Merry Christmas!

Merry Christmas!

 

Ho ho ho!  The Night Owl wishes everyone a very merry Christmas.

May Santa bring everything you wished for tomorrow morning.

See you again Monday evening!

Still some room to run higher Friday

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

• Friday higher, low confidence.
• ES pivot 1244.08.  Holding above is bullish.
• Next week bias higher if resistance broken.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside.

Recap

What a difference an hour makes.  In the time it took me to write last night's post, the situation changed dramatically.  Once ES broke through its daily pivot, I canceled my bearish call and I'm glad I did, since the Dow ended gaining a welcome half a percent today.

Tomorrow is not only Friday but the last trading day before Christmas.  Volume will be even lighter than today and all the big players will be home sipping eggnog, skiing in Aspen, or helicoptering to the Hamptons if they haven't already left.  I plan to do the same (well at least the eggnog part).  There's little point in doing a detailed analysis tonight, so let me just say that from what I saw today I think there's still a bit more upside available but we're close to some Dow resistance at 12,225.

However, the handle part of the cup and handle I mentioned earlier this week is finishing off nicely and that's quite a positive indicator.  And with ES having easily broken over its 200 day MA today and continuing nicely positive in the overnight (we're up 0.58% at 2:05 AM EST), I wouldn't be surprised to see at least a bit more upside tomorrow.

On that note I wish happy holidays to all my readers and I'll see you again Monday night.

Thursday uncertain, ES pivot is key

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

• Thursday uncertain, watch ES pivot.
• ES pivot 1236.08.  Breaking above is bullish.
• Rest of week bias higher
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader going short at 1232.50..

Recap

Last night I wrote"I think we may close a bit higher but overall it should be a small range doji day." .  Well a 4.16 point gain in the Dow qualifies as "a bit" higher, don't you think?

The technicals

The Dow: Today's tall dragonfly doji was a classical reversal warning.  However, it does require confirmation.  Still it has to make you wonder if, after such a great two day run, we may not just be due for a pullback on Thursday.  That said, support at 12K was successfully tested today and we've also got the 200 day MA for support close behind that at 11,936.

The VIX: Is in an interesting position tonight.  It gave up its support at 24.5 two days ago and its indicators are now in oversold-broken mode.  The next support here isn't til 17.8.  And the VIX almost but didn't quite touch its lower BB today.  So there's no immediate sign of a reversal here, implying at least some more potential upside for stocks.

Market index futures: Unlike last night, tonight all three are running lower, with ES down a quarter of a percent at 1 AM EST.  Interestingly, ES sent out a scouting party to recon the 200 day MA but this expedition failed.  The resulting doji warns of a reversal just like on the Dow chart.  We seem to be seeing some follow-through already so that's a bearish sign.

ES daily pivot: Rose from 1224 to 1236.08 tonight.  And since ES has been drifting lower through the evening, we've gone from above to below the pivot, a bearish sign.

Copper: My. we're just full of dojis tonight - another one on the copper chart.  Same meaning as the others.

Morningstar Market Fair Value Index: Yesterday the index jumped from 0.83 to 0.86 as I thought it would.  That's bullish for stocks.

History: According to The Stock Traders Almanac,Thursday outperforms historically and is the strongest day of the week.

     And the winner is...

This is actually a tough call but I'm going to go out on a limb and say it's the bears tonight.  Mr. Market ran too hard too fast not to take a breather for a day or too.  Today's dojis all warn of a possible pullback tomorrow.  Since the futures are guiding lower, I have to go with that and call Thursday lower.  Of course, since the doji requires confirmation, it's still possible that there might be more gas in the tank.

Contributing to the difficulty of the call is the fact that we haven't hit any upper BB's yet and there is no near term resistance in sight.  If ES can manage to break through its pivot, then a higher close isn't out of the question.  But for now anyway though, I don't think so.  We'll just have to see.

1:35 AM update:  I see that the futures now seem to be rising and NQ has actually turned positive.  This is starting to weaken my bearish call, but we still need to break through the ES pivot.  Watch the 1236 level closely in the morning.  Either way, with some good support and teh VIX almost down to 20 again, I'm not expecting a major down day.

2:15 AM update:  ES just broke through the pivot.  This means that we may very well go higher on Thursday, but it's too uncertain for me to actually call it.  However, I am striking my earlier call for a lower close.

ES Fantasy Trader

Today we stood aside in the expectation that there would not be much movement either way, and that's just how it worked out.  Portfolio stats: the account now still stands at $139,250 after 45 trades (30 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     I may regret this in the morning, but tonight we're going short at 1232.50.

 

A bit more upside possible Wednesday

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

• Wednesday higher, low confidence.
• ES pivot 1224.00.  Holding above is bullish.
• Rest of week bias higher
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader standing aside.

Recap

On Dollar, on VIXen!

Ho ho ho!  Just as I was thinking he'd forgotten to set his alarm, Santa Claus finally showed up on Wall St. today and distributed an early Christmas present to all the good little traders in the form of a nearly 3% gain in the Dow and SPX, instantly erasing an entire week's worth of losses in just one day.


The technicals

Dow daily

The Dow: Last night I said "we closed outside the right edge of the descending RTC from December 12.  That is a bullish setup."  And today we got the trigger in a big way.  You can see this in the last descending set of line sin this chart (click on the image to enlarge it).  This marks the end of the downtrend that began on 12/12 and sets the stage for further gains.

Do you see what I see?  No, it's not a star shining in the east, it's a cup & handle formation.  Check it out on this Dow daily chart.  The cup goes from 11/14 to 12/08 and the handle is just finishing up now.

If we can stay even or even advance a bit tomorrow, that will make the case even better.  The cup and handle is one of the better classical (ie. non-candlestick) technical indicators.

In addition, the Dow provides us with the pretty picture of my fave five indicators (top to bottom: RSI, momentum, money flow, stochastic, and OBV) all having bottomed and hooked up, another bullish sign.  And last but not least, today the Dow not only reclaimed the 12K support level but also blew right back through its 200 day MA at 11,936.  Both of these numbers now once again become support.  I'm liking it.

Market index futures: All three futures are running in the green at 1:15 AM EST with ES up 0.18%.  Pretty much everything I said about the Dow applies to ES too: the RTC breakout and the indicators bottoming out on oversold levels.  ES is now just 7 points from its 200 day MA at 1245 and I expect that to provide some resistance just as it did earlier this month.  Also, whenever we have these tall green candle days, they're often followed by small doji days.  I see no reason why that won't happen again on Wednesday.

ES daily pivot: Takes a big jump from 1204.75 to 1224 even tonight.  But ES is still way over that at 1238 providing a good cushion going into Wednesday.

Copper: Copper also broke out of its descending RTC today as well as a four day trading range.  With oversold indicators also turning up, it looks poised to go higher.

Morningstar Market Fair Value Index: Yesterday the index dropped again to 0.83.  Unfortunately, Morningstar gives these numbers one day late.  I'm betting anything that today's number will be higher.  A move up in this index is bullish.

History: According to The Stock Traders Almanac, the rest of this week is considered historically quite positive, being the days of the traditional Santa Claus rally.

     And the winner is...

Tonight I'm giving it to the bulls.  The futures have been drifting slowly higher all evening suggesting that there's still at least some more upside left for tomorrow.  I think we may close a bit higher but overall it should be a small range doji day.  A good day to take off and go do some Christmas shopping.  I find today's developments encouraging for the next few days, in fact.

ES Fantasy Trader

Holding my long from the 16th took a bit of nerve but patience paid off in the end.  Santa's timely arrival today got me out of that hole and today we took a 9.75 point profit shortly before lunch.  I know I left some money on the table, but that doesn't make me feel nearly as bad as holding on and watching a winner turn into a loser.  And we never want to be too piggy, oink oink.

Portfolio stats: the account now stands at $139,250 after 45 trades (30 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're standing aside with the expectation that there's not going to be much action on Wednesday.

SLD    10    ES    false    MAR12 Futures     1230.00    USD    GLOBEX    11:53:06

BOT    10    ES    false    MAR12 Futures     1220.25    USD    GLOBEX    DEC 16 01:56:34
. 
 

Tuesday likely higher

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

• Tuesday higher, low confidence.
• ES pivot 1204.75.  Failure to hold above is bearish.
• Rest of week bias uncertain
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader holding long at 1220.25.

Recap

We've seen this movie before.  Seems like every day lately the market opens up and begins to rally.  Then at some point during the day, some European opens his mouth and rains on the parade.  Today's downpour courtesy of the ECB cost us another 100 Dow points.  Is there no end to this?

The technicals

The Dow: The good news today was that despite going lower, we closed outside the right edge of the descending RTC from December 12.  That is a bullish setup.

Market index futures: Finally, all three futures are higher at 2:45 AM EDT.  However, ES is playing tag with the new daily pivot at 1214.75.  Although ES is still up 0.42%, I really want to see it break back over the pivot.  On the plus side, I note that ES OBV has turned positive from the lowest levels of the new contract yet, and that's often a good sign.

Sentiment: It's Monday again and the latest Ticker Sense Blogger Sentiment Poll is out.  Here' how the numbers shake out:

          Bullish Bearish Neutral

Last Week   52%     26%     22%

This Week   41%     38%     21%

In this case at least, the contr4arian assumption played out.  The bulls had a two to one advantage last week and the market had a terrible week.  Keep in mind of course that the poll is a 30 day outlook, not the coming week.  Still, I can't help but think that recent events affect peoples' feeling about the future, whether it's 30 days out or 7 days out.

What's interesting is that this week, the bullish sentiment has dropped considerably, creating a virtual bull/bear tie.  This reflects the ongoing tug of war between good economic news at home and a continuing flood of disconcerting noise from Europe.  Until the Europeans figure a way out of their mess, this market schizophrenia is likely to persist.

And for the record, I changed my vote to negative this week, based on my reading of the monthly SPX chart.  After a strong October, November gave us a long legged doji.  December so far at least is confirming that with a basically solid red candle.  That spells lower next month in my book.

     And the winner is...

Tonight, I'm giving it to the bulls.  With ES up nearly half a percent and looking ready to attack the pivot again, and the market in general getting pretty oversold, I think it's time for at least a one day rally before Christmas.  Tuesday may be it.  Assuming those pesky Europeans can keep quiet for that long.

ES Fantasy Trader

As I mentioned last night, on Friday I decided to hold my slightly underwater long over the weekend, a decision I may yet come to regret.  But it is what it is.  We'll see.. Portfolio stats: the account remains at $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    

Monday lower unless ES pivot breached

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Monday lower, low confidence.
• ES pivot 1214.75.  Switched to March contract.
• Rest of week bias uncertain
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader holding long at 1220.25.

Recap

Last Thursday I called for Friday to go higher.  As Maxwell Smart used to say, "Missed it by that much!" as the Dow closed with a 2.4 point loss.  Things were looking up right out the gate only to be torpedoed around 11AM by, yawn, more bad news from Europe.  I can't keep track of it anymore.  What was it this time, Italian bonds again?  Whatever, it put the kabosh on what was looking to be a promising rally.  But at least the SPX and the Naz managed to score modest gains.

This week being the week before Christmas, I expect to see more market bumpiness as the big boys go on vacation.  And the market continues to get jerked around by what you'd think would be largely irrelevant news.  Like tonight, it was reported that the North Korean dictator, Kim Jong Il kicked the bucket.  You'd think that would be great news, but ES took a big hit when that came out.

What did people think - that North Korea was going to launch their entire nuclear arsenal in random directions all at once because of this?  Anyway, by 2 AM, it was all forgotten.  But that still left ES down almost half a percent.

Anyway, this week, I'm going to shorten my daily posts a bit since I expect a lot of people will be taking the week off anyway.  I'm also super busy with the holidays and working on my book.  Putting the Night Owl together takes me over an hour every night.  So please forgive me if I go into less detail than usual this week.  The research is still all there.

The technicals

The Dow: Being Sunday night, I like to go to the weekly charts, and I'm definitely not feeling the love here.  After two weeks of gains, we put in a dark cloud cover on much higher volume.  Not a good sign.  The daily doji on Friday clearly shows how the incipient rally was cut short.  Although the daily indicators seem to point to gains on Monday, the overall tenor of this market doesn't seem to support that notion.

Market index futures: Hmm - well in just the last hour (it's 2:15 AM EST right now), ES has made something of a comeback though we're still stuck under the daily pivot of 1214.75.  But this eight point gap is not impossible to close.  And both the ES weekly and daily charts are showing some support not evident on the Dow charts.

     And the winner is...

Hmm - the winner is a big mystery.  Oddly enough, it seems like there's more uncertainty now, with the VIX having fallen back under the 30 level than there was a month ago.  With light volume expected this week, look for any news events to exaggerate market moves.

If Santa Claus is going to show up, right now is the time.  All I can suggest its to watch the ES pivot.  If ES continues its move up in the rest of the night until the open on MOnday and manages to decisively cross the pivot, then the oversold indicators may yet prevail and we can move higher.  If ES reverses course, or even just continues to wander around below the pivot, we're closing lower Monday.  I wish I could be more definite about it all, but you can only play the hand you're dealt.  Tonight we have a bunch of 6's and 7's.

ES Fantasy Trader

On Friday, I decided to hold my slightly underwater long over the weekend, a decision I may yet come to regret.  But it is what it is.  We'll see.. Portfolio stats: the account remains at $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