Friday higher

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

• Friday higher, high confidence.
• ES pivot 1210.08.  Switched to March contract.
• Next week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went long at 1220.25.

Recap

Today was very interesting.  We got some good economic news in the morning that sent the market up.  This was followed by some fairly discouraging news out of Europe.  However, unlike past reports this time the negative market reaction was fairly subdued.  In fact, the Dow managed to hang on for a 45 point gain.  Is this a sign of things to come?

The technicals

The Dow: It might very well be.  The 11,819 support line held again today giving us an inverted hammer reversal candle. Also, the stochastic began a bullish crossover and that's always a good indicator.  We were even back above the 200 day MA at 11,940 for a while this morning until the Europeans rained on the parade.  But that suggests another attack in the works for Friday.

The VIX: The VIX, which had gapped up over its 200 day MA yesterday, gapped right back down below it today posting a 3.57% drop.  It closed just above its support at 24.5.  I was wrong about the VIX closing higher today, though I was right about it going higher, opening at 24.38 and closing at 25.11.  These gap-down green candles are always tough to analyze.  I suspect this one was news induced.  There's no telling where it will go on Friday.

Market index futures: Tonight we finally have a bit of clarity in the futures.  All of the futures are in strong rally mode tonight with ES up a significant 0.7% at 2:15 AM EST.  The formation right now is similar (though not quite) a morning star reversal pattern and the overnight action is good enough to take us to the edge of the descending RTC, both bullish signs.  The indicators have all bottomed oversold and hooked back up, another good sign.




ES daily pivot: Now 1210.08 - reminder, we're now looking at the March (H) contract.  We're now more than 10 points above that, another good sign.

History: According to The Stock Traders Almanac,the S&P was up 20 out of the last 28 on this triple witching Friday.

     And the winner is...

I almost hesitate to say anything anymore, having been wrong for two days running.  But the crystal ball has defogged tonight and it looks pretty clear that the bulls take it.  I'm feeling a lot more confident in calling Friday higher.  I'll be truly surprised if we don't get a decent gain to close out the week.

ES Fantasy Trader

Sigh - two days ago I went long and got clobbered.  So last night I went short - and got clobbered again.  This time it was a 12.5 point loss. Portfolio stats: the account drops to $134,375 after 44 trades (29 wins, 15 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 1220.25 at 1:56 AM.

 
SLD 10 ES false DEC11 Futures 1207.25 USD GLOBEX 01:48:57
BOT 10 ES false DEC11 Futures 1219.75 USD GLOBEX 13:08:15

Thursday likely lower

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

• Thursday lower, medium confidence.
• ES pivot 1218.00.  Holding under is bearish..
• Friday bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went short at 1207.25.

Recap

Last night I was thinking we had a shot at going higher today but I did mark it as low confidence and gave the usual warning about Europe.  Well today the Italian bonds went awry and the stock market went down.  I guess it's just a tough time to be a technician.  I know - excuses, excuses.  OK, I was just plain wrong.  As Jack Lemmon told Osgood Fielding III in Some Like It Hot, "Nobody's perfect".

The technicals

The Dow: With three consecutive down days, the Dow is now in a downward swing trend and I've updated the trend arrow to reflect that.  It's not looking good.  Yesterday we gave up the 12,000 support level.  Today the 200 day MA caved in the first few seconds of trading and it was all downhill from there.  We finally stopped at the next support level that I mentioned at 11,819, closing at 11,823.  Again, the next line is at 11,655, then 11,230.  If we don't develop some positive momentum soon, we have a good shot at both these numbers.

VIX daily

The VIX: This one is worth a chart.  Last night I talked about how the VIX had put in a doji and how that was a potential reversal indicator.  Just take a look at this: today we saw exactly that.  But today's candle is also just about a gravestone doji - another reversal indicator!  And notice how the stochastic (bottom graph) is making a bullish crossover.  And the VIX also popped right back up over its 200 day MA today.  All those things would seem to point to a higher VIX Thursday which would be bad for stocks.

VIX futures: The futures are just wandering around with another, tighter doji today.  Not much guidance here.

Market index futures: All three are losing ground again tonight with ES down 0.41% at 1:40 AM EST and remaining solidly inside its descending RTC from 12/8.  That said, having dropped four of the last five sessions, the ES indicators are now solidly oversold.  However, there really isn't a reversal indicator on this chart just yet.

ES daily pivot: Dropped from 1231.50 to 1218 tonight.  We have a lot of ground to make up to get back to this number, so this isn't looking good either.

Dollar index: The dollar is worth noting tonight because it not only continued a rally that began at the end of October, but hit its highest level since the beginning of January today, forming a gap-up inverted hammer that lies entirely above the upper BB.  The dollar rarely spends more than one day above that level and its been there for two days now.  Coupled with some very overbought indicators (RSI above 86) it looks to be due for a reversal real soon now.

And that's supported on the euro chart.  Generally the mirror image of the dollar, I get OBV for the euro (6E #F in eSignal).  Yesterday OBV hit its second lowest level of the year and a point below that from which the last two euro rallies started.  In the overnight, OBV is increasing.  That points to a reversal for the euro on Thursday which would support the idea of the dollar going lower and that would be good for stocks.

Morningstar Market Fair Value Index: Today the index ticked down again from 0.86 to 0.85, another bearish sign.

History: According to The Stock Traders Almanac,both Wednesday and Thursday are historically bearish.  That certainly played out today and doesn't bode well for Thursday.

     And the winner is...

I'm looking hard for a reason to be optimistic and just not finding one tonight, aside from a possible reversal in the dollar.  Accordingly, I have to give this one to the bears.  I am seeing some signs that a reversal may be coming in the next few days, but right now it doesn't look like it will be tomorrow, so I have to call Thursday lower.  And of course, good news from Europe could change that, but there seems to be nothing but gloom & doom emanating from there this entire week.

ES Fantasy Trader

Today we took a nasty 17 point loss on last night's ill-fated long position.. Portfolio stats: the account drops to $140.625 after 43 trades (29 wins, 14 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 1207.25 at 1:49 AM.

BOT    10    ES    false    DEC11 Futures     1228.50    USD    GLOBEX    DEC 14 01:39:32
SLD    10    ES    false    DEC11 Futures     1211.50    USD    GLOBEX    DEC 14 11:28:04
 
 

Wednesday possibly higher

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

• Wednesday higher, low confidence.
• ES pivot 1231.50.  Watch for break above.
• Rest of week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went long at 1228.50.

Recap

I thought we'd go higher today unless the Fed said something bad.  Well we indeed were higher - right until the Fed spoke.  And even though they essentially said nothing, I guess the market didn't like it so down we went with another bump for a 66 point loss in the Dow.  That's why I marked this call as "low confidence".

The technicals

The Dow: Like the German army retreating from the Trasimene Line to the Gothic Line, today the Dow gave up the 12K psychological support line but held its ground at the 200 day MA.  Today's close of 11,955 is just over that at 11,943.  Next stop on the down elevator is 11,819, the 40 day MA.  Then 11,655 and finally 11,230, the November lows.  Are we headed there tomorrow?  I don't really think so.


The VIX: Punched through its 200 day MA to close just above its 24.5 support line with a doji.  This is an important chart.  If the VIX bounces off this support line Wednesday, it will be quite bearish.  On the other hand, there is no further support below here until 21.5.  A break under would be quite positive on a swing trend basis.  There's no sign yet of a reversal in the indicators and the doji is only a potential reversal sign, so the door is still open for a lower VIX Wednesday and that would be bullish.

VIX futures: The futures are looking even less of the way towards oversold than the VIX itself.  In fact, their stochastic just executed a bearish crossover.  This indicator is highly reliable.  Lower futures -> lower VIX -> higher stocks.

Market index futures: Tonight, all three futures are up, with ES sporting a 0.27% rise at 1:35 AM EST.  But the action is a bit concerning.  After drifting up all evening, ES took a tumble at 1:15 for no immediately obvious reason.

ES daily pivot: Dropped to 1231.50 tonight.  So far, we remain under that number and the fact that ES took at run at it at 1:15 AM and failed is bearish.

Copper: Copper extended yesterday's losses today putting in an even taller red candle extending exactly halfway into the big upside gap created at the end of November.  Nothing to suggest a reversal on this chart.

Morningstar Market Fair Value Index: Yesterday the index took a two tick drop from 0.88 to 0.86.  That's bearish.

History: According to The Stock Traders Almanac,both Wednesday and Thursday are historically bearish.

     And the winner is...

Wow - once again we've got another tough call.  ES is in the middle of its BB's.  It's close to but not quite oversold yet.  The Dow broke one support level but a second one held.  There's next to nothing to go on here.  All things considered, I'm going to go with the VIX futures and the fact that ES is not continuing lower and therefore call Wednesday higher, but with very little enthusiasm.

And as usual lately, any bit of bad news, rumors, whatever from Europe will cancel this call.  To really seal the deal, we need to see ES break over 1231.50..  Watch that number early Wednesday morning.  Happy trading!

ES Fantasy Trader

Today we took a small 4.75 point profit at lunch time ahead of the Fed and I was glad I did.  Sometimes discretion really is the better part of valor..  Portfolio stats: the account remains at $149,125 after 42 trades (29 wins, 13 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 1228.50 at 1:39 AM.

SLD    10    ES    false    DEC11 Futures     1241.00    USD    GLOBEX    12:30:00
BOT    10    ES    false    DEC11 Futures     1236.25    USD    GLOBEX    DEC 12 19:07:31
 
 

Tuesday higher possible

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

• Tuesday higher, low confidence, waiting on economic news.
• ES pivot 1240.58  Holding under is bearish.
• Rest of week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went long at 1236.25...

Recap

Bump.  Last night I warned everyone to get ready for a bumpy week.  Today saw the first bump in the form of a 163 point jolt to the Dow.  I was right about the bias lower but wrong about the doji.  With some Fed news coming out on Tuesday, get ready for another bump.  Let's try to see if it will be up or down.

The technicals

The Dow: Two good things about today's big drop: first, the 12K support level held at the close, and second, the 200 day MA held too.  Look at how well that works: the 200 MA is 11,944 and the low for the day was 11,941.  That's good enough for me.  Also, the indicators have now exited overbought territory and are now all headed back down.

We now seem to have something of a trading range going on lately between 12K and 12,200.  And since we closed today at the bottom of that range with two intact support levels close at hand, on that basis alone I'd look for a move higher tomorrow.

Market index futures: Tonight at 2:30 AM EST all three futures are just barely in the green in an overnight session characterized by unusual volatility.  Traders are apparently reacting to every little item coming in over the news wires and trying to position themselves ahead of tomorrow's FOMC.

     And the winner is...

Well tonight I'm going to flip a coin and say the bulls take it.  Basically, I expect Tuesdays economic news to come in BTE and I can't imagine the Fed saying anything to pour cold water on the campfire.  Then there's the strong historical positive bias to this week.  And with at least some technical support from the Dow, there you have it.  Tuesday's going higher, but I'm not really all that confident in saying that.  If I was in Vegas at the blackjack table right now, I wouldn't be walking away but I'd only put down the minimum bet.  That's all she wrote.

ES Fantasy Trader

Today we made no trades.  Portfolio stats: the account remains at $146,750 after 41 trades (28 wins, 13 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 1236.25.
 

Monday may go lower

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

• Monday lower, low confidence, waiting on economic news..
• ES pivot 1249.25.  Breaking under is bearish.
• Rest of week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside..

Recap

Fasten your seat belts, boys...

If you recall, last Thursday the technicals seemed to be pointing lower.  However, I thought that the market was so news-driven that my call was "Friday lower unless good EU news".  Well come to find out there was good news out of Europe Friday morning, or at least news the market liked, and so we ran higher with the Dow piling on an additional 187 points.

This coming week we have the irresistible force, being a slew of economic news here at home, meeting the immovable object, namely Europe.  And thrown into the mix is the expectation of the imminent arrival of Santa Claus and his yearly rally.  And if that isn't enough, it's another triple witching week.  To paraphrase Mae West, "Fasten your seat belts.boys, it's going to be a bumpy week".

The technicals

The Dow: The Dow remains unable to gain any traction above the 12,165-12,200 resistance zone.  Four swings last week, four misses.  A big move down on Thursday and entirely retraced on Friday.  The daily indicators look overbought but the weekly stochastic is actually executing a bullish crossover.  What does it all mean?  Who the heck knows.  Let's go ask Mr. Vix and see if he knows.

The VIX: Took a big dump on Friday with a 13.76% drop not seen since the beginning of October.  However, unlike then Friday's close at 26.38 left us just above the 200 day MA at 25.55.  If you look at the way the VIX has behaved this year when approaching the 200 MA from above, you'll see that it either bounces right off, or spends a day, not more than two, below and then rises again.  This suggests that we'll at least take a look at 25.5 and that allows for at least a bit more upside in the market early in the week.

VIX futures: The futures look to be guiding lower too, supporting the idea of at least one day of lower VIX.

ES daily

Market index futures: Right now at 1:40 AM EST all three futures are in the red.  ES is down 0.3% and has been drifting lower since 8:30 this evening.  However, there's support at the 200 day MA of 1253.57.  And most interestingly, last Thursday and Friday formed a classic bullish piercing line which is a high reliability pattern.

ES daily pivot: Rose a bit tonight to 1249.25.  We were above the pivot most of Friday and remain above it now.  However, we're only six points off, so the pivot is within striking distance.  Watch this number before the open for any attempts to drive under.  That would be bearish.

History: According to The Stock Traders Almanac,the December triple witching week is quite positive historically.

     And the winner is...

Hard to say.  I was going to suggest a weak bullish bias until I saw an item come through in the news that the FX boys are cutting their forecasts for the euro.  The euro's been in an 8 day downtrend, putting upward pressure on the dollar and that' bad for stocks.  So honestly, at this early hour it could go either way.

I'm going to guess that we'll see another small range doji day as traders wait to get the whisper numbers on Tuesday's economic data, and see what those pesky Europeans have been cooking up over the weekend.  J-Trader is going to a short position but I'm just going to stand aside on Monday again.  Perhaps tomorrow will bring some clarity to the market.

If I had to guess I'd say that if ES breaks the 200 day MA and its daily pivot, we'll close lower, otherwise higher.

2:15 AM Update: ES has just broken under the 200 MA and is now down nearly half a percent, so I'm going to go with a bearish call for Monday.

ES Fantasy Trader

On Friday I had to throw in the towel on my Thursday night short for a 20.25 point loss.  Portfolio stats: the account has dropped to $146,750 after 41 trades (28 wins, 13 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

SLD    10    ES    false    DEC11 Futures     1233.00    USD    GLOBEX    DEC 9 01:18:28    

BOT    10    ES    false    DEC11 Futures     1253.25    USD    GLOBEX    DEC 9 12:23:22     

Tonight we're standing aside again - no trade.