Friday, February 3, 2012

Friday maybe a bit higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1321.92.  Holding above is bullish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1322.50.

Last night I thought we'd be going higher today.  While the SPX and Naz did indeed close up, the Dow lost 11 points.  Since that's the index I'm following, I guess I count this call as wrong, although on these types of small range doji days, where we close is almost random.  If the market had closed 15 minutes earlier, I would have been right.  Anyway, let's see what Friday might hold in store.

The technicals

The Dow: Sigh, another doji warning of uncertainty today.  The good news is that we are still pretty far from being overbought, and the stochastic just finished its bullish crossover today.   And even losing 11 points, the Dow remains within the rising RTC, so no bearish setup there.

The VIX:  The VIX finally did something sensible today - it declined on a red candle, closing at 17.98, the lowest close since last July 22nd, just before that ugly summer swoon.  Interestingly, the Dow is now almost exactly back to the same level as on that day also.  The big difference is that back then we were considerably overbought, but that's not the case today.

The VIX right now on the other hand is in fact overbought and its stochastic has just finished a bearish crossover, portending lower on Friday, and that's good for stocks.  The VIX remains firmly in a downtrend that began last November, as fear is slowly getting wrung out of the market.

Market index futures: Like the market as a whole today, the futures in the overnight are mixed with NQ rising, but YM and ES down.  ES is off, but just barely, down 0.04% at 1:55 AM EST.  Like the Dow, we got a doji here today.  In this case I like to look at the indicators and they're still climbing off oversold levels.  We also still have at least a bit of room to rise before the next resistance at 1328.

ES daily pivot: Rose from 1316.83 to 1321.92 tonight.  This took ES under the pivot right at midnight, but it then rallied back through it and is now above again, though only about a point.  Nonetheless, as long as we can hold above the pivot, that's positive.

Dollar index: The dollar's sort of been bouncing around in a 55-55.40 range recently.  We finished today in the middle of that range.  It's still difficult to tell where it's going next from this chart.  There's basically nothing to see here, move along.

Morningstar Market Fair Value Index: Some days this indicator doesn't mean all that much, but tonight I point out that yesterday the index hit 0.95, the first time we've seen this number in an uptrend going all the way back to Sept. 9, 2010.  And the market continued up for over two months from there back then.

History: According to The Stock Traders Almanac, Friday is historically bearish.

     And the winner is...

Overall, and despite my growing unease, I'm going to give the bulls one more chance for a higher close on Friday.  I just don't see a lot of downward pressure on this market, and lately an absence of sellers has meant a slow but steady move higher.  But once again, I'm not looking for any big moves either way on Friday.  Until I see some good reversal indicators on the charts, I see no reason to be short-term bearish.  Next week though may be a different story.

ES Fantasy Trader

Today it started looking to me like enough was enough, so I bailed and took a tiny profit of one quarter point while the taking was good.  Just as well, because ES continued lower from there.  Tonight we give it another try, going long at 1322.50 at 1:58 AM.

Portfolio stats: the account is now $106,250 after 8 trades (6 wins, 2 losses) starting from $100K on 1/1.

SLD    10    ES    false    MAR12 Futures     1323.25    USD    GLOBEX    11:25:49   
BOT    10    ES    false    MAR12 Futures     1323.00    USD    GLOBEX    01:10:35


Thursday, February 2, 2012

Thursday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher, medium confidence.
  • ES pivot 1309.33.  Holding under is bearish.
  • Friday bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1323.00.

Today was one of those perfect storm days, or more like anti-storm, when a bunch of diverse pieces of good economic news converged with historical precedents to help rescue the market from what technically looked to be setting up as a down day.  So we learn that while TA really does work, contrary to the sneering assertions of some people on the web, it doesn't always work.  But we just pick up the pieces and move on.

Oh and a quick performance note: I finished January with a monthly gain of 7.41%.

The technicals

The Dow: Today's action clearly demonstrates why one should wait for confirmation of dojis and stars.  They only indicate indecision, not reversals per se.  And the decision was made to the upside today.  This 84 point move was important because it kept us inside the rising RTC from December 28th and averted a bearish setup.  In addition, the stochastic just executed a bullish crossover.  I hear people fretting about "low volume" but honestly, it's been lately right in the range we've been seeing since last October.

I think the Dow is now well-positioned to move higher.  If you look at the last time it closed rising to these levels (12,716), back on January 20th, the indicators are now much less overbought, indicating more room to run.

The VIX:  Last night the word I used for the VIX was perplexing.  Today gave us a bit more clarity, in that the VIX moved back under 20 for a 4.58% drop.  And its indicators are now looking to have peaked at overbought levels, making me think now that the VIX might move lower on Thursday, and that would be good for stocks.

Market index futures: The regression trend channel technique has been working well lately.  Yesterday we saw ES trade outside a short descending RTC, a bullish setup.  Today we traded entirely outside and that was the trigger.  And in the overnight, ES is moving higher, along with its pals NQ and YM, with ES leading the way, uo a quarter of a percent at 1:10 AM EST.  I note too that ES completed a bullish stochastic crossover, always an excellent indicator and OBV hooked upward yesterday.  What's not to like?

ES daily pivot: As a result of today's gains, rose from 1309.33 to 1316.83 tonight.  But despite this jump, we remain six points above the pivot, not a bad spot to be at.

Dollar index: I thought the dollar would move higher today and it did - but from a gap down open, so despite putting up a green candle, it still ended lower on the day.  The dollar's being affected a lot by the euro due to the latest developments in Europe, so I wouldn't rely on this chart too much right now.

Morningstar Market Fair Value Index:  Don't know what's up with this thing.  Today MS is showing two different numbers on their graph for this index, so who knows.

History: According to The Stock Traders Almanac, Thursday is historically not quite as good as today was but still bullish nonetheless.

     And the winner is...

After getting a positive resolution to the recent spate of stars and dojis, I'd say we're in for still more upside on Thursday.  But as I mentioned earlier this week, I'm starting to get nervous.  Being up over 8% personally in just over a month so far this year, this can't last.  I like to think I'm a good trader, but I'm not a 96% annual return trader.

I note that the Dow's weekly money flow has just turned lower this week after rising pretty steadily since last August.  OBV is also nearing levels associated with a top.  I'm beginning to think a pullback may be in the works later this month, but just not tomorrow.  That's all, she wrote.

ES Fantasy Trader

Today our long finally came in and we took a profit of 13.75 points.  I held on to this trade even though I thought we might go lower today because I figured that if today was indeed lower, we'd be setting up for a reversal by the end of the week.  As it turns out today went higher and this trade made some money.

Tonight, we go long at 1323.00 at 1:11 AM.

Portfolio stats: the account is now $106,125 after 7 trades (5 wins, 2 losses) starting from $100K on 1/1.

SLD    10    ES    false    MAR12 Futures     1325.50    USD    GLOBEX    13:37:17    
BOT    10    ES    false    MAR12 Futures     1311.75    USD    GLOBEX    JAN 31 01:42:35    


Wednesday, February 1, 2012

Wednesday bias lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, medium confidence.
  • ES pivot 1309.33.  Holding under is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader remains long at 1311.75..

Well I think I got a little ahead of myself last night in thinking we might go higher today, though I did mention that it wasn't a sure thing.  Serves me right for trying to call a bottom.  Will Wednesday do what Tuesday couldn't?  Let's take a look.

The technicals

The Dow: After a dragonfly doji yesterday, the Dow simply gave us more indecision today in the form of a simple star.  Today's candle landed right on the lower edge of the rising RTC from December 28th.  That's a bit of a concern.  If we don't go higher on Wednesday, then it's likely we'll see further declines.  On the other hand, today's action brought the indicators closer to oversold, and to be honest, we're not seeing bearish candles, just indecision.  So unfortunately, we need to wait one more day again in the hope of getting some confirmation.

The VIX:  The VIX continues to perplex.  After rising for two days on red candles, today it sank on a green candle - go figure.  The good part is that it was unable to get past the 20 level I mentioned last night, and its indicators are starting to look overbought.  The bad part is that the futures seem to be suggesting that the VIX may be due to rise some more over the next few days - bad for stocks.  Hard to really pin this one down.

Market index futures: Tonight, all three futures are running in the red, with ES down 0.17% at 1:20 AM EST.  Yesterday's hammer was followed by a doji - not exactly the sort of bullish confirmation we'd be looking for.  And the overnight isn't providing much to cheer about either.  The only good things I see here are that ES has now exited its descending RTC, a bullish setup, and its stochastic seems to be linging up for a bullish crossover.  But we're not there quite yet.

ES daily pivot: Bumped from 1306.50 to 1309.33 tonight.  Unfortunately, combined with an ES that's been wandering lwoer since about 8 PM, that puts us three points below the pivot, a place we don't want to be.

Dollar index: I thought the dollar would go lower today and it did indeed ghap down at the open, but then proceeded to recapture those losses and actually end higher.  The dollar is now consolidating but remains in a descending trend.  That could end tomorrow though as it's still looking oversold and getting ready to move higher.  That's supported by  the euro chart which more clearly looks poised to go lower.  None of this is good for stocks.

Morningstar Market Fair Value Index: The index hasn't been updated since last Thursday (hey Morningstar... wake up!) so no news here.

History: According to The Stock Traders Almanac, although February on the whole is actually pretty weak, the first day of the month is historically quite bullish.

     And the winner is...

Another tough call.  I'd really like to say we're going higher on Wednesday, particularly since February 1st is so strong historically, and I'm aware of the "turnaround Tuesday" phenomenon, but I'm afraid right now I'm just not feeling the love.  So I'm going to have to say Wednesday's going lower.  Not by a great deal I think, but lower nonetheless.

ES Fantasy Trader

Portfolio stats: the account remains $99,500 after 6 trades (4 wins, 2 losses)   Tonight we remain long at 1311.75.  Like I said last night, I figure if this trade doesn't make money on Tuesday (it didn't),  it more than likely will on Wednesday.

Tuesday, January 31, 2012

Tuesday maybe a bit higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence.
  • ES pivot 1306.50.  Holding above is bullish..
  • Rest of week bias higher technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1311.75..

Last night I figured it looked like we were going lower today and we did close down - all of 7 Dow points.  It was another one of those days we've come to see more of lately, with a dive right out the gate and then the rest of the day gaining it back.  Let's see what Tuesday might hold in store.

The technicals

The Dow: Today's action formed a tall dragonfly doji, and that's sometimes a good reversal indicator.  However, it does require confirmation the next day, particularly in this case where we're still a log way from the lower BB and the indicators are not yet oversold.

The VIX:  I thought the VIX wouldn't go up today but it continued to "climb backwards" putting in a second gap-up red candle that while posting a 4.7% gain on the day, closed down nearly a point from the open.  This is a very very unusual pattern.  I searched back to 2007 and only found one other instance of something similar, and the next day (Feb. 11, 2011) the VIX was lower.

I don't know if this pattern has an official name, but I will call it the "drowning man" pattern: two consecutive gap-up red candles.  The idea is that the drowning man rises up to the surface at first, but the undertow keeps pulling him back down.

Does this mean the VIX will go lower on Tuesday?  I have no idea.  However, I do believe it signals limited upside for the VIX, especially since it it now sitting just below 20.

Market index futures: Tonight all three are positive, with ES up 0.15% at 1:15 AM EST.  ES put in a classical hammer today and the upside in the overnight could be taken as confirmation of that.  The indicators are a bit less encouraging and still not at the sort of oversold levels that would more clearly signal a reversal.  However, the overnight does take us out the edge of the descending RTC and that's at least a bullish setup.

ES daily pivot: Fell tonight from 1312.92 to 1306.50.  That was enough to out ES above the pivot, a positive sign.

Dollar index: Last night I suggested the dollar had higher to go this week and it started doing that today, gaining 0.37%.  It's not clear from this if it will continue, but looking at the euro chart we see a developing symmetrical triangle and those often resolve in the direction they were entered.  That portends higher for the euro soon, meaning lower for the dollar, and that would be positive for stocks.

Morningstar Market Fair Value Index: No update given today.

History: According to The Stock Traders Almanac, Friday is one of the two most bullish days in the month (the other being the first).

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's how things stack up so far this year:

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1
1/9         56        37        +     1278   2/2
1/17        41        33        +     1289
1/23        46        32        +     1315
1/30        48        31        +     1316

The SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 1/9 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 2 for 2.  And of course that means that since I voted with the majority, the poll as a whole was also correct that week.  So far, the "majority is always wrong" theory isn't looking too good.

This week we note that while bearish sentiment remains essentially unchanged for the third week in a row, bullish sentiment continues to increase slightly.  The numbers are still not extreme enough to be contrarian bearish, but we'll see how things develop.  For the record, I voted bullish based on my reading of the monthly SPX chart.

     And the winner is...

There's two ways to play this.  The aggressive view is that we're going higher Tuesday.  The conservative view is that Tuesday is uncertain but if we don't go higher, then we're more likely to move up on Wednesday.  I think I'm going to take the view that the bears' continued inability to knock 'em lower is a positive sign, particularly in view of the fact that we're getting news from Europe that's not so hot, and therefore we have at least a chance of going higher on Tuesday.  And if we don't go higher Tuesday, I'm more confident that we will on Wednesday.  Note also that those are the last and first days of months respectively and those are historically positive days for the market.

ES Fantasy Trader

Portfolio stats: the account remains $99,500 after 6 trades (4 wins, 2 losses)   Tonight we're going long at 1311.75.  I figure if this trade doesn't make money on Tuesday, it more than likely will on Wednesday.

Monday, January 30, 2012

Monday likely lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, medium confidence.
  • ES pivot 1312.92.  Holding above is bullish..
  • Rest of week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside..

Last Thursday night, I called the Dow lower and it rewarded me with a 74 point decline.  Does this mark the start of a new downtrend?  Let's figure it out.

The technicals

Dow daily
The Dow: You can't say the Dow didn't give you enough warning of Friday's decline.  Check out the Dow daily chart here.  After four big up days, last week gave us: a doji, a hanging man, an even bigger hanging man, and a star.  The finally came the drop on Friday.  This red candle finally got the indicators off their overbought levels and they're now tracking back down the chart.  You can also see how well the RTC worked n(the steep set of lines labeled 0.988).  After breaking out the right edge on Wednesday, we got two days of declines.

The VIX:  After putting in a hammer on Thursday, the VIX on Friday did indeed post a gain on Friday, but annoyingly did so on a red candle that looks a lot like a dark cloud cover - a bearish reversal warning.  Indeed, the VIX remains firmly inside a declining RTC going all the way back to last November 25th.  Since that point, we've had no fewer than four different occasions of oversold indicators and yet none of those have managed to foster a VIX rally.  Were currently in the fourth.  Will the VIX climb on Monday, boding ill for stocks?  Right now, it's not looking very likely.  Until I see it break out of this RTC, I'm reluctant to call an extended market decline.

Market index futures: All three futures are down fairly significant;y in the overnight.  ES is off just over half a percent at 1:25 AM EST.  The uptrend that began January 5th is now clearly over.  And because of this extended rally, there's not much support below us.  There's the 1300 psychological level and then a small shelf at 1293.  Either way, there's nothing on this chart to suggest Monday might go higher.

ES daily pivot: Fell from 1318.8 to 1312.92 tonight.  This still leaves us under the pivot, just not as much as before.  After dropping off the open this evening, ES has pretty much been moving sideways.  This sort of action is more bearish than bullish.

Dollar index: The dollar continued its decline going back to January 17th last week.  It's now sitting on its lower BB and also at a fairly good intermediate term support level.  And its indicators are all quite oversold.    Although there's no sign of a reversal on Monday, I do believe the dollar will run higher this week.

Morningstar Market Fair Value Index: On Friday the index posted only its second decline in nine sessions back to 0.93.  That's bearish.

History: According to The Stock Traders Almanac, the last two days of January are actually fairly bullish.

     And the winner is...

It's not 100% clear, but the majority of the evidence this evening seems to point to a lower close on Monday.  With the VIX still reasonably below 20, I'm not looking for a major crash, but I wouldn't be surprised to see one or two more days of downside action before the advance resumes.

ES Fantasy Trader

Tonight I decided to just forget about this long running short trade from last week and covered for a half point gain.  It was just lasting too long and I wanted to start over fresh tomorrow.  Portfolio stats: the account is now $99,500 after 6 trades (4 wins, 2 losses)   Tonight we're just going to stand aside and see where we're at in a day.

BOT    10    ES    false    MAR12 Futures     1305.25    USD    GLOBEX    00:51:36