Friday, December 2, 2011

Friday higher if jobs BTE

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence
  • ES pivot 1243.42.  Holding above is bullish.
  • Next week bias lower early, rebound possible later.
  • Monthly outlook: bias down, on politics and technicals.
  • ES Fantasy Trader went long at 1247.75.

Exactly as I expected, today we got a small range day with the Dow finishing down just 26 points.  In the absence of any major new announcements from Europe, this is pretty much what one would expect following a spectacular gain like we saw yesterday.  This now leaves us at an important juncture.

So let's get right to the technicals and see how they sort out for Friday.

The technicals

The Dow: More significantly perhaps is the fact that despite a small decline, today the Dow managed to hold above both the 12,000 support level and its 200 day MA at 11,948.  The Dow now has no resistance until 12,190 and two good support points just below today's close at 12,020.  That's not a bad spot to be in.

And while the indicators are now all looking overbought, remember that they become distorted whenever the market makes a sudden large move like we saw yesterday.  I don't think we're truly as overbought right now as the indicators, uh, indicate.

The VIX: The VIX finally broke back under its support at 30 yesterday on a big gap down.  Today it moved lower again, just a bit to close at 27.41.  This makes two days now its been tickling the lower BB.  The VIX rarely spends much longer than that there without rebounding, so I'm looking for it to start moving back up again soon.  This bodes poorly for the early part of next week.

Market index futures: At 1:05 AM EST all three are in the green by non-trivial amounts.  ES is up 0.42% and NQ is up exactly half a percent.  Whenever we see the pattern of big tall green candle followed by tiny doji just hanging at the top of the big gain, one has to wonder if the next move isn't going to be back down again.

ES still has a big barrier right in front of it, the 200 day MA at 1255.08. Next stop would be 1271 and then 1284.  Thing is, the doji is only a potential reversal indicator and requires confirmation.  And so far, we're getting some fairly convincing non-confirmation.  And there's still some room to run before that resistance.

ES daily pivot: Now 1243.42.  Despite taking another big jump up, the continued upward pressure on ES keeps us above the pivot one more night and that continues to be positive.

History: According to The Stock Traders Almanac,December is the no. 1 S&P and no. 2 Dow month of the year.  Then there's the time-honored Santa Claus rally to consider.  Now ol' St. Nick doesn't always show up, and sometimes he just leaves a piece of coal in our stockings, but right now I'm thinking this year he just might be bringing some presents to all the good little traders out there.

     And the winner is...

This is another tough call.  We're at a critical juncture here, poised on the brink of  a breakout but also sitting on some big gains that could easily be retracement fodder.  Today's doji reflects that.  Nevertheless, I'm giving this one to the bulls.  I do think we're going to see some more upside return on Friday, particularly if the jobs numbers come in BTE, which I'm guessing they will.  If not, look for lower.

ES Fantasy Trader

Today the ESFT was on the sidelines.  .With ES finishing the day off down just 0.02%, there wasn't much to be gained trading either way.  With a bit more clarity now, tonight we're going long at 1247.75.

Portfolio stats: the account remains $160,250 after 36 trades (26 wins, 10 losses) since inception on 8/18 with $100K.  The portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.

Thursday, December 1, 2011

Thursday tough call, bias lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday lower, low confidence
  • ES pivot 1225.25.  Current price is well above.
  • Rest of week bias uncertain, oversold rally not done yet..
  • Monthly outlook: bias down, on politics and technicals.
  • ES Fantasy Trader standing aside..

Wow.  I'll say it again: wow.  Today was exactly the reason why last night I wrote:
"I have to add the usual disclaimer that anything coming from Europe will move the markets regardless of what the technicals tell us."
Today Europe said "Jump" and the markets leapt.  The TA said down but we rocketed up almost 500 points for the best day in over two years??  As tycoon Osgood Fielding III said in Some Like It Hot, "Zowie!"

Not that I'm complaining - I'd much rather see that than calling the market up and getting down 500 (that's happened to me too).  Of course I called the market down today and was dead wrong but until Europe gets their act together, that's how it goes. 

Anyway, today's big move greatly complicates tonight's analysis.  Because of the distortions this threw into the charts, I'm just going to concentrate on the Dow and ES to see where we may be headed on Thursday.

The technicals

The Dow:Today was very significant for the Dow because in just one day, or really just the opening 15 minutes, we not only broke the 12K resistance but  punched back through the 200 day MA at 11,949 as well.

That said, the normal market pattern, and the pattern all this year so far except for one, is for any really large jump up to be followed by either a very small doji or hanging man, or else a profit-taking leg down.

Market index futures: The futures are basically unchanged tonight at 2 AM EST.  NQ is up 0.09% while ES is down just 0.12%.  These are the smallest moves at this hour I've seen in quite a while.  The fact that profit-taking has not immediately set in is encouraging in itself.  In fact, something set off a little mini-rally around 11:35 this evening.

This all leaves us in a quandary because while the Dow popped over its 200 day MA today, ES did not.  At 1244.25, it is still 11 points shy, and that number, 1255.46 is still resistance here.

ES daily pivot: Now becomes 1225.25.  Even after taking a big jump, we're still well above this number, so that's positive.

     And the winner is...

Hmm, a tough one.  I'm going to say the bears, mostly on historical comparisons.  We ran too hard, too fast for my comfort today.  I can't see much more upside available on Thursday, though I do think we're headed for a retest of the Dow's 12,170 resistance in the next week or so.  I note also that J-Trader's system is going short and he's been really good lately.  But I don't think we're going to see a major crash tomorrow either.

And yet again, I have to point out that it's all going to hang on what those pesky Europeans say or don't say.  And that's all I have to say.

ES Fantasy Trader

After going long at 1270.50 and regretting it ever since November 9th, I finally decided to use today's gift to dump that dog of a trade at 1244.00.  That leaves us with a 26.5 point loss, and I feel lucky to get that.  It was worse, much worse for a while there.

Portfolio stats: the account now $160,250 after 36 trades (26 wins, 10 losses) since inception on 8/18 with $100K.

Tonight we're going to stand aside and see how things develop Thursday before jumping in again.

Wednesday, November 30, 2011

Wednesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, medium confidence
  • ES pivot 1196.25.  Holding under is bearish.
  • Rest of week bias uncertain, oversold rally not done..
  • Monthly outlook: bias down, on politics and technicals.
  • ES Fantasy Trader stuck long..

We opened up today as I expected last night, then see-sawed the rest of the session to finish up 33 points.  With no bad numors out of Europe today, the bears couldn't find an excuse to knock 'em down.

Tonight we're going to run the abridged edition of the Usual Suspects again and likely will continue as long as Europe continues to be running our show.

The technicals

The Dow: Today's small gain formed an inverted hammer and after yesterday's big advance that equals a shooting start.  That's a reversal indicator, though not a particularly powerful one.  Still it's worth paying attention to this.  The indecisive intraday zig-zag action gave the distinct impression of a market about to turn, especially considering the decreased volume today compared to Monday..

The VIX: Dropped 4.64% today to close just about its recent support at 30.  The last time it did this under similar chart conditions it popped higher the next day.  It could still go either way but I wouldn't be surprised to see it go higher on Wednesday.

VIX futures: I mentioned last night that the futures looked to be headed lower and they did just that today.  Tomorrow's direction is less clear.  We're still in the middle of the BB's and just at a support point.

Market index futures: All three are down tonight at 1:30 AM EDT.  ES is off a not insignificant 0.8%.  The overnight candle is forming a pattern close to an evening star and that's generally quite bearish.  This reinforces the feeling I get from the Dow's daily chart.

ES daily pivot: Now 1196.25 and we're now below it, having been drifting lower since today's close.  Another bearish sign.

     And the winner is...

Tonight I give it to the bears.  I think there' still more room to run up in the next week or so, just not on Wednesday.  After two decent days of advances, the market seems to be signaling a timeout.  We're due for a bit of profit-taking here.  But once again, I have to add the usual disclaimer that anything coming from Europe will move the markets regardless of what the technicals tell us.  It's not the best time to be s short-term trader.

Tuesday, November 29, 2011

More upside likely Tuesday

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, medium confidence
  • ES pivot 1185.50.  Current price is comfortably above that.
  • Rest of week bias higher, oversold rally is here..
  • Monthly outlook: bias down, on politics and technicals.
  • ES Fantasy Trader stuck long..

Last night it looked like today was going to be up big and so it was, with the Dow up over 300 points for a while and finishing with a 2.59% gain on some positive numors (that's news and rumors) from Europe.  It was one of those days where almost all of the action was over in the first two minutes of trading.  Then it drifted lower most of the afternoon before finishing with another strange little 56 point burst in the final five minutes. 

The technicals

The Dow: Today's solid green candle was enough to propel us right out of the descending RTC from November 14th.  The losing streak is therefore snapped and I'm changing the swing trend arrow to "trend end".  This action signals a bullish setup on the daily chart.  If we close higher again tomorrow, that will be the trigger for even more gains.  Today's big move was eeven more impressive considering that it came on the highest volume of the entire month so far.

The VIX: Gapped down on a very tall doji that left it in the Twilight Zone, halfway between BB's with a 6.79% drop.  It's not clear to me what this means.  The VIX could honestly go either way from here.

VIX futures: While the futures also gapped down today on an odd green candle, there's a bit more clarity here.  They have now fallen out of a rising RTC and their indicators have peaked overbought.  This portends lower, implying a lower VIX and therefore higher stocks.

Market index futures: Once again we've got all three solidly in the green, though not as much as this time last night (1:20 AM EDT).  ES is up 0.6% which is still quite respectable.  We have the same bullish setup as the Dow, with ES trading out of its descending RTC today.  The new candle now forming is solid green indicating decent follow-through.  With its indicators finally coming off oversold levels, I'm liking this chart right here.

ES daily pivot: Now 1185.50.  Even though that's a big jump up from today, ES is still above that at 1198.  The next resistance isn't til 1213, so this is looking good too.

Sentiment: Once again, the new Ticker Sense Blogger Sentiment Poll came out today.  The number of bears is up to 48% while the bulls have decreased to 33%.  I'm sure at least some of this move has to do with last week's Europe mess and the Super Committee's public ritual suicide.  Unfortunately, these numbers aren't quite extreme enough to draw any sort of contrarian conclusions.

In any case, for the second week in a row I voted negative.  Since this is a poll of where the SPX will be 30 days from now, I use the monthly charts to make my decisions.  And what I'm seeing now is the tall green candle from October being overshadowed by a a November candle that's looking almost like a dark cloud cover in November.

That's going to set up an interesting battle in December, historically a strong month.  Santa may show up after all, but this is not the sort of monthly follow-through from October that I'd like to see heading into December.  But the charts may not count for much since out markets are still being controlled by the Europeans.

     And the winner is...

Once again, I have to hand it to the bulls.  The bears have apparently all gone into hibernation.  Right now, it's looking like more gains are in store Tuesday.  If that happens, then the rest of the week bodes well too.  There's been a lot of shorting going on in the broader market over the last few weeks, so I'm sure that there will be some short-covering helping push prices higher at least a bit longer.

ES Fantasy Trader

Nothing to see here - I'm still waiting for the SS Nautilus to come back to the surface.

Monday, November 28, 2011

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, high confidence
  • ES pivot 1167.83.  Current price is comfortably above that.
  • Rest of week bias uncertain, oversold rally is overdue..
  • Monthly outlook: bias down, on politics.
  • ES Fantasy Trader stuck long..

After watching Greece, Spain, Portugal, Italy and then Germany all take turns tanking the market, last Thursday I wrote "how many countries are there in Europe?  I don't think we're going to see an end to this until they're all had a whack at the stock market."  It was mostly in jest, but wouldn't you know it, the next day we got news that Hungarian bonds had bombed and that there was trouble in Belgium.  Belgium?  A country barely larger than Maryland, the 8th smallest state, that I'll bet most people have trouble finding on the map?

OK, well anyway, that's two more down.  Who's next?  Monaco?  Andorra?  The Dutchy of Grand Fenwick?  In any event, Friday was indeed down as I called it, though with such light trading it's hard to draw any conclusions.

The technicals

Tonight though is quite a different story.  There are really only two things that matter here, the Dow and the futures, so let's get right to them.

The Dow: One good thing about Friday's action was the print it left on the chart - a nice inverted hammer with some support just below it at 11,206.  And in extending the Dow's losing streak to 9 (yes, I know there's one day on the 18th when we had a tiny gain), it makes a bounce even more overdue.  I've written about streaks in the past, and 9 is getting up there.

Good news, everyone!
Market index futures: Here's the key.  Right now, at 1 AM EST, all three futures are solidly in the green with ES gapping up to the tune of just over not one but two percent.  Once again it's news and rumors - I'm going to call them numors out of Europe.  Only this time it's good news for a change.

In fact this gain is already large enough to propel us right out the edge of the descending RTC we've been stuck in since November 15th.  That in itself is a bullish setup.

Obviously that can all change at the drop of a hat, but we very seldom see the futures up this much at this hour without having a good day follow.  Mr. Market, like Mikey, likes it. This is worth paying attention to.

ES daily pivot: The pivot has fallen to 1167.83 and ES has finally moved above it at 1177.25.  This is a comfortable edge going into Monday's session.

History: According to The Stock Traders Almanac,the Monday after Thanksgiving is historically positive, as is the entire week for that matter.

     And the winner is...

No need to add 'em up tonight.  It looks reasonably certain to me that we're going higher Monday.  Whether this is the start of an uptrend or just a one-shot remains to be seen, but hey, I'll take it.