Friday, November 11, 2011

Friday higher if no bad EU news

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1233.58.  Remaining above is bullish.
  • Next week bias lower on technicals.
  • Monthly outlook: bias uncertain on technicals and Europe.
  • ES Fantasy Trader remains long.

Last night the only thing I wrote that proved to be correct was my closing comment in the ESFT section, "I think today's decline was really overdone and am expecting a bounce eventually.".  Well we did in fact get a bounce today but it had more to do with the S&P's rating on France than yesterday's big decline.  Once again the news trumps the technicals.

Since I seem to be nothing but wrong lately, I'm going to try something a bit different tonight.  I'm only going to review what I think are my best indicators and I'm not going to compute the bull-bear ratio at all.  Given the ongoing volatility and irrational nonsense permeating the entire market lately, there's no point in over-analyzing things just to end up being proven wrong again.

The technicals

The Dow: The Dow shot up right out of the gate this morning and then spent the rest of the day oscillating about its pivot.  With a close of 11,894, the 200 day MA at 11,975 and the 12K psychological level now become resistance.  That's also about the 50% retracement of yesterday's drop.  Assuming that took a lot of sellers out of the fray, I don't think it unreasonable to expect another run at 12K tomorrow.

The VIX: Yesterday I observed that "the VIX rarely spends more than one day at the upper BB without retreating".  I should have had more confidence in my own observations because the VIX did indeed drop 9.26% today.  Tonight I'll add that once the VIX has hit its upper BB and then begun a decline, it most often continues to decline at least one more day.  The VIX has no support until 31.39 from today's close at 32.81 so I'm guessing it still has ate least a bit more lower to go Friday.

VIX futures: The futures also moved lower today putting in a gravestone doji candle but in the wrong place to be a reversal pattern.  I do however think that this sort of indecision favors further downside from here which would be good for the markets.

Market index futures: Tonight all three are solidly in the green at 1:40 AM EST.  ES is up 0.42%.  This sort of follow-through on today's action looks encouraging to me.

     And the winner is...

Looks like the bulls to me.  I'm going to say I see more positive than negative tonight just on the overall gestalt of things, so I'll call Friday higher with the usual caveats about new/rumors out of Europe.  I'll add that J-Trader, who went long yesterday and has been a lot more right than me this week, remains long tonight.

ES Fantasy Trader

We continue to hold the long position from two nights ago.  My decision to hold last night was a good one and we recouped about half of the loss on this trade.  With any luck, and by gosh that's exactly what's driving this market now, we should be able to recoup some more on Friday.

Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K. 


Thursday, November 10, 2011

Thursday lower technically but EU news will decide

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday lower, medium confidence.  Bull-bear ratio is 0:5.
  • ES pivot 1240.83.  Holding under is bearish..
  • Friday bias lower.
  • Monthly outlook: bias down, regardless of Fed action in September
  • ES Fantasy Trader holding long.

Well there go those pesky Europeans again.  Mama mia, this time it's Italy.  It's like we're right back to last summer playing financial Whack-a-Mole.  Just as the Greek mole disappears into his hole, the Italian one pops up, only here it's the market that got whacked.  All of my carefully wrought technical analysis from last night went pfft, right out the window.  I don't know if it's even still worth playing the game since today's seismic moves everywhere threw all the charts into disarray.  But let's give it a shot anyway and see what happens.

The technicals

The Dow: Got crushed for a 389 point loss because the Italians are lousy money managers.  Thanks a lot - for nothing.  The 12K support and 200 day MA support meant zip and the stochastic turned a bearish crossover.  Technically, I'm not liking this chart at all, so +1 bears.

The VIX: Took a big gap up to put in a tall green candle for a whopping 32% increase that went almost exactly to the upper BB and back into Psycholand, the upper 30's.  I've said it before and I'll say it again: the VIX rarely spends more than one day at the upper BB without retreating.  The stochastic formed a bullish crossover today but that may be an artifact of today's big jump rather than a true predictor.  So while there may not be much upside left to the VIX here, it would be premature to say it's coming down Thursday, so no points.

VIX futures: The futures actually went over the upper BB today but further gains are not out of the question.  Another one that's too hard to call, so no points.

Market index futures: Once again, all three are in the red, with ES down 0.27% at 1:35 AM EST.   Today's monster decline stopped at a support line of 1226 but in the overnight we're resuming lower, currently to 1222.  Next support is 1213, then 1193, then 1165 and 1120.  You'd think after such a big drop we might get a dead cat bounce but lately this year whenever we have a big down day, we get another one, so +1 bears.

ES daily pivot: Now 1240.83.  Even after coming down since today, ES is still below this level and falling again.  This looks bad, so +1 bears.

Dollar index: Made the obvious move, shooting right up to its upper BB  Big jumps like this tend to be followed by small dojis so that's what I'd look for on Thursday, but its too uncertain to give any points.

Oil: About the only chart with some semblance of sanity today, oddly enough, oil hit its 200 day MA and retreated on something of a bearish engulfing pattern.  I'd look for lower oil Thursday, so that would be +1 bears.

Copper: Took a big fall today in sync with the rest of the market.  The resulting pattern with that doji star from yesterday looks bearish and now we have a bearish stochastic crossover, so this one goes +1 bears.

Morningstar Market Fair Value Index: Today the index was unchanged again at 0.90, so still no points here.

History: History seems to count for zip right now, so no points.

     And the winner is...

The bears, with a bull-bear ratio of 0:5.  On this basis I will call for a lower close Thursday technically, with the explicit caveat that none of this analysis amounts to a hill of beans in the face of whatever the next rumor/innuendo/scrap of news might come wafting out of Europe tomorrow.  This market is now not merely irrational, it is irrationally irrational. As a consequence, I am completely standing aside until some semblance of sanity returns.  Pull up a chair.

ES Fantasy Trader

Today we are simply holding the long position entered last night.  I think today's decline was really overdone and am expecting a bounce eventually.

Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K. 


Wednesday, November 9, 2011

A bit more upside possible Wednesday

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, medium confidence.  Bull-bear ratio is 7:1.
  • ES pivot 1265.67.  Remaining above is bullish.
  • Rest of week bias lower..
  • Monthly outlook: bias up on technicals.
  • ES Fantasy Trader went long at 127050.

Last night I computed a bull-bear ratio of 6:0 but wasn't feeling all that confident about it.  Nevertheless, the BBR came through and Mr. Market delivered a nice up day for us.  I have now completely given up trying to figure out what anything coming out of Europe means anymore, so I will concentrate as always on the technicals.  So let's spin the Wheel of Fortune and see if we can make a fortune on Wednesday.

The technicals

The Dow: Did you notice the role the Dow pivot played today?  After the 10 AM reversal kicked in right one cue, the Dow declined to 12,004, almost exactly the pivot at 12,008.  Then it took off and closed the day up 102.  With a solid green candle, the 200 day MA breached yesterday now providing support at 11,976 and psychological support at 12K, no resistance til 12,225 and the upper BB at 12,316, I think there's still just enough gas left in the tank for one more push higher before we really get overbought, so +1 bulls.

The VIX: Last night I wrote "we're not done yet with declines in the VIX" and the VIX obliged with an almost 8% drop today that broke its support at 30.  With indicators still in decline, solidly in a descending RTC and no support til the lower BB at 25.17 there's nothing here to suggest a higher VIX on Wednesday, so +1 bulls.

VIX futures: The futures chart resembles the VIX itself but is if anything even more bearish and that's good for stocks so +1 bulls.

Market index futures: As last night, all three are running in the red again at 1:07 AM EST, but not badly.  ES is down now just 0.18%.  The triangleI spoke of yesterday resolved nicely to the upside today with a decent green candl that blasted right through the 200 day MA.  That number, 1261.70 now becomes support.  And with no resistance til 1281, the upper BB at 1291 and indicators still rising but not yet overbought, what's not to like?  +1 bulls.

ES daily pivot: Now 1265.67.  Even though this has risen since today, we remain above and after drifting lower this evening, ES has turned around before reaching this level and is headed higher.  This is a positive sign so I give it +1 bulls.

Dollar index: I wasn't feeling confident about the dollar last night and in an unusual move, it resolved its symmetrical triangle down, in the opposite of the entry, falling on a day when the market was up.  This drop helped create a top in the indicators as well as breaking it out of its recent range, so look for lower again tomorrow.  That would be good for stocks (assuming today was a fluke) so +1 bulls.

Oil: After clearing resistance at 94.20 two days ago, oil resumed its upward march until it ran into its 200 day MA today at 97.14.  But with increased volume and remaining solidly within its rising RTC, the MA may not prove much of a barrier.  But I've noticed that lately when oil gets to various "decision points" it often takes two days to make up its mind, so I'm not looking for a big reversal tomorrow - maybe another small advance and that would be +1 bulls.

Copper: I thought copper would go higher today and so it did but it put in a spinning top.  However, there's no reversal sign yet in the indicators.  This mixed message leads me to give no points here.

Morningstar Market Fair Value Index: Today the index remained unchanged at 0.90, so no points.

History: According to The Stock Traders Almanac,Wednesday is a down day so +1 bears.

     And the winner is...

The bulls with a bull-bear ratio of 7:1.  Clearly, we're approaching a short-term top here but I don't think tomorrow is it just yet, so I'm going to call for one more day of gains Wednesday, possibly a doji of indecision.

ES Fantasy Trader

Today we took a profit of 1.5  points.  Portfolio stats: the account is now $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1252.25    USD    GLOBEX    NOV 8 01:33:12
SLD    10    ES    false    DEC11 Futures     1253.75    USD    GLOBEX    NOV 8 11:32:16. 

Tonight we go long at 1270.50.

Tuesday, November 8, 2011

Tuesday could go higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence.  Bull-bear ratio is 6:0.
  • ES pivot 1249.67.  Falling under would be bearish..
  • Rest of week bias uncertain, rebound possible by Friday.
  • Monthly outlook: bias up on technicals
  • ES Fantasy Trader went long at 1252.25.

My call for a higher Monday was looking good out the gate this morning... then it was looking stupid.. until in the end I was redeemed with an 85 point gain in the Dow.  It wasn't much but I'll take it, especially after having been wrong two days in a row.  I was particularly pleased to read a report on Ticker Sense today to the effect that there are "two prominent technical analysts who say it is too difficult to predict the market direction".  Huh - no kidding.  Welcome to my nightmare.

But just like the Post Office, we can let neither gloom of Greece nor Roman rain deter us from our daily rounds.  So now let's cast the runes and see what Tuesday might hold in store.

The technicals

The Dow: Today's close at 12,068 means that we held not only the important psychological 12K level but the 200 day MA at 11,975 too.  There's also an ascending triangle forming here and that's usually quite bullish.  With that, plus two levels of support just below us and indicators that are now rising off oversold levels, I see no reason to give anything but +1 bulls here.

The VIX: As I thought last night, the VIX did indeed move lower today - a bit.  After moving by gaps for four straight sessions, it has barely budged in the last three.  And just as there's an ascending triangle now in the Dow, here we have a descending triangle.  With indicators coming down off overbought levels and a stochastic that has finished its bearish crossover, I'd think we're not done yet with declines in the VIX, so that would be +1 bulls.

VIX futures: Futures also edged lower today and look if anything even more overbought than the VIX itself.  I'd say they've still got some good downside ahead so that's another +1 bulls.

Market index futures: All three are, as last night, again in the red at 1:10 AM EST.  I take back what I said last night - what we've got going here now looks more like an ascending triangle (just like the Dow) than a symmetrical triangle, so that's even more bullish.  On the other hand, the stochastic is now about to execute a bearish crossover.  The other indicators are mixed.  There's a definite lack of clarity to this chart.  It really could break either way, so I'm not going to give any points here tonight - that's the first time I've done this.

ES daily pivot: is now 1249.67.  Note that we've been slowly drifting lower since 6 PM and are now quite close to the pivot, less than 2 points above.  That makes the pivot critical for Tuesday.  I'm just waiting to see if we're going to bounce off or fall through.  The decline seems to be stopping with the 1:20 AM candle but we'll wait a bit longer. 1:35 AM update: looks like ES veered away from the pivot like a mosquito from DEET.  This is promising, so I'm going to give it +1 bulls.  But still keep an eye out for any retests before the open on Tuesday.

Dollar index: I'm seeing lots of symmetrical triangles lately and this is another one.  The expected resolution here would be higher but the dollar indicators are already highly oversold and look poised to go lower.  With these sorts of mixed messages, I don't feel good about calling it either way so no points.

Oil: Contrary to my expectation last night, oil made an advance today that broke it out of its range going back to October 25th.  Indicators remain quite oversold but we've not yet reached either the upper BB or the looming 200 day MA.  If I had to guess, I'd say oil will try to reach those before putting in a top, so that would be +1 bulls.

Copper: Has been busy forming an ascending triangle for the last three days now.  That's about all I can gather from this chart along with some rising indicators, but that's enough to vote +1 bulls.

Morningstar Market Fair Value Index: On Friday the index remained unchanged at 0.90 so no points here.

History: According to The Stock Traders Almanac,tomorrow is just marginally positive but not enough to vote any points here.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last  week bullish sentiment advanced big time to an outsized 67% while the bears retreated to just 15%.  However, today there was a reversion to the mean with the bulls retreating to 40% and bears advancing to 30%.

Last week I wrote "if next week's poll becomes any more bullish, I might have to reconsider my position.".  Obviously that didn't happen and for the record, I voted bullish again now for the fifth week in a row, still on the basis of my reading of the monthly Dow chart and traditionally bullish fourth quarter seasonality.  But I can't award any points for a 40-30 sentiment ratio.

     And the winner is...

Surprisingly, considering how ambivalent things seem to be in general, it's the bulls by a shut-out with a bull-bear ratio of 6:0.  The overarching gestalt lately seems to be one of underlying resilience, especially given the continued rumblings from Greece and now Italy.  One can easily imagine a prime minister's resignation causing the Dow to plummet just a few months ago, but it just doesn't seem to be having as much effect today.

Maybe people are just getting tired of this farce - I certainly know I am.  But in any case, I'm going way out on the limb tonight and calling Tuesday higher, with the usual caveat about truly bad news trumping the technicals.

ES Fantasy Trader

Today we took a tiny profit of 0.5 points, but hey, a win is a win especially after having been down on this trade last Friday.  Portfolio stats: the account is now $172,750 after 34 trades (25 wins, 9 losses) since inception on 8/18 with $100K.

SLD    10    ES    false    DEC11 Futures     1255.50    USD    GLOBEX    15:48:16
BOT    10    ES    false    DEC11 Futures     1255.00    USD    GLOBEX    NOV 4 01:53:06

Tonight we go long at 1252.25.


Monday, November 7, 2011

Monday higher technically but EU news decides

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.  Bull-bear ratio is 7:2
  • ES pivot 1248.08.  Falling through would be bearish.
  • Rest of week bias higher.
  • Monthly outlook: bias up on technicals.
  • ES Fantasy Trader holding long.

Well I blew it again.  I thought we were going higher on Friday.  Instead the Dow handed us a 61 point decline.  In my defense I will point out that I made my call conditional on no bad news from Europe, and there was.  Honesty, I'm getting quite sick of these Greeks with their riots and referenda.  Just pack it in and get it over with already.  Sheesh.

Anyway, being as I've now been wrong two days in a row, I'm a bit cautious tonight as I check the charts.  Still, you do what must be done so once more into the breach dear friends...

The technicals

The Dow: Friday's 61 point loss to close at 11,983 came on a low volume hanging man that pretty much got hung up on the daily pivot of 11,982 as well as the 200 day MA at 11,975.  It's a tricky chart because the stochastic has completed a strong bullish crossover.  With two good support points, I think that trumps the bearish looking candle, so I'm going to give this chart +1 bulls.

The VIX: After a tall inverted hammer Thursday the VIX made a bearish engulfing pattern Friday, ending down just over 1%.  And its stochastic just finished a bearish crossover.  The VIX is really looking like it wants to go lower, so +1 bulls.

VIX futures: Same story here as the VIX itself.  Lower futures would also be good for the market, so another +1 bulls.

Daily ES
Market index futures: All three are in the red right now at 1:15 AM EST but not by much.  It looks to me like ES is making a symmetrical triangle - what do you think?  Since these usually resolve in the same direction from which the triangle started, this would imply a pop higher in a day or two.  It really looks to be nearly complete.  Not also the bullish stochastic and OBV now at levels from which we've bottomed recently and I give this chart +1 bulls.

ES daily pivot: Tonight, is 1248.08.  Even though it's up from Friday, we remain above it and in fact just survived a test at 12:35 AM.  As long as we remain above this number, it's bullish so I'm awarding +1 bulls on that basis.

Dollar index: 54.40 or fight - In the last two sessions the Dollar has made two inverted hammers and has been unable to make any headway past 54.40.  And its stochastic is making a definite bearish crossover, which is always a good indicator.  A lower dollar being good for stocks, this is +1 bulls.

Oil: Oil too has been near the top of its recent trading range and unable to go much higher.  Unless some bad news comes out it looks more likely it will go lower Monday, so that's +1 bears.

Copper: Copper is a bit confused here, with a hanging man on Friday offset by a clear bullish crossover on the stochastic.  I think that trumps the candle so I'm calling copper higher Monday and that's good for stocks so +1 bulls.

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

History: Although the first day of  the month is typically bullish for stocks and November is one of the best months, according to The Stock Traders Almanac,the Dow has been down the last 4 out of 5 years on this day, so +1 bears.

     And the winner is...

The bulls with a bull-bear ratio of 7:2.  I almost hesitate calling Monday higher after having been wrong two days in a row now, but I recognize that it's happened to me in the past that I'm often not so much wrong as just a day early.  And even though we've got a clear bull bias going here, the overall picture doesn't look particularly convincing to me.

So as I did on Friday, I have to hedge my call with the disclaimer that everything hinges on what new/rumors/ political intrigue comes out of Europe tomorrow.  All it will take is some negative opinion from some minor functionary no one ever heard of in some country most people can't even find on the map to drive our market down.  As I said last week, there's no charts for that.  We live in funny times.

2 AM Update: News is coming out that the Swiss National Bank may act again to cap the franc, thus driving down the Euro.  This is the sort of bad news I was just talking about and it already sent ES for a tumble under the pivot.  I'm now officially standing aside - Monday is just too hard to call.

ES Fantasy Trader

Tonight we are still holding the long position entered last Thursday.  It went south on us on Friday by a bit but I'm betting we'll make some money Monday.  Portfolio stats: the account remains at  $172,500 after 33 trades (24 wins, 9 losses) since inception on 8/18 with $100K.