Friday going lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Friday lower, high confidence.  Bull-bear ratio is 2:6.
• ES pivot 1195.83.  Watch for a bearish break below..
• Next week bias lower, rebound possible late week.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader remains short at 1184.75.

Recap

Well after a big mistake on Wednesday's market direction, I got it right today.  The Dow ended losing 41 points and while it went even lower intraday, it was unable to make any headway past the 11,500-11,550 resistance area.  Is there any more downside action in store for Friday?  Let's stir the tea leaves and see.

The technicals

The Dow: Put in a classic hanging man and closed outside its rising regression trend channel for the first time in 8 sessions.  That's a bearish setup.  The stochastic also (finally) made the bearish crossover I've been expecting for two days now.  Momentum and RSI have already peaked so I'm seeing a lot of bearish sign son this chart, giving this one to the bears +1.

The VIX: Fell just a bit today, only by 0.56 and respected its summer-long support levels around 31  Its indicators are now about as oversold as they can get (RSI  hit zero for the second day in a row) so any further downside from here looks unlikely.  That's another +1 bears..

VIX futures: Pretty much the same story as the VIX itself, so another +1 bears.

Market index futures: All three futures are pretty much unchanged at 12:55 AM EDT.  ES today put in a tall doji, and completed a full day outside its rising RTC.  That's a bearish trigger.   The stochastic has executed a bearish crossover and the other indicators are highly overbought.  I see nothing bullish in this chart, so it's +1 bears.

ES daily pivot: Now 1195.83.  ES is now actually above the pivot, partly from a little bump around midnight and partly because the pivot itself declined a bit.  That's bullish unless we drop back down through it.  It's too early to tell yet, so no points here right now.

Dollar index: Last night I couldn't make a call on this one.  Tonight we've got some more clarity with a gravestone doji.  The indicators are even more oversold than yesterday and yesterday's support was respected.  At this point I think the dollar can go higher Friday and that's +1 bears.

Oil: Last night I said oil would go lower today and it did with a hanging man on overbought indicators.  Oil still has room to drip lower, so +1 bears.

Morningstar Market Fair Value Index: Today the index rose for the fourth day in a row to 0.86, a level not seen since September 16th.  This sort of increase is a bullish sign, so +1 bulls.

History: According to The Stock Traders Almanac, tomorrow historically outperforms, so +1 bulls.

It's all cyclical, folks.

     And the winner is...

The bears with a bull-bear ratio of 2:6.  I'm going to call this market lower Friday.  It's now really giving me the impression of just teetering on the brink, the way a pendulum comes to a stop just before it reverses.  We'll see.

ES Fantasy Trader

Today I decided once again to hold onto my short position from yesterday on the continued expectation that Friday will bring some profits.I hate nothing more than throwing in the towel at exactly the wrong moment.  This trade will come in pretty soon.

Portfolio stats: the account still remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 
 

Better case for lower Thursday

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday lower, high confidence.  Bull-bear ratio is 1:5.
• ES pivot 1198.33.  Breaking below is bearish..
• Friday bias lower, rebound possible next week.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader remains short at 1184.75.

Recap

My headline call last night was "Wednesday's going lower".  And with all the technicals looking bearish, can you blame me?  After all, the bull-bear ratio was 1:8, just one short of a shut out.  Today's 103 point gain in the Dow proved me just plain flat out wrong.  Ouch.  Well like I've been saying lately, it's not an exact science and I've never claimed infallibility.  Sometimes stuff happens.

At this point though, I think it was more a matter of being a day early than being completely wrong.  This has happened to me a few times this year already.  I have a tendency sometimes to get ahead of myself.  But let's check the technicals again to see if maybe my analysis was actually wanting in some respect last night.

The technicals

The Dow: Last night, the Dow had put in a doji.  That's not necessarily a reversal indicator, only an indication of indecision.  Today, we got a shooting star, which is a bearish reversal indicator, though admittedly not the greatest one.  And the high brought us nearly to our upper Bollinger band and was not able to clear the resistance from the end of August.  Coupled with yesterday's doji and indicators that are even more oversold tonight, technically it still looks like +1 bears.

VIX, daily

The VIX: Last night I gave a point to the bears mostly because the VIX looked closer to support than resistance.  However, there was still a bit of room to run down and sure enough, that's what happened today.  Tonight though paints a different picture.  Today the VIX put in a gap-down hammer that was ultimately held up by support (red line).  Check it out.  That's looking like a lot better case for a reversal now than yesterday, so I'm again giving +1 bears.  This time I mean it!

VIX futures: These put in a gap down red candle right down to support, though not a hammer.  So theoretically, there's no reversal sign here yet.  However, I do believe in the support plus the even more oversold indicators (RSI is now a mere 5.4).  So, it's got to be +1 bears.

Market index futures: Last night these were overbought.  Tonight they're even more overbought.  And ES has now fallen off the right side of its rising regression trend channel.  That's a good bearish indicator.  Don't want to sound like a broken record, but technically, the only interpretation here is +1 bears.

ES daily pivot: Now 1198.33.  ES right now at 1:15 AM EDT is just hanging just barely over that basically unchanged in the overnight until just 5 minutes ago.  It just made one attempt to break under but that was rejected.  I'm not comfortable awarding any points based on the action I'm seeing right now though, so we're skipping this one too.

Dollar index: Got this one wrong too.  The dollar did not reverse today but continued lower in a big way.  It's indicators are even more oversold now and it's getting close to its 200 day MA which could provide support.  However, in the absence of a reversal candle, I'm not going to call this one either way tonight - once burned, twice shy.

Oil: I even got the oil call wrong yesterday.  Oil did not drop today but it did put in a second doji.  And unlike last night, we now have a bearish crossover in the stochastic and a peak in OBV.  That's a much stronger case than yesterday to go lower Thursday, so +1 bears.

Morningstar Market Fair Value Index: Today the index advanced from 0.83 to 0.84.  That's bullish, so +1 bulls.

History: According to The Stock Traders Almanac,tomorrow has only a slight positive historical bias, not really enough to award any points though.

     And the winner is...

Once again, the bears, this time with a bull-bear ratio of 1:5.  For now I'm going to stick with my theory that my call last night was just a day early.  I am sincerely looking for Thursday to go lower.  All I have to work with is the charts and the charts are telling me lower right now so I have to stick with that.  If this one doesn't work out, I'm going to have to step back and reassess what I'm doing wrong.  We'll see.  That's all she wrote.

ES Fantasy Trader

Today I decided to simply hold onto my short position from yesterday on the expectation that Thursday will bring some profits.I hate nothing more than throwing in the towel at exactly the wrong moment.

Portfolio stats: the account remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 

 

Wednesday looking lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Wednesday lower, high confidence.  Bull-bear ratio is 1:8.
• ES pivot 1188.33.  Pivot in play: holding under is bearish.
• Mid-week bias lower, rebound possible by Friday.
• Monthly outlook:  bias up, on technicals
• ES Fantasy Trader going short at 1184.75..

Recap

Last night I said we had a bit more room to run higher today but warned of a peak in process.  Well that's just what we got, with the Dow admittedly losing a scant 17 points but both the Nasdaq and SPX finishing in the green.  Indecision was rampant, with the Dow crossing the zero line about a dozen times during the session.  But this was pretty much to be expected after Monday's big run-up.  Let's see where we go from here on Wednesday as we run down the technicals.

The technicals

Dow daily

The Dow: The Dow today put in a small hanging man, but with indicators now becoming really oversold, I have to give this one +1 bears without any further equivocation.

The VIX: After falling for six sessions, the VIX has now reached very oversold levels.and after today's close of 32.86 is close to its support of 31.28.  Although today's red candle was not a reversal pattern, the VIX clearly has more room to run higher than lower from here, so that's +1 bears.

VIX futures: After falling also for six sessions, the futures indicators have now fallen to levels from which the VXX has reversed in the past. It looks like it's ready to move higher, so that would be +1 bears.

Market index futures: After putting in a doji Tuesday, ES is now down 0.29% at 1:20 AM EDT with NQ and YM also in the red.  ES's indicators are all quite oversold and its high reliability stochastic is just about to execute a bearish crossover.  This chart looks like a good probability of going lower Wednesday, so +1 bears.

ES, 1 minute bars

ES daily pivot: Now 1188.33, so ES at 1186.25 is now below that, but because the pivot moved above the price rather than the other way around.  This puts the pivot in play for Wednesday.  Watch price action around the pivot.

And here's a perfect example of Pivot Power.  Check out this one minute ES chart just after 1:30 AM Wednesday morning.  At 1:24, ES, which had been simply noodling around center ice for two hours, suddenly makes a break-away and skates in for the goal.  But just at the black line (pivot), he shoots, he doesn't score!  Reee-jected!  In your face, slamma-jamma.

Uh, so anyway, breaking over would be bullish.  For now though, it's +1 bears.

Dollar index: After Monday's big dump, the dollar found a floor today with a nice inverted hammer.  Dead cat bounce or reversal indicator?  I vote for the latter.  With oversold technical indicators I would not be at all surprised to see the dollar go higher Wednesday.  That's +1 bears.

Oil: Today oil put in a big tall skinny doji after four days of solid gains.  Coupled with quite oversold indicators, it sure looks like the tide of oil is starting to run out.  Since oil and the markets are in sync now, that's +1 bears.

Morningstar Market Fair Value Index: Today the index actually rose from 0.81 to 0.83, so that's +1 bulls.

History: According to The Stock Traders Almanac,this Wednesday is the weakest day of the week, so +1 bears.

     And the winner is...

The bears, by a convincing bull-bear ratio of 1:8.  Ever watch the waves at the beach?  They roll in quickly from the ocean and lose speed as they climb up the sand.  Eventually they just peter out and the water reverses to rush back out to sea.  That's where we're at today.  The tiny price movements we saw in both the Dow and SPX are like that wave washing out.  I think Wednesday's going lower.

ES Fantasy Trader

After standing aside yesterday, a decision that seems good in light of the small range we had today, the ESFT is going short tonight at.1184.75.

Portfolio stats: the account remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 
 

A bit more room to run higher Tuesday, peak near

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Tuesday bias slightly up, low confidence.  Bull-bear ratio is 6:2.
• ES pivot 1179.92.  Current price is holding above that.
• Rest of week bias uncertain, but nearing resistance.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader standing aside - no trade.

Recap

Last night I executed my veto authority and called today higher despite a negative bull-bear ratio of 2:5, just because there were some encouraging words from Europe.  Well those words proved good enough for a 330 point spike in the Dow to celebrate Columbus Day.  The day concluded with a peculiar 100 point explosion in the final 20 minutes of trading.  Here, let me save everyone the trouble: "banksters", "fraudsters", "PPT", "Helicopter Ben", etc.  Hey, whatever, you can't fight the tape.

So let's run down the list of usual suspects as we do every night and see who leaves standing.

The technicals

The Dow: Today's monster run-up to 11,433 took us near but not quite to resistance at 11,500.  This puts us at a critical juncture here.  We've already put in a higher high compared to the previous peak late last month.  We're now close to the mid-September peak.  If we can break above that, it would lend support to the idea that the bottom is in.  For now, the Dow remains firmly in its rising regression trend channel.  Volume was low, but it was admittedly a semi-holiday.  With indicators up but sitll not oversold and a tall green candle today, I see no reversal signs here so +1 bulls

The VIX: Last night the VIX was starting to look oversold.  But on today's Europe news it dropped nearly 9% and is now looking even more oversold than Friday.  And it's getting close to its support from back to August and looks to have more room to run higher than lower from here - but maybe not quite just yet.  Support is at 31.13.  We closed at 33.02.  So in the absence of a reversal candlestick, I have to give this one +1 bulls.

VIX futures: Today the futures fell out of their rising regression trend channel from July.  This is a bearish setup.  If we do not trade higher tomorrow that would be the trigger.  But the indicators are now at oversold support levels.  So right now it looks like +1 bears.

Market index futures: Today's run took the futures up to overbought levels from which declines have begun in the recent past.  OBV in particular took a hook lower today and that's been particularly reliable recently.  That is bearish.  But the other indicators aren't quite ready to roll over.  If ES isn't lower Tuesday though, I'd look for lower by Wednesday.

In any case, in the overnight the futures have basically been trading flat to slightly negative after that crazy last minute run-up in the regular session, so there's not much guidance there.  All in all, it doesn't look really bullish, but it's also not quite bearish yet, so no points here.

ES daily pivot: Now 1179.92.  We continue to hold above the pivot by about 10 points, so that's +1 bulls.

Dollar index: Last night I wrote "it looks good for the dollar to go higher Monday".  Bzzzt!  The news from Europe obviously put the kabosh on that idea, with the dollar taking a monster dump today.  But that wasn't good enough to make it oversold and we're still not close to any support, so I'd say the dollar could go lower Tuesday and that's +1 bulls.

Oil: Ran higher today after some unclear readings last night. Today's big run brings us near an important resistance level.   And with indicators just reaching oversold levels it looks like oil is near a reversal.  It might not go lower tomorrow, but I'd be surprised if it didn't dip later this week.  However, since there are no immediate reversal signs here, it's still +1 bulls.

Morningstar Market Fair Value Index: Didn't update today, still showing 0.81 from Friday, so no points awarded.

History: As I mentioned last night, according to The Stock Traders Almanac,the first two days of this week underperform historically, so again +1 bears.

Sentiment: It's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  The bullish numbers for the previous two weeks were 14%, then 21%.  Then last week, the bullish number dropped back to 14.8%, with a 52% bearish reading.  But this week the poll did an abrupt 180 with the bulls now showing 56% and bears just 11%.

For the record, I joined the crowd and switched my vote back to bullish this week on the basis of  the recent news from Europe, home economic numbers coming in BTE, and monthly charts that are looking quite bullish technically.  Normally I'd use this as a contrarian indicator, but low bearish readings don't seme to have quite the predictive power that low bullish ones do (I'll have to look into this), so for now I'm giving this +1 bulls.

     And the winner is...

The bulls, by a bull-bear ratio of 6:2.  However,I 'm a bit concerned that we maybe ran too far too fast today and the market may need a day to catch its breath.  Or looking at it another way, we may be in for another doji day of indecision that could give us some swings as the trend tops out.  Right now I'm seeing the storm clouds gathering but I don't hear any thunder just yet.

The technical bias is still slightly up though, so the Night Owl will move way out to the end of the limb tonight and hoot for either a small gain Wednesday or an intraday peak.  In the latter case, I'd start looking for the exits.

ES Fantasy Trader

Today we took a profit of 13.75 points.  I kinda wish I'd held on to the bitter end, but who could have known that the market was going to take off in the final 20 minutes.  In any case, a win is a win; I'll take it.

Portfolio stats: the account is now $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1169.00    USD    GLOBEX    00:39:01
SLD    10    ES    false    DEC11 Futures     1182.75    USD    GLOBEX    11:35:09
 
I am sufficiently ambivalent that I'm not putting on any ES trade tonight.  The ESFT is "fantasy" only in the sense that I can't afford to put on trades of such size for real.  I give very careful thought to when and where to pull the trigger and on which side.

Monday higher on Europe news

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Monday higher, high confidence.  Bull-bear ratio is 2:5.
• ES pivot 1157.83.  Holding higher is bullish.
• Rest of week bias uncertain, lower possible by Friday.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader went long at 1169.25.

Recap

Dow weekly

Wow, another crazy end to another crazy week.  Just look at this weekly Dow chart.  A giant inverted hammer last week followed by the exact opposite candle this week - a big hammer.  Or is it a hanging man?  Who the heck knows.  Even the weekly indicators are pretty mixed offering little guidance.

One observation I can make is that the pattern over the last few months is starting to  remind me a lot of the action we saw last year, May through August.  If that holds true, then we're in the middle of a complex bottoming process.  Going into the fourth quarter, this should provide some encouragement to stocks.

But first, let's see how things sort out for Monday.

The technicals

The Dow: Last Friday ended with a doji indicating that last week's rally may indeed have run out of gas.  Oversold indicators, particularly a peak in OBV tend to support this idea.  On that basis, this is +1 bears, but just (wait for it), barely.

The VIX: Took a big weekly drop last week.   Recently, that alone has been good enough for a rise the next week.  The daily chart formed a green inverted hammer, which is not a particularly powerful reversal sign but looks more convincing coupled with indicators just reaching oversold level.  So +1 bears.

VIX futures: Also oversold now, the futures put in a bullish piercing pattern on Friday.  With now oversold indicators, this makes a good case for the VIX going higher, implying stocks going lower.  Another +1 bears.

Market index futures: All three futures are up sharply at 12:35 AM EDT, all by more than a percent apparently on news today that France and Germany have a plan to save Europe, only they're not telling anyone what it is just yet.  Uh, OK, whatever.  That was good for a 19 point jump, so far. And with no particular resistance until 1192, no real reversal pattern on the charts, and remaining well inside a rising regression trend channel there is nothing to stop the futures until then so it's +1 bulls.

ES daily pivot: Now 1157.83.  Although the pivot has risen today, prices have also gone up to keep us more than 10 points above it right now.  That's a good sign, so +1 bulls.

Dollar index: On Friday the dollar put in a big hammer right at the lower edge of its rising regression trend channel.  Along with indicators at levels that have marked prior reversals, I'd say it looks good for the dollar to go higher Monday.  That would be bad for stocks, so +1 bears.

Oil: Oil put in a doji on Friday but not at any real resistance level.  With indicators near but not quite really overbought, this one is too tough to call for Monday, so no points.

Morningstar Market Fair Value Index: N/A on a Sunday night, no points.

History: According to The Stock Traders Almanac,the first two days of this week underperform historically, so +1 bears.

     And the winner is...

The bears, by a bull-bear ratio of 2:5.  However, with the VIX still in the mid-30's and the market still totally driven by news (and/or rumors) out of Europe, tonight's story about some kind of bank plan over there trumps the technicals, so the Night Owl is going out on a limb and calling Monday higher, despite some poor-looking technicals.

ES Fantasy Trader

Last Friday's trade was a wash. By the time I exited just before lunch, my earlier profit had evaporated and I decided to get out while the getting was good.  Of course later on ES rose briefly back into profit position, but such is the stuff of day trading and that's not what I do.  I'll take break-even over a loss any day.

Portfolio stats: the account is still $151.625 after 24 trades (17 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 

BOT    10    ES    false    DEC11 Futures     1158.00    USD    GLOBEX    OCT 7 00:50:28
SLD    10    ES    false    DEC11 Futures     1158.00    USD    GLOBEX    OCT 7 11:31:17

Tonight we go long at 1169.25.