Happy New Year

Happy New Year!

I want to thank all my readers for checking in with the Night Owl this year and wish everyone a safe, happy, and prosperous 2012.  Let's hope it will be better than this year was.  Be sure to stop by again Monday evening for our first call of the new year.

Friday uncertain, ES pivot is key

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

• Friday uncertain, ES pivot is key.
• ES pivot 1253.25, holding above is bullish.. 
• Next week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside.

Recap

Last night we had some very mixed messages with the Dow pointing down but the futures pointing up. The good economic news today provided the deciding vote and helped drive the Dow up 136 points.  That leaves just one more day til 2011 is history.

The technicals

The Dow: Today's solid green candle exactly mirrored yesterday's solid red candle - rather unusual.  The fact that there was no follow-through to Wednesday's bearish setup is bullish even though the indicators remain quite overbought.

The VIX: The VIX was unable to make any headway above yesterday's highs, finishing down 3.7%, and making an almost but not quite dark cloud cover in the process.  This suggests a slight bias lower, which would be good for stocks.

Market index futures: Interesting - as I began writing this, all three futures were in the red.  Then at exactly 1:28 AM EST, they suddenly took off like a rocket - quite unusual for what is usually a pretty quiet time of night.  There was a story on the newswire about China eyeing "pro-growth" economic policies around this time - I don't know if there's any connection.  In any case, we're now looking at small gains rather than losses, which is a positive sign.

ES daily pivot: Rose from 1250.67 to 1253.25.  We were above the former number earlier this evening and are even more above the new higher number now at 2:12 AM.  I view that as a positive.

Morningstar Market Fair Value Index: Yesterday the index dropped form 0.89 to 0.86 - that's bearish.

History: According to The Stock Traders Almanac,the last trading day of the year is historically bearish.

     And the winner is...

Sigh - yet another very tough call.  Tomorrow being a Friday as well as the last trading day of the year we'll be looking at another low volume day with a variety of competing influences.  The charts bear out this mixed picture.  Accordingly, I'm not going to make my usual call tonight.  My wild guess though is that if ES can hold up over its pivot by the open then we stand a chance of closing higher.  But tomorrow is really just a good day to take off and go to the liquor store to stock up for New Year's Eve.

ES Fantasy Trader

Last night's speculative long in the face of a poor looking Dow chart paid off and just after noon today we took a profit of 4.75 points.  Portfolio stats: the account is now  $134,750 after 48 trades (32 wins, 16 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 - there's just too much uncertainty and I don't think there will be much money to be made in the overnight trade anyway.

BOT    10    ES    false    MAR12 Futures     1249.75    USD    GLOBEX    01:28:10

SLD    10    ES    false    MAR12 Futures     1254.50    USD    GLOBEX    12:06:20
 

Thursday depends on EU news

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

• Thursday uncertain, depends on Italian news.
• ES pivot 1260.08, holding under is bearish. 
• Rest of week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader going long at1249.75.

Recap

Last night I thought we'd be going lower today.  The only surprise to me was the size of the move.  I wasn't thinking we'd get a 1.14% pullback in the Dow.  But that's the sort of thing that can happen in the waning days of the year.  Moving right along...

The technicals

Dow daily

The Dow: The reversal signal from yesterday's doji was confirmed with today's solid red candle.  This also dropped us out of the rising RTC as you can see here.  That is a bearish setup.  Note also how the stochastic (second lowest panel) has just completed its bearish crossover.  There's nothing on this chart to suggest anything but continued lower on Thursday.

The VIX: Yesterday the VIX broke out of its descending RTC, a bullish setup.  Today it traded entirely outside on a green candle and that is the trigger.  By this system, the VIX should go higher on Thursday and that is bad for stocks.

Market index futures: The futures meanwhile are giving a completely different message from the Dow chart.  All three are up at 1:30 AM EST and ES in particular is up by a significant 0.4%.  In fact it has been slowly rising since the close on Wednesday.  Now why would ES be going up in the overnight when the Dow chart is still looking overbought and technically bearish?

Well from what I read, today's decline was supposedly due to the pricing in of fear about Thursday's coming Italian bond auction.  My guess is that the overnight ES traders know something we don't and are thinking that there's going to be some good news coming.  Of course that's just speculation on my part but you do have to wonder why the futures are advancing in the face of what appears to be the end of an uptrend.


ES daily pivot: Dropped a bit from 1260.08 to 1250.67.  This now puts us very close and ES in fact just made one quick stab at it at 12:40 AM.  That was rejected but I expect another attempt real soon now. 

Morningstar Market Fair Value Index: The index has actually been rising for four straight sessions now, hitting 0.89 yesterday.  That is positive for stocks.

History: According to The Stock Traders Almanac,tomorrow is historically quite positive for the SPX, somewhat less so for the Dow.

     And the winner is...

Another tough one.  The Dow and the VIX are both guiding lower but the futures are looking higher.  It's particularly difficult to say given the characteristics of this low-volume holiday-shortened week.  I think Thursday is going to hinge on news out of Italy.  Good news, we go higher, bad news lower.  All in all, it looks like another good day to go on vacation.  That's all, she wrote.

ES Fantasy Trader

Today we took a profit of 10.25 points.  Portfolio stats: the account is now  $132,375 after 47 trades (31 wins, 16 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 going out on a limb and entering a highly speculative long at 1249.75.

BOT 10 ES false MAR12 Futures 1249.25 USD GLOBEX 11:19:39
SLD 10 ES false MAR12 Futures 1259.50 USD GLOBEX DEC 27 16:46:05

Wednesday lower

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

• Wednesday lower, medium confidence.
• ES pivot 1260.08, holding under is bearish. 
• Rest of week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader going short at1259.50.

Recap

With a total range of just 36 points to end with a 2 point loss, today was about as quiet a day as you can get, but basically what I expected for this last week of the year sandwiched as it is between two holidays.  Will we see more of the same on Wednesday?  Let's check it out.

The technicals

The Dow: Today's little doji is a potential reversal sign.  And my Fave Five indicators are quite overbought.  The stochastic in fact is now executing a bearish crossover.  I also note that the S&P High-Low Index hit 100 on Friday, generally a sign that a reversal is near.

The VIX: While the VIX gained 5.7% today, it did it on an unusual gap-up red candle.  This may simply be due to the post-holiday lethargy in the market.  While going higher tomorrow is not out of the question, another decline later on in the week is also still on the table.

Market index futures: All three are running in the red at 2 AM EST, with ES down a third of a percent.  This sort of bearish move following today's doji seems to point down for tomorrow.

ES daily pivot: Rose from 1256.58 to 1260.08 tonight.  With ES declining in the overnight, we've now gone below the pivot and that's a bearish sign.

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

          Bullish Bearish Neutral

Last Week   41%     38%     21%

This Week   46%     21%     33%

Interestingly, while bearish sentiment dropped significantly, bullish sentiment increased very little.  In fact "Neutral" seemed to be the big winner.  Not quite sure just what to make of that.  The fact that some former bears only moved to neutral could be considered contrarian bullish.

     And the winner is...

Speaking of bears, I think we're going lower Wednesday.  We're overbought and it just seems like we're due for a pullback.  Given the lackluster nature of this week, I'm not looking for any big moves, but the bias right now is down.

ES Fantasy Trader

Last night ES was closed so we couldn't enter a new trade.  Tonight we're going short at 1259.50 at  4:46 PM, a bit earlier than usual.

Portfolio stats: the account remains at $127,250 after 46 trades (30 wins, 16 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.

A bit more room to go higher Tuesday

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

• Tuesday higher, low confidence.
• ES pivot from Friday 1244.08. 
• Rest of week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside - ES closed.

Recap

Last Thursday I thought we still had some room to run higher and Santa delivered one last Christmas present in the form of an additional 124 Dow points.  With a quiet week ahead and the futures still not open for trading again, there's not a whole lot to go on this evening, but let's see what we can do.

The technicals

The Dow: Friday's close of 12,294, albeit on low volume, was still significant in that it finally broke the 12,225 resistance level we've been trying to pass since October.  From here, there's no more resistance until 12,386, the upper BB.  And while the indicators are now in overbought territory, they have not yet given a reversal signal.

The VIX: The VIX meanwhile broke under its support at 21.5 and now has no support til its lower BB at 20.14.  And without a reversal candle it looks like it still has room to test that level.

Morningstar Market Fair Value Index: On Friday the index rose another tick to 0.88, a bullish sign.

History: According to The Stock Traders Almanac,the first trading day after Christmas is quite bullish.

     And the winner is...

Well there's not much to go on here, but I'm going to say we still have a bit more room to go still higher, although the overbought alarm bells are just starting to ring faintly in the distance.  We may see a pullback of some sort this week but I don't think it will be Tuesday.  Absent any new disasters from Europe and assuming continued good news at home, I'm going to call Tuesday higher.

ES Fantasy Trader

Last Thursday night I wrote " I may regret this in the morning, but tonight we're going short at 1232.50."  Well I did and Friday we covered this ill-advised short for a nasty ugly loss of 24 points.  Portfolio stats: the account is now down to $127,250 after 46 trades (30 wins, 16 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   No trade tonight - ES is still closed..

SLD    10    ES    false    MAR12 Futures     1232.50    USD    GLOBEX    DEC 22 00:40:18
BOT    10    ES    false    MAR12 Futures     1256.50    USD    GLOBEX    DEC 23 01:42:43