Friday higher if no bad EU news

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

• Friday higher, high confidence.  Bull-bear ratio is 9:1.
• ES pivot 1243.00.  Remaining above is bullish.
• Next week bias up..
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1255.00.

Recap

Hoo boy, when I'm wrong I'm really wrong.  My call for a lower close today was effectively torpedoed by the Prime Minister of Greece who announced that there isn't going to be a referendum on whether or not Greeks want to retire 10 years before they begin working after all.

I don't know, maybe tomorrow he'll announce that China has bought the entire country and is having it towed to the South China Sea.  That would make as much sense as anything else I'm hearing these days.  In any case, it was good enough to power the Dow up 208 points on sketchy technicals.  Let's see if I can do any better tonight for Friday.

The technicals

The Dow: Last night I didn't like this chart, tonight I do.  We now have two strong solid green candles, today's close at 12,044 taking us back up over not only the 12K resistance line but also the 200 day MA at 11,974.too.  The indicators are all rising and the stochastic is about to execute a bullish crossover.  No resistance til 12,230 so +1 bulls.

The VIX: For the fifth time in six sessions the VIX moved in gap fashion, today dropping nearly 7%.  While we have now completely retraced the big gap up from Monday, the stochastic is just executing a bearish crossover, suggesting the VIX ca go lower Friday.  Not much in the way of good support here either, so I'm saying +1 bulls.

VIX futures: The futures dropped on a big inverted hammer but have the same bearish crossover stochastic thing going as the VIX itself.  And this gap is only about half filled.  With the other indicators also declining, I'd give this one +1 bulls too.

Market index futures: Little guidance here tonight.  YM is exactly flat, NQ is up 0.06% and ES is down by the same amount at 1:50 AM EDT.  At 1255.25, ES is getting close to its 200 day MA at 1261.84.  Rather than the pivot, I think this will be the number to watch on Friday.  If ES can cross this line successfully, that will be bullish indeed.  The stochastic just finished a bullish crossover and that's good enough for me, so +1 bulls.

ES daily pivot: Now 1243.00.  While is is basically unchanged in the overnight, the pivot moved up.  But even at that we're still 12 points above it and showing no signs of any attraction, so I'll give this one +1 bulls.

Dollar index: The dollar moved lower on an inverted hammer today.  Its indicators have all peaked and are headed lower, suggesting the buck will follow suit Friday, but it is close to its 200 day MA again.  While that provided no obstacle on the way up two days ago, it might provide some support Friday.  But it still has a bit more room to get there, so that's +1 bulls.

Oil: Moved higher today on a hanging man and mixed indicators.  Being at the top of its recent trading range suggests it will go lower Friday which would be bad for stocks so +1 bears.

Copper: At least I got this one right.  Copper did indeed move higher today.  And the indicators are still looking good and no nearby resistance, so +1 bulls.

Morningstar Market Fair Value Index: Today the index bounced right back up from 0.87 to 0.89, so +1 bulls.

History: According to The Stock Traders Almanac says Friday is bullish, so +1 bulls.

     And the winner is...

The bulls, by a bull-bear ratio of 9:1.  This sort of lopsided result is usually pretty accurate - unless of course the FT reports that George Papandreau found a fly in his moussaka or something, which will set off a global financial panic.  There's simply no chart for that.  Assuming these Europeans can keep quiet for a day, we might see some more upside Friday.

ES Fantasy Trader

Today we covered our short for a loss of 8.25 points.  Portfolio stats: the account is now $172,500 after 33 trades (24 wins, 9 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    NOV 2 01:13:12

SLD    10    ES    false    DEC11 Futures     1235.25    USD    GLOBEX    NOV 2 11:45:14   

Tonight we go long at 1255.00.

Thursday likely lower

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

• Thursday lower, medium confidence.  Bull-bear ratio is 4:5.
• ES pivot 1229.83.  Holding below is bearish.
• Friday bias higher, short term oversold...
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1219.25...

Recap

Last night I called for a higher close today and hey presto that's just what we got.  But the past few days I've been noticing something odd.  Almost all the stocks I watch are looking bullish on the daily charts but bearish on the weekly charts.  Hmmm.  Gives you (bear) paws for thought, eh?  (Pun alert).  So can today's recovery carry on into Thursday?  Let's drop a quarter in the machine, pull the lever and see if we can come up with three 7's.

The technicals

The Dow: Today's 178 point gain retraced just over half of yesterday's loss and left us with mixed indicators.  RSI, momentum, and money flow all ticked up today which is nominally bullish but OBV moved to a highly overbought state and the stochastic continued its decline without showing any signs of a bullish crossover yet.  And today's volume was lower than yesterday's.  I'm searching this chart for a reason to be bullish and not finding one so I have to give this one +1 bears.

The VIX: Hey last night I wrote "The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday" and darned if it didn't do just that, dropping nearly 6% today.  But the gap remains less than half filled and while a gap half full might seem ambiguous to some,  this one looks ready for more downside action so +1 bulls.

VIX futures: After yesterday's stratospheric doji, the futures indeed came down today but this gap still has a big way to go so I'm betting they go down again tomorrow and that's +1 bulls.

Market index futures: Tonight all three are in the red and ES is down 1.28% at 12:50 AM EDT.  A loss that size at this hour is enough to warrant a bearish outlook.  But that's also already enough to form a bearish engulfing pattern over Wednesday's green candle.  ES also broke support at 1223 today and has no further support til 1211, then 1194.  Indicators are still falling but have yet to show signs of a reversal so all in all this chart looks like +1 bears.

ES daily pivot: Rose to 1229.83 for Thursday.  ES actually went under the pivot just before 8 PM and has been drifting lower since 6.  With ES already 10 points under the pivot, it ain't looking good, so another +1 bears.

Dollar index: After yesterday's big run-up, the buck today put in a hanging man at the top of the range.  This inability to push forward makes me suspect it might be going lower Thursday and that would be good for stocks, so +1 bulls.

Oil: Has clearly peaked and is headed lower in the short term, so +1 bears.

Copper: Took a bump up today despite indicators not having reached oversold levels.  This sort of action reminds me of the abortive rally attempts we had last summer that kept getting cut off at the knees, only the other way around.  With today's green candle following Tuesday's doji, it look s like copper might go higher from here so that's +1 bulls.

Morningstar Market Fair Value Index: Today the index dropped again, from 0.89 to 0.87, so that's +1 bears.

History: According to The Stock Traders Almanac,Thursday has just a slight positive edge, but not enough to warrant awarding any points.

     And the winner is...

The bears, who just squeak one out with a 4:5 bull-bear ratio.  Overall though, the market is feeling to me more negative than this close ratio would indicate.  With the VIX bouncing around like popcorn and back again over 30 and that utterly incomprehensible European Kabuki Theatre of the Absurd now in it's, what, seems like at least the 275th act with no end in sight, I'm voting Thursday lower.

ES Fantasy Trader

Today we took a profit of 8.25 points.  The market had already put in one peak in the morning and I figured discretion was the better part of valor particular with Bernanke scheduled to talk this afternoon.  Didn't turn out badly at that.  Portfolio stats: the account is now $176.625 after 32 trades (24 wins, 8 losses) since inception on 8/18 with $100K

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    01:13:12
SLD    10    ES    false    DEC11 Futures     1235.25    USD    GLOBEX    11:45:14

Tonight we go short at 1219.25.

Some upside possible Wednesday

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

• Wednesday higher, medium confidence.  Bull-bear ratio is 5:3.
• ES pivot 1227.00.  Holding above is bullish..
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1227.25.

Recap

Well I thought we were going lower again and we sure did, with the Dow dumping another 297 points to open November with a big fizzle, thanks to those freakin' Greeks and their referendum.  But whining, like hope, is not an investment strategy.  Not like reading the charts which is what we do here, so let's get right to it and see which way they're pointing for Wednesday.

The technicals

The Dow: Ugh, another big dump that not only broke support at 11,694 but played entirely under the 200 day MA and closed on the day's lows.  Indicators are all declining but still a good ways from oversold, though it should be noted that support exists at 11,640, just shy of today's close at 11,657..  Still, it's just an ugly chart that's +1 bears.

The VIX: I was talking about gaps in the VIX last night - well holy moly, after closing yesterday at 29.96, we opened today at 36.03 - that's one heck of a gap up.  And that made a spinning top doji centered right in the 35-36 resistance zone and just short of the upper BB at 38.6.  The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday and that's +1 bulls.

VIX futures: Here we got a giant abandoned baby that's a really good reversal indicator.  No matter what the chart, they have trouble advancing after a doji like this, so I'm calling the futures lower Wednesday and that's +1 bulls.

Market index futures: Finally, all three are running in the green for once.  ES is up 0.37% at 2 AM EDT.  And its looking exactly like the VIX futures chart so the same comments apply and that's also +1 bulls.

ES daily pivot: Now is 1227.00.  ES has been trending up since 7 PM and broke through the pivot just past midnight. Then it made a quick retest that was successful and resumed climbing.  I like the looks of this sort of action, so +1 bulls.

Dollar index: The dollar rocketed up once again today, even more than I expected.  While this might look like a bullish continuation, I note that the peak of the day was right at the 54.61 resistance level, from which it retreated.  While the indicators are not technically oversold, they are at the same level they were at the last peak on October 20th.  So I'd have to say the dollar may be in line to run lower soon, if not tomorrow then even more likely Thursday.  On that basis I'm giving this +1 bulls.

Oil: I mentioned the double hanging man last night and oil indeed sank lower today - and put in a third hanging man, a long spindly one at that.  But after three straight down days, I have to wonder if this isn't now a hammer instead.  The indicators are kind of confused and so am I.  I'm not feeling the love from this chart, so no call and no points.

Copper: The Doc took a big gap down today to end with a hammer in the Twilight Zone, that spooky region halfway between Bollinger bands.  All we're left with are indicators still more overbought than oversold and having now peaked, so that's worth +1 bears.

Morningstar Market Fair Value Index: Today the index dropped to 0.77.  But all the previous numbers on the chart oddly seem to have changed too, so I don't get it.  However, it remains a pattern in decline, so that's +1 bears.

History: According to The Stock Traders Almanac,there isn't much to the second day of November, so no points.

     And the winner is...

The bulls, somewhat surprisingly given all the negativity I've been reading today, by a bull-bear ratio of 5:3.  So I'm cautiously optimistic we might see a turn-around on Wednesday after two big days of declines mostly based on European rumors and non-news.  So the Night Owl is moving about half-way out on the limb ad calling Wednesday higher.

ES Fantasy Trader

Today we took a profit of 22 points.  Portfolio stats: the account is now $172,500 after 31 trades (23 wins, 8 losses) since inception on 8/18 with $100K

SLD    10    ES    false    DEC11 Futures     1238.25    USD    GLOBEX    01:55:14
BOT    10    ES    false    DEC11 Futures     1216.25    USD    GLOBEX    11:48:29
 
Tonight we go long at 1227.25.. 
 

Tuesday lower

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

Overbought.

• Tuesday lower, high confidence.  Bull-bear ratio is 0:9.
• ES pivot 1258.42.  Current price is far below that.
• Rest of week bias lower but rebound possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1238.25.

Recap

Happy Halloween to one and all!  Today the Dow barfed up 276 points as the market rounded out a great October on a down note.  So will this nasty trick be followed on Tuesday by a yummy treat?  Let's paw through our bag of goodies and find out.

The technicals

The Dow: Today's close of 11,955 broke psychological support at 12K and took us just barely past 200 day MA support at 11,974.  Unfortunately, that happened just before the close so if we had been open longer, would the Dow have bounced there?  I'm afraid the chart's not supporting that notion.  The indicators are all still overbought and have now peaked.  OBV in particular put in a top yesterday and that's always a bad sign.  The good news is that there's more support at 11,890.  It's likely we'll revisit that tomorrow.  Then next comes 11,694 though I don't think that's in the cards for tomorrow.  Either way though, it's +1 bears.

Daily VIX

The VIX: Completely filled the big downside gap it made last Thursday on a tall green candle to leave us right back at 30 again.  In fact this candle was a gap-up.  This one is worth a chart because there's something unusual going on here.  In fact, this is now the third time I've used the phrase "something unusual" here in the last week, which is unusual in itself.

See how in the month of October, 5 of the 21 sessions featured the VIX making a gap up or down.  It seems that the volatility of the VIX is increasing - note particularly the action of the last four days.  It has been noted before that when the "VIX of the VIX", essentially the second derivative of the market increases, it signals a longer term trend change.

I view this as a positive for the market over the next two months but I don't think it will help much tomorrow.  The VIX is still just coming off oversold, is still closer to its lower BB than the upper, and isn't near any particular resistance point.  It doesn't have a good reason to go down right away from here so that's +1 bears.

VIX futures: Similar to the VIX itself, this chart actually looks to have even more room left to fill its gap.  Higher futures -> higher VIX -> lower stocks -> +1 bears.

Market index futures: Once again, all three futures are down with ES leading the way with a 0.92% loss at 2 AM EDT.  This bring it right to the lower edge of its latest rising regression trend channel, a bearish setup.  While today's loss took us out of overbought territory, the indicators are all still heading lower and the next support isn't til 1224, so that's +1 bears.

ES daily pivot: Now 1258.42.  Although that's lower than last night, ES has also declined and is now running 20 points below.  That puts the pivot effectively out of play for Tuesday.  Another +1 bears.

Dollar index: The dollar jumped today thanks to the BoJ's yentervention, nearly completely erasing its losses from last Thursday.  Today's close of 53.59 (on $USDUPX) is just short of resistance at 53.77 and the 200 day MA at 53.87 so I think that while further gains may come on Tuesday they'll be more muted than today.  But that's still +1 bears.

Oil: As I thought last night, oil did go lower today.  In fact we now have not one but two hanging men on the daily chart.  I've not seen the "double hanging man" pattern in any chart book, but I believe it's a lot better reversal sign than just one alone, so that plus overbought indicators =  +1 bears.

Copper: Last night I wrote "copper goes lower Monday" and today it took a nearly 5% drop completing an evening star-ish/two crows pattern, both of which are bearish reversals.  And it left us just about at the top of the big upside gap that formed last Thursday.  With all overbought indicators, a stochastic finishing a bearish crossover and that gap wanting filling, it's looking like copper is going down some more Tuesday so that's +1 bears.

Morningstar Market Fair Value Index: For some reason, Morningstar has not updated this number since October 27th, so no points here today.

History: According to The Stock Traders Almanac, while the Dow is up 63% of the time on the first trading day of November, it has been down 4 out of the last 5 years.  So despite November's stellar reputation as a whole, I'm going to give Tuesday +1 bears.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last  week the bulls dropped to 36% while the bears rose again to 39% putting them back into the majority.  This week we had another big reversal in the poll with the bulls getting on board to take a 67% lead compared to just 15% bearish.  You have to go back to November '08 to find such a large bullish number.  But i think it's a bit early to play the contrarian card here.  Still it's worth keeping this number in the back of your mind.

For the record, I voted bullish again now for the fourth week in a row, still on the basis of my reading of the monthly Dow chart and the upcoming bullish fourth quarter seasonality.  But if next week's poll becomes any more bullish, I might have to reconsider my position.

     And the winner is...

The bears with a shut-out for a bull-bear ratio of 0:9.  While J-Trader covered his shorts today, I'm afraid I'm going to have to part company and call Tuesday lower again.

ES Fantasy Trader

Today we took a profit of 19.75 points on last Thursday's short.  Once again, patience paid off.  Rather than taking a small loss on Friday I held short over the weekend and then today, ka-ching.

Portfolio stats: the account is now $161,500 after 30 trades (22 wins, 8 losses) since inception on 8/18 with $100K

BOT    10    ES    false    DEC11 Futures     1262.75    USD    GLOBEX    11:18:43

SLD    10    ES    false    DEC11 Futures     1243.00    USD    GLOBEX    OCT 25 01:38:26

Tonight, we go short again at 1238.25.
 
The reboot of the CNBC Million Dollar Portfolio Challenge was also most kind to the Night Owl.  On the first day of the new contest, my standing jumped significantly from where it was before the shutdown.  However, after reading the revelations of how the top players got to where they were, I've pretty much already given up on winning the big bucks.

Unfortunately, I have a life which means I don't have the time to spend all day long literally glued to my screen executing a trade every 30 seconds for 5 weeks nonstop which is apparently what it takes to bring this one home.  So it ends up being more of a fun thing for me, as in with a few well-placed trades I'm just a bit more than half a percent from the top.  And it only took a few minutes of my time.  So there :-)
 

Out of gas, Monday lower

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

• Monday lower, high confidence.  Bull-bear ratio is 3:5.
• ES pivot 1279.33.  Holding under is bearish..
• Rest of week bias lower, but rebound possible by Friday.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader remains short at 1276.25.

Recap

Exactly one week ago I wrote "This should be an interesting week ahead.".  And was it ever.  After a shaky start we were rewarded handsomely with some awesome gains on Wednesday and Thursday.  Then I called for a lower market on Friday and while I was wrong on that, it wasn't by much.

The Dow managed to pull off an anemic 22.5 point gain, the SPX was flat, and the Naz actually did lose a hair.  Nevertheless, we remain comfortably inside the rising regression trend channel established on 10/4.  So tonight  let's consult the Racing Form, look over all the horses and see if we can pick a winner for Monday.

The technicals

The Dow: The Dow's little spinning top doji along with decreased volume and overbought indicators all portend a reversal from last week's close at 12231.  This also represents a failure to breach the 12,211 resistance line in a meaningful way and gives every impression of being out of gas, at least for a day or two so it's +1 bears.

The VIX: After a big gap down on Thursday with an inverted hammer, it put in a very unusual bearish engulfing pattern from a low level with oversold indicators on Friday.  This looks to me like it's going lower Monday, although it's got its 200 day MA real close at 23.59 as support.  So that leaves maybe a point of downside from here.  So +1 bulls.

Note that since the start of 2010, the VIX has encountered its 200 day MA from above 9 times.  It only bounced off it 2 times, and those were the first two in early 2010.  The other 7 times we got this close, it went right through the MA.  As a whole I'm inclined to give this one +1 bulls.

VIX futures: After a gap down red candle Thursday, the futures fell again Friday.  And while its indicators have now reached oversold levels, they're not giving a reversal sign yet and we're not up to any support levels.  It's not out of the question that they could continue lower Monday, so that's +1 bulls.

Market index futures: All three are running in the red at 1:30 AM with ES now down a full percent.  After putting in a small doji on Friday, ES was unable to clear resistance at 1282.  With indicators that are all not only overbought but look to have peaked, ES is ready to move lower.  Its next support is its 200 day MA at 1262.45.  We're actually already pretty close to that so that's the key number to watch Monday morning.  If ES doesn't bounce off that, it's headed for 1250.  All things considered, it's clearly +1 bears.

ES daily pivot: Now 1279.33.  ES is now under it at 1268.25 in fairly ugly fashion because not only did the pivot rise but ES has been drifting steadily lower since 9 PM.  That's not a good combination, so this is +1 bears

Dollar index: After a huge dump on Thursday, I wrote "such large downward moves in the past tend to be followed by a dead cat bounce the next day" and that's exactly what we got on Friday with a tiny 0.27% gain.  But tonight's a lot harder to call.  Having hit its lower Bollinger band, it did not bounce off and indeed the lower BB is falling away.  And its indicators are all now broken oversold.  We still have a bit to go before reaching weekly support, so technically Monday could go either way.  I'm not feeling the love, so no points.

Oil: Put in a hanging man on Friday.  Its indicators are quite overbought and its stochastic has just executed a bearish crossover.  Oil is already running lower in the overnight and being as how its now at the upper end of its recent trading range, I'd have to say its going lower Monday.  Since it's now positively correlated with the market, that's +1 bears.

Copper: Finished last week right at a resistance level and its upper Bollinger band.  Its daily indicators are now all quite overbought, so this is looking like copper goes lower Monday, and therefore the market in general too, so +1 bears.

Morningstar Market Fair Value Index: No update on Sunday so no points.

History: According to The Stock Traders Almanac, the last day of October is only bullish for the Nasdaq and otherwise has just a slight positive bias.  Nothing really worth awarding any points for.

     And the winner is...

The bears with a bull-bear ratio of 3:5.  This close ratio is typical of reversal points and I tend to believe this one.  In addition, J-Trader is holding short for Monday and the sentiment from several other blogs I respect is also negative.  So I'm reasonably confident to call Monday lower.  That's all she wrote.

ES Fantasy Trader

We went short on Thursday night and decided to hold onto that position on Friday over the weekend.  So far that decision seems to be paying off.

Portfolio stats: the account remains $151.625 after 29 trades (21 wins, 8 losses) since inception on 8/18 with $100K.