Friday, March 16, 2012

Friday could go a bit higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1392.75.  Holding above is bullish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1395.25.

What did they call me?
Last night I suspected we'd go higher today if the ES pivot held.  It did and we did, with the Dow tacking on another 59 points extending its winning streak to seven straight sessions.  Can we go for eight?  Let's sort it all out.

The technicals

The Dow: Today's close at 13,253 brings us so high I had to back out to the monthly chart to find the last time we were up here.  It was way back in January of 2008, when the Great Recession was just getting underway.  The last time we climbed up to this level was even earlier: May 2007.  And speaking of streaks, the Dow is working on six straight months of gains, something we haven't seen since 2006.

The important point here is that we've now just about completely cleared out the backlog of sellers who rode the market to the bottom in 2009 after buying in on the way down and swore that they'd get out if they ever got back to even.  From here, there's no real resistance until 14,000, and then the all-time high of 14,198 set in October 2007.  Even the current monthly upper BB is at 13,525, leaving us another 250 points of upside possible.

On a daily basis though, the RSI, stochastic and OBV have reached overbought levels, but money flow is still in pretty good shape - rising but not overly high.  We have hit the daily upper BB at 13,202 though.  But unlike the VIX, the Dow is known to sometimes just crawl right up the BB when it's in rally mode, and we certainly still seem to be in rally mode.  And we remain firmly inside the rising RTC of March 7th.  So no reversal signs here just yet.

The VIX:  Last night it looked like the VIX might go higher today and it did, slightly, adding 0.72%.  But it also made a nice doji in the process.  Does this signal a reversal/  Well the VIX futures also rose today but did so on a red candle, so I'd say it's not out of the question that the VIX may be stalling out here, despite its oversold indicators.

Market index futures: At 1:11 AM EDT we've got all three futures in the red, just barely.  ES is lower by 0.09%.  This seems to be following the recent stair step pattern of gains one day followed by a pause the next.  At this point the indicators are all stuck at overbought levels and have thus lost their predictive power.  That leaves us with an ES still solidly inside its rising RTC and a tiny little developing candle.  Not much to go on tonight.  At least there's no indication of a big dump on the way.

ES daily pivot: Tonight the pivot rises again, but just a bit from 1389.08 to 1392.75.  Since ES has been essentially flat in the overnight, we're now closer to the pivot than before.  Remaining above is still bullish, but with just a 2.5 point cushion, we'll need to watch this number Friday morning.

Dollar index: The dollar bounced off its upper BB today as I figured, ad exited it most recent rising RTC in the process.  There's nothing on this chart to suggest anything but a lower dollar Friday, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.97, tying its highest level of the year so far.  If we can break above this that will definitely be a bullish sign. 
History: According to The Stock Traders Almanac, Friday's triple witching day is historically quite bullish although the Dow has been down three of the last five years.

     And the winner is...

Friday is tough to call because of the triple witching.  But there's little in the charts to suggest a reversal is at hand right now, so on that basis I'm going to call Friday's close higher, though probably not by a lot.

ES Fantasy Trader

Tonight we go long at 1395.25, less out of conviction that we're going higher than belief that we're not going lower.

For now the account remains at $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.

Thursday, March 15, 2012

Thursday higher if pivot holds

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher, low confidence..
  • ES pivot (M contract): 1389.08.  Holding above is bullish..
  • Friday bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Last night I was thinking we'd see a small-range doji today, possibly ending lower.  Well we got the small range, but the Dow finished higher, though by only 16.4 points on something like a fat little star, so that's pretty close.  But that's still in the ballpark for a follow-on to a big up day.  The question now is, will the uptrend continue or are we topping?  Read on...

The technicals

The Dow: Today's little tail perched on top of yesterday's dramatic rise was just about what might be expected.  Closing entirely outside the upper BB though is worrisome.  History says that from here we could go any direction, but with the upper BB hit, down is more likely than up.

The VIX:  Today's 3.45% move higher in the VIX was the confirmation I was looking for last night   The pattern is reminiscent of a morning star and with a stochastic just about to execute a bullish crossover, I have to think the VIX is going higher Thursday, which would be a bad sign for stocks.

Market index futures: Tonight we switch over to the "M" contracts and at 12:55 AM EDT, all three are running higher, with ES up a quarter of a percent in a steady uptrend since about 5 PM.  This, at least for now, is not confirming today's small doji as a reversal indicator.  And we remain solidly inside the latest rising RTC, so that's good too.

ES daily pivot: Tonight the pivot rises from 1382.67 to 1389.08.  However, with the steady upward drift of ES in the overnight, we are still above the new number and that's a good sign.

Dollar index: While yesterday the dollar touched its upper BB, today it closed on it.  We didn't get the reversal I thought might happen today, but now it's looking for likely for Thursday, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index rose to 0.97, tying its highest level of the year.  It will be bullish if we can push this number higher, otherwise bearish.

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

     And the winner is...

While there was an inkling of a bull case in the charts last night, the same factors are in play tonight, only stronger.  Unfortunately, we've got some mixed messages in the charts again, with the Dow and VIX looking negative, but the dollar and futures looking positive.  Whenever that happens, I tend to lean in the direction the futures are running, since they seem to be a pretty good predictor.  This week is also historically a good one and that should never be discounted.  However, I do think a rising VIX will eventually catch up with us, so that might come into play early next week.  But for now, assuming ES doesn't break below its pivot  before mid-morning I'm going to call Thursday higher.  Keep an eye on 1289.08.

ES Fantasy Trader

Tonight we're standing aside again, because although I do think the market's going higher Thursday, I also think most of the gains in ES have already been made.  I normally enter trades sometime after midnight, but the ideal entry here would have been earlier this evening.  Oh well, the stock market is like the bus, as they say - there's always another one coming along soon.

So for now the account remains at $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.

Wednesday, March 14, 2012

Small doji Wednesday, maybe a bit lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, low confidence..
  • ES pivot 1388.25Holding above is bullish..
  • Rest of week bias higher technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Holy moly.  Last night I wrote "we might be set for at least a small gain Tuesday."  That turned out to be the understatement of the year as the Dow jumped 218 points for its biggest gain of the year so far.  The Naz and S&P gained even more percentage-wise.  Nice.  So does this mean profit-taking is on the way or are we on a roll?  Read on...

The technicals

The Dow:Today's tall green candle in one fell swoop took us decisively out of the 12,950-13,000 range that has plagued us all year so far.  Interestingly, it happened on higher than average volume.  And even after today, the indicators are still not overbought, although we did bust right through the upper BB.  That's the one point that might argue against a continuation of this rally on Wednesday.

The VIX:  The VIX today extended its recent waterfall decline to four straight days, this time with a gap down inverted hammer.  Notably, its close of 14.80 was under the lower BB, and so low I had to go to the weekly chart to find the last time we were down here (it was just about a year ago, the week of April 25th, 2011).  It's worth noting that the VIX has multi-year support at these levels going back to 2008.  The last time we were substantially lower than this was in the 2005-2007 rally.

So now we're at an interesting crossroad.  The daily chart suggests a VIX reversal any day now, but the weekly chart now offers no further support until its lower BB all the way down at 11.22.  In view of the fact that the VIX, though gapping down, did put in a green candle today, the first time its managed to do that in five sessions.  But like the other charts so far this year, any reversal warning requires confirmation.  Right now the VIX may want to go higher tomorrow, but I'll believe it when I see it.

Market index futures: At 1:30 AM EDT, we've got a mixed picture, with ES and NQ running a bit lower (ES down just 0.05%) and YM higher by only 0.03%.  Let's call it essentialy flat.  But today's tall green candle decisvely busted the 1375 resistance level that plagued us last month.  It also closed way above its upper BB.  Seeing this and after such a big one day gain, it would not be unreasonable to expect a pause while the market catches its breath and digests its gains.  The small overnight doji being formed certainly seems to support that idea.  Even at that, the indicators are still only close to, but still not yet at overbought levels.

ES daily pivot: Tonight the pivot took a big jump from 1370.42 to 1388.25.  Some basically sideways action in the overnight keeps us above even the new level, though not as much.  Still, 7 points is a respectable distance, and a positive sign.

Dollar index: Today the dollar ut in a gap-up doji that just managed to touch the upper BB at its intraday high.  With overbought indicators, this portends a lower dollar Wednesday which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.96.  Given today's big run, I'll expect it to (finally) go higher tomorrow.  That would be a positive sign.

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

Sentiment: Once again it's time for the latest TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1
  2  1/9        56         37        +     1278   2/2
  3  1/17       41         33        +     1289   3/3
  4  1/23       46         32        +     1315   4/4
  5  1/30       48         31        +     1316   5/5
  6  2/6        56         30        +     1345   6/6
  7  2/13       48         31        +     1343   7/7
  8  2/21       44         32        +     1361
  9  2/27       48         24        +     1366
 10  3/5        43         26        +     1370
 11  3/12       46         32        +     1371

Again, 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 2/13 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 7 for 7.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And once again, I voted bullish this week.  I'm still not seeing any technical reversal indicators on the monthly SPX chart.

Interestingly, both bullish and bearish sentiment increased this week, apparently at the expense of the fence-sitters.  But since bearish sentiment gained more, the bull-bear ratio is actually smaller this week than last.  Hardly the sort of contrarian extreme sentiment reversal indicator one would expect in anticipation of a top.   In fact, for five weeks of the 11 so far this year, there was actually more bullish sentiment than this week.

     And the winner is...

I'm going to say that on Wednesday we're going to get a small range doji that's typical of the day adfter a big gain when the VIX is under 20.  There still seems to be room to run higher on the weekly charts (the Dow's upper BB is at 13,416), but I'd be surprised if we got an immediate push higher.  If nothing else, the fact that today we busted so many Bollinger bands makes me think that we might go at least a little lower Wednesday.

ES Fantasy Trader

Despite Fed-related uncertainty, I'm glad now I decided to go long last night, even though I left the party much too early and left some cash lying on the table.  Nevertheless, we still booked a 1.5 point gain.

Tonight, I'm not seeing a big edge either way, so we're standing aside.

The account is now $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1380.25    USD    GLOBEX    11:07:55   
BOT    10    ES    false    MAR12 Futures     1378.75    USD    GLOBEX    01:44:50   


Tuesday, March 13, 2012

Tuesday maybe higher but watch Fed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday possibly higher, unless torpedoed by Fed.
  • ES pivot 1370.08Holding above is bullish..
  • Rest of week bias mixed technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1378.75.

Well I was wrong last night - after looking at some mixed messages on the charts, I ended up picking the wrong message.  I thought we were going lower today, and although the Naz did drop 0.16%, the Dow gained 38 points.  Let's see if we can get this straightened out for Tuesday.

The technicals

The Dow: Today the Dow completed its total retracement of its big dump from a week ago.  And its close of 12,960 drops us right back into the congestion zone of 12,950-13,000 in which we spent so much time wandering around the last half of February.  Yesterday's shooting star was a false alarm.  That's why this pattern always requires confirmation.  Today's green candle cancels that and presents not even a potential reversal.  The indicators are also only about halfway up their trip from oversold to overbought.  If anything, the Dow appears to be setting up another assault on 13K.

Daily VIX
The VIX:  Once again, the chart du jour is the daily VIX.  Look at how we've now had a waterfall of three consecutive gap-down dojis here.  Today's blasted right through its ST support and took us exactly to the lower BB (and even lower intraday).  That's a remarkably quick five day trip from upper to lower BB.  And of course that means, as I always say, that the VIX doesn't like to spend more than a day or two hanging out on its BB's.

However, while a higher VIX is possible in the next day or two, a wider look at the weekly chart shows that today's drop broke support going back to January 23rd and we're now close to last year's low at 14.75.  And the weekly lower BB isn't until 12.98.  So although we may be in for a short bounce, there's still plenty of room to run lower in the coming weeks.

And finally, I note that the VIX generally has a kind of manic-depressive character to it.  When it shoots up, it tends to stay high for a while.  And the higher it goes, the harder it becomes for it to come back down.  Same thing in the other direction.  When the VIX is down, it gets depressed and that makes it harder for it to get back up again.  With the recent inability of the VIX to break back over 20 and in fact moving lower, we may be headed for one of these depressive periods.  And that's good for stocks.  At the very least, I don't think we have to worry about four consecutive days of up 400, down 400 like last summer.

Market index futures: What a difference a day makes.  After looking rather poor last night,  ES ended up staying in its rising RTC today.  True, it put in a long dragonfly doji, but we've seen so many of these false alarms this year, it really requires confirmation.  And at 1:50 AM EDT we're not seeing any, with all three futures in the green and ES up a decent 0.44%.  There's not much to dislike in this chart.

ES daily pivot: Tonight the pivot barely ticks up from 1370.08 to 1370.42.  Coupled with an uptrend that began at 1 PM Monday and continues in the overnight, we're now now a good nine points above, which is a positive sign.

Dollar index: After two big  days of gains, the dollar took a rest today, dropping 0.21%.   That might suggest a reversal lower, but we're right in the middle of the Twilight Zone (the region midway between BB's), so anything could happen Tuesday.  This chart is too tough for me.

Morningstar Market Fair Value Index: No update posted on the MS web site today.

History: According to The Stock Traders Almanac, Tuesday is historically fairly bearish and the weakest day of the week.

     And the winner is...

Technically I'd say it looks like we might be set for at least a small gain Tuesday.  Unfortunately, tomorrow is a Fed day, so I think the close will be more influenced by that than the technicals.  I suspect that the Fed will not throw any cold water on the market but one can never really be sure.  So no official call tonight - I don't pretend to know what Uncle Ben might be planning to say.

ES Fantasy Trader

Last night's short just wasn't working so I dumped it today for a small 1.5 point loss.  Despite my caveats above, tonight we're going to take a speculative long at 1378.75, with the intention of exiting before the Fed speaks.

The account is now $114,000 after 20 trades (14 wins, 6 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1369.00    USD    GLOBEX    11:16:40   
SLD    10    ES    false    MAR12 Futures     1367.50    USD    GLOBEX    01:40:59   


Monday, March 12, 2012

Monday looking lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower.
  • ES pivot 1370.08Holding under is bearish..
  • Rest of week bias mixed technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes short at 1367.50..
 Quote of the Day
"Personally, I think that it is just naturally human to like to see that you have wealth, and more wealth feels better than less."
- David Van Knapp, Seeking Alpha


Last Thursday night, I got spooked by a sudden downward blip in ES that seemed to run counter to otherwise positive looking charts.  Nevertheless, the pivot held and the market finished  a bit higher with the Dow gaining 14 points.  With a triple witching and a Fed meeting coming, this should be another interesting week.  Let's try and figure out where it might take us.

The technicals

The Dow: On Friday the Dow finished retracing its big dump from last Tuesday but then closed off its high to give us a classic shooting star.  This is a reversal warning, albeit not a highly accurate one.  With indicators just coming off oversold and a stochastic just finishing a bullish crossover, we'd definitely want to wait for confirmation before calling this a reversal.

The VIX: Meanwhile, the VIX formed a nice gap-down doji with a 4.68% loss that took it right to its recent support at 16.70 before closing a bit higher.  While this doji also warns of a possible reversal, we note that the lower BB is at 16.02, leaving about a point of possible further downside.  Though the VIX could turn right here, the indicators, still headed lower, suggest the possibility of one more day of downside, which would be good for stocks.

Market index futures: At 1:30 AM EDT, all three futures are lower with ES leading the way down, off 0.36%.  The failure of any follow-through to the excellent three day run last week is concerning.  The overnight candle so far is looking like a dark cloud cover.

ES daily pivot: Tonight the pivot rises from 1361.83 to 1370.08.   This jump, coupled with a sagging ES puts us below the pivot, though only by a few points for now.  Still this is a worrisome sign.

Dollar index: The dollar had a big gain Friday taking it nearly to its upper BB.  Though this tall green candle does not suggest a reversal, the bearish crossover in the stochastic does.  The dollar looks to have more downside potential than up right now.  The euro, meanwhile is in a support band around 1.30-1.31.  The last three downtrends in the euro have stopped here.  This also suggest a lower dollar is possible Monday.

Morningstar Market Fair Value Index: On Friday the index rose right back to 0.96 where it has stalled so far this year.  The continuing inability of the index to go above this level weakens the bull case.

History: According to The Stock Traders Almanac, Monday has a slight historical bullish bias.

     And the winner is...

Tonight I'm going to go with the Dow shooting star and the steadily declining overnight ES and vote with the bears.  The market just has a tired feel to it right now, as though it's all worn out from that slow grind back from last Tuesday's big fall.  I note also that J-Trader is going short.  So unless we can break above the ES pivot by mid-morning, I say we close lower on Monday.

ES Fantasy Trader

After skipping a trade on Friday, tonight we go short at 1367.50.

So far the account remains at $114,750 after 19 trades (14 wins, 5 losses) starting from $100,000 on 1/1.