Monday higher on weekly view

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

• Monday higher, medium confidence.  Bull-bear ratio is 7:0.
• ES pivot 1211.25.  Current price is well above that.
• Rest of week bias uncertain, more gains possible.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader standing aside.

Recap

Once upon a time, long long ago I was trying very hard to master a particular figure skating jump and it just wasn't working.  I kept trying and trying, and falling and falling.  Finally my coach said "If what you're doing isn't working, try something different".  So I did, and literally on my very next attempt, I landed the jump.  Right now, this is kind of how I'm feeling about this market.  I keep looking at the technicals and thinking this market is going lower.  And for two out of the last three days I've been flat out wrong.

So tonight I'm going to try something different.  I'm still going to make a call, but it's going to be based exclusively on weekly charts, not daily.  I'm getting the impression that something has changed recently in the market and it's time to try something different.  So let's see if we can stop falling down and land this forecast for Monday.

The technicals

The Dow: Put in its best week since June last week with a strong solid green candle after a successful test of its 200 week MA a week earlier.  Last week's close also pierced resistance at 11,525 albeit on lower volume than the week before.  And last week also brought us out of a descending weekly regression trend channel from the beginning of July.  With weekly indicators now clearly having bottomed and on the way back up again, the weekly chart goes to the bulls.

The VIX: Put in a tall red candle, the second in two weeks.  The VIX has clearly put in a weekly top here.  Candle-wise, there's nothing here to suggest higher this week, but the VIX is near support in the form of its 200 week MA at 27.6.  In any case, with a weekly close finally under 30 for the first time since July and indicators that are declining but not yet oversold, this chart looks like +1 bulls.

VIX futures: The futures, which had been on a near vertical tear since July, peaked two weeks ago on a tall inverted hammer and finished last week with a tall red candle.  With declining indicators and no support in sight, there's nothing here to suggest the futures won't go lower still, so +1 bulls.

Market index futures: All three are in the green by about half a percent at 1:40 AM EDT.  ES put in a big hammer two weeks ago and a tall solid green candle last week that cleared resistance at 1214.  There is now no further resistance until 1251.  Its indicators while rising are still not at overbought levels.  I see no reversal signs here, so +1 bulls.

ES daily pivot: Now 1211.25.  We've actually closed above the pivot for the last five weeks running and remain above tonight, so that's +1 bulls.

Dollar index: After two full weeks of indecisive dojis, the dollar took a dive last week on a tall solid red candle.  With its indicators still just coming off overbought and having fallen out of its weekly rising regression trend channel, the dollar still has room to run lower, so +1 bulls.

Oil: After a hammer and a solid green candle, oil is now near both a peak resistance shelf and its 200 week MA, though it still has a bit of room to rise further before it gets to either one, so for tomorrow at least, +1 bulls.

Morningstar Market Fair Value Index: N/A on a Sunday night, no points.

History: According to The Stock Traders Almanac, the Monday before October expiration is historically positive, so +1 bulls.

     And the winner is...

The bulls, with a shut out for a weekly-basis bull-bear ratio of 7:0.  So without even looking at the daily charts which have not been particularly productive recently, I'm going to call Monday higher.

ES Fantasy Trader

Tonight I finally threw in the towel on my short from last week once again proving why your first loss is your best loss.  I simply got tired of waiting and being wrong.  This loss was an ugly, embarrassing 42.25 points.

Portfolio stats: the account is now $130,500 after 24 trades (17 wins, 7 losses) since inception on 8/18 with $100K. 

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    01:16:23

SLD    10    ES    false    DEC11 Futures     1184.75    USD    GLOBEX    OCT 11 20:16:46 

No trade tonight while I see how my weekly forecast works out.
 

Friday going lower

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

• Friday lower, high confidence.  Bull-bear ratio is 2:6.
• ES pivot 1195.83.  Watch for a bearish break below..
• Next week bias lower, rebound possible late week.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader remains short at 1184.75.

Recap

Well after a big mistake on Wednesday's market direction, I got it right today.  The Dow ended losing 41 points and while it went even lower intraday, it was unable to make any headway past the 11,500-11,550 resistance area.  Is there any more downside action in store for Friday?  Let's stir the tea leaves and see.

The technicals

The Dow: Put in a classic hanging man and closed outside its rising regression trend channel for the first time in 8 sessions.  That's a bearish setup.  The stochastic also (finally) made the bearish crossover I've been expecting for two days now.  Momentum and RSI have already peaked so I'm seeing a lot of bearish sign son this chart, giving this one to the bears +1.

The VIX: Fell just a bit today, only by 0.56 and respected its summer-long support levels around 31  Its indicators are now about as oversold as they can get (RSI  hit zero for the second day in a row) so any further downside from here looks unlikely.  That's another +1 bears..

VIX futures: Pretty much the same story as the VIX itself, so another +1 bears.

Market index futures: All three futures are pretty much unchanged at 12:55 AM EDT.  ES today put in a tall doji, and completed a full day outside its rising RTC.  That's a bearish trigger.   The stochastic has executed a bearish crossover and the other indicators are highly overbought.  I see nothing bullish in this chart, so it's +1 bears.

ES daily pivot: Now 1195.83.  ES is now actually above the pivot, partly from a little bump around midnight and partly because the pivot itself declined a bit.  That's bullish unless we drop back down through it.  It's too early to tell yet, so no points here right now.

Dollar index: Last night I couldn't make a call on this one.  Tonight we've got some more clarity with a gravestone doji.  The indicators are even more oversold than yesterday and yesterday's support was respected.  At this point I think the dollar can go higher Friday and that's +1 bears.

Oil: Last night I said oil would go lower today and it did with a hanging man on overbought indicators.  Oil still has room to drip lower, so +1 bears.

Morningstar Market Fair Value Index: Today the index rose for the fourth day in a row to 0.86, a level not seen since September 16th.  This sort of increase is a bullish sign, so +1 bulls.

History: According to The Stock Traders Almanac, tomorrow historically outperforms, so +1 bulls.

It's all cyclical, folks.

     And the winner is...

The bears with a bull-bear ratio of 2:6.  I'm going to call this market lower Friday.  It's now really giving me the impression of just teetering on the brink, the way a pendulum comes to a stop just before it reverses.  We'll see.

ES Fantasy Trader

Today I decided once again to hold onto my short position from yesterday on the continued expectation that Friday will bring some profits.I hate nothing more than throwing in the towel at exactly the wrong moment.  This trade will come in pretty soon.

Portfolio stats: the account still remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 
 

Better case for lower Thursday

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

• Thursday lower, high confidence.  Bull-bear ratio is 1:5.
• ES pivot 1198.33.  Breaking below is bearish..
• Friday bias lower, rebound possible next week.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader remains short at 1184.75.

Recap

My headline call last night was "Wednesday's going lower".  And with all the technicals looking bearish, can you blame me?  After all, the bull-bear ratio was 1:8, just one short of a shut out.  Today's 103 point gain in the Dow proved me just plain flat out wrong.  Ouch.  Well like I've been saying lately, it's not an exact science and I've never claimed infallibility.  Sometimes stuff happens.

At this point though, I think it was more a matter of being a day early than being completely wrong.  This has happened to me a few times this year already.  I have a tendency sometimes to get ahead of myself.  But let's check the technicals again to see if maybe my analysis was actually wanting in some respect last night.

The technicals

The Dow: Last night, the Dow had put in a doji.  That's not necessarily a reversal indicator, only an indication of indecision.  Today, we got a shooting star, which is a bearish reversal indicator, though admittedly not the greatest one.  And the high brought us nearly to our upper Bollinger band and was not able to clear the resistance from the end of August.  Coupled with yesterday's doji and indicators that are even more oversold tonight, technically it still looks like +1 bears.

VIX, daily

The VIX: Last night I gave a point to the bears mostly because the VIX looked closer to support than resistance.  However, there was still a bit of room to run down and sure enough, that's what happened today.  Tonight though paints a different picture.  Today the VIX put in a gap-down hammer that was ultimately held up by support (red line).  Check it out.  That's looking like a lot better case for a reversal now than yesterday, so I'm again giving +1 bears.  This time I mean it!

VIX futures: These put in a gap down red candle right down to support, though not a hammer.  So theoretically, there's no reversal sign here yet.  However, I do believe in the support plus the even more oversold indicators (RSI is now a mere 5.4).  So, it's got to be +1 bears.

Market index futures: Last night these were overbought.  Tonight they're even more overbought.  And ES has now fallen off the right side of its rising regression trend channel.  That's a good bearish indicator.  Don't want to sound like a broken record, but technically, the only interpretation here is +1 bears.

ES daily pivot: Now 1198.33.  ES right now at 1:15 AM EDT is just hanging just barely over that basically unchanged in the overnight until just 5 minutes ago.  It just made one attempt to break under but that was rejected.  I'm not comfortable awarding any points based on the action I'm seeing right now though, so we're skipping this one too.

Dollar index: Got this one wrong too.  The dollar did not reverse today but continued lower in a big way.  It's indicators are even more oversold now and it's getting close to its 200 day MA which could provide support.  However, in the absence of a reversal candle, I'm not going to call this one either way tonight - once burned, twice shy.

Oil: I even got the oil call wrong yesterday.  Oil did not drop today but it did put in a second doji.  And unlike last night, we now have a bearish crossover in the stochastic and a peak in OBV.  That's a much stronger case than yesterday to go lower Thursday, so +1 bears.

Morningstar Market Fair Value Index: Today the index advanced from 0.83 to 0.84.  That's bullish, so +1 bulls.

History: According to The Stock Traders Almanac,tomorrow has only a slight positive historical bias, not really enough to award any points though.

     And the winner is...

Once again, the bears, this time with a bull-bear ratio of 1:5.  For now I'm going to stick with my theory that my call last night was just a day early.  I am sincerely looking for Thursday to go lower.  All I have to work with is the charts and the charts are telling me lower right now so I have to stick with that.  If this one doesn't work out, I'm going to have to step back and reassess what I'm doing wrong.  We'll see.  That's all she wrote.

ES Fantasy Trader

Today I decided to simply hold onto my short position from yesterday on the expectation that Thursday will bring some profits.I hate nothing more than throwing in the towel at exactly the wrong moment.

Portfolio stats: the account remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 

 

Wednesday looking lower

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

• Wednesday lower, high confidence.  Bull-bear ratio is 1:8.
• ES pivot 1188.33.  Pivot in play: holding under is bearish.
• Mid-week bias lower, rebound possible by Friday.
• Monthly outlook:  bias up, on technicals
• ES Fantasy Trader going short at 1184.75..

Recap

Last night I said we had a bit more room to run higher today but warned of a peak in process.  Well that's just what we got, with the Dow admittedly losing a scant 17 points but both the Nasdaq and SPX finishing in the green.  Indecision was rampant, with the Dow crossing the zero line about a dozen times during the session.  But this was pretty much to be expected after Monday's big run-up.  Let's see where we go from here on Wednesday as we run down the technicals.

The technicals

Dow daily

The Dow: The Dow today put in a small hanging man, but with indicators now becoming really oversold, I have to give this one +1 bears without any further equivocation.

The VIX: After falling for six sessions, the VIX has now reached very oversold levels.and after today's close of 32.86 is close to its support of 31.28.  Although today's red candle was not a reversal pattern, the VIX clearly has more room to run higher than lower from here, so that's +1 bears.

VIX futures: After falling also for six sessions, the futures indicators have now fallen to levels from which the VXX has reversed in the past. It looks like it's ready to move higher, so that would be +1 bears.

Market index futures: After putting in a doji Tuesday, ES is now down 0.29% at 1:20 AM EDT with NQ and YM also in the red.  ES's indicators are all quite oversold and its high reliability stochastic is just about to execute a bearish crossover.  This chart looks like a good probability of going lower Wednesday, so +1 bears.

ES, 1 minute bars

ES daily pivot: Now 1188.33, so ES at 1186.25 is now below that, but because the pivot moved above the price rather than the other way around.  This puts the pivot in play for Wednesday.  Watch price action around the pivot.

And here's a perfect example of Pivot Power.  Check out this one minute ES chart just after 1:30 AM Wednesday morning.  At 1:24, ES, which had been simply noodling around center ice for two hours, suddenly makes a break-away and skates in for the goal.  But just at the black line (pivot), he shoots, he doesn't score!  Reee-jected!  In your face, slamma-jamma.

Uh, so anyway, breaking over would be bullish.  For now though, it's +1 bears.

Dollar index: After Monday's big dump, the dollar found a floor today with a nice inverted hammer.  Dead cat bounce or reversal indicator?  I vote for the latter.  With oversold technical indicators I would not be at all surprised to see the dollar go higher Wednesday.  That's +1 bears.

Oil: Today oil put in a big tall skinny doji after four days of solid gains.  Coupled with quite oversold indicators, it sure looks like the tide of oil is starting to run out.  Since oil and the markets are in sync now, that's +1 bears.

Morningstar Market Fair Value Index: Today the index actually rose from 0.81 to 0.83, so that's +1 bulls.

History: According to The Stock Traders Almanac,this Wednesday is the weakest day of the week, so +1 bears.

     And the winner is...

The bears, by a convincing bull-bear ratio of 1:8.  Ever watch the waves at the beach?  They roll in quickly from the ocean and lose speed as they climb up the sand.  Eventually they just peter out and the water reverses to rush back out to sea.  That's where we're at today.  The tiny price movements we saw in both the Dow and SPX are like that wave washing out.  I think Wednesday's going lower.

ES Fantasy Trader

After standing aside yesterday, a decision that seems good in light of the small range we had today, the ESFT is going short tonight at.1184.75.

Portfolio stats: the account remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 
 

A bit more room to run higher Tuesday, peak near

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

• Tuesday bias slightly up, low confidence.  Bull-bear ratio is 6:2.
• ES pivot 1179.92.  Current price is holding above that.
• Rest of week bias uncertain, but nearing resistance.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader standing aside - no trade.

Recap

Last night I executed my veto authority and called today higher despite a negative bull-bear ratio of 2:5, just because there were some encouraging words from Europe.  Well those words proved good enough for a 330 point spike in the Dow to celebrate Columbus Day.  The day concluded with a peculiar 100 point explosion in the final 20 minutes of trading.  Here, let me save everyone the trouble: "banksters", "fraudsters", "PPT", "Helicopter Ben", etc.  Hey, whatever, you can't fight the tape.

So let's run down the list of usual suspects as we do every night and see who leaves standing.

The technicals

The Dow: Today's monster run-up to 11,433 took us near but not quite to resistance at 11,500.  This puts us at a critical juncture here.  We've already put in a higher high compared to the previous peak late last month.  We're now close to the mid-September peak.  If we can break above that, it would lend support to the idea that the bottom is in.  For now, the Dow remains firmly in its rising regression trend channel.  Volume was low, but it was admittedly a semi-holiday.  With indicators up but sitll not oversold and a tall green candle today, I see no reversal signs here so +1 bulls

The VIX: Last night the VIX was starting to look oversold.  But on today's Europe news it dropped nearly 9% and is now looking even more oversold than Friday.  And it's getting close to its support from back to August and looks to have more room to run higher than lower from here - but maybe not quite just yet.  Support is at 31.13.  We closed at 33.02.  So in the absence of a reversal candlestick, I have to give this one +1 bulls.

VIX futures: Today the futures fell out of their rising regression trend channel from July.  This is a bearish setup.  If we do not trade higher tomorrow that would be the trigger.  But the indicators are now at oversold support levels.  So right now it looks like +1 bears.

Market index futures: Today's run took the futures up to overbought levels from which declines have begun in the recent past.  OBV in particular took a hook lower today and that's been particularly reliable recently.  That is bearish.  But the other indicators aren't quite ready to roll over.  If ES isn't lower Tuesday though, I'd look for lower by Wednesday.

In any case, in the overnight the futures have basically been trading flat to slightly negative after that crazy last minute run-up in the regular session, so there's not much guidance there.  All in all, it doesn't look really bullish, but it's also not quite bearish yet, so no points here.

ES daily pivot: Now 1179.92.  We continue to hold above the pivot by about 10 points, so that's +1 bulls.

Dollar index: Last night I wrote "it looks good for the dollar to go higher Monday".  Bzzzt!  The news from Europe obviously put the kabosh on that idea, with the dollar taking a monster dump today.  But that wasn't good enough to make it oversold and we're still not close to any support, so I'd say the dollar could go lower Tuesday and that's +1 bulls.

Oil: Ran higher today after some unclear readings last night. Today's big run brings us near an important resistance level.   And with indicators just reaching oversold levels it looks like oil is near a reversal.  It might not go lower tomorrow, but I'd be surprised if it didn't dip later this week.  However, since there are no immediate reversal signs here, it's still +1 bulls.

Morningstar Market Fair Value Index: Didn't update today, still showing 0.81 from Friday, so no points awarded.

History: As I mentioned last night, according to The Stock Traders Almanac,the first two days of this week underperform historically, so again +1 bears.

Sentiment: It's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  The bullish numbers for the previous two weeks were 14%, then 21%.  Then last week, the bullish number dropped back to 14.8%, with a 52% bearish reading.  But this week the poll did an abrupt 180 with the bulls now showing 56% and bears just 11%.

For the record, I joined the crowd and switched my vote back to bullish this week on the basis of  the recent news from Europe, home economic numbers coming in BTE, and monthly charts that are looking quite bullish technically.  Normally I'd use this as a contrarian indicator, but low bearish readings don't seme to have quite the predictive power that low bullish ones do (I'll have to look into this), so for now I'm giving this +1 bulls.

     And the winner is...

The bulls, by a bull-bear ratio of 6:2.  However,I 'm a bit concerned that we maybe ran too far too fast today and the market may need a day to catch its breath.  Or looking at it another way, we may be in for another doji day of indecision that could give us some swings as the trend tops out.  Right now I'm seeing the storm clouds gathering but I don't hear any thunder just yet.

The technical bias is still slightly up though, so the Night Owl will move way out to the end of the limb tonight and hoot for either a small gain Wednesday or an intraday peak.  In the latter case, I'd start looking for the exits.

ES Fantasy Trader

Today we took a profit of 13.75 points.  I kinda wish I'd held on to the bitter end, but who could have known that the market was going to take off in the final 20 minutes.  In any case, a win is a win; I'll take it.

Portfolio stats: the account is now $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1169.00    USD    GLOBEX    00:39:01
SLD    10    ES    false    DEC11 Futures     1182.75    USD    GLOBEX    11:35:09
 
I am sufficiently ambivalent that I'm not putting on any ES trade tonight.  The ESFT is "fantasy" only in the sense that I can't afford to put on trades of such size for real.  I give very careful thought to when and where to pull the trigger and on which side.

Monday higher on Europe news

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

• Monday higher, high confidence.  Bull-bear ratio is 2:5.
• ES pivot 1157.83.  Holding higher is bullish.
• Rest of week bias uncertain, lower possible by Friday.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader went long at 1169.25.

Recap

Dow weekly

Wow, another crazy end to another crazy week.  Just look at this weekly Dow chart.  A giant inverted hammer last week followed by the exact opposite candle this week - a big hammer.  Or is it a hanging man?  Who the heck knows.  Even the weekly indicators are pretty mixed offering little guidance.

One observation I can make is that the pattern over the last few months is starting to  remind me a lot of the action we saw last year, May through August.  If that holds true, then we're in the middle of a complex bottoming process.  Going into the fourth quarter, this should provide some encouragement to stocks.

But first, let's see how things sort out for Monday.

The technicals

The Dow: Last Friday ended with a doji indicating that last week's rally may indeed have run out of gas.  Oversold indicators, particularly a peak in OBV tend to support this idea.  On that basis, this is +1 bears, but just (wait for it), barely.

The VIX: Took a big weekly drop last week.   Recently, that alone has been good enough for a rise the next week.  The daily chart formed a green inverted hammer, which is not a particularly powerful reversal sign but looks more convincing coupled with indicators just reaching oversold level.  So +1 bears.

VIX futures: Also oversold now, the futures put in a bullish piercing pattern on Friday.  With now oversold indicators, this makes a good case for the VIX going higher, implying stocks going lower.  Another +1 bears.

Market index futures: All three futures are up sharply at 12:35 AM EDT, all by more than a percent apparently on news today that France and Germany have a plan to save Europe, only they're not telling anyone what it is just yet.  Uh, OK, whatever.  That was good for a 19 point jump, so far. And with no particular resistance until 1192, no real reversal pattern on the charts, and remaining well inside a rising regression trend channel there is nothing to stop the futures until then so it's +1 bulls.

ES daily pivot: Now 1157.83.  Although the pivot has risen today, prices have also gone up to keep us more than 10 points above it right now.  That's a good sign, so +1 bulls.

Dollar index: On Friday the dollar put in a big hammer right at the lower edge of its rising regression trend channel.  Along with indicators at levels that have marked prior reversals, I'd say it looks good for the dollar to go higher Monday.  That would be bad for stocks, so +1 bears.

Oil: Oil put in a doji on Friday but not at any real resistance level.  With indicators near but not quite really overbought, this one is too tough to call for Monday, so no points.

Morningstar Market Fair Value Index: N/A on a Sunday night, no points.

History: According to The Stock Traders Almanac,the first two days of this week underperform historically, so +1 bears.

     And the winner is...

The bears, by a bull-bear ratio of 2:5.  However, with the VIX still in the mid-30's and the market still totally driven by news (and/or rumors) out of Europe, tonight's story about some kind of bank plan over there trumps the technicals, so the Night Owl is going out on a limb and calling Monday higher, despite some poor-looking technicals.

ES Fantasy Trader

Last Friday's trade was a wash. By the time I exited just before lunch, my earlier profit had evaporated and I decided to get out while the getting was good.  Of course later on ES rose briefly back into profit position, but such is the stuff of day trading and that's not what I do.  I'll take break-even over a loss any day.

Portfolio stats: the account is still $151.625 after 24 trades (17 wins, 6 losses, 1 wash) since inception on 8/18 with $100K. 

BOT    10    ES    false    DEC11 Futures     1158.00    USD    GLOBEX    OCT 7 00:50:28
SLD    10    ES    false    DEC11 Futures     1158.00    USD    GLOBEX    OCT 7 11:31:17

Tonight we go long at 1169.25.

Some higher still Friday but watch for profit taking

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

• Friday higher, medium-low confidence.  Bull-bear ratio is 8:1.
• ES pivot 1149.00.  Falling below would be bearish..
• Next week bias lower, on technicals.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader going long at 1158.00.

Recap

Last night I called the market higher again today and that's what we got.  Today's action was pretty much a slow and steady uphill march with no big pop off the open, unlike many recent sessions.  Interestingly, the bears refused to come out to play at all today and the market put in a final push higher into the close, exactly as it did the past two days.

The technicals

The Dow: Put in another strong performance today, gaining 183 points and busting right through the resistance at 11K like butter to close at 11,123 on a good short-wick green candle.  We're now nearing a band of resistance from 11,190 to 11,315 that proved unbreakable last month.  Can we push through this time?  I don't think so.  It looks to me like there's less gas left in the tank now than during the last attempt in September.  In particular, note that volume has been declining the past three days even as the market has been advancing.  However, there's still no reversal pattern on the chart just yet so it has to go to the bulls, +1.

The VIX: Continued lower today, as I called last night for the third day in a row, though the rate of decline is slowing.  The VIX is now down to halfway between Bollinger bands but has no real support there.  Its indicators are all now closer to oversold than overbought, but there is still  more downside possible here Friday, so +1 bulls.

VIX futures: Once again, this chart mirrors the VIX itself, though the decline seems to be nearing an end.  I'd say we may reach a turning point early next week at this rate.  But for now, it's still +1 bulls.

ES daily

Market index futures: The chart patterns tonight are looking just like last night and the night before with all three futures basically unchanged at 1 AM EDT but drifting slowly up in the evening hours.

On Tuesday ES closed outside of its descending daily regression trend channel (see chart at right).  That was the bullish setup.  Today ES traded entirely outside the channel.  According to this trading technique, that is a bullish trigger, meaning Friday should run higher once again.

Supporting this idea is that while the indicators are now approaching overbought levels, none has yet peaked.  And importantly, ES has no resistance until 1170 (blue line).  That still leaves about a dozen points to go.  All of this nets +1 bulls.

ES daily pivot: With the raising of the pivot to 1149.00, we're now considerably closer, though still above.  With ES at 1157.50, the pivot is close to being in play.  I'd watch this number carefully throughout the day tomorrow for clues to the close.  Holding above or bouncing off is bullish, falling through, bearish.  Since we're above right now, it goes to the bulls, +1.

Dollar index: The dollar continued the downward move it started on Tuesday, slicing through initial support.  Now at the bottom edge of its rising regression trend channel, its still overbought indicators suggest more downside to come.  Should the dollar fall again tomorrow, watch for it to drop even further next week. +1 bulls.

Oil: Last night I wrote that "oil will continue higher on Thursday" and so it did, with its biggest gain in a month.  But even this tall green candle neither brought oil to overbought levels nor to any resistance point, so with oil in sync with the market that's another +1 bulls.

Morningstar Market Fair Value Index: Today the index rose, for the first time since 9.29, to 0.81.  That's +1 bulls.

History: According to The Stock Traders Almanac,the first week of October underperforms.  And tomorrow we "celebrate" the week of 10./10/08, the worst week in the history of Wall St.  So +1 bears.

     And the winner is...

The bulls again, by a bull-bear ratio of 8:1.  While this all sounds positive enough I'm getting the feeling that this rally is getting long in the tooth.  There may be enough gas left in the tank for one more push higher, but the high may be intraday followed by some profit taking into the close as traders want to book some of the nice profits they made the past few days and don't want to be long into the weekend with the European situation still rumbling.

So I'm looking for a bit more upside Friday but not necessarily a higher close.  With the charts approaching overbought levels, that's getting too tough to call.  I'd exercise caution Friday and pay close attention to the ES pivot.  If we drop below it and don't come back quickly, I'm changing my call to a lower finish.

ES Fantasy Trader

Today we took a profit of 10.5 points.  Left some on the table again, but such is life.

Portfolio stats: the account is now $151.625 after 23 trades (17 wins, 6 losses) since inception on 8/18 with $100K. 
 

BOT    10    ES    false    DEC11 Futures     1134.25    USD    GLOBEX    00:46:12   

SLD    10    ES    false    DEC11 Futures     1144.75    USD    GLOBEX    10:39:09 

Tonight we're going long at 1158.00

Higher again Thursday

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

• Thursday higher, high confidence.  Bull-bear ratio is 9:0.
• ES pivot 1127.59.  Watch for any break under..
• Rest of week bias uncertain, lower possible Friday.
• Monthly outlook: bias down, on technicals
• ES Fantasy Trader going long at 1134.25.

Recap

Last night I called for some more upside today and indeed we were well rewarded with another 131 point gain in the Dow.  We were strong out the gate and then just drifted higher the rest of the day without the mad and maddening yo-yo swings of recent sessions..

The technicals

The Dow: Put in a strong green candle but left us with mixed indicators.  RSI turned lower and OBV is at levels associated with a top, but the stochastic just made a bullish crossover.  With no resistance til 11,000 and no reversal pattern on the chart, I tend to believe the stochastic and give this one +1 bulls.

The VIX: Last night I wrote "more downside for the VIX Wednesday" and that's just what we got today with the VIX down another 7.4% on a solid red candle.  But even at that, the indicators are still all just coming off overbought.  And finally coming down out of Psycholand (the region above 40) can only be a good thing, so +1 bulls.

VIX futures: Again tonight, this chart looks like the VIX itself, reinforcing my belief that we have lower to go Thursday.  That's also +1 bulls.

Market index futures: All three are basically unchanged at 1 AM EDT.  In fact, the ES chart looks a lot like it did last night.  With no reversal pattern in sight and a stochastic just coming off oversold, I see nothing bearish here, so +1 bulls.

ES daily pivot: Now 1127.59.  ES being seven points above this now, we're just on the edge of gravitational attraction.  The pivot is always worth watching, but without some external influence I don't think it will be a factor tonight.  +1 bulls.

Dollar index: Finally!  The dollar came down today on a big red candle confirming last night's doji as a top.  Its stochastic also executed a bearish crossover today.  Even though it remains in its rising regression trend channel, it looks likely to go down at least a bit further from here, so +1 bulls.

Oil: after some confusing signs last night, oil finally did reverse and go higher today.  With new support established and its stochastic making a bullish crossover today, it looks like oil will continue higher on Thursday, so +1 bulls.

Morningstar Market Fair Value Index: Today the index rose from 0;77 to 0.79, so +1 bulls.

History: According to The Stock Traders Almanac, tomorrow is actually a positive day, so +1 bulls.

     And the winner is...

The bulls, by a shutout with a 9:0 bull-bear ratio.  Technically, I'm reasonably confident we're going higher again Thursday, as long as Greece can avoid collapsing overnight and the members of the ECB can keep their mouths zipped for a day or so.  Enjoy it while it lasts.  While this market still seems to have the mojo right now, I think Friday may go lower.

ES Fantasy Trader

Closed today's trade at 1125.75 for a nice 15.5 point gain.  Once again, I left some money on the table, but no one ever blew up their account doing that.  There's simply no point being greedy.

Portfolio stats: the account is now $146,375 after 22 trades (16 wins, 6 losses) since inception on 8/18 with $100K. 

BOT    10    ES    false    DEC11 Futures     1110.25    USD    GLOBEX    01:25:39
SLD    10    ES    false    DEC11 Futures     1125.75    USD    GLOBEX    11:07:52
 
 Tonight we go long again at 1134.25.

More upside for Wednesday

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

• Wednesday higher, high confidence.  Bull-bear ratio is 6:2.
• ES pivot 1100.42.  Current price is above that.
• Rest of week bias uncertain, resumption lower possible by Friday.
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader opened new long position at 1110.25..

Recap

Another nutty day on the Street, courtesy of the VIX and continuing noise from Europe.  We were down big, then up, then down, until the Dow finally took off like a rocket at 3:10 PM on YAR (Yet Another Rumor) in the FT.  I don't even remember what - something about J.C. "Zut Alors" Trichet approving of the new Beaujolais vintage, I think.  Whatever, it was good enough to propel the Dow to a 153 point gain.

The technicals

The Dow: While the intraday chart looked like a map of Space Mountain at Disneyland, the daily formed a nice looking hammer, right at support and with indicators finally starting to look oversold.  We also broke back over 10,730 resistance with a close at 10,809 and no face no further resistance until the 11K level again.  That's good enough right there for +1 bulls.

The VIX: Last night I wrote "the VIX is looking toppy here", and today the bottom fell out with the VIX taking a 10% dump on a long solid red candle.  Never discount a VIX hanging man that's hanging off the upper BB.  That one is a slam dunk.  With indicators still quite overbought and the stochastic executing a high reliability bearish crossover, it looks like more downside for the VIX Wednesday, implying higher stocks.  +1 bulls.

VIX futures: This daily chart looked just like the VIX, so the same analysis goes, meaning another +1 bulls.

Market index futures: ES, NQ, and YM are all running slightly in the red with ES down 0.2% at 1:15 AM EDT in rather directionless evening trading.  But the day's candle, a nice hammer/bullish piercing pattern was encouraging.  With the ES daily stochastic just executing a bullish crossover and OBV setting up for only the fourth hook upward since the Z contract began trading, this all adds up to +1 bulls.

ES daily pivot: Virtually unchanged today at 1100.42 and trading above since 3:40 this afternoon.  Holding higher is bullish, so +1 bulls.

Dollar index: Once again I called for a lower dollar today and once again I was proven wrong.  Not so much because the dollar is so wonderful, but simply because the euro is so rotten.  But today the dollar finally showed a reversal sign, in the form of a an evening star doji.  This one is high reliability.  Coupled with even more oversold indicators, I will (sigh) once again call the dollar lower Wednesday.  Hey, I've got to be right sooner or later.  That's +1 bulls.

Oil: Last night it looked to me like oil was slipping again and indeed it did go lower today.  It has now broken all support.  However, its indicators are now quite oversold.  Oil's weekly chart is showing a developing hammer and it looks to have more upside than downside from here.  On the other hand, oil went down and the market went up today indicating a possible reversal in the relationship between the two.  Because of this confusion at the moment, no oil points awarded tonight.

Morningstar Market Fair Value Index: Today the index  actually declined to 0.77 from 0.79.  That's the lowest level since April 1st, 2009.  But since it's still going down, it's +1 bears.

History: According to The Stock Traders Almanac, the first Wednesday rates a little bear head, so that's good enough for +1 bears.

     And the winner is...

The bulls, with a bull-bear ratio of 6:2.  That's good enough to call the market higher Wednesday on technicals.  But as always, and I hate sounding like a broken record but it remains true, with the VIX still in Psycholand, any kind of news, or even rumor, good or bad, from Europe will trump any technical call.  Caveat trader.

ES Fantasy Trader

Closed today's trade at 1094.50.  With the VIX still in outer space, I thought discretion was the better part of valor and at these levels one takes profits where one finds them.  I found 5.75 points during lunch time.

Portfolio stats: the account is now $139,625 after 21 trades (15 wins, 6 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1088.75    USD    GLOBEX    OCT 4 01:08:58
SLD    10    ES    false    DEC11 Futures     1094.50    USD    GLOBEX    OCT 4 12:21:25

Tonight we go long again at 1110.25.

Tuesday higher on oversold rally

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

• Tuesday higher, medium confidence.  Bull-bear ratio is 4:5.
• ES pivot 1101.67.  Current price is slightly below that.
• Rest of week bias uncertain, oversold bounce possible midweek.
• Monthly outlook: bias down, on technicals
• ES Fantasy Trader going long at 1088.75.

Recap

Last night I called for a lower Monday and boy did we ever get one with the Dow diving 258 points to finish at session lows.  It was bad, really bad.  We kissed the 11K level goodbye and then went on to bust through the August/September support at 11,730.  All that stopped the Dow today was its encounter with its 200 week moving average at 10,648.

Also of note is that the SPX gave up the 1100 level today.  And it went under its own 200 week MA three days ago.

This makes tomorrow crucial.  If we break under the 200 week MA, then we're headed to 10,450 for sure.  Let's shake the Magic 8 Ball once again and see where we're headed Tuesday.

The technicals

The Dow: Today's ugly 2.36% decline on a long red candle going below support gives us nothing to cheer about.  Even worse, its indicators are not particularly oversold.  And even worse than that, the RSI is actually increasing and OBV remains stubbornly high.  So even though we hit the lower Bollinger band today, this is not the stuff reversals are made of.  I'm really not feeling the lvoe here and it's +1 bears.

The VIX: Last night I wrote "the VIX could still go higher tomorrow".  And so it did, jumping an additional 5.8% to close at a crazy 45.45.  This number is so high I have to switch to a weekly chart to find anything comparable.  And when was that?  The week of 5/17 last year when it hit a high of 48.20, during the Greek Crisis v. 1.0.  The only other time in history the VIX has been higher than this was during the fall of 2008 during the Lehman Bros. meltdown.

So anyway, today's gain was on a hanging man that took it right to its upper Bollinger band.  As I've noted here often, the VIX never spends much time higher than its upper BB  Being now also near another resistance point, I'd have to say the VIX is looking toppy here so I'm giving it +1 bulls.

VIX futures: Remain in their upward regression trend channel on a gap up green candle taking them to new highs.  However, they're now near the top of this RTC.  That's not enough to be a bullish sign, but enough to not give this one to the bears.  So no points here.

Market index futures: ES, NQ, and YM are, amazingly enough, actually in the green for once, though admittedly not by all that much.  ES is up 0.18% at 1:12 AM EDT.  That said, ES gave up not one but two support levels today, at 1121 and 1100.  However, two big days of declines have left the futures looking fairly oversold.

If nothing else, a dead cat bounce looks to be in order right now.  I also note that OBV hooked up today.  The other two times this has happened to this contract, the next day was up.  The stochastic %K line, at 11.21 is quite low and in good position for a bullish crossover soon.  On these items, I give the futures a +1 bulls.

ES daily pivot: is now 1101.67.  We're 11 points below that right now at 1089.  That doesn't make it an immediate factor tomorrow.  However, since tonight we're a lot closer to the pivot than last night (mainly because the pivot came down) it becomes more likely that its gravitational effect will start to be felt, so I'm giving this one to the bulls.  And should we break above this number that would be quite bullish indeed.

Dollar index: Last night I wrote "I'd be highly surprised if the dollar didn't move lower from here" on the basis of a big weekly hanging man.  Well I'm highly surprised.  The dollar took off like a rocket today to close at levels not seen since February.  In fact, its chart is looking exponential here.

And having hit its upper Bollinger band today I'm going to stick to my guns and call for a lower dollar.  But it may not be tomorrow.  Today's long green candle isn't a reversal sign and the indicators are not quite yet at oversold levels.  So I give the dollar one more day to rise before the fall and that's +1 bears.

Oil: Broke under its recent trading range today.  The pattern I spoke of last night did not hold.  Today's red candle and lack of any oversold indications can only lead to another +1 bears here.

Morningstar Market Fair Value Index: Something's screwy with Morningstar again.  The number they're putting up today is 0.79.  The graph says 0.85.  I tend to believe the former number is correct and therefore give +1 bears.

History: Well October certainly started off in accordance with its awful reputation.  With nothing historically looking any better for rest of the first week of the month, it's +1 bears.

Sentiment: The new Ticker Sense Blogger Sentiment Poll  came out today.  The bullish numbers for the last two weeks were 14%, then 21%.  This week, the bullish number dropped back to 14.8%, with a 52% bearish reading.  This is the kind of spread that's associated with contrarian reversals, so strictly on that basis it's +1 bulls.  Also, J-Trader remains bullish for tomorrow.  For the record, I switched my vote to bearish this week on the basis of continuing turmoil in Europe.

     And the winner is...

The bears by a bull-bear ratio of 4:5.  I'll admit I was surprised to see this when I added it up because tonight, like Van Halen who didn't feel tardy, I don't feel bearish.  It just seems to me that the recent sell-off was overdone.  Not that I don't believe there's still more downside to come, but for now, I think we may see a one, possibly two day rally from here.  So I'm going to exercise an executive veto over the voting tonight and cautiously call the market higher on Tuesday.

ES Fantasy Trader

Today we covered last night's short at  1116.00 for a 2.75 point gain.  I was really expecting a turn in the market later in the day which is why I closed out early.  OK, so I left some money on the table, but hey, that always beats losing money, or even the risk of losing money.

Portfolio stats: the account is now $136,750 after 20 trades (14 wins, 6 losses) since inception on 8/18 with $100K.

SLD    10    ES    false    DEC11 Futures     1118.75    USD    GLOBEX    00:43:26
BOT    10    ES    false    DEC11 Futures     1116.00    USD    GLOBEX    12:30:23

Tonight, the ESFT went long at 1088.75.  In the For Real world, I'm still standing aside due to the absurdly high level of the VIX  I have zero appetite for that sort of risk.

Monday going lower

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

• Monday lower, high confidence.  Bull-bear ratio is 3:7.
• ES pivot 1135.75.  Current price is far below that.
• Rest of week bias up, on technicals.
• Monthly outlook: bias down, on technicals
• ES Fantasy Trader opened new short position at 1118.75.

Recap

Thank God last Friday finally ended.  And last week too for that matter, with all that psycho-VIX fueled whipsawing going on.  And the month.  And let's face it, the whole quarter was a train wreck.  I vaguely expected the market to be able to go higher on Friday but the case wasn't strong.  I'm now glad I didn't put on any long trades then.  But I say foo on all that and let's move on to the spooky month of October.

The technicals

The Dow: On Friday, the Dow broke through its important 11,000 support (though not by much) to close at 10,913.  Its daily stochastic is just executing a bearish crossover and OBV remains alarmingly high.

The weekly chart on the other hand presented us with an inverted hammer.  However that's not a really high reliability pattern and requires confirmation.  That said, the weekly indicators are actually more oversold than overbought.  I like this chart more than the daily.

Dow monthly

But on yet another hand, the monthly chart (on the right) looks fairly discouraging. Note how we've now (finally) fallen out of the rising regression trend channel that goes back to the March 2009 bottom.  That is a bearish setup.  We also remain firmly entrenched in the descending monthly RTC of May of this year.

The only positive here is the stochastic (second from the bottom) which as you can see is nearing oversold.  But since this is a monthly chart, it could be another month or two before this signals a bottom.  While the monthly RSI has entered oversold territory already, it also did that in March 2008 and remained there for a whole year before we saw a bottom.  And the Dow now has no support all the way down to 10,440.

So all things considered, I'm giving this one to the bears.

The VIX: After some indecision last Thursday, the VIX made a decisive 11% gap up on Friday.  Now at 42.96, it is right back up to its 2011 resistance in the 43-45 area.  With an upper Bollinger band of 43.6,  and a stochastic that has actually executed a very unusual bullish crossover at a high level, the VIX could still go higher tomorrow, although its upside seems limited from here.  So that's +1 bears.

VIX futures: The daily futures gapped up on Friday to their upper Bollinger band too.  However, they're now well past their last resistance level and Friday's green candle gives no indication of a turnaround on Monday, so +1 bears.

Market index futures: ES, NQ, and YM are all down at 12:35 AM.  ES is down 0.58%.  That puts it right at its support level around 1107-1122, a level it has successfully tested four times already since the VIX went crazy in August.  However, its indicators are now looking weaker (meaning less oversold) than at any of those previous four times.  This bodes poorly for a fifth success, so +1 bears.

ES daily pivot: Now 1135.75 and ES is trading considerably under that, at 1119.00.  This puts the pivot out of play.  Being below the pivot like this is bearish in and of itself, so +1 bears

USD, weekly

Dollar index: After a truly amazing monthly run-up in September, the dollar put in the mother of all weekly hammers last week.  Its indicators are all oversold on this chart and the stochastic is about to execute a bearish crossover.  I'd be highly surprised if the dollar didn't move lower from here, so that's +1 bulls.

Oil: Daily chart executed a giant bearish engulfing pattern Friday, but one that took it right to support.  Weekly chart remains in a stairstep decline mode with a big weekly dump followed by about five weeks of gradual partial retracement.  If this pattern holds, then this coming week should see oil prices increase, but only slightly.  With oil still in sync with the market, that would be good for stocks, so +1 bulls.

Morningstar Market Fair Value Index: Morningstar reports the index has dropped to 0.79, so that's bearish for stock.  +1 bears.

History: According to The Stock Traders Alamanc,October is a tricky month.  For a long time it had the reputation as being the worst month of the year, but now September seems to have taken over tha dubious honor.  And in the five years from 1999 to 2003, when September was down big, October was up big.  We're just coming off a positively disastrous September.  Then you've got the first day of the month, which is traditionally good, but the Dow has been down four of the last five years on this day.  So on that basis, for tomorrow at least, it's another +1 bears.

Sentiment: After a rough August, J-Trader's market model (see sidebar) did quite well in September, down less than a percent.  He's calling for a buy on Monday, so I'll give +1 bulls for that.

     And the winner is...

The bears with a bull-bear ratio of 3:7.  That said, we are close enough to enough support levels that it will take some really bad news to go significantly lower on Monday.  And if we do go lower, I become more optimistic for Tuesday.    But once again, with the VIX stubbornly remaining up in outer space somewhere, anything's possible.  New rumblings from Greece and now China in the overnight wires though only add to my pessimism for Monday.  Still, not to go against J-Trader, but this Sunday night the Night Owl hoots for a lower Monday.  We'll see.

ES Fantasy Trader

Tonight, the ESFT goes short at  1118.75.

Weekend reading

For your reading pleasure, here is some entertainment while we're waiting for the market to reopen next week.


 How to put out Greece fires

Here's a truly excellent analysis from Stratfor that explains the whole Greek problem in some pretty stark terms: Preparing for Greece's Failure.  It's a video, and while I normally would rather read than watch some talking head read to me, Peter Zeihan manages to present a clear, concise analysis in a succinct 3 minutes and 41 seconds.  This video gets 4 hoots up from the Night Owl.

And along the same lines, here's a brief excerpt from this week's Wells Fargo Weekly Economic Commentary:

"Will the ECB Cut Rates?
After implementing two 25-bps rate hikes earlier this year, the ECB appeared to have moved to an “easing bias” at its September policy meeting. We had been expecting the ECB to cut rates by 25 bps on Thursday until the “flash” estimate of CPI inflation printed much higher than expected. (Preliminary data showed that the overall rate of CPI inflation rose from 2.5 percent in August to 3.0 percent in September.) It may be difficult for the inflation-phobic ECB to sanction a rate cut if the current rate of inflation is 3.0 percent.

However, the pace of economic activity in the overall euro area is very weak, and the ongoing sovereign debt crisis poses significant downside risks to the Eurozone. Moreover, some European banks are having difficulty securing financing due to concerns about their balance sheets. Therefore, we look for the ECB to announce that it will allow banks to tap its liquidity financing operations for longer periods. We also think that the ECB will eventually cut rates. Although we do not rule out a rate cut at the October 6 policy meeting, we believe that the ECB will want to see inflation receding again before it takes that step."

The Night Owl believes that there will be no recovery in the US until the Europeans get their act in gear.

Kodak's Death Throes

 This Greek tragedy of a company is now entering the final act, complete with wailing chorus.  Turns our my obituary last Sunday called "The Rise and Fall of Eastman Kodak" here has become my all-time number one hit.  Talk about perfect timing.  Just before I wrote that piece, Kodak closed last week at $2.38.  It closed yesterday at $0.78.  You can buy a tank of gas or 100 shares of EK now.  Same price.

Now consigned to pink sheet hell, the bottom feeders are already all over this one.  Yes, had you bought Kodak at its Friday low of 54 cents and sold at the close, you would have had a 20% profit in 90 minutes.  Some people are buying it now simply on the theory that it can't go much lower so it has to go higher (no it doesn't).

Jim Jones Kool-Aid Korner

Don't drink the Kool-Aid

And if you're not already depressed enough, check out this blog post from MISH'S
Global Economic Trend Analysis: FICO Survey: “Sharp and Deep Turn to Pessimism” on Housing, Credit Card Lending, Auto and Student Loans.  I quote:

"According to the survey, 73% of bank risk managers expect mortgage foreclosure to rise in the next 5 years and 49% predict housing prices won't return to 2007 levels until 2020, at the earliest."

As Count Floyd used to say on Second City TV, "Scary stuff, eh kids?"

That's all she wrote.

The Market Meets Washing Machine Charlie

Washing Machine Charlie and the 2 AM Bandit

Euro, 5 min. bars

Something had been bothering me recently but it wasn't until I read this blog post in The Disciplined Investor, The 2am Bandit Strikes Again!, that I figured it out.  In it, TDI asks "have you ever noticed that something odd occurs right at about 2am ET?".

Well as he points out, most people probably haven't noticed, since they're asleep.  However, 2 AM is prime time for the Night Owl and as a matter of fact I have noticed.  In fact, take a look at this chart.

This is the Euro in a 5 minute chart from last night.  Notice how after bottoming around midnight, it started a gradual rise right up until, yes, you got it, 2 AM, on the dot, when it took a big dump.  All of a sudden, for no reason.

So what the heck does this have to do with Washing Machine Charlie and who was he anyway?  Well back in World War II, during the battle for Guadalcanal, the Japanese would send a lone Betty bomber over the American positions late at night, around 2AM.

The Betty bomber

The guy would drop one bomb and then go home.  The point wasn't so much to cause mass destruction as to deprive the Marines of sleep.  To add to the irritation, this guy deliberately set his props out of sync, resulting in a distinctive "wah wah wah" sound that gave him his name.

I've heard two versions of how this ended.  In one story (the one I like), Pappy Boyington, of Black Sheep Squadron fame finally had enough of this and one night climbed into his Corsair, laid in wait for Charlie and blasted him out of the sky.  The other version is that the poor guy was accidentally shot down by his own troops one night while returning from a mission.  In any case, he finally went away, one way or another.

In any case, it looks like we've got some new sort of late night raider in our midst once again.  He doesn't show up every night but when he does, he drops a bomb on the euro and on ES.  Who is this guy?  Where does he come from and what does he want?  TDI is right - there is indeed something odd going on at 2 AM.

So Charlie, you're on my radar now - I'll be watching for you next week.

Friday uncertain, slight bias up

 Greetings to our readers in the UK!

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

• Friday higher, low confidence.  Bull-bear ratio is 4:2..
• ES pivot 1153.50.  Current price is now below that.
• Next week bias higher on technicals.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader standing aside on lack of clear direction.

Recap

Last night I called for the market to go higher unless the Germans voted nein on the Greek TARP (the GARP).  Well the world according to GARP is still here and the Dow did indeed finally manage to finish with a 143 point gain (after being up big, then down big, then up big... well with the VIX at these levels, you get what you get).   Tonight we roll the dice to see if we throw a seven on Friday or snake eyes.

The technicals

The Dow: Seems to be channeling those crazy days in August when we have four days of violent up/down swings.  Monday was up, Tuesday was down, today was up.  There's absolutely nothing to learn from such candles.  Even the indicators are all mumbling rather than speaking clearly.  I can't figure out what kind of points to award for this sort of bad behavior.


The VIX: Put in something of a gravestone doji today in the process of retreating back under 40.  It's also formed a symmetrical  triangle on the daily chart and most of the time these resolve in the direction from which the triangle started, in this case lower.  And since its indicators are still all oversold, I give this one to the bulls, +1.

VIX futures: Looks again a lot like the VIX itself.  Put in a shooting starish candle, though not high enough to actually qualify.  More telling is the indicators still oversold implying lower futures.  And that's good for stocks so +1 bulls.

Market index futures: All in the red at 1:55 AM though not by much, ES down just 0.17%.  Interestingly ES is also putting in a symmetrical triangle, this one entering from above.  However, it's also suffering from wandering indicators and I can't really call it either way, so no points.

ES daily pivot: Now 1153.50.  ES is just barely above this at 1154.00 so the pivot is in play once again.  We just passed above it so the staying above is bullish.  However, ES is taking another run at it.  Watch this level carefully Friday morning for a break under.  2:00 AM update, ES just broke under the pivot pretty dramatically, so I'm giving this one to the bears.

Dollar index: Last night I called for a lower dollar today.  Wrong again, two days in a row.  Hmmm. but putting in a hanging man with indicators that are declining rather than advancing, I'm going to call for the dollar to go lower Friday again.  Hey, I've got to be right one of these day.  +1 bulls.

Oil: Last night oil was too slippery to call.  Today's gain provided enough clarity for me to want to go long on the basis of rising indicators, a bullish engulfing pattern, and a successful test of support.  With oil still in sync with the market, that's +1 bulls.

Morningstar Market Fair Value Index: Today the index took a big drop back from 0.83 to 0.80.  A declining index is bearish, so +1 bears

History:  To finish off the week, recall that the week as a whole performs poorly.  Since we've finished the middle three days that tend to outperform according to The Stock Traders Almanac, that should favor the bears.  On the other hand, Friday is the end of the week, the end of the month, and the end of the quarter all in one.  If there's any window dressing to be done this is the day.  Since these two sort of cancel out, no points here either.

     And the winner is...

The bulls, by a bull-bear ratio of 4:2..From what I'm reading on the net, no one seems to have a real good feel for Friday and I have to agree.  Although the bull-bear ratio is positive, the numbers are small reflecting the indecision going around.  So I'm going to call the market higher Friday on a whim but I'm not at all confident about it, certainly not enough to be putting on any trades in advance.  Tonight is honestly just too tough to call.  Hey, sometimes that happens.

ES Fantasy Trader

Standing aside again.  A lack of clear market direction makes any trade more like gambling than trading.  And we save the gambling for Vegas, baby.

Thursday bias weakly higher but German vote decides

Приветствую наших читателей в России!

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

• Thursday higher, low confidence.  Bull-bear ratio is 4:3.  All hangs on German vote.
• ES pivot 1158.00.  In play: break above is bullish.
• Friday bias lower on volatility and Europe.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader standing aside on German uncertainty.

Recap

Last night I called for the rally to end today even though the bull-bear ratio was essentially neutral.  And although the Dow gave it the old college try right out of the gate, it then choked and ended losing 180 points.  Tonight we're faced with an interesting situation.  Let's put the usual suspects on the 5:20 to Glendale and see where they get off.

The Kodak hits the fan

After I wrote my obituary on Eastman Kodak Sunday (here), their stock tanked 26%.  Today it went even lower to close at a pitiful $1.55, and sinking further to $1.50 in after hours on its inexorable march to the pink sheets.  The blogosphere was all abuzz over this today and amazingly there are still some people who claim that this parrot is not dead but merely pining for the fjords.  Delusion is a wonderful thing.

The technicals

The Dow: In addition to just losing money, the Dow put in a bearish engulfing pattern and closed outside its rising regression trend channel today.  Therefore I changed the swing trend arrow from up to "X".  Also, the indicators have rolled over without even reaching overbought levels.  OBV in particular is now the highest it's been all year.  That all adds up to +1 bears.

The VIX: As I suspected last night, the VIX did indeed run up today, punching through its 40 resistance level and closing at 41.08 back in the Zone of Total Psychosis (the area around 40) which you will recall comes just above the Region of Complete Lunacy.  With two green candles in a row, above resistance and a bit more room to run (its upper Bollinger band is at 42.55, its not at all clear that the VIX is done going up just yet, so +1 bears for that.

VIX futures: On the other hand, the futures do look to be at a resistance point and are quite overbought now.  They look about ready to start coming down.  Lower futures -> lower VIX -> higher stocks -> +1 bulls.

Market index futures: The good news is that all three are up at :30 AM by about half a percent.  The bad news is that they're in the Twilight Zone, that region near the midpoint between Bollinger bands and OBV is running quite high and the stochastic is about to execute a bearish crossover.  So that all pretty much cancels out - no points.

ES daily pivot: Now 1158.00, ES is running just below that at 1156.000.  That puts the pivot very much in play for Thursday.  ES has already made one attempt to break though at 12:20 AM and was rejected.  It looks to be gearing up for a second try right now at 1:35 AM.  Another rejection would be bearish.  With no evidence to the contrary yet, it's +1 bears.  Watch this number before the open.  A break above would definitely be a bullish sign.

Dollar index: OK, I got this one wrong last night.  I thought the dollar had room to run lower but instead it staged a comeback retracing half its loss yesterday.  However, today it traded outside its last rising regression trend channel, a bearish trigger.  With its indicators all still coming off overbought, I once again have to call for a lower $ tomorrow, so that's +1 bulls.

Oil:  Wrong again.  I thought oil was going higher today but it sank instead.  Tonight this one is too tough to call, so no points.

Morningstar Market Fair Value Index: Increased from 0.81 to 0.83 today, so that's definitely +1 bulls.

History: Once again, I mention that while the week as a whole performs poorly, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give again +1 bulls.

     And the winner is...

The bulls, by only weakly with a 4:3 bull-bear ratio.  But all this is really irrelevant since the only thing that is going to move the market on Thursday is the results of the upcoming German vote on the Greek TARP (the GARP?).

I just talked to my good friend Angela Merkel on the phone and she says the deal is done.  (No, just kidding, I don't even know her - I just flipped a coin.  With the VIX in Psycholand again, that's as good as anything).  So the Night Owl is moving further out on her usual limb tonight and cautiously calling the market higher on Thursday.  Prosit!

ES Fantasy Trader

Covered our short position today at 1156.00 for an 8.5 point gain.  The portfolio stats: the account is now $135,375 after 19 trades (13 wins, 6 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1156.00    USD    GLOBEX    SEP 29   00:32:44 
SLD    10    ES    false    DEC11 Futures     1164.50    USD    GLOBEX    SEP 28 01:45:47

Tonight we're standing aside - too much uncertainty related to Deutschland.

CNBC Million Dollar Portfolio Challenge stats: Now ranked 98.72%, 7,520th position.

Wednesday looking lower

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

• Wednesday lower, medium confidence.  Bull-bear ratio is 5:4.
• ES pivot 1171.50.  In play: holding under is bearish.
• Rest of week bias lower on volatility and Europe.
• Monthly outlook: bias  up on technicals.
• ES Fantasy Trader opened new short position at 1164.50.

Recap

Today's action played out just about as I expected Monday night when I wrote that yesterday's gain was  "big enough to develop some traction but not so big as to invite a major correction the next day, leaving us in the sweet spot. ".  And how sweet it was, with a 147 point advance in the Dow, up over 300 at one point.  After three consecutive up days, can we make it four?  We shake the Magic 8 Ball and look for clues...

The technicals

The Dow:  Today's gain unfortunately left us with a classic shooting star and that's a bearish reversal pattern, albeit not a particularly strong one.  Countering that is the fact that the stochastic is just finishing a bullish crossover and RSI is just coming off oversold levels.  However, OBV and momentum are at levels associated with a top.  Also, today's advancing volume was lower than yesterday's.  So all in all, that just barely tips this scale to the bear side, so +1 bears.

The VIX: Also as expected, the VIX ran lower again today but did it on a gap-down green candle.  At 37.71, it fell below its Zone of Total Psychosis (the area around 40) and is now merely in the Region of Complete Lunacy.  Being stuck around halfway between Bollinger bands but with indicators still in oversold territory, they pretty much cancel out so no points awarded.

VIX futures: While this chart once again looks pretty much like the VIX, I can draw a rising regression trend channel on it that indicates the futures are in no hurry to drop much further.  On the other hand, the stochastic here also just finished a bearish crossover and that's always very reliable.  I'm going to award +1 bulls on that basis alone  (hey, it's not an exact science)

Market index futures:  All three (ES, NQ, and YM) are now down by nearly a third of a percent (1:15 AM EDT) unlike on the past three nights. With today's shooting star followed by a developing dark cloud cover, this one is +1 bears.

ES daily pivot: We've gone below the new pivot at1171.50.  Or more precisely with ES at 1165.75, the new pivot has climbed above the current price.  This puts the pivot in play, so watch this in the morning hours.  Failure to climb above this level is bearish.  Right now, this has to go +1 bears.

USD Index, daily

Dollar index: Also as I expected last night, the dollar took a hit today, though I wasn't expecting it to be quite this big.  In any case, we broke recent support and the indicators are all just coming off overbought levels, so +1 bulls (lower $ -> higher stocks).

And just look at this beauty of a chart.  One hanging man, a second hanging man and then kaboom, look out below.  That double hanging man (and double hammer) pattern is one of the best around.

Oil: As I suggested last night, oil did indeed rally today.  Still coming off oversold levels and approaching a gap needing filling-in, it looks like there's still room to run higher here, so +1 bulls.

Morningstar Market Fair Value Index: Jumped from 0.79 to 0.81 today.  Coming off such a depressed level, this is bullish.  +1 bulls.

History: As last night, I mention that while the week as a whole has a bum rap, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give again +1 bulls.

Sentiment: The general short-term feeling of the three blogs I follow the most has turned negative.  Since this is a small sample, it doesn't become a contrarian indicator and therefore is +1 bears.

     And the winner is...

The bulls again, but unlike yesterday's 9:0 shutout, tonight it's only a squeaker, with a bull-bear ratio of just 5:4.  But this is a tough one.  This shooting star in the middle of the Bollinger bands isn't a very common pattern (I had to go back to 2006 to find one - the next day then was up).

But with the bull:-bear ratio basically undecided and the futures running out of steam and right at resistance, the Night Owl is going out on a limb and calling Wednesday lower on the expectation of profit-taking, the level of the VIX, the fact that we haven't heard a discouraging word from Europe for a whole day (which makes it overdue), and the fact that I'm just not feeling the love (like I said, it's not an exact science).

ES Fantasy Trader

We closed out today's trade for a nice 23.25 point gain or $11,625.  The portfolio stats the account is now $131,125 since inception on 8/18 after 18 trades, 12 wins, 6 losses:

BOT    10    ES    false    DEC11 Futures     1160.50    USD    GLOBEX    00:43:26
SLD    10    ES    false    DEC11 Futures     1183.75    USD    GLOBEX    11:23:53

Tonight, we go short at 1164.50.

CNBC Million Dollar Portfolio Challenge stats:

Hey CNBC, you can keep that weekend in Dubai, I want the Lamborghini :-)  Vroom vroom!