Friday lower

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

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

Recap

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

The technicals

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

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

VXX daily

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

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

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

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

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

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

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

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


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

     And the winner is...

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

ES Fantasy Trader

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

Thursday lower unless good Greek news

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

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

Recap

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


The technicals

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

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

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

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

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

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

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

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


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

     And the winner is...

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

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

ES Fantasy Trader

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

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

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

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


 

More gains possible Wednesday

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

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

Recap

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

The technicals

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

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

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

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

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

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


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

     And the winner is...

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

ES Fantasy Trader

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

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

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

Tuesday a bit lower but watch Greek news

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

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

Recap

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

The technicals

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

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

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

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

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

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


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

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

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1

1/9         56        37        +     1278   2/2

1/17        41        33        +     1289   3/3

1/23        46        32        +     1315

1/30        48        31        +     1316

2/6         56        30        +     1345

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 1/17 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 3 for 3.  And of course that means that since I voted with the majority, the poll as a whole was also correct that week.  So far, the contrarian "majority is always wrong" theory still isn't looking too good.


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



     And the winner is...


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

ES Fantasy Trader

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

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

Monday looking lower

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

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

Recap

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

The technicals

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

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

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

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

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

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

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


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

     And the winner is...

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

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

ES Fantasy Trader

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

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

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

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

 

Friday maybe a bit higher

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

• Friday higher, low confidence.
• ES pivot 1321.92.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1322.50.

Recap

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

The technicals

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

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

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

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

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

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

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


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

     And the winner is...

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

ES Fantasy Trader

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

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

SLD    10    ES    false    MAR12 Futures     1323.25    USD    GLOBEX    11:25:49   

BOT    10    ES    false    MAR12 Futures     1323.00    USD    GLOBEX    01:10:35

 

Thursday higher

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

• Thursday higher, medium confidence.
• ES pivot 1309.33.  Holding under is bearish.
• Friday bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1323.00.

Recap

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

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

The technicals

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

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

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

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

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

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

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

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

     And the winner is...

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

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

ES Fantasy Trader

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

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

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

SLD    10    ES    false    MAR12 Futures     1325.50    USD    GLOBEX    13:37:17    

BOT    10    ES    false    MAR12 Futures     1311.75    USD    GLOBEX    JAN 31 01:42:35    

 

Wednesday bias lower

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

• Wednesday lower, medium confidence.
• ES pivot 1309.33.  Holding under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains long at 1311.75..

Recap

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

The technicals

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Tuesday maybe a bit higher

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

• Tuesday higher, low confidence.
• ES pivot 1306.50.  Holding above is bullish..
• Rest of week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1311.75..

Recap

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

The technicals

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

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

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

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

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

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

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

Morningstar Market Fair Value Index: No update given today.

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

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

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1

1/9         56        37        +     1278   2/2

1/17        41        33        +     1289

1/23        46        32        +     1315

1/30        48        31        +     1316

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

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

     And the winner is...

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

ES Fantasy Trader

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

Monday likely lower

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

• Monday lower, medium confidence.
• ES pivot 1312.92.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside..

Recap

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

The technicals

Dow daily

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

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

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

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

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

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


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

     And the winner is...

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

ES Fantasy Trader

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

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

Friday likely lower

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

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

Recap

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

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

The technicals

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

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

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

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

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

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


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

     And the winner is...

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

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

ES Fantasy Trader

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

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1871.17.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

I guess it could have gone either way.  An "uncertain" call seemed logical last night though in retrospect there were certainly signs of a move higher.  But then again everyone has 20./20 hindsight.  So nothing ventured, nothing lost and we simply move on to Wednesday.

The technicals

The Dow: Frustratingly enough, we seem to be in the same spot here as last night - right on the very edge of a rising RTC.  Only now the indicators are even more overbought and the stochastic is pinching in for a bearish crossover Real Soon Now.  With a vague inverted hammer candle at this point I have to think a move lower is coming soon.

The VIX:  Last night I wrote "I'd say the VIX is going to take a peek at [13] on Tuesday."  Well a low of 12.90 and a close of 13.19 sure qualifies as a peek in my book.  The resulting doji leaves the indicators oversold and the stochastic flattening out for a bullish crossover.  We also bounced off support at 12.91.  It still requires confirmation, but I think there's a move higher in the offing here.

Market index futures: Tonight the futures are mixed at 1:19 EDT, with ES down just one tick buy YM up 0.02%. Call it basically flat.  After a nice run on Tuesday, tonight ES is sitting right on the ragged edge of its rising RTC for a bearish setup, a theory that is supported by a very overbought RSI of 99.2.  The stochastic is moving into position for a bearish crossover and OBV already looks to have rolled over.  The upper BB is at 1893 but it's looking to me like we're about out of gas right here.  And yet as we've seen in the past year, the market can get very overbought and still go up.

ES daily pivot: Tonight the ES daily pivot rises again from 1862.17 to 1871.17. And once again we remain above the new pivot so this indicator continues to be bullish.

Dollar index: Last night I thought we were going higher - well the candle was green but the net effect on Tuesday was a modest 0.04% loss.  It now looks like the overbought indicators and the stochastic about to form a bearish crossover are asserting themselves.  So I'm changing my prediction to bearish here.

Euro: At least I got the euro right when I said a reversal was coming as the euro put in a green candle to close at 1.3801 on Tuesday. With a spinning top in place, oversold indicators and a stochastic about to form a bullish crossover, I'm now claiming the euro goes higher on Wednesday.

Transportation: The trans have been on fire-o, with a now six day winning streak that outperformed the Dow on Tuesday and busted right through resistance at 7700 like it wasn't even there.  We remain in a rising RTC but having just touched the upper BB and with a stochastic that is >< that close to forming a bearish crossover, I think we're overdue for a move lower here.


Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   5       2      2           1       0.750    107
March     12       3      6           0       0.800    431
April      7       2      4           0       0.778    342


     And the winner is...

After a long winning streak like this I get nervous trying to call a top, and yet I'm starting to see some bearish signs in the charts.  I certainly wouldn't be going long right here.  But we also don't have enough evidence to just go out and out short.  I do think we're right on the cusp of a reversal lower but I'm going to content myself with another call for Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $105,625 after two trades in 2014, staring with $100,000.  We are now 2 for 2 total, 2 for 2 long, 0 for 0 short.  Tonight we stand aside again with another uncertain call.

Wednesday uncertain, watch Fed

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Tuesday looking lower

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

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

Recap

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

The technicals

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

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

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

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

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

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


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

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1

1/9         56        37        +     1278

1/17        41        33        +     1289

1/23        46        32        +     1315

The SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  Since that moment is now at hand, I note that my bullish call on 1/3 was correct, the S&P now being higher than then.  So now I'm adding an extra column "Accuracy" to track my calls.  For now, I'm 1 for 1.  And of course that means that since I voted with the majority, the poll as a whole was correct that week.

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


     And the winner is...

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

ES Fantasy Trader

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

Monday may move lower

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader





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

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

Friday likely lower

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

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

 

Thursday maybe a bit higher

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

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

Of note


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

Recap

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

The technicals

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

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

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

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

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

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

     And the winner is...

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

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

ES Fantasy Trader

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

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

 

Wednesday looking lower

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

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

Recap

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

The technicals

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

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


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

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

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

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

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

Week   % Bullish  % Bearish  NightOwl SPX

1/3         46        21        +     1258

1/9         56        37        +     1278

1/17        41        33        +     1289

The SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we'll be able to see how well we did.  For the record, I voted bullish yet again this week, mainly on the basis of my reading of the monthly SPX chart as well as on seasonality.

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

     And the winner is...

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

ES Fantasy Trader

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



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