Friday higher if no bad EU news

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

• 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

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

• 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

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

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

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.

Friday higher if no bad EU news

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

• Friday higher, high confidence.  Bull-bear ratio is 9:1.
• ES pivot 1243.00.  Remaining above is bullish.
• Next week bias up..
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1255.00.

Recap

Hoo boy, when I'm wrong I'm really wrong.  My call for a lower close today was effectively torpedoed by the Prime Minister of Greece who announced that there isn't going to be a referendum on whether or not Greeks want to retire 10 years before they begin working after all.

I don't know, maybe tomorrow he'll announce that China has bought the entire country and is having it towed to the South China Sea.  That would make as much sense as anything else I'm hearing these days.  In any case, it was good enough to power the Dow up 208 points on sketchy technicals.  Let's see if I can do any better tonight for Friday.

The technicals

The Dow: Last night I didn't like this chart, tonight I do.  We now have two strong solid green candles, today's close at 12,044 taking us back up over not only the 12K resistance line but also the 200 day MA at 11,974.too.  The indicators are all rising and the stochastic is about to execute a bullish crossover.  No resistance til 12,230 so +1 bulls.

The VIX: For the fifth time in six sessions the VIX moved in gap fashion, today dropping nearly 7%.  While we have now completely retraced the big gap up from Monday, the stochastic is just executing a bearish crossover, suggesting the VIX ca go lower Friday.  Not much in the way of good support here either, so I'm saying +1 bulls.

VIX futures: The futures dropped on a big inverted hammer but have the same bearish crossover stochastic thing going as the VIX itself.  And this gap is only about half filled.  With the other indicators also declining, I'd give this one +1 bulls too.

Market index futures: Little guidance here tonight.  YM is exactly flat, NQ is up 0.06% and ES is down by the same amount at 1:50 AM EDT.  At 1255.25, ES is getting close to its 200 day MA at 1261.84.  Rather than the pivot, I think this will be the number to watch on Friday.  If ES can cross this line successfully, that will be bullish indeed.  The stochastic just finished a bullish crossover and that's good enough for me, so +1 bulls.

ES daily pivot: Now 1243.00.  While is is basically unchanged in the overnight, the pivot moved up.  But even at that we're still 12 points above it and showing no signs of any attraction, so I'll give this one +1 bulls.

Dollar index: The dollar moved lower on an inverted hammer today.  Its indicators have all peaked and are headed lower, suggesting the buck will follow suit Friday, but it is close to its 200 day MA again.  While that provided no obstacle on the way up two days ago, it might provide some support Friday.  But it still has a bit more room to get there, so that's +1 bulls.

Oil: Moved higher today on a hanging man and mixed indicators.  Being at the top of its recent trading range suggests it will go lower Friday which would be bad for stocks so +1 bears.

Copper: At least I got this one right.  Copper did indeed move higher today.  And the indicators are still looking good and no nearby resistance, so +1 bulls.

Morningstar Market Fair Value Index: Today the index bounced right back up from 0.87 to 0.89, so +1 bulls.

History: According to The Stock Traders Almanac says Friday is bullish, so +1 bulls.

     And the winner is...

The bulls, by a bull-bear ratio of 9:1.  This sort of lopsided result is usually pretty accurate - unless of course the FT reports that George Papandreau found a fly in his moussaka or something, which will set off a global financial panic.  There's simply no chart for that.  Assuming these Europeans can keep quiet for a day, we might see some more upside Friday.

ES Fantasy Trader

Today we covered our short for a loss of 8.25 points.  Portfolio stats: the account is now $172,500 after 33 trades (24 wins, 9 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    NOV 2 01:13:12

SLD    10    ES    false    DEC11 Futures     1235.25    USD    GLOBEX    NOV 2 11:45:14   

Tonight we go long at 1255.00.

Thursday likely lower

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

• Thursday lower, medium confidence.  Bull-bear ratio is 4:5.
• ES pivot 1229.83.  Holding below is bearish.
• Friday bias higher, short term oversold...
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1219.25...

Recap

Last night I called for a higher close today and hey presto that's just what we got.  But the past few days I've been noticing something odd.  Almost all the stocks I watch are looking bullish on the daily charts but bearish on the weekly charts.  Hmmm.  Gives you (bear) paws for thought, eh?  (Pun alert).  So can today's recovery carry on into Thursday?  Let's drop a quarter in the machine, pull the lever and see if we can come up with three 7's.

The technicals

The Dow: Today's 178 point gain retraced just over half of yesterday's loss and left us with mixed indicators.  RSI, momentum, and money flow all ticked up today which is nominally bullish but OBV moved to a highly overbought state and the stochastic continued its decline without showing any signs of a bullish crossover yet.  And today's volume was lower than yesterday's.  I'm searching this chart for a reason to be bullish and not finding one so I have to give this one +1 bears.

The VIX: Hey last night I wrote "The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday" and darned if it didn't do just that, dropping nearly 6% today.  But the gap remains less than half filled and while a gap half full might seem ambiguous to some,  this one looks ready for more downside action so +1 bulls.

VIX futures: After yesterday's stratospheric doji, the futures indeed came down today but this gap still has a big way to go so I'm betting they go down again tomorrow and that's +1 bulls.

Market index futures: Tonight all three are in the red and ES is down 1.28% at 12:50 AM EDT.  A loss that size at this hour is enough to warrant a bearish outlook.  But that's also already enough to form a bearish engulfing pattern over Wednesday's green candle.  ES also broke support at 1223 today and has no further support til 1211, then 1194.  Indicators are still falling but have yet to show signs of a reversal so all in all this chart looks like +1 bears.

ES daily pivot: Rose to 1229.83 for Thursday.  ES actually went under the pivot just before 8 PM and has been drifting lower since 6.  With ES already 10 points under the pivot, it ain't looking good, so another +1 bears.

Dollar index: After yesterday's big run-up, the buck today put in a hanging man at the top of the range.  This inability to push forward makes me suspect it might be going lower Thursday and that would be good for stocks, so +1 bulls.

Oil: Has clearly peaked and is headed lower in the short term, so +1 bears.

Copper: Took a bump up today despite indicators not having reached oversold levels.  This sort of action reminds me of the abortive rally attempts we had last summer that kept getting cut off at the knees, only the other way around.  With today's green candle following Tuesday's doji, it look s like copper might go higher from here so that's +1 bulls.

Morningstar Market Fair Value Index: Today the index dropped again, from 0.89 to 0.87, so that's +1 bears.

History: According to The Stock Traders Almanac,Thursday has just a slight positive edge, but not enough to warrant awarding any points.

     And the winner is...

The bears, who just squeak one out with a 4:5 bull-bear ratio.  Overall though, the market is feeling to me more negative than this close ratio would indicate.  With the VIX bouncing around like popcorn and back again over 30 and that utterly incomprehensible European Kabuki Theatre of the Absurd now in it's, what, seems like at least the 275th act with no end in sight, I'm voting Thursday lower.

ES Fantasy Trader

Today we took a profit of 8.25 points.  The market had already put in one peak in the morning and I figured discretion was the better part of valor particular with Bernanke scheduled to talk this afternoon.  Didn't turn out badly at that.  Portfolio stats: the account is now $176.625 after 32 trades (24 wins, 8 losses) since inception on 8/18 with $100K

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    01:13:12
SLD    10    ES    false    DEC11 Futures     1235.25    USD    GLOBEX    11:45:14

Tonight we go short at 1219.25.

Some upside possible Wednesday

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

• Wednesday higher, medium confidence.  Bull-bear ratio is 5:3.
• ES pivot 1227.00.  Holding above is bullish..
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1227.25.

Recap

Well I thought we were going lower again and we sure did, with the Dow dumping another 297 points to open November with a big fizzle, thanks to those freakin' Greeks and their referendum.  But whining, like hope, is not an investment strategy.  Not like reading the charts which is what we do here, so let's get right to it and see which way they're pointing for Wednesday.

The technicals

The Dow: Ugh, another big dump that not only broke support at 11,694 but played entirely under the 200 day MA and closed on the day's lows.  Indicators are all declining but still a good ways from oversold, though it should be noted that support exists at 11,640, just shy of today's close at 11,657..  Still, it's just an ugly chart that's +1 bears.

The VIX: I was talking about gaps in the VIX last night - well holy moly, after closing yesterday at 29.96, we opened today at 36.03 - that's one heck of a gap up.  And that made a spinning top doji centered right in the 35-36 resistance zone and just short of the upper BB at 38.6.  The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday and that's +1 bulls.

VIX futures: Here we got a giant abandoned baby that's a really good reversal indicator.  No matter what the chart, they have trouble advancing after a doji like this, so I'm calling the futures lower Wednesday and that's +1 bulls.

Market index futures: Finally, all three are running in the green for once.  ES is up 0.37% at 2 AM EDT.  And its looking exactly like the VIX futures chart so the same comments apply and that's also +1 bulls.

ES daily pivot: Now is 1227.00.  ES has been trending up since 7 PM and broke through the pivot just past midnight. Then it made a quick retest that was successful and resumed climbing.  I like the looks of this sort of action, so +1 bulls.

Dollar index: The dollar rocketed up once again today, even more than I expected.  While this might look like a bullish continuation, I note that the peak of the day was right at the 54.61 resistance level, from which it retreated.  While the indicators are not technically oversold, they are at the same level they were at the last peak on October 20th.  So I'd have to say the dollar may be in line to run lower soon, if not tomorrow then even more likely Thursday.  On that basis I'm giving this +1 bulls.

Oil: I mentioned the double hanging man last night and oil indeed sank lower today - and put in a third hanging man, a long spindly one at that.  But after three straight down days, I have to wonder if this isn't now a hammer instead.  The indicators are kind of confused and so am I.  I'm not feeling the love from this chart, so no call and no points.

Copper: The Doc took a big gap down today to end with a hammer in the Twilight Zone, that spooky region halfway between Bollinger bands.  All we're left with are indicators still more overbought than oversold and having now peaked, so that's worth +1 bears.

Morningstar Market Fair Value Index: Today the index dropped to 0.77.  But all the previous numbers on the chart oddly seem to have changed too, so I don't get it.  However, it remains a pattern in decline, so that's +1 bears.

History: According to The Stock Traders Almanac,there isn't much to the second day of November, so no points.

     And the winner is...

The bulls, somewhat surprisingly given all the negativity I've been reading today, by a bull-bear ratio of 5:3.  So I'm cautiously optimistic we might see a turn-around on Wednesday after two big days of declines mostly based on European rumors and non-news.  So the Night Owl is moving about half-way out on the limb ad calling Wednesday higher.

ES Fantasy Trader

Today we took a profit of 22 points.  Portfolio stats: the account is now $172,500 after 31 trades (23 wins, 8 losses) since inception on 8/18 with $100K

SLD    10    ES    false    DEC11 Futures     1238.25    USD    GLOBEX    01:55:14
BOT    10    ES    false    DEC11 Futures     1216.25    USD    GLOBEX    11:48:29
 
Tonight we go long at 1227.25.. 
 

Tuesday lower

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

Overbought.

• Tuesday lower, high confidence.  Bull-bear ratio is 0:9.
• ES pivot 1258.42.  Current price is far below that.
• Rest of week bias lower but rebound possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1238.25.

Recap

Happy Halloween to one and all!  Today the Dow barfed up 276 points as the market rounded out a great October on a down note.  So will this nasty trick be followed on Tuesday by a yummy treat?  Let's paw through our bag of goodies and find out.

The technicals

The Dow: Today's close of 11,955 broke psychological support at 12K and took us just barely past 200 day MA support at 11,974.  Unfortunately, that happened just before the close so if we had been open longer, would the Dow have bounced there?  I'm afraid the chart's not supporting that notion.  The indicators are all still overbought and have now peaked.  OBV in particular put in a top yesterday and that's always a bad sign.  The good news is that there's more support at 11,890.  It's likely we'll revisit that tomorrow.  Then next comes 11,694 though I don't think that's in the cards for tomorrow.  Either way though, it's +1 bears.

Daily VIX

The VIX: Completely filled the big downside gap it made last Thursday on a tall green candle to leave us right back at 30 again.  In fact this candle was a gap-up.  This one is worth a chart because there's something unusual going on here.  In fact, this is now the third time I've used the phrase "something unusual" here in the last week, which is unusual in itself.

See how in the month of October, 5 of the 21 sessions featured the VIX making a gap up or down.  It seems that the volatility of the VIX is increasing - note particularly the action of the last four days.  It has been noted before that when the "VIX of the VIX", essentially the second derivative of the market increases, it signals a longer term trend change.

I view this as a positive for the market over the next two months but I don't think it will help much tomorrow.  The VIX is still just coming off oversold, is still closer to its lower BB than the upper, and isn't near any particular resistance point.  It doesn't have a good reason to go down right away from here so that's +1 bears.

VIX futures: Similar to the VIX itself, this chart actually looks to have even more room left to fill its gap.  Higher futures -> higher VIX -> lower stocks -> +1 bears.

Market index futures: Once again, all three futures are down with ES leading the way with a 0.92% loss at 2 AM EDT.  This bring it right to the lower edge of its latest rising regression trend channel, a bearish setup.  While today's loss took us out of overbought territory, the indicators are all still heading lower and the next support isn't til 1224, so that's +1 bears.

ES daily pivot: Now 1258.42.  Although that's lower than last night, ES has also declined and is now running 20 points below.  That puts the pivot effectively out of play for Tuesday.  Another +1 bears.

Dollar index: The dollar jumped today thanks to the BoJ's yentervention, nearly completely erasing its losses from last Thursday.  Today's close of 53.59 (on $USDUPX) is just short of resistance at 53.77 and the 200 day MA at 53.87 so I think that while further gains may come on Tuesday they'll be more muted than today.  But that's still +1 bears.

Oil: As I thought last night, oil did go lower today.  In fact we now have not one but two hanging men on the daily chart.  I've not seen the "double hanging man" pattern in any chart book, but I believe it's a lot better reversal sign than just one alone, so that plus overbought indicators =  +1 bears.

Copper: Last night I wrote "copper goes lower Monday" and today it took a nearly 5% drop completing an evening star-ish/two crows pattern, both of which are bearish reversals.  And it left us just about at the top of the big upside gap that formed last Thursday.  With all overbought indicators, a stochastic finishing a bearish crossover and that gap wanting filling, it's looking like copper is going down some more Tuesday so that's +1 bears.

Morningstar Market Fair Value Index: For some reason, Morningstar has not updated this number since October 27th, so no points here today.

History: According to The Stock Traders Almanac, while the Dow is up 63% of the time on the first trading day of November, it has been down 4 out of the last 5 years.  So despite November's stellar reputation as a whole, I'm going to give Tuesday +1 bears.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last  week the bulls dropped to 36% while the bears rose again to 39% putting them back into the majority.  This week we had another big reversal in the poll with the bulls getting on board to take a 67% lead compared to just 15% bearish.  You have to go back to November '08 to find such a large bullish number.  But i think it's a bit early to play the contrarian card here.  Still it's worth keeping this number in the back of your mind.

For the record, I voted bullish again now for the fourth week in a row, still on the basis of my reading of the monthly Dow chart and the upcoming bullish fourth quarter seasonality.  But if next week's poll becomes any more bullish, I might have to reconsider my position.

     And the winner is...

The bears with a shut-out for a bull-bear ratio of 0:9.  While J-Trader covered his shorts today, I'm afraid I'm going to have to part company and call Tuesday lower again.

ES Fantasy Trader

Today we took a profit of 19.75 points on last Thursday's short.  Once again, patience paid off.  Rather than taking a small loss on Friday I held short over the weekend and then today, ka-ching.

Portfolio stats: the account is now $161,500 after 30 trades (22 wins, 8 losses) since inception on 8/18 with $100K

BOT    10    ES    false    DEC11 Futures     1262.75    USD    GLOBEX    11:18:43

SLD    10    ES    false    DEC11 Futures     1243.00    USD    GLOBEX    OCT 25 01:38:26

Tonight, we go short again at 1238.25.
 
The reboot of the CNBC Million Dollar Portfolio Challenge was also most kind to the Night Owl.  On the first day of the new contest, my standing jumped significantly from where it was before the shutdown.  However, after reading the revelations of how the top players got to where they were, I've pretty much already given up on winning the big bucks.

Unfortunately, I have a life which means I don't have the time to spend all day long literally glued to my screen executing a trade every 30 seconds for 5 weeks nonstop which is apparently what it takes to bring this one home.  So it ends up being more of a fun thing for me, as in with a few well-placed trades I'm just a bit more than half a percent from the top.  And it only took a few minutes of my time.  So there :-)
 

Out of gas, Monday lower

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

• Monday lower, high confidence.  Bull-bear ratio is 3:5.
• ES pivot 1279.33.  Holding under is bearish..
• Rest of week bias lower, but rebound possible by Friday.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader remains short at 1276.25.

Recap

Exactly one week ago I wrote "This should be an interesting week ahead.".  And was it ever.  After a shaky start we were rewarded handsomely with some awesome gains on Wednesday and Thursday.  Then I called for a lower market on Friday and while I was wrong on that, it wasn't by much.

The Dow managed to pull off an anemic 22.5 point gain, the SPX was flat, and the Naz actually did lose a hair.  Nevertheless, we remain comfortably inside the rising regression trend channel established on 10/4.  So tonight  let's consult the Racing Form, look over all the horses and see if we can pick a winner for Monday.

The technicals

The Dow: The Dow's little spinning top doji along with decreased volume and overbought indicators all portend a reversal from last week's close at 12231.  This also represents a failure to breach the 12,211 resistance line in a meaningful way and gives every impression of being out of gas, at least for a day or two so it's +1 bears.

The VIX: After a big gap down on Thursday with an inverted hammer, it put in a very unusual bearish engulfing pattern from a low level with oversold indicators on Friday.  This looks to me like it's going lower Monday, although it's got its 200 day MA real close at 23.59 as support.  So that leaves maybe a point of downside from here.  So +1 bulls.

Note that since the start of 2010, the VIX has encountered its 200 day MA from above 9 times.  It only bounced off it 2 times, and those were the first two in early 2010.  The other 7 times we got this close, it went right through the MA.  As a whole I'm inclined to give this one +1 bulls.

VIX futures: After a gap down red candle Thursday, the futures fell again Friday.  And while its indicators have now reached oversold levels, they're not giving a reversal sign yet and we're not up to any support levels.  It's not out of the question that they could continue lower Monday, so that's +1 bulls.

Market index futures: All three are running in the red at 1:30 AM with ES now down a full percent.  After putting in a small doji on Friday, ES was unable to clear resistance at 1282.  With indicators that are all not only overbought but look to have peaked, ES is ready to move lower.  Its next support is its 200 day MA at 1262.45.  We're actually already pretty close to that so that's the key number to watch Monday morning.  If ES doesn't bounce off that, it's headed for 1250.  All things considered, it's clearly +1 bears.

ES daily pivot: Now 1279.33.  ES is now under it at 1268.25 in fairly ugly fashion because not only did the pivot rise but ES has been drifting steadily lower since 9 PM.  That's not a good combination, so this is +1 bears

Dollar index: After a huge dump on Thursday, I wrote "such large downward moves in the past tend to be followed by a dead cat bounce the next day" and that's exactly what we got on Friday with a tiny 0.27% gain.  But tonight's a lot harder to call.  Having hit its lower Bollinger band, it did not bounce off and indeed the lower BB is falling away.  And its indicators are all now broken oversold.  We still have a bit to go before reaching weekly support, so technically Monday could go either way.  I'm not feeling the love, so no points.

Oil: Put in a hanging man on Friday.  Its indicators are quite overbought and its stochastic has just executed a bearish crossover.  Oil is already running lower in the overnight and being as how its now at the upper end of its recent trading range, I'd have to say its going lower Monday.  Since it's now positively correlated with the market, that's +1 bears.

Copper: Finished last week right at a resistance level and its upper Bollinger band.  Its daily indicators are now all quite overbought, so this is looking like copper goes lower Monday, and therefore the market in general too, so +1 bears.

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

History: According to The Stock Traders Almanac, the last day of October is only bullish for the Nasdaq and otherwise has just a slight positive bias.  Nothing really worth awarding any points for.

     And the winner is...

The bears with a bull-bear ratio of 3:5.  This close ratio is typical of reversal points and I tend to believe this one.  In addition, J-Trader is holding short for Monday and the sentiment from several other blogs I respect is also negative.  So I'm reasonably confident to call Monday lower.  That's all she wrote.

ES Fantasy Trader

We went short on Thursday night and decided to hold onto that position on Friday over the weekend.  So far that decision seems to be paying off.

Portfolio stats: the account remains $151.625 after 29 trades (21 wins, 8 losses) since inception on 8/18 with $100K. 
 

Overextended, Friday 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 1269.75.  Breaking below is bearish..
• Next week bias up on technicals and economic news.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1276.25

Recap

Well it seems that just as the market spent most of the summer pricing in a Europe-induced recession, it is now spending October un-pricing it.  Today's spectacular 340 point rocket in the Dow broke a bunch of barriers all at once and positioned us well for further gains going into November, but maybe not tomorrow.  Let's take a Delphic journey to consult the Oracle for clues to Friday's direction.

The technicals

The Dow: Today's close at 12,209 was very important for three reasons: first it blasted right through the 200 day MA at 11,971 in convincing fashion, second, it broke the psychological 12K barrier equally easily, and third it broke the 0.618 Fibonacci retracement of the decline that began on July 22nd.  There is now no resistance until 12,400.

That said, one might reasonably expect a pause after one day gain of such magnitude, especially with a Friday coming up, on which traders might be more inclined to lock in gains before the weekend..  Today also brought us to the upper Bollinger band.  And OBV is now running off the map at 24.4B, a number I've never seen before and far above the point at which previous tops have been put in.  The other indicators are similarly overbought.  While I think we still have room to go higher in November, this chart is looking a bit overextended, so +1 bears.

The VIX: The all-important VIX lost almost 15% today on a big gap-down forming an inverted hammer. that took it clear to its lower Bollinger band and almost to its 200 day MA at 23.55.  The VIX generally tends to bounce right off its lower BB whenever it reaches it and its stochastic is jsut about to execute a bullish crossover.  On that basis it's looking like +1 bears.

VIX futures: Pretty much the same story here as the VIX itself.  These sorts of big gaps cry out to be refilled, so that would also be bad for stocks.  Another +1 bears.

Market index futures: All three are down this evening with ES down nearly half a percent at 1:10 AM EDT.  Today's tall green candle gives me the impression of being overextended.  However, since ES also crossed well over its own 200 day MA at 1262.5 today, that becomes a good support level.  But I think we may revisit that area before the next push upward, so +1 bears.

ES daily pivot: Now 1269.75.  With ES at 1276.50, the pivot is making its magnetic attraction felt.  Since ES has been drifting lower since 8 PM, I'd expect it to hit the pivot around 7 AM Friday.  If we bounce off, that's bullish.  Breaking under, bearish.  However, I can't give any points for that right now.  I'll be sleeping when it happens, so a word to the wise: see where ES is before the market open on Friday.

Dollar index: The dollar took a massive dump today that brought it clear to its lower Bollinger band at 52.7 (remember I'm looking at $USDPX, not $DXY).  What's not clear is if that will mark a stopping point.  While the indicators have entered oversold territory, there's no support until the summer lows around 52.11.  However, such large downward moves in the past tend to be followed by a dead cat bounce the next day, so I'm going to call the dollar a bit higher tomorrow and that's bad for stocks, so +1 bears.

Oil: Went back up today.  The oil chart is confused here as is its relationship with the rest of the market, so I'm going to take a pass on this one tonight.

Copper: Today, copper took a big gap-up pop to its upper Bollinger band and beyond.  I've been kicking myself for forgetting to buy some FCX earlier this week.  But now the indicators are all oversold and the stochastic just made a bearish crossover so tonight it's +1 bears.  Tomorrow might be the day to grab that FCX.

Morningstar Market Fair Value Index: Today the index rose from 0.87 to 0.88, so that's +1 bulls.

History: According to The Stock Traders Almanac,the last two days of this week tend to outperform historically and Friday is easily the strongest day of the week, so +1 bulls.

     And the winner is...

The bears, with a bull-bear ratio of 2:6.  And that's about how I'm feeling too.  I note also that J-Trader is bearish on Friday and I agree.  I think we'll see Friday go lower.

ES Fantasy Trader

Today we took a profit of 14.5 points.  Portfolio stats: the account remains at $154,750 after 29 trades (21wins, 8 losses) since inception on 8/18 with $100K.  .

Portfolio stats: the account is now $151.625 after 29 trades (21 wins, 8 losses) since inception on 8/18 with $100K. 

BOT    10    ES    false    DEC11 Futures     1256.25    USD    GLOBEX    01:40:31    

SLD    10    ES    false    DEC11 Futures     1270.75    USD    GLOBEX    11:57:01     

Tonight we go short at 1276.25.. 
 

Thursday higher on EU news

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

• Thursday higher, high confidence.  Bull-bear ratio is 6:4.
• ES pivot 1232.17.  Current price is far below that.
• Next week bias up on technicals and economic news.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1255.00

Recap

My admittedly wimpy call last night was that today's market would be driven by news out of Europe.  Well the news was encouraging and the Dow rewarded us with another 162 points to the upside.  I also said Sunday night that this was going to be an interesting week.  How interesting?  Read on as we shake the dice for a lucky roll on Thursday.

The technicals

Dow daily

The Dow: Last night I thought technically that the Dow would go lower today.  However, I refrained from calling this because of the expectation that news from Europe would be the deciding factor.  And so it was, giving us another nice gain.  But tonight I want to point out what I see as a descending triangle (blue lines).  This is a bearish pattern.  And with indicators still quite oversold, that's enough for me to give this one to the bears, +1.

The VIX: I did pretty well with the VIX last night.  Even though the VIX had risen, I called it lower today based on the unusual downside gap three methods pattern and sure enough the VIX dropped 7.3% today to give us a tall inverted hammer.  This is a low reliability reversal candle and requires confirmation.   Since the VIX is not yet at its support around 29-28, it still has at least some more room to run lower.  Its stochastic in particular is not yet giving a bullish reversal sign, so that's +1 bulls.

VIX futures: Again, pretty much the same chart as the VIX itself.  Absent an actual reversal pattern, I'm hesitant to call a bottom here, so it's another +1 bulls.

Market index futures: Of course, all the rest of tonight's technical analysis is pretty much academic, because news just came out that the EU cut a deal for a Greek haircut to the tune of 50%.  Obviously the market likes this hairstyle because all three futures are up about 1 1/2% at 1:30 AM EDT.  ES in particular is up 1.58%.  Tonight's ES action also broke out over the 1252 resistance level.  The stage is now set for an assault on the 200 day MA at 1262.  The indicators are confused but the mood is not, so it's clearly +1 bulls here.

ES daily pivot: Down just a bit to 1232.17.  The late European news effectively puts the pivot out of play for Thursday.  This action is quite positive, so it's another +1 bulls.

Dollar index: The direction of the dollar was unclear last night.  Today's doji combined with oversold indicators and a stochastic making a bullish crossover lead me to believe the dollar's moving higher Thursday.  That would be bad for stocks, so +1 bears.

Oil: Oil slipped today as I predicted last night.  It was unable to break resistance at 93.46.  Significantly though, while oil fell, the market was up on Wednesday.  We may be seeing a change from a positive to inverse correlation between the two.  I still think oil will go lower again Thursday.  If the current inverse correlation holds, that would be +1 bulls.

Copper:Last night I thought copper was too confusing to make a call on.  Apparently the market agreed because today copper simply put in a doji star.  However, having done so right at the top of its recent trading range and with indicators nearly overbought levels I'm more inclined to say copper's going lower on Thursday, so that's +1 bears.

Morningstar Market Fair Value Index: Today the index dropped right back down from 0.91 to 0.87 again.  That's bad, so +1 bears.

History: According to The Stock Traders Almanac,the last two days of this week tend to outperform historically, so +1 bulls.

     And the winner is...

The bulls with a bull-bear ratio of 6:4.  However, whereas the other night I was more pessimistic than the ratio suggested, I think tonight the technicals are too conservative.  I believe that the market will be celebrating the Greek barbers on Thursday and I'm calling the close higher.

ES Fantasy Trader

Today we did not trade.  Portfolio stats: the account remains at $147,500 after 28 trades (20 wins, 8 losses) since inception on 8/18 with $100K.  Tonight we go long at 1255.00.
 

Wednesday to be EU news driven.

 Analysis 100% Made in America

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

• Wednesday uncertain, news-driven.  Bull-bear ratio is 5:3
• ES pivot 1233.75.  Breaking above would be bullish.
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias lower on technicals.
• ES Fantasy Trader standing aside

Recap

As I expected last night, the Dow was flummoxed Tuesday by the double barrier of its upper Bollinger band and the 200 day MA which left it nowhere to go but down.

The technicals

The Dow: Today's close at 11,706 still leaves us a bit above first support at  11,675.  The 207 point drop gave us a medium reliability bearish two crows pattern.  With indicators that have now peaked at overbought levels and turned downward, I'm afraid I see no sign of higher here so that's +1 bears.

The VIX: Today the all-important VIX rose a solid 10% to close back above 30 at 32.22 forming a pattern you don't see very often, the downside gap three methods.  That is a bearish continuation pattern of medium reliability.  This suggests that despite today's advance, the VIX still has lower to go.  Of the three active VIX indicators, RSI and momentum are rising (bullish) but the stochastic, which is very reliably is still descending (bearish).  The preponderance of evidence on this chart suggests a lower VIX tomorrow so that's +1 bulls.

VIX futures: This chart looks very much like the VIX itself with the added advantage of having OBV available.  And that is now at levels from which we've gone lower the next day.  Lower futures -> lower VIX -> higher stocks, so +1 bulls.

Market index futures: All three are higher this evening by better than a third of a percent with ES up 0.41% at 1:30 AM EDT.  Today's big drop in ES formed a difficult candle.  Not quite dark cloud cover, not quite bearish engulfing, I'm not quite sure what to make of it.  I do know we saw the same pattern on Oct. 14-17 and the next day was up.  The indicators are kind of all over the place.  OBV is now in a position looking up for tomorrow but the stochastic is tied up like a ball of spaghetti - you don't see that very often.

Trendwise, Monday's close was right at some good near-term support, and the overnight is respecting that for now anyway.  It isn't completely clear, but I'm going to give this +1 bulls anyway.

ES daily pivot: Is now 1233.75.  We're just three points below this level now but have yet to mount an attack on it.  We'll need to see ES break above this sometime before noon Wednesday to get a higher close.  But since we've been drifting higher since 7 PM, we're at least moving in the right direction and although it's still a bit early I'm going to give this one +1 bulls too.  As usual on uncertain days, watch the pivot for clues.

Dollar index: The buck made an inverted hammer that was unable to move below yesterday's close.  That said, there isn't any particular support here, we're not at the lower Bollinger band yet, and the indicators, while nearing oversold levels aren't there yet.  With this sort of mix, I'm reluctant to call a direction for Wednesday (though I think we'll be going higher by Friday), so no points.

Oil: Oil put in an evening star today right to its upper Bollinger band on heavy volume.   Its oversold indicators suggest lower tomorrow and that would confirm the bearish candlestick pattern.  It might be a day too soon, but I'm still giving a vote for lower oil Wednesday here.  With oil still in sync with the markets, that's +1 bears.

Copper: Copper fell today but only enough to make day two of a three inside down pattern.  But that definitely requires confirmation on Wednesday.  Meantime, copper is in no-man's land, at neither support nor resistance, not close to any Bollinger band, and not in any regression trend channel.  I'm getting no guidance from this tonight so no points.

Morningstar Market Fair Value Index: Today the index jumped from 0.87 to 0.91.  Not only is this bullish in and of itself, but it marks the first time since 8/31 that we've crossed back up over 0.90.  And to the extent that TA can be applied to this graph, I'm seeing an inverse head and shoulders here.  So with all these positive signs, it's +1 bulls.

History:  According to The Stock Traders Almanac,the first three days of the last week of October all underperform historically, so +1 bears. I'd really like to make it 1/2 though, because Wednesday is the least bad of these three days.

     And the winner is...

The bulls by a 5:3 bull-bear ratio.  But that's not exactly a ringing endorsement.  However, J-Trader has covered his shorts but interestingly isn't going long either, suggesting a similar view to what I'm seeing.  Meanwhile Quantifiable Edges is bearish.  And one more key opinion from alert reader Daniel, who today demonstrated a keen insight when he observed:

"But I also wish to call your attention to the many and various “breadth thrust” signals being generated by this upmove in the US equity market. When you report “quite an unusual pattern, stochastics executing a bullish crossover from a high level”, that’s yet another kind of big move alert signal. Similarly with other measures of extreme buying pressure, where the indicators have recently entered overbought zones, then came out of them briefly, and now have moved right back in.

There are many specific definitions of a “breadth thrust” signal, but the concept is universal to all of them. Strong persistent widespread buying, without much letup."

So overall tonight I find myself in a quandary.  The technicals seem to be suggesting at least the possibility of a reversal to the upside on Wednesday but they're not very convincing.  I think what's really going on is anticipation of the upcoming EU summit meeting.  I believe that, once again, Wednesday's market action will hinge entirely on what comes out of Europe, so all the technicals are for nought.

This one really could go either way.  The Night Owl's usual perch is simply not long enough to go that far out on a limb, so we're just going to have to wait and see what happens Wednesday.  Tonight, I'm simply standing aside.  As Peter Sellers said in Being There, "I like to watch".

ES Fantasy Trader

Today we took a profit of 8.75 points.  Portfolio stats: the account is now $147,500 after 28 trades (20 wins, 8 losses) since inception on 8/18 with $100K.  

 

SLD    10    ES    false    DEC11 Futures     1243.00    USD    GLOBEX    01:38:26
BOT    10    ES    false    DEC11 Futures     1234.25    USD    GLOBEX    11:31:57


Tonight we're standing aside - no trade.

 

Tuesday likely lower

The Night Owl is now read on four continents.

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

• Tuesday lower, low confidence.  Bull-bear ratio is 3:3.
• ES pivot 1242.08.  Holding above is bullish..
• Rest of week bias uncertain, sideways to lower likely.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1243.00.

Recap

I love it when a plan comes together and last night's worked out quite well indeed today with the Dow producing a solid 105 point gain.  Can we keep this rally running?  Let's tilt the Ouija board and find out what Tuesday might hold in store.

The technicals

The Dow: Today's close at 11,914 took us just about clear up to both the upper Bollinger band (11,966) and the 200 day MA (11,967).  Theoretically at least, both of these can be resistance.  The Dow has crossed up over its 200 day MA six times since the start of 2010.  Only in one of those cases was it able to accomplish that in one day.  The others took anywhere from 2 to 8 days to break out.

Also, all of the Dow's indicators are now at quite overbought levels.  RSI and momentum have already peaked, but stochastic is actually executing a bullish crossover from a high level, quite an unusual pattern.  Still with just 50 points of available "free" upside remaining, I'd say the Dow is about due to top out in the next day or two, so I'm giving it +1 bears.

The VIX: Dropped another 6.5% today, as I expected.  However, even today's close at 29.25 neither brings us to support (at 28) nor puts the indicators in oversold territory.  This VIX may now be closer to a bottom than a top, but I don't see a reversal sign yet here so it has to be +1 bulls.

VIX futures: This chart is looking pretty much like the VIX itself.  They are now close to, but not quite at support.So while not exactly bearish, they definitely don't look encouraging.  Therefore, no points here tonight.

Market index futures: Unlike the past few nights, tonight all three are in the red.  ES is now down 0.3% at 1:30 AM EDT.  Although ES is close to, but not quite at its own upper Bollinger band and 200 day MA, all of its indicators are now overbought, and four of them (RSI, momentum, money flow and OBV) have peaked and turned down, a bad sign.  I'm not feeling the love from this chart so it's +1 bears.

ES daily pivot: Now 1242.08.  With ES now at 1243.75, we're just barely holding above the pivot.  That makes it tough.  Remaining above or bouncing off is bullish, falling through is bearish.  It's really still too early to call, so no points here.  Just keep a very close eye on this number before the open on Tuesday.

Dollar index: After piercing its 200 day MA yesterday, the dollar did indeed continue lower today but even this drop did not bring it into oversold territory.  We're not even near the next support level, so it stands a good chance to continue lower Tuesday and that's +1 bulls.

Oil: Oil gushed today right up to its upper Bollinger band and resistance from last month.  It's indicators are now all overbought but without an actual reversal sign, it's too early to call a top.  It might come down tomorrow, but I don't see it just yet.  Accordingly, no points for this chart.

Copper: The abandoned baby of which I spoke last night delivered today in a big way with copper gapping up above its previous October resistance and nearly to its upper Bollinger band.  Even at that, all the indicators are still just coming off oversold.  With no further resistance in sight until 388, it's +1 bulls here.

Morningstar Market Fair Value Index: Morningstar did not update this today, so no points.

History:  According to The Stock Traders Almanac,the first three days of the last week of October all underperform historically, so +1 bears.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last week the bullish number dropped  just a bit to 55% and the bears rose from 11% to 23%.  This week the bulls dropped to 36% while the bears rose again to 39% putting them back into the majority but just barely (nyuk nyuk).  With such a close score there's nothing to base an opinion on, either with the crowd or contrarain, so no points.

For the record, I voted bullish again for the third week in a row, still on the basis of my reading of the monthly Dow chart and the upcoming bullish fourth quarter seasonality.
 
     And the winner is...

No one.  It's a tie with a bull-bear ratio of 3:3. My overall impression tonight is more pessimistic than that though, so the Night Owl is moving way out on the limb and calling Tuesday lower.

ES Fantasy Trader

Today we took a profit of 9.5 points.  Portfolio stats: the account is now $143,125 after 27 trades (19 wins, 8 losses) since inception on 8/18 with $100K.  
 

BOT    10    ES    false    DEC11 Futures     1238.75    USD    GLOBEX    OCT 24 01:19:52
SLD    10    ES    false    DEC11 Futures     1248.25    USD    GLOBEX    OCT 24 12:16:25
Tonight we go short at 1243.00.

Monday higher

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

• Monday higher, high confidence.  Bull-bear ratio is 8:1.
• ES pivot 1226.33.  Holding above is bullish.
• Rest of week bias higher, top possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1238.75.

Recap

Last week's dramatic symmetrical triangle that resolved to the upside on Friday triggered a number of important changes in a lot of charts, as we'll detail below.  This should be an interesting week ahead.

The technicals

Starting this week, thanks to an excellent suggestion from a valued reader who is way smarter than me, we are going to add copper to the daily mix I use to computer the bull-bear ratio.  Thanks, and a tip of the Hatlo hat to Daniel.  For the record, I'll be watching $ISC, the ISC Global Copper Index.

Dow weekly

The Dow: Take another look at that symmetrical triangle I showed in my last post here.  It is truly a thing of beauty.  This 267 point pop on Friday not only neatly resolved the triangle but took us (finally) up over resistance at 11,500 (blue line) going all the way back to the start of August.

And note on this weekly chart how it's looking like a double bottom now.  You can see how both legs of the "W" found support right at the 200 week moving average (dashed orange line).  The inability of the bears to force the Dow under this is bullish in and of itself, so +1 bulls.

The VIX: On Friday the VIX gapped down big time to close down 10%.  That also caused its stochastic to make a bearish crossover.  That's a highly reliable indicator.  The VIX does have some support at 30.50, but that still leaves a bit lower to go even if that holds, so +1 bulls.

VIX futures: A big gap down on Friday took the futures right to the lower edge of their recent rising regression trend channel for a bearish setup.  Nothing here suggests they might go higher Monday, so +1 bulls.

Market index futures: All three are up  at 1:20 AM, with ES rising 0.24%.  Friday's gain took ES above its October resistance.  ES has no further resistance until 1260, which is right where its upper Bollinger band and 200 day MA are currently located, so there's still room to run.  The fact that we're seeing follow-through in the overnight even in the face of mixed and confusing weekend news from Europe is bullish, so I'm inclined to give this one +1 bulls.

ES daily pivot: Even though the pivot jumped tonight to1226.33 we remain comfortably above it.  Unless there's some sort of awful news early Monday morning, I don't think the pivot should be a factor, although we always want to keep an eye on it.  Anyway, this configuration merits +1 bulls.

Dollar index: In another significant chart, the dollar on Friday put in a big red candle that not only broke its recent support but also sliced through its 200 day MA.  This action short-circuited the rise of its indicators and the stochastic is in fact now about to make a bearish crossover.  With still a bit to go to reach its lower Bollinger band, the dollar could definitely still go lower Monday and that's +1 bulls.

Oil: Oil is right in the middle of its recent trading range but its indicators suggest it could go higher Monday and it is indeed advancing at least a bit in the overnight, so +1 bulls.

Copper $ISC, daily

Copper:  Thursday copper put in a doji at the bottom of a descending regression trend channel from 10/14.  Friday it gapped up on a decent green candle and completed a classical three candle abandoned baby pattern.  That's high reliability bullish as is the fact that it closed outside the RTC.

Also its stochastic is just about to execute a bullish crossover (see bottom row, blue line cutting up over red line).  Copper therefore looks set yo go higher Monday and given its correlation with the market, that's +1 bulls.

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

History: According to The Stock Traders Almanac,the first three days of the last week of October all underperform historically, so +1 bears.

     And the winner is...

The bulls with a bull-bear shut-out of  8:1.  With J-Trader holding onto his long signal and my mentor Daniel offering subtle hints of further upside, this is not a night I'm going to override the B-B ratio, so I will call for a higher market close on Monday.

ES Fantasy Trader

On Friday we took a profit of 17.25 points. Portfolio stats: the account  now stands at $138,375. after 26 trades (18 wins, 8 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1214.00    USD    GLOBEX    OCT 21 02:16:11 
SLD    10    ES    false    DEC11 Futures     1231.25    USD    GLOBEX    OCT 21 11:26:16

Tonight we again go long at 1238.75.