Friday lower unless good EU news

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

• Friday lower unless good EU news.
• ES pivot 1246.25.  Holding under is bearish.
• Next week bias lower, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader going short at 1233.00.

Recap

So the Europeans disagree amongst each other.  Whoa - big surprise there, eh?  Nevertheless, that was all it took to drive the Dow down nearly 200 points today.  The only good thing I can say about today's action is that it got the charts off of being stuck on top dead center.  Finally the market threw us a freakin' technical bone to chew on.  So without further ado, let's get chompin'.  Yum!

The technicals

The Dow: Looking at it purely technically, today's big red candle was a giant bearish engulfing pattern, one that gobbled up an entire week's worth of gains.  It also served to knock all the indicators out of their overbought-broken torpor and begin the trip back to oversold.  We also fell out of the rising RTC back to 11/28 and that is a bearish trigger.

The only good things here are that the 12K support level basically held ( I count a close within two points as holding) and the 200 day MA was never seriously threatened.  But on the face of it, this still remains an ugly looking chart.  And now that the Europeans have clearly signaled that they are more interested in theatrics than the good of the global economy, the stage is set for further declines on Friday.

The VIX: The VIX, predictably, took a 6.7% jump today.  True to form, after visiting the lower BB last week, that was all it took to begin the march upwards, even before the latest drama from the EU.  The VIX has now completely retraced the big gap down it took last week and is smack in the Twilight Zone - halfway between BB's.  It's indicators are also still looking more oversold than overbought suggesting still more room to run higher on Friday.

VIX futures: Gapped up today - little here to suggest any reversal Friday.  Also still more oversold than overbought.

Market index futures: On a purely technical basis, today's tall red candle skewered the 200 day MA and completed a bearish RTC trigger, just like the Dow did.  With indicators now definitely off overbought peaks, this all looks pretty bad for the market.

You can see just how much Europe is influencing the market by looking at the 5 minute ES chart from about 3 PM through the evening.  It's been getting jerked around every which way as various rumors, twitters, innuendos, and new flashes popped up.  ES has crossed its 4 PM closing value no fewer than 6 times til now (1:05 AM EST).

Currently, all three futures are in the red; ES is down 0.15%.  That alone does not bode well for Friday.  Assuming we do go lower, one likely support point would be the 50% retracement of last Wednesday's big spike, that would be at 1222, which coincidentally (or maybe not) has been a good S/R line back to last summer.

ES daily pivot: Is little changed tonight, now at 1246.25.  Unfortunately, we were below the pivot all day and we're still below it.  Not good.

Copper: Took a big hit today.  This daily chart definitely looks like it's going lower, with all that implies for the broader market.

Morningstar Market Fair Value Index: Yesterday, the index remained at 0.89.  There is no update on the site for today's index.  I suspect it will move lower.  But it has moved little in six straight days.  This suggests the absence of any strong negative pressure on stocks.

History: According to The Stock Traders Almanac, Friday is not a particularly bullish day, so we've got no help from history here.

     And the winner is...

All things considered, technically it looks like the bears take it.  There appears to be about 11 ES points of downside available without too much trouble.  Once again though, it all hinges on Europe.  But if the can-kicking contest we saw today is any indication of what will happen over there tomorrow, then I'm not too optimistic.  So I have to say Friday's going lower.

ES Fantasy Trader

Today we just stood on the sidelines and watched.  Nothing ventured, nothing lost.  Portfolio stats: the account remains at $156,875 after 40trades (28 wins, 12 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier. Tonight we go short at 1233.00 in anticipation of more thumb-twiddling and violin fiddling on Friday from Europe while their economy burns.  

No call for Thursday pending EU news

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

• Thursday uncertain, awaiting EU news
• ES pivot 1258.67.  Holding above is bullish.
• Rest of week bias uncertain, awaiting EU news..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader standing aside pending, yes, EU news.

 Pearl Harbor Day

Tonight, we salute the memory of those who served and who paid the supreme sacrifice protecting our nation and our freedom 70 years ago.  We also use the opportunity to recognize and honor those serving our country today.  My hat is off to you.  Thank you all.

Recap

I went moderately far out on the limb last night in calling the market higher today.  And unlike yesterday, today I got it right, with the Dow handing us a little 46 point bump.  Right now the market is clearly in a holding pattern awaiting the results of the upcoming meetings in Europe Thursday and Friday.  Accordingly there is absolutely no point in even reviewing the technicals.  Which way the market moves for the rest of this week will depend 100% on what news comes out of Europe.

The technicals

The Dow: OK, I can't help myself.  I will make a few comments about the Dow.  Today's little gain actually was significant in one respect - it marks the first time we've closed above the 12,165 resistance line since it was established a month ago.  That number now becomes support.  And remember that there are two more levels close by: the 12K psychological support and the 200 day MA at 11,945.

Also of note was today's high of 12,258, which marks the first scouting party on the 12,255 resistance level from October's high.  If the news from Europe is good, then this one should fall without too much trouble.  Then there's no resistance until 12,400, then 12,745, and finally the high of the year at 12,846.

If the news from Europe is bad, then we still have three good support levels close at hand.


We won't review anything else tonight.  While I'm a firm believer in consistency, I also recognize exercises in futility when I see them.  The futures are all flat and there's really nothing to go on right now.

     And the winner is...

No one.  Honestly, if you're got a bus being driven by an enraged chimpanzee, would you rather be on it, in front of it, or behind it.  Personally, I'd rather be the King of Siam.  If I had to make a guess, I'd say that the news from Europe is not going to be a total disaster, but that's pure speculation at this point. 

So tonight is one of those rare occasions where I do not make a call because there's no way to do so in a meaningful way.  We're just going to pull up a chair, relax, maybe do some Christmas decorating, and wait for the fireworks.

ES Fantasy Trader

Today we managed to snatch defeat from the jaws of victory on last night's long trade with a 9 point loss. Portfolio stats: the account is now $156,875 after 40trades (28 wins, 12 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier. Tonight we are standing aside.

BOT 10 ES false DEC11 Futures 1261.75 USD GLOBEX DEC 7 01:25:01
SLD 10 ES false DEC11 Futures 1252.75 USD GLOBEX DEC 7 12:14:36


 

More gains possible Wednesday

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

• Wednesday higher, medium confidence
• ES pivot 1255.33.  Holding above is bullish.
• Rest of week bias higher unless bad EU news..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went long at 1261.75.

Recap

Last night I said "the market" was going lower today.  It ended up being one of those mixed days you don't see all that often.  The SPX was essentially flat, the Naz did in fact fall just a tad, and the Dow actually gained 0.43%.  So I guess I was wrong, since I base my calls on the Dow.  We'll take a look at how this happened and see if it provides any clues for Wednesday.

Quote of the Day

“the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them... To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment.”

           - Leon Cooperman, Omega Advisers, in an open letter to President Obama

The technicals

The Dow: Today's candle was almost a carbon copy of Monday's.  The Dow made some good progress in its third attack on that pesky 12,165 resistance line, sending out a scouting party to a high of 12,216 and finally closing at 12,150.  The fact that we didn't go down today in the face of three candles that looked like reversal indicators is a positive.  It's also a good lesson of why you wait for confirmation after an inverted hammer, especially when it's not a classical example of that pattern.

Right now, the Dow looks like it's in "climb the wall of worry" mode and that's not a bad thing.   The last three times it took on the 12,165 level  This time we seem to be better positioned to actually break out.

The VIX: The VIX, finally below the 30 level, which I define as the brink of insanity, put in a small hanging man today.  Coming as it does after two strong green candles makes me wonder if the VIX has a lot of gas in the tank to motor any higher Wednesday.

Market index futures: Tonight we're seeing all three futures solidly in the green by over half a percent.  ES is up a decent 0.58% at 1:40 AM EST.  And most significantly, ES is now trading entirely above its 200 day MA at 1254.33.  Watch that number  now for support.  And watch 1265 for some minor resistance.  Then 1275, then 1285.  With yesterday's doji apparently resolving to the upside, it's looking promising here for Wednesday.

ES daily pivot: Dropped a bit today to 1255.33.  ES broke above the pivot just after the close today and has been drifting higher all evening.  With a seven point spread right now, it's looking good.  As long as we can hold above this, I'm encouraged.

     And the winner is...

Tonight it looks like the bulls.  The indicators are all overbought now but they're broken and have lost their predictive power for the time being.  My guess is that they're going to run 'em up guardedly into Friday's EU meetings.  If that works well, then we're going higher, possibly revisiting the July highs.  And if not, then we're going down, simple as that.  So I'm going to say that all things considered it looks like Wednesday's going higher.

ES Fantasy Trader

Today we took disappointing 11.5 point loss on last night's short.  Portfolio stats: the account is now $161,375 after 39 trades (28 wins, 11 losses) since inception on 8/18 with $100K.  Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we go long at 1261.75.. 
 

Tuesday lower

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

• Tuesday lower, medium confidence
• ES pivot 1256.42.  Holding under is bearish.
• Rest of week bias higher if 200 MA breached..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went short at 1249.00.

Recap

Today was another great example of how news-driven this market is.  Good news out of Europe this morning and the Dow shot up.  Bad news from S&P about Europe after lunch and back down we went.  Then at 3:30, a little mini-rally set in for some unknown reason.  But we did hold on for a positive finish, as I had expected last night.  Where next?  Let's see.

The technicals

The Dow: The Dow made another run at the 12,165 resistance line today for the second day in a row, and once again was rejected.  On the other hand, the 12,000 support held nicely, so we remain wedged between these two barriers for the time being.  If you ignore the last two days of small range action, what we saw today is a shooting star.  While that's a reversal indicator, it's not a particularly good one and it really requires confirmation.

The VIX: After three days of tickling its lower BB, the VIX finally came off it with a 1.16% gain today.  And its oversold indicators portend a higher VIX to come, and that's bad for stocks.  Whenever the VIX comes off the lower BB, it usually begins a march back to the other end.  There's clearly more upside to this chart than further downside right now.

Market index futures: Fortunately, the futures trade all the time so we can look for some confirmation there.  And right now they're guiding lower.  All three are in the red and ES is down nearly half a percent at 1:45 AM EST.  Just as the Dow was unable to clear its resistance today, so ES was unable to clear its 200 day MA at 1254.44.

This failure after two doji days and an inverted hammer today makes me think the market may need to back off a bit and get a running start for its next attempt at cracking 1254.  We're also right on the edge of the rising RTC.  Falling out of that would be bearish.

ES daily pivot: Took a jump from 1249.42 to 1256.42 today and that means that we're now below the pivot.  We need to see ES cross back over this level and right now it's not doing it, so that's not encouraging.

     And the winner is...

Hmmm, another tough call but I'm going to give this one to the bears.  After last week's big gains, we've not put in three sessions of mostly wheel-spinning and tonight we're actually seeing some declines fairly late in the overnight.  I'm just not feeling the love here so I'm calling Tuesday lower.  I think there's still more upside to come in December, but just not on Tuesday.

And the usual Europe/news/rumor disclaimer remains in force.

ES Fantasy Trader

Today we took a profit of exactly 10 points.  Just before noon it looked like the getting was good, and after the latest S&P Europe downgrade news hit right after lunch, I was glad I did.  Another good reminder that it never pays to be too greedy.

Portfolio stats: the account is now $167,125 after 38 trades (28 wins, 10 losses) since inception on 8/18 with $100K.  Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we go short at 1249.00.

BOT    10    ES    false    DEC11 Futures     1253.25    USD    GLOBEX    01:09:03

SLD    10    ES    false    DEC11 Futures     1263.25    USD    GLOBEX    11:11:59
. 
 

Monday higher unless bad EU news

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

• Monday higher, medium confidence
• ES pivot 1249.42.  Holding above is bullish.
• Rest of week bias higher if 200 MA breached..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went long at 1253.25.

Recap

Last Thursday night I called the market higher as long as the jobs number was BTE.  Well unemployment did come in better and the market did rally hard early but then spent the rest of the day giving back all those gains to finish essentially flat.  But the whole gestalt of the day didn't really feel all that bearish if you know what I mean.

The technicals

The Dow: The Dow has now spent two days waffling at the top of that big 497 point gain last Wednesday.  The good news is that it's retraced none of that.  The bad news is that we weren't able to clear the resistance at 12,165.  I think that's what Friday's gravestone doji was all about.  Still, without any confirmation, it's premature to call that a reversal sign.  And we do have not one but two support levels real close below: the 12K psychological level and the 200 day MA at 11,946.

The VIX: The VIX found its own support on Friday, bouncing off its 200 day MA of 25.34.  This marked its third day of touching its lower BB and that's fairly unusual.  However, the VIX now has some resistance around 28, just above where it closed Friday.  Thus it is in kind of a squeeze play that tends to reduce its volatility.  Just as cars slow down when two lanes merge into one, this helps to damp down the crazy jumps the VIX has been making of late and that can only be good for the markets, at least for a few days.

Market index futures: This is really the big news on a Sunday night.  All three are solidly in the green with ES up 0.76%.at 1:20 AM EST.  ES mounted an attack on its 200 day MA on Friday and was repulsed.  It appears to be mounting a second charge as I write this.  At 1252.75, we a re just under the MA at 1254.68.

The fact that we are continuing higher in ES after two doji days of indecision is quite positive for the markets.  And another positive is that OBV has come way down from its mid-November highs.  I do note that the stochastic is forming a bearish crossover but I think this is still an artifact of Wednesday's tall green candle.

ES daily pivot: Has now risen to 1249.42 from 1243.42, but with the price continuing to rise we remain above the pivot.  That's another positive sign.

     And the winner is...

Tonight, it's the bulls.  As long as there's no negative news from Europe tomorrow, I'll be looking for a higher close Monday.

ES Fantasy Trader

Friday we took a small profit of 3.75 points.  Portfolio stats: the account is now $162,125 after 37 trades (27 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.  Tonight we go long at 1253.25.

SLD 10 ES false DEC11 Futures 1244.00 USD GLOBEX NOV 30 16:47:48
BOT 10 ES false DEC11 Futures 1247.75 USD GLOBEX DEC 2 00:49:20