.  Lower futures -> lower VIX -> higher sotcks -> +1 bulls.

Market index futures: All three (ES, NQ, YM) are up at 1:20 AM with ES up 0.15%.  What's important here is not so much the amount of the gain as that almost none of the China bond rumor run-up has been retraced.  +1 bulls.

ES daily pivot:  Tuesday's pivot is now 1152.25 and we're now comfortably above that level at 1164.50.  This pivot serves as support.  If we break under that will be bearish, if we bounce off, bullish.  Right now it's looking like +1 bulls.

Dollar index:The dollar, having cleared resistance yesterday continued its relentless upward march today and did not pull back to its 200 day MA.  While looking overbought technically, there's no telling when this will end.  It's all news-driven out of Europe right now.  A strengthening dollar being bad for stocks, this gets a +1 bears.

Oil: After falling for two days, oil rose today to the middle of its recent trading range and stayed right in the Twilight Zone, that region near the center of the Bollinger bands.  No telling where it's headed tomorrow, so no points here.

Morningstar Market Fair Value Index: This doesn't seem to have been updated today, so no points here.

History: Not much in the way of history for tomorrow, but I give +1 bears just because the week as a whole is historically bad.

Sentiment: Finally, we once again make note of the latest  Ticker Sense Blogger Sentiment Poll which came out today.  As I suspected, bearish sentiment increased from last week.  Last week it was running 22% bullish and 44% bearish which was an increased bearish level from the week before.

Today's poll shows that gap has now increased to 21% bullish and 48% bearish.. (For the record, I again voted bearish).  That's getting closer to where I'd award a point to the bulls on a contrarian basis.  As I mentioned last week, the last time the bullish number was this low was in February 2010 at the end of a month-long decline.  The Dow then went on to rally over 1000 points in the following two months.  I really want to see that bullish number drop below 20% to go contrarian bullish.  But this is so close, I'll give it a +1 bulls anyway.

     And the winner is...

The bulls, with a bull-bear ratio of 6:2.  This isn't a new bull market and it probably isn't even a multi-day rally, but I think the market has been looking for an excuse to go up for a day or so now and today's rumor was all the catalyst it needed.  Once the smoke clears, it's probably back down again, but for tomorrow at least I'm looking for a higher close.

ES Fantasy Trader

The ESFT covered last night's trade this morning, prematurely as it turned out at1144.00, settling for a meager 1.5 point profit.  The account is now $128,500 since inception on 8/18 after 12 trades, 8 wins, 4 losses.

SLD    10    ES    false    SEP11 Futures     1145.50    USD    GLOBEX 01:04:55
BOT    10    ES    false    SEP11 Futures     1144.00    USD    GLOBEX 11:09:34   

Tonight, we go long at 1145.50.

Monday, September 12, 2011

Monday looking lower on ECB follies

Bonjour a nos lecteurs en France et la Suisse Romande!

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, high probability.  Bull-bear ratio is very low at 0:8
  • ES pivot 1166.25.  Current price is far below that.
  • Rest of week bias uncertain, contrarian rebound possible mid-week.
  • Monthly outlook: bias down, regardless of Fed action in September
  • ES Fantasy Trader opened new short position at 1145.50.

Last Thursday night I had a weak bias to the plus side if we could get the ES to go over its daily pivot.  It didn't and we didn't.  The catalyst of course was the abrupt departure of Jurgen Stark, who I had never heard of, from the ECB.  Thanks much for tanking my portfolio with your personal grievances, Jurgen.

We finish off the weekend with just a bit more reading.

   Everything you always wanted to know about the euro but were afraid to ask...

Here's good post from Mike Shedlock in Mish's Global Economic Trend Analysis yesterday explaining just what the heck is going on with the euro: "Euro Death Wish" and Global Finger-Pointing: U.S. Senior Official Blames Eurozone for "75% of the Dark Things Happening in the World" It's well worth a look.  Quick summary - it don't look good.

And if that doesn't explain it well enough, then this one from Michael Cembalest of J.P. Morgan should, using Legos: The debt crisis in the European Monetary Union:  I give this one four hoots up.

Of course you can't tell the players without a program so you'll have to read the article for the key.  But hey, this makes as much sense as anything else I've read.

The technicals

Time once again this Sunday night to round up the usual suspects and see who might salute on Monday.

Daily Dow
The Dow: Friday's big drop in the Dow  had several nasty implications.  First, it pretty much killed the whole double bottom idea.  Second, it prevented the establishment of a new rising regression trend channel from the previous three days.  Third, Friday's declining volume was up compared to Thursday.  Fourth, the indicators are not really very oversold looking, even after Friday.  Only the RSI has entered oversold territory, and just barely.

And last, I'm starting to see a head-and-shoulder in there, centered around the peak on 8/31-9/01.  FWIW, in this post, SPX Bearish Head Shoulders underway Target 1056, MarketTrend sees one in the SPX too.

Countering this, at least as of right now is the fact that on the last two oscillations since the lows of 8/09, each one has still put in higher lows and higher highs.

But given all of the above, I have to give this one is +1 bears.

The VIX: Despite a 12% advance on Friday, the daily VIX remains firmly in the Twilight Zone, that gray region around halfway between Bollinger bands.  So we move out to the weekly chart seen here  Several things stand out.  First, the VIX has some strong resistance around 40.  Friday's close at 38.52 leaves it bumping up against that level.  The VIX has only managed to put in a weekly close above 40 twice since March 2009.
Weekly VIX

Next, we got a classic hanging man on last week's candle.  That is at least a potential reversal indicator.  Then notice how the VIX has had an exponential run-up since mid-July.  Since the peak on 8.8, the VIX has been unable to make any further headway and has been simply oscillating in the upper 30's.  That looks like a good sign of lower numbers to come.  So overall, I think the weekly chart is pointing to a decline in the VIX.  I just don't see it happening Monday.  +1 bears.

VIX futures: On Friday the VIX futures gapped up big time and put in a tell green candle but did not pierce the upper Bollinger band.  The technical indicators are mixed, some suggesting further upside, others looking overbought.  In the past, the futures have shown a proclivity for climbing the upper Bollinger band, and given the continued unsettling news out of Europe, I'm going to give this vote to the bears.

Market index futures: All three (ES, NQ, and YM) are down at 1 AM EDT.  ES is down a full percent on a big gap down from Friday as the weekend has done nothing to tamp down the European mess.  ES RSI is now oversold.  OBV is now below levels from which previous rallies occurred.

However, ES has no support until 1121 and so still has room to move lower.  I'd expect an oversold/gap-filling rally at some point, but not Monday.  Maybe later this week.  So +1 bears..

ES daily pivot: Now 1166.25, and with ES far below that at 1145.50 at 1 AM EDT, I don't think this will be a factor tomorrow.  No points.

Dollar index: On Friday, the dollar blasted right through resistance at 54.32 and kept right on going through its 200 day MA at 54.37, also courtesy of the ECB.  (Recall that I'm using the Deutsche Bank US Dollar Index since it's free, unlike the $DXY anymore).  Two consecutive long solid green candles give no indication of any reversal any time soon.  The only caution here is that the dollar is going exponential here.  This sort of parabolic run-up can't go on much longer.  Overall, I see nothing right now pressing against the dollar so this one has to go +1 bears.

Oil: Oil fell out of its daily rising regression trend channel on Friday, a bearish signal.  Since the market is now trading in correlation with oil, this is another +1 bears.

Morningstar Market Fair Value Index: This fell again on Friday to 0.83.  FWIW, the last two reversal we had (on 8.9 and 8.19), this index hit 0.81 both times.  So I'd call this short term bearish (like for Monday) but indicating that we may be near a bottom.

History:  The Monday before Triple Witching is historically bad, according to The Stock Traders Almanac.  Really bad.  In 2001, the Dow dropped a whopping 14.3% this week.  In 2008, it lost 504 points on Monday,  So +1 bears here too.

     And the winner is...

The bears, I'd say, by a knock-out.  The bull-bear ratio is a whopping 0:8, the worst reading since I started computing this number.

ES Fantasy Trader

Tonight the ESFT is going  short tonight at 1145.50.  I'm looking for a contrarian/oversold rally at some point later this week.  I just don't think it will be Monday.

Sunday, September 11, 2011

Weekend musings


Last Thursday night, things were looking weakly bullish for Friday.  I was getting some mixed messages that tipped out just barely on the positive side.  Unfortunately, that whole plan went off the rails when some guy I never heard of (and I'm sure a lot of other people too) in the ECB decided to take a powder on Friday.  That, apparently, was all it took to set off a 304 point dive in the Dow.

Angela Merkel meditates.
Here we see Angela Merkel counting on her fingers how many Germans now support further economic aid for Greece.*

I'm not quite sure if it's two or ten, but either way, it's not many.  And why the heck should they?  The caption summarizes my feeling exactly.  Why doesn't Greece just declare bankruptcy and get it over with?  Would that be worse than this bizarre financial Chinese water torture the ECB seems determined to inflict on the markets?

Later tonight I'll have my forecast for tomorrow and a monthly outlook.

* The Federal Truth in Blogging Act compels me to disclose that the caption really says  "So that something changes".


I got rid of my AKS idea on Thursday, taking a tiny five cent profit, because it looked like it was running out of steam, not because I knew there was going to be more trouble at the ECB the next day.  OTOH, I held onto my Intel because I have more confidence in that than AKS.

The ES Fantasy Trader was another casualty of Herr Stark.  Despite some misgivings I bought at 1189.25 Thursday night and then had to sell it back at 1168 Friday morning.  ES continued lower to close at 1158.  Anyway, that unfortunate trade was good for a 21.25 point loss or $10,625.  The account stats are now: $127,750 since inception after 11 trades with 7 wins and 4 losses.


There's absolutely nothing I can add to the torrent of news, interviews, and bloggage that have already appeared surrounding today.  And I can't tell you how I really feel about it or the jihadists would come after me.  So I'll just leave it at this.  Remember those who died today, and then work hard to strengthen America.