The Night Owl Trader

Friday lower

2012-02-10T01:37:00.000-05:00

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Friday lower, high confidence.
ES pivot 1347.25. Holding below is bearish.
Next week bias uncertain technically.
Monthly outlook: bias up.
ES Fantasy Trader goes short at 1345.25.

Recap

Last night I was thinking today's action would hang on the news out of Greece. Well we got some news today, I think, but darned if I can figure out if it was good or bad. And I guess the market couldn't either, with the Dow ending up just 6.5 points. What does this all mean for Friday? Read on, MacDuff...

The technicals

The Dow: For the fourth day in a row, the Dow provided us with another reversal indicator, today a small body star. But for the first time since January 23rd, the stochastic is forming a bearish crossover. The 23rd was also a star about the same size as today's. And the next day then closed lower, down over 100 points in fact from high to low.

Of additional concern is that the SPX Hi-Low index has now spent four days at its extreme level of 100. The last time this happened was December 7, 2011. The next day, December 8th, the Dow was down 198 points.

VXX daily

The VIX: Last night I wrote "I'm thinking the VIX goes higher Thursday" and sure enough, the VIX gained 2.59% today. But the Chart of the Day is the VIX futures. Check this out (click the chart to enlarge). Notice the strong descending RTC with a Pearson's coefficient of 0.984 going back to January 13th. Then notice how two days ago, the VXX closed just outside the right edge of this channel.

That's the bullish setup. Then we have the green candle yesterday trading entirely outside the RTC. That's the trigger. And then finally today, bang, a gap-up green candle, with the biggest daily gain since last December 28th. The downtrend in the futures is now definitely over. Clearly someone thinks the VIX is going up. This is a very very important move, in my not so humble opinion. And it is even more significant given that the VIX has a natural tendency to decline on Fridays. And that's bad for stocks.

I'm not alone in this view either. The great Rob Hanna in his blog today says, "Implications of the rising VIX and 50-day SPX high appear to be moderately bearish over the next few days, suggesting a pullback."

Market index futures:Right now at 1:17 AM EST, all three futures are in the red, with ES down a significant 0.43%. It's been a while since we've seen losses of this magnitude at this hour of the night. Today's action brought us yet another reversal indicator in the form of a small body star but this time, the overnight is providing some confirmation.

Today's candle also fell right on the edge of the rising RTC and now we're trading outside it. That would be a bearish trigger. We'd have to rise from 1342, where we are now, to 1355 just to get back in the RTC. That's not looking likely right now. The indicators have now all peaked (finally) at overbought levels and the stochastic has completed its bearish crossover.

ES daily pivot: Rose once again tonight from 1344.50 to 1347.25. But tonight is different. For the first time in days, we broke under the pivot at 8:20 PM. Then with ES drifting lower and the pivot rising, we're even further below it now - another bad sign for stocks.

Dollar index: The dollar gave us a doji today warning of a possible move higher on Friday, and that would be bad for stocks.

Morningstar Market Fair Value Index: The index extended its flat streak to four days stuck on 0.96. The last time we saw a run of four days level like this ended on 11/8./11. The next day was down 385 points. Just sayin'.

History: According to The Stock Traders Almanac, Friday is historically just slightly bullish. But recall that February on the whole is pretty weak and one third of the way through so far we've yet to see any weakness.

And the winner is...

After a number of days of difficult charts and wishy-washy indicators, tonight we're finally getting some significantly stronger guidance, and it sure looks like it's in a downward direction. The rise in the VIX futures really rings the alarm bells for me. I really think the pullback everyone's been waiting for is now on the doorstep. I even took on a position in DXD (the Dow Ultra Short ETF) this afternoon at 13.62. So I'm going to call Friday lower.

ES Fantasy Trader

Last night we stood aside from insufficient information to pick a direction. Tonight though, we're going short at 1345.25. Portfolio stats: the account remains $108,375 after 11 trades (8 wins, 3 losses) starting from $100,000 on 1/1.

Thursday lower unless good Greek news

2012-02-09T01:52:00.000-05:00

The Hoot
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Thursday uncertain: slight negative bias pending Greek news.
ES pivot 1344.50. Holding above is bullish.
Friday bias uncertain technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

Recall that last night I said "we're closing higher on Wednesday". Well it sure wasn't looking good early on, but once again, as we've been seeing so often lately, the bulls blocked the bears and battled back for a win in all three major averages. Admittedly, the Dow gained just 6 points, but hey, green is green. Tomorrow is likely to be tricky - let's try and figure it out.

The technicals

The Dow: Some crazy session today, eh? At 10:20 AM it was looking like the rally was kaput. But after marching downhill for just an hour, the Dow came in for a landing and then took off right back up again, to end with yet another hanging man. That makes, in the last three days, hanging man, star, hanging man. I hate to sound like a broken record, but none of these reversal warnings are giving us a reversal. In an ongoing uptrend like this, I will absolutely require confirmation before calling the Dow lower. And so far, I'm still not seeing it.

When it comes, and it will come eventually, I will have missed the top. But that's much better than calling for a reversal every day and not getting one.

The VIX: I got this one plain wrong last night - I thought we had a shot at a lower VIX today but instead it gained 2.89%, coming with a bullish stochastic crossover. Now I'm thinking the VIX goes higher Thursday and that's bad for stocks.

Market index futures: All three futures just turned negative at 1:27 AM EST. Like the Dow, ES has been rife with reversal warnings lately. Today it gave us its third hanging man in a row. But all three have been higher than the ones before. And ironically, the overnight action so far anyway is also forming, yes, yet another hanging man. And the indicators are all oversold-broken.

So you can't believe the candles, you can't believe the indicators, what can you believe? The regression trend channel to the rescue. Right now, we've moved right the the edge of the rising RTC from 2/1. That is a bearish setup.

ES daily pivot: Rose from 1340.75 to 1344.50 tonight. And we are once again above even this number. As long as we hold above it, there's no reversal coming.

Dollar index: Actually closed higher from a gap-down open. That signals at least the possibility of higher Thursday, but it's far from certain.

Morningstar Market Fair Value Index: For the third day in a row the index remained at 0.96. The fact that it appears to be pooping out at this level now is cause for at least a bit of concern.

History: According to The Stock Traders Almanac, Thursday is historically only very slightly bullish.

And the winner is...

Very very tough to say. The technicals seem to be starting to show at least a few signs of weakness, though no outright reversal just yet. But right now we're pretty much just waiting for those freakin' Greeks again. After kicking their latest can down the road for four days straight, we're supposedly going to get some sort of news (again) on Thursday that will resolve the question of whether or not the Greeks will accept retiring at age 50 instead of 49 or whatever the hold-up is. I think that's really what all these dojis have been about all week so far. And with all that uncertainty in the air, it would be foolhardy of me to call anything right now without technical confirmation.

So it's really pretty simple: Greece reports good news, market goes up. Greece reports bad news, market goes down. Greece keeps kicking the can, market goes nowhere. On Thursday, don't watch the charts, watch the news.

ES Fantasy Trader

I held on and held on to this trade as long as I dared, finally giving up at 1:11 AM with a quarter point profit. But hey I'll take it - that still beats a quarter point loss. Tonight, we're going to stand aside. This may be an ES fantasy trade, but it's not wild gambling. I'm not putting on any trades where I don't feel I have an edge and tonight's one of those times.

Portfolio stats: the account is now $108,375 after 11 trades (8 wins, 3 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1,347.000    USD    GLOBEX    01:10:49

BOT 10 ES false MAR12 Futures 1346.75 USD GLOBEX FEB 8 01:38:53

More gains possible Wednesday

2012-02-08T01:50:00.000-05:00

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

Wednesday higher, medium confidence.
ES pivot 1340.75. Holding above is bullish.
Rest of week bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader goes long at 1346.75.

Recap

Last night I called for a slightly lower close today and while the market did open lower, it rallied back as we've seen so often lately through the day to close higher by 33 points, apparently on expectations that things are improving in Greece. Where to next? Let's see...

The technicals

The Dow: Today's candle was a star, and like yesterday's hanging man, it is ordinarily a sign of indecision. But all year so far, the decisions, when they come, all seem to be in the upward direction. We finally got an oversold indication from RSI today but not from the stochastic, which is generally more accurate. I do not see a top on this chart yet. We remain firmly inside the rising RTC and today's close at 12,878 finally moves us above the 12,850 resistance line and even two points above last year's intraday high. There's no resistance now until 13,000 which is both psychological and the "spring shelf" from 2008.

The VIX: The VIX finally put in a rational candle, declining 0.62% on a small red candle. With a close at 17.65, a general downtrend, and two recent stabs down to 16.10, I'm thinking there's more downside potential here on Wednesday, and that would be good for stocks.

Market index futures:Tonight all three futures are up, with ES gaining 0.15% at 1:40 AM EST.   This continues the five day winning streak for ES with no sign of reversal. The indicators are all overbought but they're basically "overbought broken". The market no longer seems to care about this. Last month we were overbought for 12 straight sessions before getting a pullback. We're also still well inside the rising RTC, so no signs of a reversal here yet.

ES daily pivot: Rose again from 1336.58 to 1340.75 tonight. This brings us a bit closer to the pivot but we remain above as ES continues to drift slowly higher in the overnight. Again, I see nothing negative here.

Dollar index: The dollar broke out of an eight day trading range to the downside today on the strength of the euro. There's nothing on this chart to suggest a reversal either. So a lower dollar would be good for stocks on Wednesday.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.96. The uptrend remains in place, a positive sign.

History: According to The Stock Traders Almanac, Wednesday is historically on the bearish side and the weakest day of this week.

   And the winner is...

I have to say tonight it's looking like the bulls remain in control so I'll say we're closing higher on Wednesday. Although I have to think a pullback is coming soon, I just don't see it right now. And as they say, you can't fight the tape.

ES Fantasy Trader

Tonight I had enough and threw in the towel on yesterday's short. This market just refuses to go down and there's no point arguing with it, so I just took the 12.5 point loss. Ugh. Tonight we go long at 1346.75.

Portfolio stats: the account is now $108,250 after 10 trades (7 wins, 3 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1346.50    USD    GLOBEX    01:10:18
SLD    10    ES    false    MAR12 Futures     1334.00    USD    GLOBEX    FEB 6 01:47:03

Tuesday a bit lower but watch Greek news

2012-02-07T01:58:00.001-05:00

The Hoot
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Tuesday lower, low confidence.
ES pivot 1336.58. Breaking under is bearish.
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader remains short at 1334.00.

Recap

I figured we'd go lower today and so we did, although the entire drop came right out the gate and the market spent the rest of the day playing catch up, finishing down just 17 points despite renewed rumblings from Greece. I find it interesting that the sort of news that last summer would have resulted in a triple digit dive, today barely moved the needle. Can we continue pushing higher on Tuesday? Let's consult the crystal ball.

The technicals

The Dow: Today the Dow gave us a little toy hanging man for a candle. Is this a reversal sign? Well, during the current uptrend, the last two hammers were actually followed by moves higher. With the clear positive bias to the market this year so far, I'd hesitate to call Tuesday lower on the basis of this candle. Note also that we're still not overbought in any of my Fave Five indicators.

The VIX: My call for a higher VIX today worked out nicely with the VIX up 3.86% stopping just short of its resistance at 18. But what to make of the big tall hammer, or is it a hanging man. With no clear trend, it's hard to say. Even the indicators aren't particularly clear at this point. I'm going to have to take a pass on where the VIX goes tomorrow, which is a shame since that's normally one of my favorite markers for the next day's movement.

Market index futures: All three are just barely in the red at 1:40 AM. ES is down just a quarter point at 1338.75. It also put in a small hanging man. However, tonight's action neither confirms nor dispels that, and we do remain within the rising RTC. The only reversal warnings I see are from the indicators which are now all overbought. But recall they can stay that way for a while before the trend ends.

ES daily pivot: Rose from 1333.67 to 1336.58 tonight. With ES running basically flat since the close today, that now puts us very close to this level, though still above, which is a good sign.

Dollar index: In keeping with the odd action of late, the dollar today gained 0.16% on a big red gap-up candle. It's acting like it wants to rise but isn't quite up to the task. So we remain stuck in the range going back to January 27th. No real guidance here.

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

History: According to The Stock Traders Almanac, Tuesday historically has no significant bias either way.

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   3/3

1/23        46        32        +     1315

1/30        48        31        +     1316

2/6         56        30        +     1345

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 1/17 was correct, the S&P now being higher than then. I'm using the column "Accuracy" to track my calls. So now I'm 3 for 3. 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 contrarian "majority is always wrong" theory still isn't looking too good.

I note that the bullish sentiment is back to 56% while the bears barely changed. So we're still not seeing the sort of decline in bearish sentiment that would lead to a contrarian bearish call. I voted positive again this week, but this may be the last time for a while.

And the winner is...

If this was a weather forecast, it would be "light and variable". I'm still not seeing any signs of an imminent decline, but the market is also clearly having some trouble getting past the 12,850 level. The old crystal ball is just a bit murky tonight. My best guess is that the current pause may continue another day or so, so I'll call Tuesday's close slightly lower. But, and this is a big but,, there's supposed to be some more news from Greece coming out and that's sure to have an impact on prices. No chart can predict that, so keep one eye on the news ticker for that.

ES Fantasy Trader

Tonight we remain short at 1334.00. If this doesn't pan out tomorrow, I will seriously consider giving up on it..

Portfolio stats: the account remains $114,500 after 9 trades (7 wins, 2 losses) starting from $100,000 on 1/1.

Monday looking lower

2012-02-06T02:15:00.000-05:00

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

Monday lower, medium confidence.
ES pivot 1333.67. Breaking under is bearish.
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader goes short at 1334.00.

Recap

As I suspected Thursday night, we did indeed move higher on Friday. But I was surprised by the strength and breadth of the advance. There was in fact much hand wringing and tooth-gnashing in the blogosphere about how and why this market simply refuses to go down. I don't really care about the why's as much as I do simply about being on the right side. And which side might that be on Monday? Read on...

The technicals

The Dow: The Dow went out like gangbusters on Friday, shooting up 157 points to close at levels not seen since May of 2008, although last year's intraday high was a bit above this on May 2nd. Interestingly, while back then we were very overbought indeed, right now the Dow's daily indicators, though rising, still have not reached those levels yet. And we remain firmly in the rising RTC going back to December 29th, 2011.

That said, we can consider Friday to have closed right on a resistance line. Although we have finally cleared the "summer shelf" from 2008 around 11,685, we now have to deal with the spring shelf of 2008 around 13,000. I think the Dow's in much better shape to mount an assault on this level than it was the last time around, last May. This chart, in fact doesn't look bad at all.

The VIX: Perhaps the most telling chart tonight is the VIX, which took quite a gap down on Friday to close at 17.10, a level not seen since last July 22nd, just before the Europe-fueled summer insanity of 2011. But there are two important things here: first the VIX formed a clear hammer, and second, it did it by piercing the lower BB. As I've noted before, the VIX rarely goes lower after breaking under the lower BB. This would seem to suggest a higher VIX on Monday and that would be bad for stocks.

Market index futures: Friday's tall green candle isn't a reversal sign, but the fact that it closed almost two points above the upper BB is. Moving out to the weekly chart, it appears that the ES indicators have now peaked in overbought territory Add in the fact that we've got no positive follow-through in the overnight and it's looking like we may be in for a pause.

ES daily pivot: Rose once again from 1321.92 to 1333.67 tonight. This had the effect of considerably narrowing the distance to the pivot. Combined with ES opening lower and drifting down from there in the overnight so far, we'll need to watch this level. If ES breaks under the pivot that's bearish for sure.

Dollar index: Meanwhile, the dollar on Friday remained stuck in what's now a 7 day trading range. Once again, not much to learn from this chart.

Morningstar Market Fair Value Index: On Friday the index rose again to 0.96 extending a run from 0.83 on December 19th. While this is still positive for stocks, the approach of the 1.0 level is definitely a caution sign.

History: According to The Stock Traders Almanac,Monday historically has a small bearish bias to it.

And the winner is...

I'm going to have to say it's the bears. Although the Dow chart's in pretty good shape, the ES and the VIX are both suggesting a lower close Monday. That's my story and I'm sticking to it.

In fact we just might see a few days of retrenchment here before the next leg up. But let's get Monday out of the way first. We'll see.

ES Fantasy Trader

Last Friday's long trade worked out nicely and I rang the register just before lunch time with a tidy16.5 point gain. Not too shabby. Tonight we go short at 1334.00 at 1:47 AM.

Portfolio stats: the account is now $114,500 after 9 trades (7 wins, 2 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1339.00    USD    GLOBEX    FEB 3 11:40:44

BOT 10 ES false MAR12 Futures 1322.50 USD GLOBEX FEB 3 01:57:10

Friday maybe a bit higher

2012-02-03T02:18:00.001-05:00

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.

Recap

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 higher

2012-02-02T01:39:00.001-05:00

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.

Recap

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 bias lower

2012-02-01T01:45:00.000-05:00

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..

Recap

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 maybe a bit higher

2012-01-31T01:58:00.001-05:00

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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..

Recap

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 likely lower

2012-01-30T02:15:00.001-05:00

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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..

Recap

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

Friday likely lower

2012-01-27T01:50:00.000-05:00

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Friday slightly lower, medium confidence.
ES pivot 1318.08. Holding above is bullish..
Next week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader remains short.

Recap

Well it was more of a star than a doji, but I think I had the right idea when last night I called for today to run slightly lower and that's just what the Dow gave us with a 22 point loss.

And I apologize for screwing up the blog. Due to a slip of the mouse, I somehow managed to delete yeterday's post (Wednesdy night's call for Thursday). Which is a shame, because I was right abour today.

The technicals

The Dow: Today's not-quite-a doji candle is another reversal warning. But as I mentioned yesterday, we've seen many of these for over a month now and none of them has generated a reversal. More telling is the fact that we traded entirely outside the rising RTC for a second day now. That is a much better indicator that the uptrend may be at an end. In either case, I now see more risk than reward in the Dow daily chart.

The VIX: The VIX has now spent six straight sessions touching it lower BB - highly unusual. But today it put in its first green candle since January 17th, forming an almost-hammer. With a bullish stochastic crossover, the VIX is now giving some good signs that it may be ready to move higher again tomorrow.

Market index futures: Tonight at 1:30 AM all three futures are again in the red with ES down a quarter percent. The star ES put in today was a reversal warning and took us right to the edge of the rising RTC from .January 5th. The overnight trade is now happening entirely outside the RTC. This is a bearish setup.

ES daily pivot: Tonight the pivot rose from 1316.00 to 1318.08. We made a failed attempt to break over the pivot at the close and have been drifting lower ever since. The movement of the pivot higher places us even further below it now. This is all bearish.

Dollar index: Today the dollar dropped 0.26% on a gap-down green candle that took it right to its lower BB. This is at least a suggestion that we may see a higher dollar on Friday and that would be bad for stocks.

Morningstar Market Fair Value Index: Yesterday the index actually moved up a notch to 0.94, a positive sign for stocks.

History: According to The Stock Traders Almanac, Friday has a slight historically bullish.edge.

And the winner is...

I have to say, I'm starting to get nervous. January is now nearly over and I've only had one losing day so far. In fact, this has been my best month ever. I'm up 7.75% YTD. And it's starting to remind me of last year when I also started out strong. In 2011 I was up 8.32% by February 10th. I then lost 2.5% over the following week. Clearly, gains of 8% per month are not realistically sustainable. That would be a a 96% annualized gain. Ain't gonna happen. Accordingly, I have started to scale back some of my positions. In the past week, I've sold my positions in GLW (two days before it dove), LOW, and F to raise some cash.

Let's not forget that last year January started off with a great run too, until the day before the last day of the month when the Dow dropped 189 points. I don't know if history will repeat itself, but I'm beginning to feel we're overdue for at least some sort of pullback. Right now, I see Friday going lower.

ES Fantasy Trader

Tonight we're still hanging onto our short from four nights ago. I think this trade is about to come in. Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)

Wednesday uncertain, watch Fed

2012-01-25T02:01:00.000-05:00

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Wednesday uncertain, pending Fed..
ES pivot 1311.42. Holding above is bullish..
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader remains short.

Recap

Today we got pretty much what I was expecting - a small decline, with the Dow dropping just 33 points. After a 75 point dump out the gate, we retraced half that and just wandered aimlessly the rest of the day. Clearly the market was anticipating the Fed on Wednesday, and to a lesser extent, the Empty Suit's speech tonight. We'll run down some technicals tonight, although I don't think they'll be the primary market driver on Wednesday.

The technicals

The Dow: Today's action formed a classic hanging man. Coupled to yesterday's doji, this is quite a bearish looking pattern. Also, the bearish stochastic crossover is now complete.

The VIX: Last night I noted the odd action of the VIX, which closed higher yesterday on a red candle. Well, today it did it again, gaining 1.29% this time on another, longer red candle. A pair of rising red candles off a bottom like this is a fairly good bullish sign, suggesting a higher VIX on Wednesday which would be bad for stocks.

Market index futures: By contrast, tonight all three futures are in the green, with ES up a non-trivial 0.34%. NQ is actually up just over a percent at 1:45 AM EST, no doubt a reflection of today's Apple news. But today's action formed a dragonfly doji, a bearish reversal candle.

On the other hand, since the current rally began on December 20th, the path upward has been littered with various dojis and hanging men, without any reversals following. In short, the candlesticks don't seem to be working too well here right now. One thing that usually works great though is the regression trend channel and we remain solidly inside the rising RTC bounding this rally.

ES daily pivot: Moved down again tonight from 1311.42 to 1308.25. Since ES broke over the pivot at today's close and has been pretty much just meandering ever since, this puts us even higher above the pivot now and that's a good sign.

Morningstar Market Fair Value Index: Yesterday the index held at 0.93, consistent with its recent upward trend. Still a positive sign.

History: According to The Stock Traders Almanac, the last three days of this week are historically actually positive.

And the winner is...

Much too hard to call. We've got some serious mixed messages in the charts tonight, with the Dow looking toppy and the VIX guiding lower but the futures marching higher. But in the end, it's all moot because tomorrow's going to be news driven, partly in reaction to tonight's State of the Union address and partly in reaction to whatever pronouncements the Fed has to make. So no official call tonight. We'll just have to see how this one plays out. Wednesday's going to be a good day to stay on your toes and watch the news.

ES Fantasy Trader

Tonight we're hanging onto our short from two nights ago. I'm going to hang on to this one a while longer. Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)

Tuesday looking lower

2012-01-24T02:09:00.001-05:00

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Tuesday lower, medium confidence..
ES pivot 1311.42. Holding under is bearish..
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

After something of a mini-roller coaster day, the Dow saved my call for the day by ending down a mere 11.7 points. What does this mean for Tuesday? Read on, McDuff...

The technicals

The Dow: Today's amusement park ride produced a classic doji, the first one we've seen since December 27th. This is often a good reversal indicator (the market did indeed fall on December 28th). And after spending several days at highly overbought levels, today the Dow's stochastic made a bearish crossover. In addition the S&P High-Low index hit 100 today, also a bearish sign.

The VIX: The VIX actually closed up 2.13% today but did it on a fourth consecutive red candle. Meanwhile its indicators continue to travel from overbought to oversold but aren't there yet. Nevertheless, we touched the lower BB at 18.55 for the second day in a row. The VIX tends to not spend more than two days playing tag with the lower BB so there's at least the possibility of moving higher Tuesday.

Market index futures: Like last night, all three futures are running lower, with ES down 0.21% at 1:50 AM EST. Today's inverted hammer clearly demonstrates the resistance we've got at 1311. It also took us to the right edge of the current rising RTC from January 5th, another bearish sign.

ES daily pivot: Moved up from 1309.08 to 1311.42 still leaving us a few points below. But just like last night, we're seeing ES gradually rising, this time starting at 11 PM. This sort of price movement does not look particularly bearish to me.

Morningstar Market Fair Value Index: Didn't post a new number today.

History: According to The Stock Traders Almanac, this whole week is historically pretty bad. Wednesday "has been down big 9 of the last 13". Tuesday is still bearish, though not as bad as Monday.

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

1/17        41        33        +     1289

1/23        46        32        +     1315

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. Since that moment is now at hand, I note that my bullish call on 1/3 was correct, the S&P now being higher than then. So now I'm adding an extra column "Accuracy" to track my calls. For now, I'm 1 for 1. And of course that means that since I voted with the majority, the poll as a whole was correct that week.

We note that this week while bearish sentiment remains unchanged, bullish sentiment advanced 5% to the same level as the start of January. And for the record, I voted bullish yet again this week, once again on the basis of my reading of the monthly SPX chart as well as on seasonality.

And the winner is...

And once again, I'm going to say the bears, in part because of the technicals on the charts as outlined above, but also partly because we're getting some noise from Europe again and in part because of the Fed on Wednesday. I don't think there's going to be much enthusiasm for a big rally ahead of that. n So there you have it - Tuesday lower. OTOH, also once again I'm not looking for a major decline.

ES Fantasy Trader

Tonight we're hanging onto our short from last night. It's just a couple of points under water, and I still believe in this trade.. Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)

Monday may move lower

2012-01-23T01:35:00.000-05:00

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Monday lower, medium confidence.
ES pivot 1309.08. Holding under is bearish.
Rest of week bias uncertain pending Fed.
Monthly outlook: bias up.
ES Fantasy Trader short at 1305.75.

Recap

Friday was a very strange day. I had called it lower, and while the Nasdaq did indeed end down 0.06%, the Dow motored to a 0.76% gain, propelled by large moves in IBM, HPQ and MSFT. And I made money on my ESFT short, even though the S&P closed up 0.07%. It was sort of like one of those days when it's raining while the sun is out. But what of tomorrow? Will the sun come out again? Let's figure it out.

The technicals

The Dow: The Dow continued its winning ways with what's looking a lot like a Three White Soldiers pattern, and those guys are bull bull bullish. But it might have been too much of a good thing with the close of 12,720 actually exceeding the upper BB at 12,693. Volume though was running higher than normal, showing continued buying interest.

The VIX: The VIX meanwhile just plunged below the important 20 level to close down a big 8% at 18.28. The VIX now has only minor support around 17, and that goes all the way back to last July. And its indicators are still not even to oversold levels yet, implying the possibility of still lower to come which would be good for stocks.

Market index futures: Tonight everything's in the red with ES leading lower, down 0.31% at 1:35 AM EST But we've seen this movie before several times last week and the market then went on to rally the next day. Will this happen again Monday? I'm not so sure. Friday ES put in a classic hanging man. Tonight's trading opened with a gap down. Taking that as confirmation of the hanging man, it seems to be guiding lower. In addition, all of my Fave Five indicators have now put in peaks at quite overbought levels.

ES daily pivot: Rose from 1307.08 to 1309.08 tonight. That means we're now below the pivot. That is bearish on the face of it although I note that we've been slowly creeping higher since 9 PM.

Dollar index: The buck is at a critical juncture, having dropped right to the bottom of its rising RTC on Friday. It has no support here. Tomorrow will be key - if the dollar goes lower, look for a big rally in stocks. Otherwise, we may see a down day or two.

Copper: Ah, the good Doctor struck a sour note on Friday, declining for the first time in three sessions on an ugly sagging red candle. It gives every indication of having peaked, including very overbought indicators. Look for lower copper on Monday.

Morningstar Market Fair Value Index: Continues a gradual uptrend that began on December 27th, to hit 0.93 last Friday. This type of movement is bullish.

History: According to The Stock Traders Almanac, Monday is historically very bearish, though things improve as the week goes on.

   And the winner is...

I'm going to say it's the bears for Monday. I'm still optimistic for the next few weeks at least but there are clearly a number of reversal indicators worth paying attention to right now. I note also that the Greece fire seems to be at least sputtering on the back burner over the weekend and that could dampen things on Monday. So I'm going to call the close lower Monday. I'm not looking for a spectacular dive, but lower nonetheless.

ES Fantasy Trader

On Friday we took a profit of 3.75 points. It was an odd day - the S&P closed higher, but I made money on a short anyway. Portfolio stats: the account now becomes $99,250 after 5 trades (3 wins, 2 losses)   Tonight we go short at 1305.75.

BOT   10    ES    false    MAR12 Futures     1306.75    USD    GLOBEX JAN 20 12:13:11
SLD   10   ES   false   MAR12 Futures    1310.50   USD   GLOBEX   JAN 20 01:38:22

Friday likely lower

2012-01-20T01:48:00.000-05:00

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Friday lower, medium confidence.
ES pivot 1307.08. Holding above is bullish.
Next week bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader short at 1310.50.

Recap

It looks to me like we're in "climb the wall of worry" mode, and that's not necessarily a bad thing Last night I thought we still had a bit more room to advance and that's just what we got on Thursday with a 45 point gain in the Dow. Can we squeeze one more day out of this rally? Let's see.

The technicals

The Dow: Today's high of 12,626 brought us almost exactly to the upper BB of 12,644. This is often a reversal indicator. In addition, I note that the Dow formed a bullish stochastic crossover from a high level today, something you don't see too often. When it does happen, it's actually more often a bearish sign than not. We had three of these last year. In all three cases, the market was lower within two days.

The VIX: I thought we'd be seeing a lower VIX today and that's just what happened, with the VIX gapping down to 19.87. This is significant because it's the first sub-20 close we've had since last July 25th. That said, the VIX also touched its lower BB today. The VIX is very good about respecting this level and generally starts back up again within a day or two, and that's bad for stocks.

Market index futures: Once again, the futures are running higher, but just a bit. ES is up a scant 0.02% at 1:25 AM EST. However, the trend had been up since 10:30 PM. Two good solid green candles in a row plus a second close above 1300 are good signs.

ES daily pivot: Rose from 1297.67 to 1307.08 tonight. But this evening's trend actually puts us further from the new pivot than we were before,a bullish sign.

Dollar index: The dollar continued lower today but on a gap down doji that took it exactly to the bottom of its recent rising RTC back to last November. This at least suggests the possibility of a reversal on Friday which would be bad for stocks.

Copper: Continued to climb its upper bB today and is starting to look a bit overextended, with indicators looking quite overbought. I'd not be surprised to see a decline here in a day or two.

Morningstar Market Fair Value Index: Yesterday the index rose for the second time in a row to 0.93, something that hasn't happened since September 1st, 2010. Recall that then, the market had just come off a bottom three days earlier and then went off to a two and a half month rally.

History: According to The Stock Traders Almanac, tomorrow, options expiration day, is down big time 10 of the last 13 years.

And the winner is...

The feeling I'm getting is that we're overdue for a pullback of at least a day or two and Friday is when it just might happen. So although the futures are not guiding lower at the moment, I note that J-Trader is going short and I agree. So I'll call for a lower close Friday. And if we don't go lower tomorrow, I expect lower on Monday even more.

ES Fantasy Trader

After spending the past several days just watching, tonight we go short at 1310.50.

Portfolio stats: the account remains $97,375 after 4 trades (2 wins, 2 losses)

Thursday maybe a bit higher

2012-01-19T02:06:00.002-05:00

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Thursday higher, low confidence.
ES pivot 1297.67. Holding above is bullish.
Friday bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Of note

You may know I've been following the saga of the decline and fall of Kodak since last fall in my regularly updated post here. Well, we just learned that, to the complete surprise of absolutely no one, Kodak has finally, at long last gone bankrupt, having just filed Chapter 11. It is the end of an era and the end of an icon. My sympathies go out to all the employees and retirees who will be hurt by this action.

Recap

Last night I published at 8 PM as a gesture of sympathy with the Stop SOPA movement. And it was a perfect example of why I usually post around 2 AM instead. At 8 PM it looked to me like we were going lower today. Instead, the Dow gained an impressive 97 points. Is there any more where that came from? Let's take a look.

The technicals

The Dow: The big thing about today's action was that we finally managed to close above the 12,500 resistance level that has dogged us for over a week now. The next resistance is the upper BB at 12,674, then last summer's highs around 12,725, and finally last year's high at 12,876. For the time being, today's solid green candle invalidates yesterday's inverted hammer and the preceding hanging man.

The VIX: Last night's solid green candle sure looked like it would run the VIX higher today and it did - at first. After a big gap-up opening, it dribbled back down to actually end lower by 5.9%. That formed a very negative looking dark cloud cover that takes the upward wind right out of the sails of the VIX for Thursday.

Market index futures: Aside from a mysterious spike around 9:45 PM this evening, the futures have been fairly quiet and are essentially flat at 1:45 AM EST. The indicators are all broken in overbought mode so no guidance there. There's no candlestick reversal signs on this chart but the upper BB at 1310.68 represents the next resistance. Today's close above 1300 is a promising sign.

ES daily pivot: Moved up from 1291.00 to 1297.67. With ES at 1302.50 at 1:40 AM EST, we're in good shape as long as ES doesn't break under that level.

Dollar index: Gapped down today with all its indicators in decline, pointing the way for lower still on Thursday, also good for stocks.

Copper: Broke out over resistance yesterday and continued higher today. It is now climbing its upper BB on the daily chart. No reversal sign here, another positive sign for stocks.

And the winner is...

Tonight, I'm giving it to the bulls. Not so much because I see any roaring signs of upward pressure as because I don't see any signs of downward pressure. Even though a lot of indicators are overbought, we still have some room to run before encountering more resistance. So on that basis, I'll call for Thursday at least a bit higher, though I'd be surprised if we run up as much as we did today.

And because we're so close to the ES pivot, if we should break convincingly below that before the open on Thursday, then all bets are off.

ES Fantasy Trader

Because I'm not expecting a significant move in the overnight, I'm going to take the conservative route and stand aside once again. One of the luxuries we have as traders compared to blackjack players in Vegas is that we don't have to play every hand. It's OK to just sit at the table and watch without worrying about some surly pit boss coming around to chase you away.

Portfolio stats: the account remains $97,375 after 4 trades (2 wins, 2 losses)

Wednesday looking lower

2012-01-17T20:54:00.000-05:00

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Wednesday lower, medium confidence..
ES pivot unavailable - SOPA blackout...
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

Last night I called for today to go higher and we in fact got a 60 point gain in the Dow. Tonight, we're posting early because I am going to join the SOPA blackout (after a fashion) and not publish on Wednesday. If you haven't heard about this issue yet, check it out here.

The technicals

The Dow: I'm a bit concerned about the shape of today's action - an inverted hammer that was unable to break the12,500 resistance level that has been stopping us for five straight sessions now. We are now at the top of this rage with not much momentum seemingly available to push higher.

The VIX: Took a 6% jump today out of oversold territory on a solid green candle that portends higher once again, a bearish sign for stocks.

Market index futures: Right now, it's still very early at 8:40 PM Tuesday night. However, all three futures are running just barely in the green. The trend though, going back to about noon today, is lower.

ES daily pivot: Unavailable tonight since I'm writing this before midnight.

Morningstar Market Fair Value Index: Today the index took a big drop from 0.90 to 0.87, a bearish sign.

History: According to The Stock Traders Almanac, this whole week is historically pretty bad. Wednesday "has been down big 9 of the last 13".

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

1/3         46        21        +     1258

1/9         56        37        +     1278

1/17        41        33        +     1289

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'll be able to see how well we did. For the record, I voted bullish yet again this week, mainly on the basis of my reading of the monthly SPX chart as well as on seasonality.

Today we note that both bullish and bearish sentiment have declined since last week. .But bullish sentiment declined more and in fact is now at its lowest level of the still young year. That alone could be considered a contrarian bullish indicator. Going by the bull-bear spread though, not so much. With just an 8 point gap between the two, there's not much predictive power there.

And the winner is...

A tough one but given the bulk of evidence I'm going to say lower on Wednesday. I'm just not feeling the love.

ES Fantasy Trader

Once again we're standing aside in solidarity with the SOPA blackout.

Portfolio stats: the account remains $97,375 after 4 trades (2 wins, 2 losses)

Tuesday higher

2012-01-17T01:43:00.000-05:00

The Hoot
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Tuesday higher, high confidence..
ES pivot 1285.58. Holding over is bullish..
Rest of week bias uncertain pending Tuesday's action.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

No trading today so nothign to recap. Nonetheless, I find the action in the futures interesting. Read on.

The technicals

The Dow: With no trading today, I will simply reiterate what I said last night: with now three hanging men in a row, and the last being the largest of the three, I'd say the Dow is trying to tell us something here. This is not a good sign.

Market index futures: Oddly enough, while the Dow chart is looking ready to roll over, the futures are looking quite strong indeed tonight. Unlike last night, all three are solidly in the green. ES is up three quarters of a percent at 1:25 AM EST and NQ is up nearly a full percent. This is quite unusual for this time of night and the last time we saw such numbers, the following day was up strongly.

With ES now at 1299, we've finally broken above the 1290-1295 resistance level that plagued us last week. From here, there's just psychological resistance at 1300, then the upper BB at 1313.

ES daily pivot: Dropped from 1290.00 to 1285.58. But even before that, ES crossed over around 11 PM and never looked back, another good sign..

History: According to The Stock Traders Almanac, historically, the Dow is up 14 of the last 19 on the first day of options expiration week in January.

And the winner is...

I'm going to completely reverse my opinion from last night and now claim that Tuesday is going higher. Apparently, today the S&P ratings downgrades didn't bother the Europeans, so I guess the theory is that it isn't going to bother us. It's always a challenge to call the direction of the market after three days off, but this one is looking pretty good.

ES Fantasy Trader

It's not even 2 AM yet but we've already had quite a run up in ES. I'm getting the feeling that the overnight window of opportunity has already closed so we're standing aside again tonight.

Portfolio stats: the account remains at $97,375 after 4 trades (2 wins, 2 losses)

Tuesday looking lower

2012-01-16T02:20:00.000-05:00

The Hoot
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Tuesday lower, medium confidence..
ES pivot 1285.58. Holding under is bearish..
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

Last Thursday night I was expecting a turn in the market but I didn't think it would happen on Friday. Well, it did, in the form of a minor 49 point drop in the Dow. We're coming up on yet another holiday-shortened week, but it's still worth taking a look at where we might be going on Tuesday. Here's a quick look with more detail to follow tomorrow.

The technicals

The Dow: Of greater significance than the small decline was the hanging man the Dow put in. That makes now three hanging men in a row, and the largest of the three. I'd say the Dow is trying to tell us something here, if you know what I mean.

Market index futures: The stock market may be closed Monday but futures trading resumed Sunday evening and right now at 2:10 AM EST all of the big three are down. ES is off nearly half a percent after a gap down opening. With a three day pattern of small hanging man, doji, big hanging man, ES looks ready to move lower still.

ES daily pivot: Moved down from 1290.00 to 1285.58. However, ES is still trading below that, at 1283.00. Unless it can break above this level, that only strengthens the bear case.

And the winner is...

Right now, I'd have to say it's looking like there's more downside risk than upside potential. Asia was down in their regular hours today and the repercussions of the S&P European ratings downgrades last week may not yet be fully baked into our market. We'll have a clearer picture tomorrow evening, but at the moment I'm leaning to a lower close on Tuesday.

ES Fantasy Trader

Because of the typical holiday-induced distortions, we're standing aside again tonight.

Portfolio stats: the account drops to $97,375 after 4 trades (2 wins, 2 losses)

A bit more upside possible Friday

2012-01-13T02:08:00.000-05:00

The Hoot
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Friday higher, low confidence..
ES pivot 1290.00. Holding over is bullish..
Next week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

Things were looking good for my call for a slightly lower close today until a late day rally hoisted the Dow to a modest 22 point gain. Nevertheless, the Dow continues to have trouble cracking resistance at 12,500. Will Friday be the day?

The technicals

The Dow: Today's gain came in the form of a second hanging man in a row. As we've seen before, one hanging man, bad - two hanging men, real bad. There's no guidance at all from the indicators which are all still stuck in overbought-broken mode. But the candlesticks are looking bearish.

The VIX: The VIX has been putting in some strange looking candles the past few days with a big inverted hammer today. Meanwhile it just continues to trend lower. There's some support at 20 just below today's close but that's about it.

Market index futures: The futures on the other hand are all running in the green tonight. At 1:40 AM ES is up a non-trivial 0.23%.

ES daily pivot: Rose nearly five points to 1290.00 tonight but ES just continues to move up up and away. Rising away from the pivot is a positive sign. The funny thing is that while the Dow is looking toppy, Es just seems to keep climbing the wall of worry. After two doji days in a row, we're simply continuing higher. We've left the 1279 resistance line in the dust. At this point there is no resistance until the psychological 1300 level and then the upper BB at 1311.

History: According to The Stock Traders Almanac, Friday is only slightly more bullish than today.

And the winner is...

Hard to say, once again. I have the feeling that this rally is getting a bit old here. I have yet to have a losing day this year after eight sessions and my trading account is up 4.7% YTD. Clearly this is unsustainable. In fact, it's starting to remind me a bit of the way last year began. We're getting overdue for a pullback and I expect one sometime over the next few days.

Will it be tomorrow? I'm guessing not. I still just don't really see enough technical reversal signs or bad economic news lately. I think we have one more day of gains possible on Friday before some profit taking sets in. I'm more cautious about the early part of next week. We'll just have to see.

ES Fantasy Trader

Tonight we threw in the towel on our short for a loss of 12 points. We are now going to stand aside for a day to avoid getting whipsawed.

Portfolio stats: the account drops to $97,375 after 4 trades (2 wins, 2 losses)

BOT 10 ES false MAR12 Futures 1294.75 USD GLOBEX 01:24:23
SLD 10 ES false MAR12 Futures 1282.75 USD GLOBEX JAN 10 20:15:24

Thursday looking a bit lower

2012-01-12T01:12:00.000-05:00

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

Thursday uncertain, weak bias lower..
ES pivot 1285.67. Holding over is bullish..
Rest of week bias lower technically.
Monthly outlook: bias up.
ES Fantasy Trader holding short at 1282.75.

Recap

Last night my best guess was that we'd see another doji day today. We did have some fairly uninspired action, though not a doji. It was one of those down right out of the gate, then slowly meander back up kind of days.

The technicals

The Dow: While we did end just 13 Dow points down from where we began, it was on a very clear hanging man candle and that is a good bearish reversal pattern.

Market index futures: Like last night, all three futures are down, but tonight it's just barely. Nonetheless, the overnight's failure to advance so far (at coupled with today's clear hanging man mirroring that of the Dow is a sign to me anyway that this market is running out of steam. It seems to me that we're overdue for at least a small retrenchment anyway.

ES daily pivot: Rose slightly to 1285.67 tonight. Even at that, ES is still holding just over that level at 1287.00. Remaining here is bullish on the face of it.

Morningstar Market Fair Value Index: The index continues to rise, hitting 0.90 yesterday, definitely a positive sign.

History: According to The Stock Traders Almanac, there is no historical edge to Thursday.

And the winner is...

Well we're still getting a bit of a mixture of messages tonight but the balance seems to be tipping in favor of the bears. I think we're about due for at least one down day and Thursday may be it. Probably not a big loss but I'm more bearish than bullish on Thursday right now.

ES Fantasy Trader

Tonight we're hanging on to our underwater short. Portfolio stats: the account remains $103,375 after 3 trades (2 wins, 1 loss)

Wednesday uncertain

2012-01-11T02:16:00.000-05:00

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

Wednesday uncertain, weak bias lower..
ES pivot 1284.17. Holding over is bullish..
Rest of week bias uncertain technically.
Monthly outlook: bias up.
ES Fantasy Trader went short at 1282.75.

Quote of the Day

"Even in a good market year it is typical to have a 15% drawdown at some point."

- Jeff Miller, "A Dash of Insight" (see blog sidebar)

Recap

Last night my call was simply "Tuesday higher" and that's just what happened with a pleasing 70 point gain in the Dow. Is there any more upside left here? Let's spin the wheel and find out.

The technicals

The Dow: Today the symmetrical triangle resolved to the upside demonstrating once again what a great pattern this is. But today's close at 12,462 also left us in the middle of a resistance band from the middle of last July. From here we have resistance at 12,500 and then the upper BB at 12,531.

Daily VIX

The VIX: Here's an interesting chart I really want to share with you. First notice the symmetrical triangle I pointed out last week.and how it finally resolved to the downside on January 4th. Then recall how I mentioned the dark cloud cover last night. Worked like a charm. Today the VIX gapped down 1.8%.

Two important things now: first, today's decline came on a green candle and second, notice how the stochastic is just making a bullish crossover (bottom row). These both suggest the possibility of a higher VIX on Wednesday which would be bearish for stocks.

Balancing this is the fact that today's close of 20.69 still leaves us a bit shy of the lower BB at 19.4. When declining, the VIX often (but not always) makes it all the way to the lower BB before reversing.

Market index futures: Unlike last night, tonight all three futures are back in the red with EES down 0.19% at 12:45 AM EST. But today's big green candle finally broke us out of the narrow trading we'd been stuck in for the last five sessions with the triangle here also resolving higher. What's concerning me in tonight's chart is that OBV has peaked and is now declining after rising since December 19th. While the other indicators are pretty much stuck in overbought-broken mode, a peak in OBV is often a good bearish reversal signal.

ES daily pivot: Rose to 1284.17 tonight. This puts ES just under the new value. And ES just finished an attempt to break through but was rejected. The longer we hold under the pivot, the more bearish I feel.

Dollar index: Last night I wrote "Today's decline should be followed by more on Tuesday", and so it was, with the dollar gapping down for a 0.35% decline. And it may still not be over as the $USDUPX is just now making a bearish crossover on its stochastic.

Copper: Very much contrary to my expectations last night, copper took a big gap up today clear to its upper BB. That alone increases the chances that it will go lower on Wednesday.

Morningstar Market Fair Value Index: Yesterday the index rose to 0.89. While a rising index is good for stocks, the 0.89 level represents resistance. We haven't been above this level since last November 8th suggesting that further short term gains may be harder to come by.

History: According to The Stock Traders Almanac Wednesday is historically on the minus side for all three major averages.

And the winner is...

Not looking as clear to me as the individual components of the analysis might suggest. Right now I'm seeing some headwinds building but not a lot of downward pressure yet. As I wrap this up just after 2 AM, I note that ES has broken above its pivot and is trending higher. If it doesn't come back down by the open, we may very well see at least some more gains on Wednesday. Otherwise I'm going to go out on a limb and guess we see another doji day on Wednesday.

ES Fantasy Trader

Today we took a profit of 6.5 points just before lunch. It was one of those cases where it just looked best not to get too greedy, a decision that paid off later on as the day moved lower. Portfolio stats: the account remains $103,375 after 3 trades (2 wins, 1 loss). On Tuesday night we go short at 1282.75 at 8:15 PM.

BOT    10    ES    false    MAR12 Futures     1282.00    USD    GLOBEX    01:10:39 

SLD 10 ES false MAR12 Futures 1288.50 USD GLOBEX 11:40:00

Tuesday looking higher

2012-01-10T01:33:00.000-05:00

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

Tuesday higher, high confidence.
ES pivot 1273.50. Holding above is bullish..
Rest of week bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader went long at 1282.00.

Recap

Last night was a tough call. I'm glad I paid attention to the VIX to temper my impression that a top might be in, since we did end up going up by 33 Dow points today. I said "Monday may just give us yet another day like we've been seeing the past four sessions." Now make that five. Go for six maybe? Let's see...

The technicals

Daily Dow

The Dow: With a range of just about half of Friday's, the symmetrical triangle I spoke of last night continued to develop today. Check it out in this daily chart and see if you don't agree. It's not perfect, but it's pretty good.

It looks like there's room for maybe one more day of action to compress this spring, and then boiing! Remember, most often these things resolve in the direction of entry, and here that would be up. It could happen Tuesday, and if not then, then on Wednesday.

Also, the High-Low index has come down off its highs from the end of the year and that is an encouraging sign too.

The VIX: The VIX actually gained a bit today but did it on a red candle that's actually a good dark cloud cover and that's a high reliability bearish reversal indicator. A lower VIX should also help stocks on Tuesday.

Market index futures: For once we're getting some non-trivial upside in the overnight. ES is up just over half a percent at 1:15 AM EST. It looks like the ascending triangle that's been developing in ES for the last five days is finally starting to resolve to the upside. ES has been trending up steadily since today's close. My only concern is that we're right at a resistance line at 1282 now. This is a level that has stymied the market for five straight days now. However, Tuesday may just be the day of the breakthrough.

ES daily pivot: The pivot actually dropped a bit to 1273.50. This puts us comfortably above the pivot which is a bullish sign.

Dollar index: The dollar seems to have peaked short term after two days of gap-up gains that left it quite overbought. Today's decline should be followed by more on Tuesday, another positive signs for stocks.

Copper: Striking something of a bearish note, copper is now clearly in a downtrend on the daily charts.

Morningstar Market Fair Value Index: Today the index

History: According to The Stock Traders Almanac, Tuesday is basically flat. Note that despite the widely publicized "January Effect", January is only the 6th best month for the Dow, and 5th best for The S&P.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll. Starting today we're going to track the poll to see how well it performs. Here's how things shake out so far:

Week   % Bullish  % Bearish  NightOwl SPX

1/3         46        21        +     1258

1/9         56        37        +     1278

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, we'll run four weeks and see how well we did. For the record, I voted bullish again this week, on the basis of my reading of the monthly SPX chart as well as on seasonality.

Today we note that while bullish sentiment has increased to 46%, interestingly, bearish sentiment has also increased to 37%. The spread is therefore narrower than last week.

And the winner is...

All things considered, I'd say the bulls have it. With Asia closing up strongly and the futures trending up significantly in the overnight, this market gives the impression of wanting to go higher. So absent any new disasters from Europe (which seems to have mysteriously vanished from the news radar in the past few days) I'm going to say that Tuesday goes higher.

Note too that Rob Hanna's great Quantifiable Edges blog gives a historical statistical edge to our present situation.

ES Fantasy Trader

Portfolio stats: the account remains $100,125 after 2 trades (1 win, 1 loss).

Tonight we go long at 1282.00

Monday uncertain, pivot is key

2012-01-09T02:46:00.000-05:00

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

Monday uncertain, ES pivot is key.
ES pivot 1274.42. Breaking over is bullish..
Rest of week bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

One of the possibilities for last Friday that I mentioned was that "any gains will reverse later in the day on week ending profit taking." and that's essentially what happened with the Dow sinking out the gate, then recovering the rest of the morning only to give it all back later to close down a modest 56 points.

The technicals

The Dow: Friday's red candle serves as confirmation to Thursday's long doji. That said, it looks like we've got another symmetrical triangle forming on the daily chart which should resolve in the next day or two. And given an entry from below, the exit will most likely be to the upside.

The VIX: The VIX is now flirting with short term support just above 20 but still has a ways to go before hitting its lower BB at 18.93. And its indicators are not yet in oversold territory. In fact, the last three days suggest a bearish three black crows pattern. All of this suggests continued downside risk for the VIX, If not leading to higher stock prices, I'd expect this at least to put the brakes on any potential market downside.

Market index futures: Right now (2:25 AM EST) all three futures are in the red. ES is down 0.28%. However, it has actually been gaining since around 12:35 AM. After four days of complete indecision we may be getting a break lower tonight. Inverted hammer, hanging man and two dojis followed by some downside in the overnight all has a bearish feel to it. The failure of ES to break resistance at 1276 four days running also seems to suggest that we may need to back off and get a running start at it later on.

ES daily pivot: The new pivot has jumped to 1274.42 leaving us now about 3 points under. Given that ES is actually moving up right now, that puts the pivot in play. This will be the number to watch before the open. If ES attacks the pivot and fails to break through, that strengthens the bearish case.

Morningstar Market Fair Value Index: On Friday the index dropped to 0.88.

History: According to The Stock Traders Almanac, Monday is historically negative for the Dow.

And the winner is...

Another very very tough call tonight. As I've been writing, ES has continued to gain and is now just a point and a half below the pivot. Because of a lack of bearish guidance from the VIX and market charts demonstrating more indecision than signs of reversals, and with no new developments out of Europe over the weekend and no major economic news on the calendar for Monday I'm going to guess that Monday may just give us yet another day like we've been seeing the past four sessions.

If ES breaks above the pivot before trading opens, then we definitely could go higher, else lower. Watch 1274.42. For the time being anyway, the bias is actually to the upside but I'm not looking for any major moves either way. That's all, she wrote.

ES Fantasy Trader

Portfolio stats: the account remains $100,125 after 2 trades (1 win, 1 loss).

Tonight we're standing aside. Once again I see no real reason to put on a trade in either direction until we get out of this ongoing narrow range doji situation.

Another doji possible Friday, pivot is key

2012-01-06T01:54:00.000-05:00

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

Friday uncertain, ES pivot is key.
ES pivot 1270.25. Breaking under is bearish.
Next week bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader standing aside.

Recap

Last night I called the market lower and I suppose I was right, if you can call a 3 point decline in the Dow as confirmation. This market is sort of spinning its wheels in the mud right now. It won't go down but it's not making any headway either. Is there a tow truck in the house? Let's figure it out.

The technicals

The Dow: OK, yesterday we got a hanging man, a reversal indicator. Today we got no reversal but did get a dragonfly doji, another reversal indicator. You don't see this too often, but when you do get two reversal indicators following a run up, the eventual resolution is most often to the downside.

The VIX: The VIX put in a second solid red candle today in a classic bearish continuation pattern. Its indicators have all come off overbought levels too. With no support until 20.70, today's close at 21.48 still leaves some room to run lower. And as I've often observed, a lower VIX tends to predict higher stocks in a day or two at the most.

Market index futures: Wow, three days of reversal indicators and still no reversal. An inverted hammer, a hanging man, and a long-legged doji. What's holding this market up? This evening we find a very similar picture to last night around this time (1:10 AM EST): all three futures down with ES lower by 0.27%. OBV declining again tonight is another bearish indicator. Also, the SPX High Low indicator remains quite elevated, having topped 90 for an unusual 11 straight sessions.

ES daily pivot: The new pivot is now 1270.25 and we dropped below it just before 11 PM. ES tried to retrace but that level is now providing resistance. This sort of action is bearish.

Dollar index: I haven't mentioned this lately but today was interesting. The dollar took a big gap up to the exact top of its recent range and very close to its upper BB. There seems to be more chance of it going lower over the next few days than continuing higher. That would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index not surprisingly held steady at 0.89.

History: According to The Stock Traders Almanac,Friday has a slightly negative historical bias.

And the winner is...

Once again, hard to say. Just like last night we have two distinct conflicting messages with both the Dow and ES charts looking ready to roll over but the VIX wanting to push the market higher. We also have unemployment numbers coming out on Friday and if they're BTE, then that could help push the market higher, in other words a replay of today. And that's my best guess. I think we're due for lower at some point soon but I'm not seeing any real pressure in that direction right now.

1:30 AM Update: ES just broke above the pivot. I can't stay up all night watching this, but if we're still above before the open on Friday and get good economic news, we might very well go higher despite all the overbought indicators. It's also possible that any gains will reverse later in the day on week ending profit taking.

So I'm just going to call for another doji day on Friday. I don't see a big decline happening. Boring for swing traders, great for day traders. That's all she wrote.

ES Fantasy Trader

Today we took a small one point loss to close out our first trade of the year. I decided just before noon that the trade was beginning to move the wrong way and I didn't want my profit to turn into a loss, especially with the first trade of the year. That turned out to be a good idea since ES continued to climb the rest of the day. Portfolio stats: the account is now $100,125 after 2 trades (1 win, 1 loss).

Tonight we're standing aside. I see no real reason to put on a trade in either direction until we get out of this ongoing narrow range doji situation.

SLD    10    ES    false    MAR12 Futures     1270.25    USD    GLOBEX    02:05:50

BOT 10 ES false MAR12 Futures 1271.25 USD GLOBEX 12:32:30

Thursday possibly lower

2012-01-05T02:31:00.001-05:00

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

Thursday lower, low confidence.
ES pivot 1270.17. Holding under is bearish.
Friday bias higher technically.
Monthly outlook: bias up.
ES Fantasy Trader going short at 1270.25

Recap

Last night we were getting some mixed messages with the Dow looking played out but the VIX looking set to go lower, implying higher stocks. After some debate, I came down on the bear side and was wrong, as the Dow finished by gaining 21 points. Turns out the VIX, as is so often the case was the better predictor. Though admittedly, it was a pretty small range day for all the major averages. And unfortunately, that kind of action doesn't provide much guidance for the following day. Let's pick through what meager scraps we can find for clues.

But first, for those of you following my saga on the impending death of Kodak, dramatic new developments today with the WSJ reporting that bankruptcy right around the corner for this beleaguered company. EK immediately dropped from 65 cents to close at 47 cents. Things aren't looking good. All the gruesome details in the post here.

The technicals

The Dow: Today's small gain created a classic hanging man and that is a good reversal indicator. In addition, the Dow remains quite overbought and OBV is running quite high, all bearish signs. However, we do have some fair support at 12,300 and we've just passed an inflection point in the 200 day MA which has (funally) begun to rise again, a good sign.

The VIX: Following yesterday's small doji, the VIX today resolved the symmetrical triangle I pointed out in the down direction with a big bearish engulfing pattern. Along with a stochastic that just made a bearish crossover, this sure seems to be guiding lower.

Market index futures: All three are running negative in the overnight with ES down 0.18% at 2:10 AM EST. Today's ES candle formed a cross between a hanging man and a dragonfly doji. No matter, both are bearish reversal signs. OBV has also peaked and is declining in the overnight - I find that to be a good indicator of lower prices to come.

ES daily pivot: Drops tonight from 1274.08 to 1270.17. Notice how ES traded up from its morning lows just about up to today's pivot, but never broke though. That's a bearish sign. But now we're trading right around the new pivot. In fact no fewer than 9 five minute bars have touched this number between midnight at 2:10 AM.

Morningstar Market Fair Value Index: Yesterday the index bumped up from 0.87 to 0.89, a positive sign.

History: According to The Stock Traders Almanac,Thursday is the weakest day of the week.

And the winner is...

Arrgh - the Night Owl is pulling her hair, uh, feathers out. Once again we have both the Dow and the VIX seemingly poised to go lower. This is quite an unusual situation. I ought to do a correlation of the next day after the VIX goes down but the Dow goes up.

In any event, I am going to claim that the VIX situation will help temper any declines as well as bolster the argument for a rally by Friday, but the Dow will likely go lower on Thursday. These mixed message days are really tough nuts to crack.

I should add that with employment and jobless numbers coming out on Thursday, that could easily drive us higher if they're BTE, and it would not surprise me if they were. We'll see.

ES Fantasy Trader

Today we took a teensy profit of 1.25 points to close out our first trade of the year. I decided just before noon that the trade was beginning to move the wrong way and I didn't want my profit to turn into a loss, especially with the first trade of the year. That turned out to be a good idea since ES continued to climb the rest of the day. Portfolio stats: the acocunt is now $100,625 after 1 trade (1 win, 0 losses).

SLD    10    ES    false    MAR12 Futures     1269.25    USD    GLOBEX    01:56:47

BOT 10 ES false MAR12 Futures 1268.50 USD GLOBEX 11:57:52

Wednesday looking likely lower

2012-01-04T02:19:00.000-05:00

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Wednesday lower, medium confidence.
ES pivot 1274.08. Holding under is bearish.
Rest of week bias higher historically.
Monthly outlook: bias up.
ES Fantasy Trader going short at 1269.25.

Recap

It was certainly pleasant to see the year begin with a 180 point advance in the Dow. If nothing else, today's action give us something to chew on as we contemplate where we're headed Wednesday. As we run down the usual list of suspects one thing is clear: after just one day of trading, we're already at a crossroads.

The technicals

The Dow: Today's high of 12,480 took us above the upper BB at 12,435. That level proved unsustainable and we retreated to close at 12,397. This suggests that we could see a pullback on Wednesday, though remember that we have some support at 12,300. And note that the 12,400 level is also a resistance line from last summer. Since the Dow has lately been loath to climb its upper BB, preferring instead to bounce off, it's questionable if we have the oomph to follow through from here.

Daily VIX

The VIX: Interesting chart in the VIX today - check it out. Looks like we're getting another symmetrical triangle. But which way will it resolve? If you think we entered from below, at the bottom on December 22nd, then it will go higher. If you take the longer view from earlier in December, it will go lower.

In any case, today's doji of indecision was accompanied by a stochastic (bottom row) that sure looks like it's going to make a bearish crossover, sending the VIX lower.

VIX futures: Meanwhile the futures dropped exactly to their 200 day MA support line, with their own stochastic bearish crossover. A breakdown here would strongly imply a lower VIX and higher stocks. We're really teeterng on the edge here.

Market index futures: We now have ES trading again, and at 2:05 AM EST, it's trading down 0.2%, along with NQ and YM. Of particular concern is that this drop is forming an evening star pattern and that's a good bearish reversal indicator. ES, like the Dow hit is upper BB today also, and this big gap up looks like it may be wanting filling.

ES daily pivot: The pivot jumped from 1254.58 to 1274.08 while ES began sagging just before 1 AM. Now being under the new pivot is a negative for the market.

Dollar index: The buck broke recent support with a solid red candle to the downside today and its stochastic executed a bearish crossover. A weakening dollar is good for stocks.

Oil: Took a big spike up today, mainly on childish posturing from the Iranians. Iran is clearly attempting to thread the needle here, trying to act just belligerent enough to jack up the price of oil enough to hurt the West (and help their own bottom line) without bringing down a military strike on them, an action they could not answer, contrary to their comical North Korean-esque bombast. Since oil is now 100% politically driven, it has no technical importance. However, if its price continues to rise above $100, that will clearly act as a brake on any advance in the market.

Copper: Dr. Cu took a big gap up today that looked a lot like the action last November 30th, right down to the stochastic bullish crossover from a high level. And back then, what followed was three small-range consolidation days. Will history repeat itself?

Morningstar Market Fair Value Index: On Friday, the index remained at 0.87, so no guidance here.

History: According to The Stock Traders Almanac, the Dow is up 13 of the last 18 years on this day, and it's the strongest day of the week.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll. Today we note that bullish sentiment has increased to 46% while bearish sentiment has declined to 21%. I find it interesting that the bearish sentiment has decreased more than the bullish view has increased. You could view that as contrarian bullish.

In any case, there are not yet enough bulls to view these numbers as contrarian bearish. And for the record, I helped the bull case by voting with them this wee, based on my reading of the monthly SPX chart. We see there that SPX has emerged from its descending RTC and given a bullish trigger with no resistance until 1366.

And the winner is...

All things considered, I have to say that despite the historical positives for tomorrow and signs that the VIX could go lower, I'm going to call Wednesday lower. I'm not seeing much technical motivation to drive us higher just at the moment. And I note that J-Trader is going short and he's been doing quite well for a long time now.

ES Fantasy Trader

Tonight we put on our first trade of 2012 with a short at 1269.25 at 1:57 AM. Portfolio stats: we begin with $100,000 after 0 trades (0 wins, 0 losses).

Slight up bias Tuesday

2012-01-03T02:08:00.000-05:00

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Tuesday higher, low confidence
Last ES pivot 1253.25. New value tomorrow..
Rest of week bias higher historically..
Monthly outlook: bias up.
ES Fantasy Trader reset to $100K.

Short Form

Well here comes 2012, ready or not. This evening's edition is brief, since we're missing any input from the futures. I'm also having some computer issues this evening that need to be resolved right away. Suffice it to say that the earlier European, Australian, and Asian trading all seem to be guiding higher for Tuesday.

With all of the last two weeks charts distorted by light holiday trading as well as the year ending, it's tough to make any informed decisions on that either. Suffice it to say that we're still looking fairly overbought and more downside in not out of the question for the Dow and the SPX. The first trading day of the new year is also not favorable historically.

But without any futures, this is really just speculation. Let's see how Tuesday starts off so we can calibrate our charts to the new year. Wish I could be more specific but I see no real edge in jumping either way right now.

We'll resume the usual complete analysis Tuesday night. Happy New Year and happy trading!

ES Fantasy Trader

Today the ESFT account resets to $100,000. Since ES is still closed for the holiday right now, there is no trade tonight. Reminder, the main purpose of this section is to prove whether or not my market calls are any good, not necessarily for others to trade from.

Annual Performance Review

2012-01-01T15:24:00.002-05:00

With the end of 2011, it's time to see how the Night Owl did Here are the numbers for my trading account, my IRA and the ES Fantasy Trader.

Trading Account

My final annual gross return on my trading account in 2011 was -1.15%, my first losing year since 2008 (I was up 30% in both 2009 and 2010). I missed my basic goal of turning a profit, and also missed my goal of beating the Dow, which ended with a 5.5% gain. I also failed to beat the3 SPX which finished flat. I did at least manage to beat the Nasdaq (down 1.8%), the average of US equity funds, which lost 2.2%, and the Eurkeahedge hedge fund index, down 4.1%.

Clearly 2011 was a difficult year. It was also a learning experience for me, not having encountered this sort of crazy environment since I began trading full-time in 2004. In many ways, it was harder than 2008 to be a swing trader. When you have the Dow up and down by 400 points for four consecutive days, it's really hard to make any money swing trading.

And that was part of the problem - I don't like to trade when the VIX is above 20, and the VIX spent nearly half of 2011 above that level. By the time it broke 30, I pretty much stopped trading entirely. So I really only ended up actively trading five months this year. In addition, I was hampered by a failure to play the short side effectively so I missed a number of good opportunities there.

Also, I was hurt by one very stupid trade. I had bought CSIQ and held onto it while it did nothing but go down. I finally threw in the towel on that one but the damage was already done. Without that one realized loss, I would have managed to equal the Dow for the year.

IRA

My IRA on the other hand did quite nicely, finishing the year with an 8.67% gain. The big difference here was that my IRA is more heavily weighted to large cap dividend yielders that were in fashion this year. I also unloaded almost all my shares in silver (SLV) at 44.50 near the April peak, realizing a nice profit there (I had bought in at 13).

ES Fantasy Trader

And finally, the ES Fantasy Trader. This ended 2011 with a 34.75% gross gain. I made 48 trades and had 32 winners and 16 losers, for a 2:1 win/loss ratio. Commissions came to $1920, leaving us with a net profit of 32.83%. And recall that I began the ESFT only on August 18th, so these are not full-year numbers.

Recall that the point of the ESFT is to put some substance behind my daily market calls. I generally enter each trade late at night, usually around 1 to 2 AM, based on my call for the next day and then exit the next day (to be precise, later on in the same day) at some point during the regular session. Very rarely, I'll hold a trade for a few days if that seems warranted.

So why not do this for real? First, my trading account won't support the sort of leverage that even one ES contract affords, much less the 10 I trade each night. IB will let me do it, but I'm just not very comfortable with it.

Second, I sleep better not holding futures positions overnight. Obviously, just about anything can go wrong while my trade is cooking and I'm sleeping, whether it's an earthquake in Japan or some country in Europe going bust. And since I don't put any stops on these trades, there's the potential for some really nasty surprises when I get up in the morning.

And third, although I regularly put on short ESFT trades, I don't like going short for real. I'll admit that's just a purely psychological bias on my part and it's something I think I'll put on my New Year's resolutions list. Still, it's sort of frustrating that my paper trading did so much better than my for-real trading.

Oh and last but not least, readership of The Night Owl Trader was up by an order of magnitude in 2011 over 2010. Many thanks to all my devoted readers.

Happy New Year

2011-12-31T20:00:00.001-05:00

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

2011-12-30T02:26:00.001-05:00

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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

2011-12-29T01:53:00.000-05:00

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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

2011-12-28T02:23:00.001-05:00

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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

2011-12-27T01:25:00.001-05:00

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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

Merry Christmas!

2011-12-24T16:35:00.000-05:00

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

2011-12-23T02:15:00.000-05:00

The Hoot
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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

2011-12-22T01:40:00.001-05:00

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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

2011-12-21T01:26:00.000-05:00

The Hoot
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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
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Tuesday likely higher

2011-12-20T02:55:00.000-05:00

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

2011-12-19T02:30:00.000-05:00

The Hoot

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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

Friday higher

2011-12-16T02:26:00.000-05:00

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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

2011-12-15T01:59:00.000-05:00

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

2011-12-14T02:08:00.000-05:00

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

2011-12-13T02:50:00.001-05:00

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

2011-12-12T02:06:00.001-05:00

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.

Friday lower unless good EU news

2011-12-09T01:21:00.000-05:00

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

Friday lower unless good EU news.
ES pivot 1246.25. Holding under is bearish.
Next week bias lower, on technicals.
Monthly outlook: bias up, on technicals.
ES Fantasy Trader going short at 1233.00.

Recap

So the Europeans disagree amongst each other. Whoa - big surprise there, eh? Nevertheless, that was all it took to drive the Dow down nearly 200 points today. The only good thing I can say about today's action is that it got the charts off of being stuck on top dead center. Finally the market threw us a freakin' technical bone to chew on. So without further ado, let's get chompin'. Yum!

The technicals

The Dow: Looking at it purely technically, today's big red candle was a giant bearish engulfing pattern, one that gobbled up an entire week's worth of gains. It also served to knock all the indicators out of their overbought-broken torpor and begin the trip back to oversold. We also fell out of the rising RTC back to 11/28 and that is a bearish trigger.

The only good things here are that the 12K support level basically held ( I count a close within two points as holding) and the 200 day MA was never seriously threatened. But on the face of it, this still remains an ugly looking chart. And now that the Europeans have clearly signaled that they are more interested in theatrics than the good of the global economy, the stage is set for further declines on Friday.

The VIX: The VIX, predictably, took a 6.7% jump today. True to form, after visiting the lower BB last week, that was all it took to begin the march upwards, even before the latest drama from the EU. The VIX has now completely retraced the big gap down it took last week and is smack in the Twilight Zone - halfway between BB's. It's indicators are also still looking more oversold than overbought suggesting still more room to run higher on Friday.

VIX futures: Gapped up today - little here to suggest any reversal Friday. Also still more oversold than overbought.

Market index futures: On a purely technical basis, today's tall red candle skewered the 200 day MA and completed a bearish RTC trigger, just like the Dow did. With indicators now definitely off overbought peaks, this all looks pretty bad for the market.

You can see just how much Europe is influencing the market by looking at the 5 minute ES chart from about 3 PM through the evening. It's been getting jerked around every which way as various rumors, twitters, innuendos, and new flashes popped up. ES has crossed its 4 PM closing value no fewer than 6 times til now (1:05 AM EST).

Currently, all three futures are in the red; ES is down 0.15%. That alone does not bode well for Friday. Assuming we do go lower, one likely support point would be the 50% retracement of last Wednesday's big spike, that would be at 1222, which coincidentally (or maybe not) has been a good S/R line back to last summer.

ES daily pivot: Is little changed tonight, now at 1246.25. Unfortunately, we were below the pivot all day and we're still below it. Not good.

Copper: Took a big hit today. This daily chart definitely looks like it's going lower, with all that implies for the broader market.

Morningstar Market Fair Value Index: Yesterday, the index remained at 0.89. There is no update on the site for today's index. I suspect it will move lower. But it has moved little in six straight days. This suggests the absence of any strong negative pressure on stocks.

History: According to The Stock Traders Almanac, Friday is not a particularly bullish day, so we've got no help from history here.

And the winner is...

All things considered, technically it looks like the bears take it. There appears to be about 11 ES points of downside available without too much trouble. Once again though, it all hinges on Europe. But if the can-kicking contest we saw today is any indication of what will happen over there tomorrow, then I'm not too optimistic. So I have to say Friday's going lower.

ES Fantasy Trader

Today we just stood on the sidelines and watched. Nothing ventured, nothing lost. Portfolio stats: the account remains at $156,875 after 40trades (28 wins, 12 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 1233.00 in anticipation of more thumb-twiddling and violin fiddling on Friday from Europe while their economy burns.

No call for Thursday pending EU news

2011-12-08T01:42:00.000-05:00

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

Thursday uncertain, awaiting EU news
ES pivot 1258.67. Holding above is bullish.
Rest of week bias uncertain, awaiting EU news..
Monthly outlook: bias up, on politics and technicals.
ES Fantasy Trader standing aside pending, yes, EU news.

Pearl Harbor Day

Tonight, we salute the memory of those who served and who paid the supreme sacrifice protecting our nation and our freedom 70 years ago. We also use the opportunity to recognize and honor those serving our country today. My hat is off to you. Thank you all.

Recap

I went moderately far out on the limb last night in calling the market higher today. And unlike yesterday, today I got it right, with the Dow handing us a little 46 point bump. Right now the market is clearly in a holding pattern awaiting the results of the upcoming meetings in Europe Thursday and Friday. Accordingly there is absolutely no point in even reviewing the technicals. Which way the market moves for the rest of this week will depend 100% on what news comes out of Europe.

The technicals

The Dow: OK, I can't help myself. I will make a few comments about the Dow. Today's little gain actually was significant in one respect - it marks the first time we've closed above the 12,165 resistance line since it was established a month ago. That number now becomes support. And remember that there are two more levels close by: the 12K psychological support and the 200 day MA at 11,945.

Also of note was today's high of 12,258, which marks the first scouting party on the 12,255 resistance level from October's high. If the news from Europe is good, then this one should fall without too much trouble. Then there's no resistance until 12,400, then 12,745, and finally the high of the year at 12,846.

If the news from Europe is bad, then we still have three good support levels close at hand.

We won't review anything else tonight. While I'm a firm believer in consistency, I also recognize exercises in futility when I see them. The futures are all flat and there's really nothing to go on right now.

And the winner is...

No one. Honestly, if you're got a bus being driven by an enraged chimpanzee, would you rather be on it, in front of it, or behind it. Personally, I'd rather be the King of Siam. If I had to make a guess, I'd say that the news from Europe is not going to be a total disaster, but that's pure speculation at this point.

So tonight is one of those rare occasions where I do not make a call because there's no way to do so in a meaningful way. We're just going to pull up a chair, relax, maybe do some Christmas decorating, and wait for the fireworks.

ES Fantasy Trader

Today we managed to snatch defeat from the jaws of victory on last night's long trade with a 9 point loss. Portfolio stats: the account is now $156,875 after 40trades (28 wins, 12 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 are standing aside.

BOT 10 ES false DEC11 Futures 1261.75 USD GLOBEX DEC 7 01:25:01
SLD 10 ES false DEC11 Futures 1252.75 USD GLOBEX DEC 7 12:14:36

More gains possible Wednesday

2011-12-07T01:51:00.002-05:00

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Wednesday higher, medium confidence
ES pivot 1255.33. Holding above is bullish.
Rest of week bias higher unless bad EU news..
Monthly outlook: bias up, on politics and technicals.
ES Fantasy Trader went long at 1261.75.

Recap

Last night I said "the market" was going lower today. It ended up being one of those mixed days you don't see all that often. The SPX was essentially flat, the Naz did in fact fall just a tad, and the Dow actually gained 0.43%. So I guess I was wrong, since I base my calls on the Dow. We'll take a look at how this happened and see if it provides any clues for Wednesday.

Quote of the Day

“the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them... To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment.”

           - Leon Cooperman, Omega Advisers, in an open letter to President Obama

The technicals

The Dow: Today's candle was almost a carbon copy of Monday's. The Dow made some good progress in its third attack on that pesky 12,165 resistance line, sending out a scouting party to a high of 12,216 and finally closing at 12,150. The fact that we didn't go down today in the face of three candles that looked like reversal indicators is a positive. It's also a good lesson of why you wait for confirmation after an inverted hammer, especially when it's not a classical example of that pattern.

Right now, the Dow looks like it's in "climb the wall of worry" mode and that's not a bad thing.   The last three times it took on the 12,165 level This time we seem to be better positioned to actually break out.

The VIX: The VIX, finally below the 30 level, which I define as the brink of insanity, put in a small hanging man today. Coming as it does after two strong green candles makes me wonder if the VIX has a lot of gas in the tank to motor any higher Wednesday.

Market index futures: Tonight we're seeing all three futures solidly in the green by over half a percent. ES is up a decent 0.58% at 1:40 AM EST. And most significantly, ES is now trading entirely above its 200 day MA at 1254.33. Watch that number now for support. And watch 1265 for some minor resistance. Then 1275, then 1285. With yesterday's doji apparently resolving to the upside, it's looking promising here for Wednesday.

ES daily pivot: Dropped a bit today to 1255.33. ES broke above the pivot just after the close today and has been drifting higher all evening. With a seven point spread right now, it's looking good. As long as we can hold above this, I'm encouraged.

   And the winner is...

Tonight it looks like the bulls. The indicators are all overbought now but they're broken and have lost their predictive power for the time being. My guess is that they're going to run 'em up guardedly into Friday's EU meetings. If that works well, then we're going higher, possibly revisiting the July highs. And if not, then we're going down, simple as that. So I'm going to say that all things considered it looks like Wednesday's going higher.

ES Fantasy Trader

Today we took disappointing 11.5 point loss on last night's short. Portfolio stats: the account is now $161,375 after 39 trades (28 wins, 11 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 1261.75..

Tuesday lower

2011-12-06T01:57:00.000-05:00

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Tuesday lower, medium confidence
ES pivot 1256.42. Holding under is bearish.
Rest of week bias higher if 200 MA breached..
Monthly outlook: bias up, on politics and technicals.
ES Fantasy Trader went short at 1249.00.

Recap

Today was another great example of how news-driven this market is. Good news out of Europe this morning and the Dow shot up. Bad news from S&P about Europe after lunch and back down we went. Then at 3:30, a little mini-rally set in for some unknown reason. But we did hold on for a positive finish, as I had expected last night. Where next? Let's see.

The technicals

The Dow: The Dow made another run at the 12,165 resistance line today for the second day in a row, and once again was rejected. On the other hand, the 12,000 support held nicely, so we remain wedged between these two barriers for the time being. If you ignore the last two days of small range action, what we saw today is a shooting star. While that's a reversal indicator, it's not a particularly good one and it really requires confirmation.

The VIX: After three days of tickling its lower BB, the VIX finally came off it with a 1.16% gain today. And its oversold indicators portend a higher VIX to come, and that's bad for stocks. Whenever the VIX comes off the lower BB, it usually begins a march back to the other end. There's clearly more upside to this chart than further downside right now.

Market index futures: Fortunately, the futures trade all the time so we can look for some confirmation there. And right now they're guiding lower. All three are in the red and ES is down nearly half a percent at 1:45 AM EST. Just as the Dow was unable to clear its resistance today, so ES was unable to clear its 200 day MA at 1254.44.

This failure after two doji days and an inverted hammer today makes me think the market may need to back off a bit and get a running start for its next attempt at cracking 1254. We're also right on the edge of the rising RTC. Falling out of that would be bearish.

ES daily pivot: Took a jump from 1249.42 to 1256.42 today and that means that we're now below the pivot. We need to see ES cross back over this level and right now it's not doing it, so that's not encouraging.

And the winner is...

Hmmm, another tough call but I'm going to give this one to the bears. After last week's big gains, we've not put in three sessions of mostly wheel-spinning and tonight we're actually seeing some declines fairly late in the overnight. I'm just not feeling the love here so I'm calling Tuesday lower. I think there's still more upside to come in December, but just not on Tuesday.

And the usual Europe/news/rumor disclaimer remains in force.

ES Fantasy Trader

Today we took a profit of exactly 10 points. Just before noon it looked like the getting was good, and after the latest S&P Europe downgrade news hit right after lunch, I was glad I did. Another good reminder that it never pays to be too greedy.

Portfolio stats: the account is now $167,125 after 38 trades (28 wins, 10 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 1249.00.

BOT    10    ES    false    DEC11 Futures     1253.25    USD    GLOBEX    01:09:03

SLD 10 ES false DEC11 Futures 1263.25 USD GLOBEX 11:11:59
.

Monday higher unless bad EU news

2011-12-05T01:36:00.000-05:00

The Hoot
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Monday higher, medium confidence
ES pivot 1249.42. Holding above is bullish.
Rest of week bias higher if 200 MA breached..
Monthly outlook: bias up, on politics and technicals.
ES Fantasy Trader went long at 1253.25.

Recap

Last Thursday night I called the market higher as long as the jobs number was BTE. Well unemployment did come in better and the market did rally hard early but then spent the rest of the day giving back all those gains to finish essentially flat. But the whole gestalt of the day didn't really feel all that bearish if you know what I mean.

The technicals

The Dow: The Dow has now spent two days waffling at the top of that big 497 point gain last Wednesday. The good news is that it's retraced none of that. The bad news is that we weren't able to clear the resistance at 12,165. I think that's what Friday's gravestone doji was all about. Still, without any confirmation, it's premature to call that a reversal sign. And we do have not one but two support levels real close below: the 12K psychological level and the 200 day MA at 11,946.

The VIX: The VIX found its own support on Friday, bouncing off its 200 day MA of 25.34. This marked its third day of touching its lower BB and that's fairly unusual. However, the VIX now has some resistance around 28, just above where it closed Friday. Thus it is in kind of a squeeze play that tends to reduce its volatility. Just as cars slow down when two lanes merge into one, this helps to damp down the crazy jumps the VIX has been making of late and that can only be good for the markets, at least for a few days.

Market index futures: This is really the big news on a Sunday night. All three are solidly in the green with ES up 0.76%.at 1:20 AM EST. ES mounted an attack on its 200 day MA on Friday and was repulsed. It appears to be mounting a second charge as I write this. At 1252.75, we a re just under the MA at 1254.68.

The fact that we are continuing higher in ES after two doji days of indecision is quite positive for the markets. And another positive is that OBV has come way down from its mid-November highs. I do note that the stochastic is forming a bearish crossover but I think this is still an artifact of Wednesday's tall green candle.

ES daily pivot: Has now risen to 1249.42 from 1243.42, but with the price continuing to rise we remain above the pivot. That's another positive sign.

And the winner is...

Tonight, it's the bulls. As long as there's no negative news from Europe tomorrow, I'll be looking for a higher close Monday.

ES Fantasy Trader

Friday we took a small profit of 3.75 points. Portfolio stats: the account is now $162,125 after 37 trades (27 wins, 10 losses) since inception on 8/18 with $100K. The portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier. Tonight we go long at 1253.25.

SLD 10 ES false DEC11 Futures 1244.00 USD GLOBEX NOV 30 16:47:48
BOT 10 ES false DEC11 Futures 1247.75 USD GLOBEX DEC 2 00:49:20

Friday higher if jobs BTE

2011-12-02T01:29:00.000-05:00

The Hoot
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Friday higher, low confidence
ES pivot 1243.42. Holding above is bullish.
Next week bias lower early, rebound possible later.
Monthly outlook: bias down, on politics and technicals.
ES Fantasy Trader went long at 1247.75.

Recap

Exactly as I expected, today we got a small range day with the Dow finishing down just 26 points. In the absence of any major new announcements from Europe, this is pretty much what one would expect following a spectacular gain like we saw yesterday. This now leaves us at an important juncture.

So let's get right to the technicals and see how they sort out for Friday.

The technicals

The Dow: More significantly perhaps is the fact that despite a small decline, today the Dow managed to hold above both the 12,000 support level and its 200 day MA at 11,948. The Dow now has no resistance until 12,190 and two good support points just below today's close at 12,020. That's not a bad spot to be in.

And while the indicators are now all looking overbought, remember that they become distorted whenever the market makes a sudden large move like we saw yesterday. I don't think we're truly as overbought right now as the indicators, uh, indicate.

The VIX: The VIX finally broke back under its support at 30 yesterday on a big gap down. Today it moved lower again, just a bit to close at 27.41. This makes two days now its been tickling the lower BB. The VIX rarely spends much longer than that there without rebounding, so I'm looking for it to start moving back up again soon. This bodes poorly for the early part of next week.

Market index futures: At 1:05 AM EST all three are in the green by non-trivial amounts. ES is up 0.42% and NQ is up exactly half a percent. Whenever we see the pattern of big tall green candle followed by tiny doji just hanging at the top of the big gain, one has to wonder if the next move isn't going to be back down again.

ES still has a big barrier right in front of it, the 200 day MA at 1255.08. Next stop would be 1271 and then 1284. Thing is, the doji is only a potential reversal indicator and requires confirmation. And so far, we're getting some fairly convincing non-confirmation. And there's still some room to run before that resistance.

ES daily pivot: Now 1243.42. Despite taking another big jump up, the continued upward pressure on ES keeps us above the pivot one more night and that continues to be positive.

History: According to The Stock Traders Almanac,December is the no. 1 S&P and no. 2 Dow month of the year. Then there's the time-honored Santa Claus rally to consider. Now ol' St. Nick doesn't always show up, and sometimes he just leaves a piece of coal in our stockings, but right now I'm thinking this year he just might be bringing some presents to all the good little traders out there.

And the winner is...

This is another tough call. We're at a critical juncture here, poised on the brink of a breakout but also sitting on some big gains that could easily be retracement fodder. Today's doji reflects that. Nevertheless, I'm giving this one to the bulls. I do think we're going to see some more upside return on Friday, particularly if the jobs numbers come in BTE, which I'm guessing they will. If not, look for lower.

ES Fantasy Trader

Today the ESFT was on the sidelines. .With ES finishing the day off down just 0.02%, there wasn't much to be gained trading either way. With a bit more clarity now, tonight we're going long at 1247.75.

Portfolio stats: the account remains $160,250 after 36 trades (26 wins, 10 losses) since inception on 8/18 with $100K. The portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.

Thursday tough call, bias lower

2011-12-01T02:20:00.000-05:00

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Thursday lower, low confidence
ES pivot 1225.25. Current price is well above.
Rest of week bias uncertain, oversold rally not done yet..
Monthly outlook: bias down, on politics and technicals.
ES Fantasy Trader standing aside..

Recap

Wow. I'll say it again: wow. Today was exactly the reason why last night I wrote:

"I have to add the usual disclaimer that anything coming from Europe will move the markets regardless of what the technicals tell us."

Today Europe said "Jump" and the markets leapt. The TA said down but we rocketed up almost 500 points for the best day in over two years?? As tycoon Osgood Fielding III said in Some Like It Hot, "Zowie!"

Not that I'm complaining - I'd much rather see that than calling the market up and getting down 500 (that's happened to me too). Of course I called the market down today and was dead wrong but until Europe gets their act together, that's how it goes.

Anyway, today's big move greatly complicates tonight's analysis. Because of the distortions this threw into the charts, I'm just going to concentrate on the Dow and ES to see where we may be headed on Thursday.

The technicals

The Dow:Today was very significant for the Dow because in just one day, or really just the opening 15 minutes, we not only broke the 12K resistance but punched back through the 200 day MA at 11,949 as well.

That said, the normal market pattern, and the pattern all this year so far except for one, is for any really large jump up to be followed by either a very small doji or hanging man, or else a profit-taking leg down.

Market index futures: The futures are basically unchanged tonight at 2 AM EST. NQ is up 0.09% while ES is down just 0.12%. These are the smallest moves at this hour I've seen in quite a while. The fact that profit-taking has not immediately set in is encouraging in itself. In fact, something set off a little mini-rally around 11:35 this evening.

This all leaves us in a quandary because while the Dow popped over its 200 day MA today, ES did not. At 1244.25, it is still 11 points shy, and that number, 1255.46 is still resistance here.

ES daily pivot: Now becomes 1225.25. Even after taking a big jump, we're still well above this number, so that's positive.

And the winner is...

Hmm, a tough one. I'm going to say the bears, mostly on historical comparisons. We ran too hard, too fast for my comfort today. I can't see much more upside available on Thursday, though I do think we're headed for a retest of the Dow's 12,170 resistance in the next week or so. I note also that J-Trader's system is going short and he's been really good lately. But I don't think we're going to see a major crash tomorrow either.

And yet again, I have to point out that it's all going to hang on what those pesky Europeans say or don't say. And that's all I have to say.

ES Fantasy Trader

After going long at 1270.50 and regretting it ever since November 9th, I finally decided to use today's gift to dump that dog of a trade at 1244.00. That leaves us with a 26.5 point loss, and I feel lucky to get that. It was worse, much worse for a while there.

Portfolio stats: the account now $160,250 after 36 trades (26 wins, 10 losses) since inception on 8/18 with $100K.

Tonight we're going to stand aside and see how things develop Thursday before jumping in again.

Wednesday lower

2011-11-30T01:43:00.000-05:00

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Wednesday lower, medium confidence
ES pivot 1196.25. Holding under is bearish.
Rest of week bias uncertain, oversold rally not done..
Monthly outlook: bias down, on politics and technicals.
ES Fantasy Trader stuck long..

Recap

We opened up today as I expected last night, then see-sawed the rest of the session to finish up 33 points. With no bad numors out of Europe today, the bears couldn't find an excuse to knock 'em down.

Tonight we're going to run the abridged edition of the Usual Suspects again and likely will continue as long as Europe continues to be running our show.

The technicals

The Dow: Today's small gain formed an inverted hammer and after yesterday's big advance that equals a shooting start. That's a reversal indicator, though not a particularly powerful one. Still it's worth paying attention to this. The indecisive intraday zig-zag action gave the distinct impression of a market about to turn, especially considering the decreased volume today compared to Monday..

The VIX: Dropped 4.64% today to close just about its recent support at 30. The last time it did this under similar chart conditions it popped higher the next day. It could still go either way but I wouldn't be surprised to see it go higher on Wednesday.

VIX futures: I mentioned last night that the futures looked to be headed lower and they did just that today. Tomorrow's direction is less clear. We're still in the middle of the BB's and just at a support point.

Market index futures: All three are down tonight at 1:30 AM EDT. ES is off a not insignificant 0.8%. The overnight candle is forming a pattern close to an evening star and that's generally quite bearish. This reinforces the feeling I get from the Dow's daily chart.

ES daily pivot: Now 1196.25 and we're now below it, having been drifting lower since today's close. Another bearish sign.

And the winner is...

Tonight I give it to the bears. I think there' still more room to run up in the next week or so, just not on Wednesday. After two decent days of advances, the market seems to be signaling a timeout. We're due for a bit of profit-taking here. But once again, I have to add the usual disclaimer that anything coming from Europe will move the markets regardless of what the technicals tell us. It's not the best time to be s short-term trader.

More upside likely Tuesday

2011-11-29T01:40:00.000-05:00

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Tuesday higher, medium confidence
ES pivot 1185.50. Current price is comfortably above that.
Rest of week bias higher, oversold rally is here..
Monthly outlook: bias down, on politics and technicals.
ES Fantasy Trader stuck long..

Recap

Last night it looked like today was going to be up big and so it was, with the Dow up over 300 points for a while and finishing with a 2.59% gain on some positive numors (that's news and rumors) from Europe. It was one of those days where almost all of the action was over in the first two minutes of trading. Then it drifted lower most of the afternoon before finishing with another strange little 56 point burst in the final five minutes.

The technicals

The Dow: Today's solid green candle was enough to propel us right out of the descending RTC from November 14th. The losing streak is therefore snapped and I'm changing the swing trend arrow to "trend end". This action signals a bullish setup on the daily chart. If we close higher again tomorrow, that will be the trigger for even more gains. Today's big move was eeven more impressive considering that it came on the highest volume of the entire month so far.

The VIX: Gapped down on a very tall doji that left it in the Twilight Zone, halfway between BB's with a 6.79% drop. It's not clear to me what this means. The VIX could honestly go either way from here.

VIX futures: While the futures also gapped down today on an odd green candle, there's a bit more clarity here. They have now fallen out of a rising RTC and their indicators have peaked overbought. This portends lower, implying a lower VIX and therefore higher stocks.

Market index futures: Once again we've got all three solidly in the green, though not as much as this time last night (1:20 AM EDT). ES is up 0.6% which is still quite respectable. We have the same bullish setup as the Dow, with ES trading out of its descending RTC today. The new candle now forming is solid green indicating decent follow-through. With its indicators finally coming off oversold levels, I'm liking this chart right here.

ES daily pivot: Now 1185.50. Even though that's a big jump up from today, ES is still above that at 1198. The next resistance isn't til 1213, so this is looking good too.

Sentiment: Once again, the new Ticker Sense Blogger Sentiment Poll came out today. The number of bears is up to 48% while the bulls have decreased to 33%. I'm sure at least some of this move has to do with last week's Europe mess and the Super Committee's public ritual suicide. Unfortunately, these numbers aren't quite extreme enough to draw any sort of contrarian conclusions.

In any case, for the second week in a row I voted negative. Since this is a poll of where the SPX will be 30 days from now, I use the monthly charts to make my decisions. And what I'm seeing now is the tall green candle from October being overshadowed by a a November candle that's looking almost like a dark cloud cover in November.

That's going to set up an interesting battle in December, historically a strong month. Santa may show up after all, but this is not the sort of monthly follow-through from October that I'd like to see heading into December. But the charts may not count for much since out markets are still being controlled by the Europeans.

And the winner is...

Once again, I have to hand it to the bulls. The bears have apparently all gone into hibernation. Right now, it's looking like more gains are in store Tuesday. If that happens, then the rest of the week bodes well too. There's been a lot of shorting going on in the broader market over the last few weeks, so I'm sure that there will be some short-covering helping push prices higher at least a bit longer.

ES Fantasy Trader

Nothing to see here - I'm still waiting for the SS Nautilus to come back to the surface.

Monday higher

2011-11-28T01:23:00.000-05:00

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Monday higher, high confidence
ES pivot 1167.83. Current price is comfortably above that.
Rest of week bias uncertain, oversold rally is overdue..
Monthly outlook: bias down, on politics.
ES Fantasy Trader stuck long..

Recap

After watching Greece, Spain, Portugal, Italy and then Germany all take turns tanking the market, last Thursday I wrote "how many countries are there in Europe? I don't think we're going to see an end to this until they're all had a whack at the stock market." It was mostly in jest, but wouldn't you know it, the next day we got news that Hungarian bonds had bombed and that there was trouble in Belgium. Belgium? A country barely larger than Maryland, the 8th smallest state, that I'll bet most people have trouble finding on the map?

OK, well anyway, that's two more down. Who's next? Monaco? Andorra? The Dutchy of Grand Fenwick? In any event, Friday was indeed down as I called it, though with such light trading it's hard to draw any conclusions.

The technicals

Tonight though is quite a different story. There are really only two things that matter here, the Dow and the futures, so let's get right to them.

The Dow: One good thing about Friday's action was the print it left on the chart - a nice inverted hammer with some support just below it at 11,206. And in extending the Dow's losing streak to 9 (yes, I know there's one day on the 18th when we had a tiny gain), it makes a bounce even more overdue. I've written about streaks in the past, and 9 is getting up there.

Good news, everyone!

Market index futures: Here's the key. Right now, at 1 AM EST, all three futures are solidly in the green with ES gapping up to the tune of just over not one but two percent. Once again it's news and rumors - I'm going to call them numors out of Europe. Only this time it's good news for a change.

In fact this gain is already large enough to propel us right out the edge of the descending RTC we've been stuck in since November 15th. That in itself is a bullish setup.

Obviously that can all change at the drop of a hat, but we very seldom see the futures up this much at this hour without having a good day follow. Mr. Market, like Mikey, likes it. This is worth paying attention to.

ES daily pivot: The pivot has fallen to 1167.83 and ES has finally moved above it at 1177.25. This is a comfortable edge going into Monday's session.

History: According to The Stock Traders Almanac,the Monday after Thanksgiving is historically positive, as is the entire week for that matter.

And the winner is...

No need to add 'em up tonight. It looks reasonably certain to me that we're going higher Monday. Whether this is the start of an uptrend or just a one-shot remains to be seen, but hey, I'll take it.

Friday lower

2011-11-25T01:29:00.001-05:00

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Friday lower, high confidence
ES pivot 1163.00. Holding under is bearish.
Next week bias uncertain, oversold rally is overdue..
Monthly outlook: bias down, on politics.
ES Fantasy Trader stuck long..

Happy Thanksgiving!

The Night Owl wishes all my readers a happy Thanksgiving. And despite all the terrible things happening today in our markets, our country and around the world, we still have a lot to be thankful for in America.

Tonight is going to be an abbreviated holiday edition of the Night Owl Trader mostly because everyone is no doubt either watching TV and digesting turkey, or out battling the Black Friday mobs. For me, I'm just going to take it easy tomorrow.

Although the market will be open for half a day, there will be little to learn from the action regardless of which way it goes. All the big players are taking the day off and I firmly believe we should emulate them.

Recap

Tuesday night we were right at a support level but I called Wednesday lower anyway and that's unfortunately what came about with the Dow diving another 236 points. My screens were literally awash in red. It was real ugly.

The technicals

The Dow: Closed for Thanksgiving. That's one way to get a day where the Dow doesn't go down - we can be thankful for that. Will this one day timeout give the bulls a chance to regroup and drive the market up in Friday's short session as is historically the case? Let's check the futures for some clues.

Market index futures: Well stocks were closed but the futures soldiered on today, putting in a small doji in the abbreviated Thanksgiving session. Any hope that might signal a reversal though was dashed when trading resumed this evening and ES promptly resumed its march lower. This time, apparently Germany was the culprit. Um, how many countries are there in Europe? I don't think we're going to see an end to this until they're all had a whack at the stock market.

Anyway, all signs now point to continued lower on Friday. ES, now at 1153.50 at 1:15 AM EDT has no support til 1122. The indicators are all lying broken on the floor. RSI has now hit zero for the second day in a row after 10 straight down days. And there are still no reversal signs in the candles. We remain firmly entranced in the descending RTC. I'm saying we're going lower tomorrow but I'm not even going to bother with it. I need a break.

Wednesday looking lower on politics

2011-11-23T02:04:00.000-05:00

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Wednesday lower, medium confidence.
ES pivot 1187.00. Holding below is bearish.
Rest of week bias lower, on US & EU politics.
Monthly outlook: bias uncertain on politics.
ES Fantasy Trader remains stuck long.

Recap

Another miserable day on the Street today. It looked for a while like the ECB might come to my rescue and make the day finish higher as I was calling for but that rally attempt fizzled right after lunch and back down we went for another 54 points lower in the Dow.

The technicals

The Dow: Today's drop took us to quite oversold levels and made two days we're bumping along the lower BB. The last two times that happened lately, we rallied the next day. Unfortunately, the time before that was the giant summer swoon from July through August, when the Dow spent a full eleven sessions hugging a lower Bollinger band that kept falling away from the market. Let's hope this isn't turning into that. And uh oh, I used the "h" word, something I normally avoid. When you start pinning your strategy on hope, you're in trouble. And this market sure looks like it's in trouble right now.

Of course part of the problem is the thin trading due to the holiday week. Volume has been declining for the last three sessions as all the "banksters" pack up and head for the Hamptons to gobble their turkeys.

The VIX: One thing I did get right last night was to call for a lower VIX and sure enough, it went down 2.86% today. Given the leading indicator qualities of the VIX, this is about the one bright spot I can find in the charts as a lower VIX should mean higher stocks.

ES daily

Market index futures: This is the Chart of the Day, and a thing of beauty it is not. Nothing but down for almost eight straight sessions now (the 15th saw a puny 2.5 point gain, so that might as well be down). At this point, it's time to start talking about streaks again. This down streak is now longer than anything from the waterfall crash back in July and the market is as oversold now as it was after that. And yet this chart is looking like the market that has fallen and can't get up. The candles are locked into that descending RTC like a train on rails.

The only good thing here is that 1169 is another support level and that seems to have held in the overnight, so far at least (at 2 AM EDT). But with all three futures down about a full percent, Wednesday's not looking good.

ES daily pivot: Now 1187.00 but even as the pivot comes down, ES seems to just fall away from it. We're not going to catch a reversal this way. Ugh.

And the winner is...

Europe. Not the bulls, not the bears, it's all about Europe and the Pain in Spain, which causes no one's gain. Until we get a hint of good news out of Europe, you can just fuggedabout it. Technically, we're overdue for a bounce any day now, but it simply doesn't seem to want to happen.

I'm not going to the Hamptons, but I am completely sick and tired of this nonsense. I'm taking the rest of the week off. The only good thing here is that eventually, there may be some bargains around but I'll leave the falling knife to the turkey, thank you very much.

ES Fantasy Trader

The ESFT is now underwater in the same way as the Trieste exploring the Marianas Trench. I can only assume that eventually it will have to come up for air. In the meantime, well, I'm on vacation.

Tuesday higher

2011-11-22T01:30:00.000-05:00

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Tuesday higher, medium confidence. Bull-bear ratio is 4:0.
ES pivot 1193.42. Holding above is bullish.
Rest of week bias uncertain, on US & EU politics.
Monthly outlook: bias uncertain on politics.
ES Fantasy Trader remains long.

Recap

I had a bad feeling about today despite a majority of last night's indicators looking bullish. Turns out my instincts were correct as the Dow handed us a nasty 249 point dump amid continuing uncertainty in Europe and the comedic antics of our very own Twelve Stooges in Washington. And you super-committee-ians are earning a paycheck for what exactly? Where is Donald Trump when you need him to tell you you're all fired?

But before I tell you how I really feel, let's look at the charts to see where Tuesday might lead. Tonight we again concentrate on just the Big 4. And I am deliberately excluding the commodities and historical effects I normally consider because of their erratic behavior lately. I find this helps cut down on the noise when the VIX is at elevated levels.

The technicals

The Dow: As I suspected, the Dow chart last night was looking a bit queasy. And so today it barfed up a gob of points to take us right to the lower BB. The last two times a big drop took us to that level, we rallied the next day. A stochastic finally making a bullish crossover tends to support that view, so +1 bulls.

The VIX: Put in an unusual dark cloud cover on a gap-up red candle today. So while the VIX did gain 2.8% today, it was almost all right out the gate with the rest of the day retracing. I know I called for a lower VIX today and didn't get it but tonight the case is much stronger for lower tomorrow, so +1 bulls

Market index futures: Unlike last night, right now all three are actually in the green by non-trivial amounts, with ES up 0.44% at 1:15 AM EST. There's support at 1191 and the indicators are all now quite oversold. The stochastic has completed a bullish crossover and OBV has bottomed. Having now hit the lower BB, I think we're due for a bounce from here, so +1 bulls.

ES daily pivot: Now 1193.42. We've finally moved above the pivot, or more to the point, the pivot has moved below the current price of 1195.50. The pivot is now support, so unless we cross back under, it's looking good for Tuesday. +1 bulls.

And the winner is...

It's all bulls, 4:0. I'm not ready to call it a trend, but I think we're due for an oversold bounce on Tuesday. That's it in a nutshell.

ES Fantasy Trader

Last Friday I said that sometimes you just have to take the heat. This trade is starting to get pretty hot though. Ouch. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

More downside likely Monday

2011-11-21T01:42:00.001-05:00

The Hoot
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Monday lower, medium confidence. Bull-bear ratio is 4:2.
ES pivot 1217.50. Holding under is bearish.
Rest of week bias uncertain, on US & EU politics.
Monthly outlook: bias uncertain on politics.
ES Fantasy Trader remains long.

Night Owl News

The Night Owl now has email. If you prefer to contact me directly by email instead of leaving a comment on the blog, just send to nightowltrader (at) gmail.com.   I'll be checking that regularly.

Recap

My call for Friday was correct, with the Dow gaining 25.4 points. OK so the SPX lost all of half a point, but that's really basically unchanged. And I don't usually follow the Nasdaq which dropped 0.6% In any event that sort of decorrelation was sort of to be expected for an expiration day. In any event, Mr. Market remains totally fixated on Europe. The latest news is that the Spaniards seem to have given the Socialists the boot. Let's see if that will give us a boost on Monday.

The technicals

The Dow: Last week's dismal performance took us right back down to recent daily support.   The fact that the bears were unable to push the market below the 11,750 level is encouraging. On the other hand, the weekly chart isn't looking nearly as good. All of the indicators have now peaked at overbought levels and are headed down, with the stochastic just finishing a bearish crossover. Indeed, the notable factor here is the Dow's continued inability to push much over 12,170 going back four weeks now.

And if that wasn't bad enough, the Dow fell out of its weekly rising regression trend channel. Note also that the two previous weeks formed a hanging man candle and then this past week, boom - down we went. I'll say it again, one hanging man, bad; two hanging men, double bad.

But on a daily basis at least, Friday's inverted hammer is a reversal indicator, so +1 bulls.

The VIX: After touching its upper BB on Thursday with a bearish shooting star, the VIX did indeed decline on Friday as I predicted. The second inverted hammer it formed signals continued downward pressure and the stochastic is executing a bearish crossover. This points to a lower VIX Monday, so +1 bulls.

VIX futures: This chart is not as clear as the VIX itself. I see at least a possibility of lower futures Monday but I'm not confident enough to award any points here.

Market index futures: Are all in the red once again at 1 AM EST. ES is doing the worst, down about three quarters of a percent. Worse, they gapped down this evening to open under support at 1213. Next support, psychological at 1200, then technical at 1193. On the plus side, we've now hit the lower BB and the stochastic is more oversold than it's been since July. On the minus side, that doesn't guarantee a reversal Monday. And the depth of the overnight drop makes me pessimistic here, so +1 bears.

ES daily pivot: Now 1217.50. We're quite below this now at 1203.50. ES is going to have a tough job breaking through this pivot, so +1 bears.

Dollar index: Put in a big hanging man on Friday that did not manage to advance beyond Thursday's high. That looks toppish to me. RSI has peaked at overbought levels and the stochastic is making a bearish crossover. Absent any new unexpected jerking around by Europe tomorrow, the dollar should go lower and that makes it +1 bulls.

Oil: Following a bearish engulfing pattern Thursday, on Friday oil fell out of its rising RTC from October 4th, stopped only by its 200 day MA at 97.15. I think oil may have topped here and has plenty of room to run lower Monday. Unfortunately, oil has lost its market correlation, so no points.

Copper: Hit its lower BB on Friday along with very oversold indicators. Unfortunately, copper has displayed the ability to slide down the lower BB rather than bounce off it this year, so I'd be cautious about this being a reversal indicator. I want some confirmation. If Monday is up, then I think Tuesday will be also. But no points for now.

Morningstar Market Fair Value Index: Last Friday the index was unchanged at 0.86, so no points here.

History: According to The Stock Traders Almanac,the Thanksgiving holiday week is historically positive and improves as the week goes on, so +1 bulls.

   And the winner is...

The bulls, with a bull-bear ratio of 4:2. However, with continuing disruptions in Europe and with a looming deadline for the 12 Stooges on our super-committee of fools more interested in playing politics than helping the country here at home, I'm going to exercise my veto over the B-B numbers and call Monday lower.

ES Fantasy Trader
Last Friday I said that sometimes you just have to take the heat. This trade is starting to get pretty hot though. Ouch. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Friday due for a bounce

2011-11-18T01:28:00.000-05:00

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Friday higher, low confidence.
ES pivot 1221.0. Breaking over is bullish.
Next week bias uncertain, depends entirely on Europe.
Monthly outlook: bias up on technicals and seasonality.
ES Fantasy Trader remains long from last week.

Recap

Well things were looking good for a while there this morning until those pesky Europeans put the kabosh on the market, sigh, once again. In true tag-team fashion, the Greeks handed off to the Italians who passed it on to Spain this time. Meanwhile, our markets sink while they play musical leaders. Where is R. Lee Ermey when you need him? I want to send him over there to shout "What is your major malfunction?!"

In the meantime, we managed to snatch defeat from the jaws of victory with yet another loss, this time 135 Dow points. Let's now run down the few remaining technicals that still seem to make any sense at all to come up with a direction for Friday.

The technicals

The Dow: Today's drop left us just under support at 11,780. It also left the indicators in a considerably more oversold condition than they were the last two rallies we had this month. This of course does not mean that we can't still go lower, but it would appear we're closer to a bottom than a top right now. Today's drop also took us very near the lower BB.

The VIX: In a comment on a recent post, Daniel commented on the power of the Bollinger band. Well today the VIX shot up, hitting a high of 36.46. Today's upper BB? 36.54. Once that level was hit, the VIX turned around and finished with just a 3% gain on the day at 34.51. Once again I will point out that most often when the VIX touches its upper BB, it goes lower the next day.

There's no reason to think this time will be different, particularly since today's candle was an inverted hammer. Although my call for a lower VIX today last night was a bit premature, the combination of a hanging man followed by an inverted hammer is a much better reversal indicator than either one alone. We saw this at the end of June 2010 and the next day gapped down.

Market index futures: All three are running in the red tonight at 1:05 AM EST though not hugely, with ES down 0.14%. However, there are three factors in play tonight that weren't there last night. First, the RSI has now reached oversold levels and appears to have bottomed. The last three times we were in a similar position this year, ES rallied hard the next day. Second, while we broke the 1222 support level today, the next level down at 1212, held Third, today's low took us to the lower BB and while we're down from the day's close right now, we have moved off the lower BB. That is also positive.

And the winner is...

At the risk of sounding like a broken record, I'm going to call for a higher close Friday. We're now below levels from which previous rallies have happened after big drops. It just feels like we're due for one. Note also that Friday is options expiration and that the Dow is up 6 of the last 8 on this day. In 2008, in the depths of the Great Recession the Dow gained 494 points on this day according to The Stock Traders Almanac.

ES Fantasy Trader

My decision not to let this one go is proving costly in the short run but I'm going to hang in there. Sometimes you just have to take the heat. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Futures point to higher Thursday

2011-11-17T02:06:00.000-05:00

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Thursday higher, low confidence.
ES pivot 1240.08. Breaking over is bullish.
Friday bias up, depends entirely on Europe.
Monthly outlook: bias up on technicals and seasonality.
ES Fantasy Trader remains long from last Thursday.

Recap

Well we seem to be back on track, for now anyway. My idea of filtering out some of the noise seems to have helped and as I expected, the Dow did close lower today by 191 points. So I'm going to continue along these lines tonight, looking more at the forest than the trees to try and figure out which way this market may be hiking.

The technicals

The Dow: Today's close at 11,906 was right at a support level after a very odd session featuring two big cliffs separated by a gentle upslope - all related to Europe i one way or another. There remains a big symmetrical triangle forming, going back to October 28th. I'm still expecting a resolution to the upside within a few days.

The VIX: The VIX popped out of its own triangle, but it was to the upside. This does happen about 25% of the time. The "exit in the same direction as entry" rule isn't perfect. However, today's 7.3% pop came in the form of a hanging man which provides at least some expectation of going lower tomorrow which would be good for stocks.

Market index futures: All three are in the green tonight at 2 AM EST by nearly half a percent. ES has been rising since about 8 PM this evening and looks to be getting primed for a run at the new pivot. Note also that today's low stopped short of recent support around 1225. Catching some traction from 1230 is a good sign. The indicators are also now approaching oversold levels, with the exception of OBV which is running quite high. Overall though, being as we are now at the bottom of the recent trading range and near support, I'd say ES has a better chance of advancing tomorrow.

And the winner is...

The bulls. I'm starting to see various charts moving enough out of the dangerous middle ground to areas from which reversals become more likely. I can't say this is the start of any trend, but I'm feeling better about our chances for tomorrow so I'm going to call Thursday higher.

ES Fantasy Trader

Gosh, this is the trade that wouldn't die. We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Wednesday looking lower

2011-11-16T01:40:00.001-05:00

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Wednesday lower, low confidence.
ES pivot 1250.08. Holding below is bearish.
Rest of week bias uncertain, depends entirely on Europe.
Monthly outlook: bias up on technicals and seasonality.
ES Fantasy Trader remains long from last Thursday.

Recap

Europe explained, by M.C. Escher

In a great comment to last night's post, reader Daniel corroborates my feelings that TA is failing us lately. He also notes that the Italian and Greek situation is very complex, which is about all I've been able to figure out myself. As far as I'm concerned, it's beyond merely complex; it's positively baffling and incomprehensible.

So tonight I'm bringing back a metaphor I first used on September 14th, also about this very topic. Since then nothing much seems to have changed. The players are pretty much all still walking upside down sideways up the down staircase. Just what exactly is going on over there in Europe anyway?

The technicals

Dow daily

The Dow: Last night was the first time in a long time I just threw up my hands and couldn't make a call. Turns out not making a call was actually a pretty good call as the Dow put in an extraordinary long symmetrical doji that ended up a mere 17 points after a whole day of bobbing and weaving. Things don't get any more indecisive than this.

Just look at it: the upper bound was limited by the exact same resistance that stopped us four of the last five sessions (blue line) and the lower bound was just above the 200 day MA.

The other interesting point here is that you can see a developing triangle here too. In his comment, Daniel opines that another move up is in the cards and I tend to agree. The only question is when.

VIX weekly

The VIX: As an example of how screwy this market is, today the major averages were up and the VIX was also up. That's quite unusual. And since the daily charts are such a tough read, I'm once again backing out to the weekly chart.

And look at this: yet another symmetrical triangle on the weekly chart. These things seem to be popping up everywhere lately. And since this one was entered from above, one would expect the resolution to be lower, and that would be quite bullish for stocks.

Japanese candlesticks, Dow 2011 style

Due to the recent technical uncertainty, tonight I'm going to take a pass on the rest of the Usual Suspects. At this point I think we're just dabbling in noise and they're confusing the issue more than they are clarifying it. The only real guidance I'm seeing tonight is from the futures and they're all headed south.

And the winner is...

Well we'll still nominate a winner for Wednesday. Even without computing the bull-bear ratio, the overall impression I'm getting is that technically we're due for a lower close Wednesday. But I'm also expecting some upward movement pretty soon, maybe by the end of this week. I guess we'll just have to see if the new leader of Italy can deliver the full Monti.

ES Fantasy Trader

We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Tuesday too tough to call, watch EU news

2011-11-15T01:43:00.000-05:00

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Tuesday uncertain, no confidence. Bull-bear ratio is 4:4.
ES pivot 1255.58. Holding below is bearish.
Rest of week bias uncertain, depends entirely on Europe.
Monthly outlook: bias up on technicals and seasonality.
ES Fantasy Trader remains long from last Thursday.

Recap

Once again, the 12,180 barrier proved too tough a nut for the Dow to crack today, ending with a 75 point loss. My call last night was indeed derailed by Italian bond yields, or maybe it was Spain - at this point it doesn't really matter much. I can only point out that I did mention Europe would be the deciding factor, as it's been for quite some time now. We'll run down the technicals again tonight, though I'm afraid it's getting to be little more than a, ahem, technical exercise.

The technicals

The Dow: Today's 75 point drop made a pretty non-descript candle, not quite hanging man, not quite dark cloud cover. I'm not really sure what to make of this. My instinct though is that this could easily get pulled either way depending on, that's right, Europe. Sorry to be a broken record here but that's just the reality of it. Accordingly, I can't really award any points here though my personal bias is down on this chart.

The VIX: For the second day in a row, the VIX moved in gap fashion, this time gaining 3.6% to form a tall inverted hammer. While this pattern isn't the greatest reversal indicator, I note that the stochastic made a bearish crossover today and that is a good indicator. The whole configuration of this chart really reflects the mood of the market, jumping about every which way every time some news flash or another comes out. Technically, I'd say the VIX has a shot at going lower from here on Tuesday but being as we're still stuck in the Twilight Zone between the BB's, I'm not real confident about it. I will though give it +1 bulls anyway.

VIX futures: A similar story to the VIX itself here. I do see though that often when the futures put in an inverted hammer, the next day is lower. On that basis, I'll give this one +1 bulls.

Market index futures: All three are in the red at 1:25 AM EST with ES down 0.28%. Today's action formed a classical dark cloud cover that failed to break over the 200 day MA. That's not a good sign, so I'm afraid this chart is +1 bears.

ES daily pivot: Actually rose to 1255.58 tonight. After bumping into the old pivot at 1253.33 at 7:30 this evening, ES has just been drifting around vaguely lower. It's looking like it's rather lacking in conviction. As long as ES is unable to mount an effective run on the pivot, that's going to be bearish for Tuesday, so +1 bears as of now.

Dollar index: The dollar continues its herky-jerky ways, rising today almost as much as it fell on Friday, all for no apparent technical reason. I said it last night and I'll say it again - I'm not touching this one. No points for you.

Oil: Last night I wrote "I can only assume oil will go higher again on Monday." and so it did. Only this time it was not good for stocks. Oil went up, the market went down. We may be reaching the price level where rising oil is bad for stocks and it goes into a negative correlation with the market. In any case, the same factors are in play tonight, so I'm going to look for another rise tomorrow which if my conjecture is correct would now be bad for stocks, so +1 bears.

Copper: Cu continued narrowing its range today, going along with my theory of a symmetrical triangle. If this triangle is going to pop, it's going to happen soon. My guess is by Wednesday. On that basis, it's +1 bulls.

Morningstar Market Fair Value Index: On Friday the index rose from 0.88 to 0.89, so +1 bulls.

History: According to The Stock Traders Almanac,Tuesday has a negative bias, so +1 bears.

And the winner is...

A tie - with a bull-bear ratio of 4:4. And that really sums up my feelings about the market right now. I do note that J-Trader is calling for a strong buy for Tuesday - I'm just not seeing it. It isn't often that I don't make a market call for the next day but this is going to be one of those times. This one is just too tough for me.

My best advice is to watch the pivots. If you like the Dow, that one will be a bit under 12,075. The SPX somewhere around 1252. If the market can break above these numbers, we have a shot at a higher close. If we bounce off, we're closing lower. And as usual, did I mention that news from Europe is controlling everything right now?

ES Fantasy Trader

We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Calling Monday cautiously higher

2011-11-14T02:08:00.000-05:00

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Monday higher, medium confidence. Bull-bear ratio is 5:0.
ES pivot 1253.33. Remaining above is bullish..
Rest of week bias uncertain, depends entirely on Europe.
Monthly outlook: bias up on technicals and seasonality.
ES Fantasy Trader remains long from last Thursday.

Recap

Well I finally got one right last Friday, although I can't claim too much credit - with this crazy market it's pretty much the luck of the draw. Today we got a well-written thoughtful comment from alert reader Daniel (see the comments to last Friday's post below) in which he says "Within that range, brave prognosticators such as yourself have tried to discern a pattern from day to day or in short swing timeframes, in a Market where the day-to-day changes could have been sent to StockCharts by a random-number generator."

I don't know if it's bravery or lunacy that brings me to wade into this minefield every day, but all I can do is analyze the charts. But Daniel is right - with a market that's hanging on every bit of news, every rumor of a rumor, and every hint of a rumor of news out of Europe, doing TA is pretty much a crap shoot. As long as the news wires remain quiet, we usually do pretty well. Keep that in mind as you read along this evening. (And do read Daniel's comment - his analysis is excellent).

The technicals

Dow monthly

The Dow: On Friday the Dow shot up to its resistance point around 12,100, closing near its high. I can't really fault it for not breaking this level given that it had already advanced 260 points. But it does leave us in a quandary for Monday. Two green candles are bullish and we handily broke both the 12K resistance and the 200 day MA at 11,976. Interestingly, the Dow has visited the 200 MA in 9 of the last 11 sessions. Each time this happens, it loses some of its character as a barrier, either up or down. Just mentioning...

But the chart I really want to look at tonight is the Dow monthly here. This is the basis on which I've been voting bullish in the Ticker Sense weekly sentiment polls lately (and for the record, I did so again in tomorrow's poll). Note the five consecutive months of declines beginning in May and ending in September. That coincided with a bottom in the indicators October broke the decline in a big way and took us just to the right edge of the declining regression trend channel. The action this month so far at least is a bullish setup. I know its dangerous making predictions on the basis of a half-baked candle, but that's all we've got right now.

The other big thing about the candles here is that October formed a classic bullish engulfing pattern. You don't often see this on a monthly chart. I had to go back to November/December of 1991 to find something similar and that was followed by five months of further gains.

So bottom line, I'm going out on a limb to give this one +1 bulls for Monday because of the resistance on the daily chart, but with the longer term support behind us as well as the end of year seasonality, I'm a bit more confident. If my system had it, I'd give this one maybe 2/3 bulls.

The VIX: Ah the VIX, the King of indicators. All hail the VIX! After touching its upper BB last week, it retreated and gapped down 8.4% on Friday to form a small doji. That alone raises the possibility of a reversal on Monday. And if you take out Thursday's odd spiky candle, it's looking like a bullish doji star. Also, Friday closed right at 30, which has proven to be support recently.

But the VIX also ended right in the center of the Twilight Zone, that area in the middle of the Bollinger bands. And with the volatility of the VIX itself remaining abnormally high since August, it is premature to call a higher VIX on Monday on this basis. The best I can say is that we have a bullish reversal sign that requires confirmation. That should come tomorrow. So I can't give any points yet.

VIX futures: When the VIX lacks clarity, we seek it from the futures. Unfortunately, this chart looks a lot like the VIX itself. Even moving out to the weekly chart is of no help since that is simply a great big doji of indecision. Too hard to call, no points.

Market index futures: I'm a bit encouraged this evening to see all three futures are up, with ES being up 0.4% at 1:45 AM EST. Seeing some follow-through after Friday's big gain is a good sign. So is the fact that ES opened today with a gap up over its 200 day MA of 1261.28. That's our new support. The indicators mostly continue to rise (RSI being the exception) but I'm wary of them right now - they tend to get distorted when the market has big swings like we saw last week. Nevertheless, I'm feeling the love here, so +1 bulls.

ES daily pivot: Now 1253.33. With ES now at 1268.00 we have a fair cushion against the pivot. This is the sweet spot - not close enough to risk falling through and not far away enough to be overextended. I'm liking it, so +1 bulls.

Dollar index: The poor dollar is really getting jerked around by the European brouhaha. Last week it was up big and down big. Sorry, I want nothing to do with this chart tonight - no points.

Oil: Broke over its 200 day MA on Thursday and did not retreat on Friday. Oil remains firmly in a rising regression trend channel from 10/4/11. There is now no resistance until 100. With its indicators all broken-overbought, I can only assume oil will go higher again on Monday. Higher oil is still good for stocks (for the time being anyway), so this one is +1 bulls.

Copper, weekly

Copper: After holding support on Thursday with a stubby doji that held support of its previous low, copper executed a nice bullish piercing pattern on Friday. And speaking of symmetrical triangles as we've been recently, note the nice one forming on copper's weekly chart here. Since these tend to resolve in the direction of entry about 75% of the time, this would imply that copper could be due for a breakout as early as this week.

This triangle is getting about as coiled as it can get. It's looking about ready to blow any day now. And as alert reader Daniel notes, "triangularity of any kind usually resolves in the prior major direction, and given the kaboom of October that still has to be seen as UP. And that UP must be especially respected as we come into year-end Bonus angst time".

Note also that last week closed just about at the 50% retracement of the big jump three weeks ago and attempts to drive it lower in the past two weeks failed. On this basis, I give copper +1 bulls.

Morningstar Market Fair Value Index: No update on Sunday night so no points.

History: According to The Stock Traders Almanac,the Dow was down 7 of the last 11 on the Monday before November expiration. However, they rate the day bullish. To me, this sort of cancels out, so I'm not giving any points here.

And the winner is...

The bulls, with a bull-bear ratio of 5:0. While the shut-out is impressive, the low score strikes a cautionary note. In fact, the astute J-Trader closed out his long position on Friday but did not go short. But the Night Owl rarely equivocates, so tonight we move a bit further out on the limb than usual and call for a higher Monday, modulo the usual noise out of Europe. That's all she wrote (that's enough!)

ES Fantasy Trader

We continue to hold the long position from three nights ago. My decision to hold once again on Friday was a good one and we have no recovered almost all of the loss (the Italian job) on this trade. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Friday higher if no bad EU news

2011-11-11T01:52:00.000-05:00

The Hoot
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Friday higher, low confidence.
ES pivot 1233.58. Remaining above is bullish.
Next week bias lower on technicals.
Monthly outlook: bias uncertain on technicals and Europe.
ES Fantasy Trader remains long.

Recap

Last night the only thing I wrote that proved to be correct was my closing comment in the ESFT section, "I think today's decline was really overdone and am expecting a bounce eventually.". Well we did in fact get a bounce today but it had more to do with the S&P's rating on France than yesterday's big decline. Once again the news trumps the technicals.

Since I seem to be nothing but wrong lately, I'm going to try something a bit different tonight. I'm only going to review what I think are my best indicators and I'm not going to compute the bull-bear ratio at all. Given the ongoing volatility and irrational nonsense permeating the entire market lately, there's no point in over-analyzing things just to end up being proven wrong again.

The technicals

The Dow: The Dow shot up right out of the gate this morning and then spent the rest of the day oscillating about its pivot. With a close of 11,894, the 200 day MA at 11,975 and the 12K psychological level now become resistance. That's also about the 50% retracement of yesterday's drop. Assuming that took a lot of sellers out of the fray, I don't think it unreasonable to expect another run at 12K tomorrow.

The VIX: Yesterday I observed that "the VIX rarely spends more than one day at the upper BB without retreating". I should have had more confidence in my own observations because the VIX did indeed drop 9.26% today. Tonight I'll add that once the VIX has hit its upper BB and then begun a decline, it most often continues to decline at least one more day. The VIX has no support until 31.39 from today's close at 32.81 so I'm guessing it still has ate least a bit more lower to go Friday.

VIX futures: The futures also moved lower today putting in a gravestone doji candle but in the wrong place to be a reversal pattern. I do however think that this sort of indecision favors further downside from here which would be good for the markets.

Market index futures: Tonight all three are solidly in the green at 1:40 AM EST. ES is up 0.42%. This sort of follow-through on today's action looks encouraging to me.

And the winner is...

Looks like the bulls to me. I'm going to say I see more positive than negative tonight just on the overall gestalt of things, so I'll call Friday higher with the usual caveats about new/rumors out of Europe. I'll add that J-Trader, who went long yesterday and has been a lot more right than me this week, remains long tonight.

ES Fantasy Trader

We continue to hold the long position from two nights ago. My decision to hold last night was a good one and we recouped about half of the loss on this trade. With any luck, and by gosh that's exactly what's driving this market now, we should be able to recoup some more on Friday.

Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

Thursday lower technically but EU news will decide

2011-11-10T01:55:00.000-05:00

The Hoot
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Thursday lower, medium confidence. Bull-bear ratio is 0:5.
ES pivot 1240.83. Holding under is bearish..
Friday bias lower.
Monthly outlook: bias down, regardless of Fed action in September
ES Fantasy Trader holding long.

Recap

Well there go those pesky Europeans again. Mama mia, this time it's Italy. It's like we're right back to last summer playing financial Whack-a-Mole. Just as the Greek mole disappears into his hole, the Italian one pops up, only here it's the market that got whacked. All of my carefully wrought technical analysis from last night went pfft, right out the window. I don't know if it's even still worth playing the game since today's seismic moves everywhere threw all the charts into disarray. But let's give it a shot anyway and see what happens.

The technicals

The Dow: Got crushed for a 389 point loss because the Italians are lousy money managers. Thanks a lot - for nothing. The 12K support and 200 day MA support meant zip and the stochastic turned a bearish crossover. Technically, I'm not liking this chart at all, so +1 bears.

The VIX: Took a big gap up to put in a tall green candle for a whopping 32% increase that went almost exactly to the upper BB and back into Psycholand, the upper 30's. I've said it before and I'll say it again: the VIX rarely spends more than one day at the upper BB without retreating. The stochastic formed a bullish crossover today but that may be an artifact of today's big jump rather than a true predictor. So while there may not be much upside left to the VIX here, it would be premature to say it's coming down Thursday, so no points.

VIX futures: The futures actually went over the upper BB today but further gains are not out of the question. Another one that's too hard to call, so no points.

Market index futures: Once again, all three are in the red, with ES down 0.27% at 1:35 AM EST. Today's monster decline stopped at a support line of 1226 but in the overnight we're resuming lower, currently to 1222. Next support is 1213, then 1193, then 1165 and 1120. You'd think after such a big drop we might get a dead cat bounce but lately this year whenever we have a big down day, we get another one, so +1 bears.

ES daily pivot: Now 1240.83. Even after coming down since today, ES is still below this level and falling again. This looks bad, so +1 bears.

Dollar index: Made the obvious move, shooting right up to its upper BB Big jumps like this tend to be followed by small dojis so that's what I'd look for on Thursday, but its too uncertain to give any points.

Oil: About the only chart with some semblance of sanity today, oddly enough, oil hit its 200 day MA and retreated on something of a bearish engulfing pattern. I'd look for lower oil Thursday, so that would be +1 bears.

Copper: Took a big fall today in sync with the rest of the market. The resulting pattern with that doji star from yesterday looks bearish and now we have a bearish stochastic crossover, so this one goes +1 bears.

Morningstar Market Fair Value Index: Today the index was unchanged again at 0.90, so still no points here.

History: History seems to count for zip right now, so no points.

And the winner is...

The bears, with a bull-bear ratio of 0:5. On this basis I will call for a lower close Thursday technically, with the explicit caveat that none of this analysis amounts to a hill of beans in the face of whatever the next rumor/innuendo/scrap of news might come wafting out of Europe tomorrow. This market is now not merely irrational, it is irrationally irrational. As a consequence, I am completely standing aside until some semblance of sanity returns. Pull up a chair.

ES Fantasy Trader

Today we are simply holding the long position entered last night. I think today's decline was really overdone and am expecting a bounce eventually.

Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

A bit more upside possible Wednesday

2011-11-09T01:34:00.000-05:00

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

Wednesday higher, medium confidence. Bull-bear ratio is 7:1.
ES pivot 1265.67. Remaining above is bullish.
Rest of week bias lower..
Monthly outlook: bias up on technicals.
ES Fantasy Trader went long at 127050.

Recap

Last night I computed a bull-bear ratio of 6:0 but wasn't feeling all that confident about it. Nevertheless, the BBR came through and Mr. Market delivered a nice up day for us. I have now completely given up trying to figure out what anything coming out of Europe means anymore, so I will concentrate as always on the technicals. So let's spin the Wheel of Fortune and see if we can make a fortune on Wednesday.

The technicals

The Dow: Did you notice the role the Dow pivot played today? After the 10 AM reversal kicked in right one cue, the Dow declined to 12,004, almost exactly the pivot at 12,008. Then it took off and closed the day up 102. With a solid green candle, the 200 day MA breached yesterday now providing support at 11,976 and psychological support at 12K, no resistance til 12,225 and the upper BB at 12,316, I think there's still just enough gas left in the tank for one more push higher before we really get overbought, so +1 bulls.

The VIX: Last night I wrote "we're not done yet with declines in the VIX" and the VIX obliged with an almost 8% drop today that broke its support at 30. With indicators still in decline, solidly in a descending RTC and no support til the lower BB at 25.17 there's nothing here to suggest a higher VIX on Wednesday, so +1 bulls.

VIX futures: The futures chart resembles the VIX itself but is if anything even more bearish and that's good for stocks so +1 bulls.

Market index futures: As last night, all three are running in the red again at 1:07 AM EST, but not badly. ES is down now just 0.18%. The triangleI spoke of yesterday resolved nicely to the upside today with a decent green candl that blasted right through the 200 day MA. That number, 1261.70 now becomes support. And with no resistance til 1281, the upper BB at 1291 and indicators still rising but not yet overbought, what's not to like? +1 bulls.

ES daily pivot: Now 1265.67. Even though this has risen since today, we remain above and after drifting lower this evening, ES has turned around before reaching this level and is headed higher. This is a positive sign so I give it +1 bulls.

Dollar index: I wasn't feeling confident about the dollar last night and in an unusual move, it resolved its symmetrical triangle down, in the opposite of the entry, falling on a day when the market was up. This drop helped create a top in the indicators as well as breaking it out of its recent range, so look for lower again tomorrow. That would be good for stocks (assuming today was a fluke) so +1 bulls.

Oil: After clearing resistance at 94.20 two days ago, oil resumed its upward march until it ran into its 200 day MA today at 97.14. But with increased volume and remaining solidly within its rising RTC, the MA may not prove much of a barrier. But I've noticed that lately when oil gets to various "decision points" it often takes two days to make up its mind, so I'm not looking for a big reversal tomorrow - maybe another small advance and that would be +1 bulls.

Copper: I thought copper would go higher today and so it did but it put in a spinning top. However, there's no reversal sign yet in the indicators. This mixed message leads me to give no points here.

Morningstar Market Fair Value Index: Today the index remained unchanged at 0.90, so no points.

History: According to The Stock Traders Almanac,Wednesday is a down day so +1 bears.

And the winner is...

The bulls with a bull-bear ratio of 7:1. Clearly, we're approaching a short-term top here but I don't think tomorrow is it just yet, so I'm going to call for one more day of gains Wednesday, possibly a doji of indecision.

ES Fantasy Trader

Today we took a profit of 1.5 points. Portfolio stats: the account is now $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1252.25    USD    GLOBEX    NOV 8 01:33:12

SLD 10 ES false DEC11 Futures 1253.75 USD GLOBEX NOV 8 11:32:16.

Tonight we go long at 1270.50.

Tuesday could go higher

2011-11-08T01:46:00.000-05:00

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

Tuesday higher, low confidence. Bull-bear ratio is 6:0.
ES pivot 1249.67. Falling under would be bearish..
Rest of week bias uncertain, rebound possible by Friday.
Monthly outlook: bias up on technicals
ES Fantasy Trader went long at 1252.25.

Recap

My call for a higher Monday was looking good out the gate this morning... then it was looking stupid.. until in the end I was redeemed with an 85 point gain in the Dow. It wasn't much but I'll take it, especially after having been wrong two days in a row. I was particularly pleased to read a report on Ticker Sense today to the effect that there are "two prominent technical analysts who say it is too difficult to predict the market direction". Huh - no kidding. Welcome to my nightmare.

But just like the Post Office, we can let neither gloom of Greece nor Roman rain deter us from our daily rounds. So now let's cast the runes and see what Tuesday might hold in store.

The technicals

The Dow: Today's close at 12,068 means that we held not only the important psychological 12K level but the 200 day MA at 11,975 too. There's also an ascending triangle forming here and that's usually quite bullish. With that, plus two levels of support just below us and indicators that are now rising off oversold levels, I see no reason to give anything but +1 bulls here.

The VIX: As I thought last night, the VIX did indeed move lower today - a bit. After moving by gaps for four straight sessions, it has barely budged in the last three. And just as there's an ascending triangle now in the Dow, here we have a descending triangle. With indicators coming down off overbought levels and a stochastic that has finished its bearish crossover, I'd think we're not done yet with declines in the VIX, so that would be +1 bulls.

VIX futures: Futures also edged lower today and look if anything even more overbought than the VIX itself. I'd say they've still got some good downside ahead so that's another +1 bulls.

Market index futures: All three are, as last night, again in the red at 1:10 AM EST. I take back what I said last night - what we've got going here now looks more like an ascending triangle (just like the Dow) than a symmetrical triangle, so that's even more bullish. On the other hand, the stochastic is now about to execute a bearish crossover. The other indicators are mixed. There's a definite lack of clarity to this chart. It really could break either way, so I'm not going to give any points here tonight - that's the first time I've done this.

ES daily pivot: is now 1249.67. Note that we've been slowly drifting lower since 6 PM and are now quite close to the pivot, less than 2 points above. That makes the pivot critical for Tuesday. I'm just waiting to see if we're going to bounce off or fall through. The decline seems to be stopping with the 1:20 AM candle but we'll wait a bit longer. 1:35 AM update: looks like ES veered away from the pivot like a mosquito from DEET. This is promising, so I'm going to give it +1 bulls. But still keep an eye out for any retests before the open on Tuesday.

Dollar index: I'm seeing lots of symmetrical triangles lately and this is another one. The expected resolution here would be higher but the dollar indicators are already highly oversold and look poised to go lower. With these sorts of mixed messages, I don't feel good about calling it either way so no points.

Oil: Contrary to my expectation last night, oil made an advance today that broke it out of its range going back to October 25th. Indicators remain quite oversold but we've not yet reached either the upper BB or the looming 200 day MA. If I had to guess, I'd say oil will try to reach those before putting in a top, so that would be +1 bulls.

Copper: Has been busy forming an ascending triangle for the last three days now. That's about all I can gather from this chart along with some rising indicators, but that's enough to vote +1 bulls.

Morningstar Market Fair Value Index: On Friday the index remained unchanged at 0.90 so no points here.

History: According to The Stock Traders Almanac,tomorrow is just marginally positive but not enough to vote any points here.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll came out today. Last week bullish sentiment advanced big time to an outsized 67% while the bears retreated to just 15%. However, today there was a reversion to the mean with the bulls retreating to 40% and bears advancing to 30%.

Last week I wrote "if next week's poll becomes any more bullish, I might have to reconsider my position.". Obviously that didn't happen and for the record, I voted bullish again now for the fifth week in a row, still on the basis of my reading of the monthly Dow chart and traditionally bullish fourth quarter seasonality. But I can't award any points for a 40-30 sentiment ratio.

And the winner is...

Surprisingly, considering how ambivalent things seem to be in general, it's the bulls by a shut-out with a bull-bear ratio of 6:0. The overarching gestalt lately seems to be one of underlying resilience, especially given the continued rumblings from Greece and now Italy. One can easily imagine a prime minister's resignation causing the Dow to plummet just a few months ago, but it just doesn't seem to be having as much effect today.

Maybe people are just getting tired of this farce - I certainly know I am. But in any case, I'm going way out on the limb tonight and calling Tuesday higher, with the usual caveat about truly bad news trumping the technicals.

ES Fantasy Trader

Today we took a tiny profit of 0.5 points, but hey, a win is a win especially after having been down on this trade last Friday. Portfolio stats: the account is now $172,750 after 34 trades (25 wins, 9 losses) since inception on 8/18 with $100K.

SLD    10    ES    false    DEC11 Futures     1255.50    USD    GLOBEX    15:48:16

BOT    10    ES    false    DEC11 Futures     1255.00    USD    GLOBEX    NOV 4 01:53:06 

Tonight we go long at 1252.25.
.

Monday higher technically but EU news decides

2011-11-07T01:39:00.003-05:00

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

Monday higher, low confidence. Bull-bear ratio is 7:2
ES pivot 1248.08. Falling through would be bearish.
Rest of week bias higher.
Monthly outlook: bias up on technicals.
ES Fantasy Trader holding long.

Recap

Well I blew it again. I thought we were going higher on Friday. Instead the Dow handed us a 61 point decline. In my defense I will point out that I made my call conditional on no bad news from Europe, and there was. Honesty, I'm getting quite sick of these Greeks with their riots and referenda. Just pack it in and get it over with already. Sheesh.

Anyway, being as I've now been wrong two days in a row, I'm a bit cautious tonight as I check the charts. Still, you do what must be done so once more into the breach dear friends...

The technicals

The Dow: Friday's 61 point loss to close at 11,983 came on a low volume hanging man that pretty much got hung up on the daily pivot of 11,982 as well as the 200 day MA at 11,975. It's a tricky chart because the stochastic has completed a strong bullish crossover. With two good support points, I think that trumps the bearish looking candle, so I'm going to give this chart +1 bulls.

The VIX: After a tall inverted hammer Thursday the VIX made a bearish engulfing pattern Friday, ending down just over 1%. And its stochastic just finished a bearish crossover. The VIX is really looking like it wants to go lower, so +1 bulls.

VIX futures: Same story here as the VIX itself. Lower futures would also be good for the market, so another +1 bulls.

Daily ES

Market index futures: All three are in the red right now at 1:15 AM EST but not by much. It looks to me like ES is making a symmetrical triangle - what do you think? Since these usually resolve in the same direction from which the triangle started, this would imply a pop higher in a day or two. It really looks to be nearly complete. Not also the bullish stochastic and OBV now at levels from which we've bottomed recently and I give this chart +1 bulls.

ES daily pivot: Tonight, is 1248.08. Even though it's up from Friday, we remain above it and in fact just survived a test at 12:35 AM. As long as we remain above this number, it's bullish so I'm awarding +1 bulls on that basis.

Dollar index: 54.40 or fight - In the last two sessions the Dollar has made two inverted hammers and has been unable to make any headway past 54.40. And its stochastic is making a definite bearish crossover, which is always a good indicator. A lower dollar being good for stocks, this is +1 bulls.

Oil: Oil too has been near the top of its recent trading range and unable to go much higher. Unless some bad news comes out it looks more likely it will go lower Monday, so that's +1 bears.

Copper: Copper is a bit confused here, with a hanging man on Friday offset by a clear bullish crossover on the stochastic. I think that trumps the candle so I'm calling copper higher Monday and that's good for stocks so +1 bulls.

Morningstar Market Fair Value Index: No update on Sunday so no points.

History: Although the first day of the month is typically bullish for stocks and November is one of the best months, according to The Stock Traders Almanac,the Dow has been down the last 4 out of 5 years on this day, so +1 bears.

And the winner is...

The bulls with a bull-bear ratio of 7:2. I almost hesitate calling Monday higher after having been wrong two days in a row now, but I recognize that it's happened to me in the past that I'm often not so much wrong as just a day early. And even though we've got a clear bull bias going here, the overall picture doesn't look particularly convincing to me.

So as I did on Friday, I have to hedge my call with the disclaimer that everything hinges on what new/rumors/ political intrigue comes out of Europe tomorrow. All it will take is some negative opinion from some minor functionary no one ever heard of in some country most people can't even find on the map to drive our market down. As I said last week, there's no charts for that. We live in funny times.

2 AM Update: News is coming out that the Swiss National Bank may act again to cap the franc, thus driving down the Euro. This is the sort of bad news I was just talking about and it already sent ES for a tumble under the pivot. I'm now officially standing aside - Monday is just too hard to call.

ES Fantasy Trader

Tonight we are still holding the long position entered last Thursday. It went south on us on Friday by a bit but I'm betting we'll make some money Monday. Portfolio stats: the account remains at $172,500 after 33 trades (24 wins, 9 losses) since inception on 8/18 with $100K.