Tough call - Friday might go higher

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

• Friday higher, low confidence.
• ES pivot 1359.00.  Holding above is bullish..
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Once again the market did not really move the way I expected today, though I did point out that I had some doubts about calling today lower. Instead, the Dow continues to bump up against the 13K line, being unable to cross it so far.  Much has been made recently about the last time we visited this level, back in May of 2008.  But there's one big technical difference.

Back then, the 200 day MA was also right at 13K, providing a sort of double barrier.  The Dow made two attempts to cross 13K in May '08 and then just gave up.  Of course, there were also some major fundamental economic differences back then, but technically, today's chart is in a different place.  First we're considerably above the 200 day MA now and second, instead of taking one quick stab at 13K, we're in a period of consolidation right below it.


I'm also hearing a lot of talk about how a big pullback is imminent, and I'm as guilty as anyone, having painted a gloomy picture just last night.  Now, I'm not so sure.  Read on...
The technicals

The Dow: Our friend the Dow seems to be back in the same mode it was in earlier this month, only now at a slightly higher level - alternating up-down days featuring a variety of reversal candles that don't reverse.  Indeed, we seem to be continuing the stair step advance pattern in place since last December.  Every time we level out for a few days, it gets people thinking the rally is over and we're about to get a pullback - and then the market takes a quick move higher, where the process repeats.

I note too that the stochastic bearish crossover I saw last night unknotted itself today and now is looking more thready and therefore useless as a predictor of anything.

The VIX:  The VIX blew right through its recent support at 17.75 to finish down 7.6% today on a long solid red candle.  It closed on its last support point at 16.80 and is now back in its descending RTC.  The upside move of last week was more of a fake-out than a breakout.  Today's close was the lowest since early last July.  The VIX now has no support until 16.49, the lower BB, and then 15.30.  I see nothing in either the daily VIX or futures to suggest a reversal on Friday, though next week might be a different story.

Market index futures: At 1:35 AM EST, all three futures are up with ES leading the way, gaining 0.17%.  While we did not hit 1369 today, as I figured last night, today's green candle could be taken as both a hammer and a bullish engulfing pattern.  A chart that was looking pretty poor last night isn't looking so bad tonight.  And the lack of negative follow-through in the overnight diminishes the bearish case.

ES daily pivot: Bumped up a bit from 1357.67 to 1359.00 tonight.  After rising all evening, we remain six points above the new number, which is a good sign.

Dollar index: The dollar continues in a somewhat erratic downtrend.  It's now close to support and its lower BB, but not quite there yet.  Although it put in a star today, we could see at least a bit more downside here on Friday.

Morningstar Market Fair Value Index: Yesterday the index extended its streak at 0.96 to four straight days.  The last time we had a streak at this level ended on February 9th at 5 days.  The 10th was down.


Meanwhile, speaking of streaks, the SPX Hi-Low index was stuck on 100 for eight straight days now.  That's quite unusual without a pullback.


History: According to The Stock Traders Almanac, this Friday is historically the weakest day of the week, decidedly bearish.

     And the winner is...

Yet another tough call.  Last night I was feeling pretty negative and it didn't happen today.  This market continues, for the time being at least, to be able to shake off bad technicals.  I still think a pullback is coming but right now it's not looking like it will happen on Friday, especially not with the VIX in decline and now below 17.  So instead, I will call for a slightly higher close on Friday, but once again, I don't have a lot of confidence here - the signals are just not that clear right now.

ES Fantasy Trader

 I said last night that I had a bad feeling about this trade.  That prompted me to close it out right at the open for a one point profit, figuring I'd better get while the getting was good.  I'm glad I did, since the market began rising shortly thereafter.

Tonight I'm simply chickenig out.  While I think we may go a bit higher tomorrow, I'm not confident enough to put on a big ES trade and I'm still not liking the risk/reward ratio at these levels.  Nothing ventured, nothing lost.

The account is now $113,250 after 15 trades (12 wins, 3 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1353.50    USD    GLOBEX    09:30:38

SLD    10    ES    false    MAR12 Futures     1354.50    USD    GLOBEX    FEB 22 20:57:07   

 

Thursday unclear, maybe lower

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

• Thursday lower, low confidence.
• ES pivot 1357.67.  Holding below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1353.50.

Recap

Aside from the small range, today did not really pan out as I had expected.  I'm starting to get a feeling of existential malaise in the markets, and that was only reinforced by some rather sharp observations from alert reader Daniel in a comment to yesterday's post, which I strongly encourage all my readers to check out.  Let's see if the technicals support these ideas.

The technicals

The Dow: In dropping 27 points today, the Dow formed something close to a bearish engulfing pattern.  Today's red candle can also be viewed as bearish confirmation of yesterday's star.  On the indicator side, while RSI is just short of overbought, OBV hit its highest level of the year yesterday and moved lower today..  Money flow also declined today.  And the stochastic is right on the cusp of a bearish crossover.  This is a chart that's looking ready to go lower.

On top of this, the SPX Hi-Low indicator has now been pegged at 100 for seven straight sessions.  That's really looking overdue for a pullback.

Daniel made some comments about $TRAN, the Dow transport index.  This has actually been in decline since February 6th.  However, the Dow itself has not followed suit.  Not yet anyway.  Compare this situation to the second half of last November when the Dow and $TRAN both declined in lockstep.  Something's up here.

The VIX:  After a gap-up open, the VIX then meandered lower to close exactly unchanged, at 18.19 on the dot.  The failure of the VIX to advance could be taken as a non-confirmation of yesterday's star, meaning it could go lower on Thursday, which would be good for stocks.  At the same time, the VIX has found some good support at 17.75, so it's possible it could bounce off that level and then move higher.  Who knows.  The stochastic is now in a position from where a reversal (ie. a move higher) usually occurs in about two days.

Market index futures: Very little guidance from the futures tonight.  At 1:56 AM EST we've got ES flat, NQ up 0.12% and YM up just 0.05%.  However, today's red candle did take us out of the rising RTC for a bearish setup.  ES would have to trade up to 1369 Thursday to get back in.  A failure to hit that number (and I don't think we're going to see 1369) would be a bearish trigger.  In addition, the indicators have now all peaked at overbought levels and are headed lower.  The stochastic completed a bearish crossover today.  None of this is particualrly good news for stocks.

ES daily pivot: Tonight the pivot dropped from 1361.75 to 1357.67.  However, even with that, ES continues to run under the new value, though little changed all evening.  In any event, holding under the pivot is bearish and I see no sign, at least not as of this writing of an attack on it.

Dollar index: The dollar is another chart that did not move the way I expected today, finishing up 0.21% rather than continuing down.  But it did it on a red candle.  We now have two red stars in a row.  With this sort of indecision, I can't really draw any conclusions.  It's really more reflection of the continuing mess in Europe.

Copper: One item Daniel mentioned a while back but not today is copper.  Copper broke out of a declining RTC two days ago, the same day it also climbed back above its 200 day MA.  These both seem to suggest higher copper, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.96 for the third day in a row.  The failure of the index to continue advancing is of concern.

History: According to The Stock Traders Almanac, Thursday is historically actually slightly bullish, the best day of this week

     And the winner is...

There's a fine line between looking at too little data and too much data.  The former leaves you open to poor decision making and the latter just drives you mad.  Right now, I'm looking over my shoulder for the men in the white coats.  Something's up.  To quote noted stock market guru Buffalo Springfield, "There's something happening here, what it is ain't exactly clear".

I'm now seeing signs of a reversal lower everywhere, and yet in the time it took me to write this, ES suddenly jumped from 1355 at 1:40 AM to 1357 at 2:06 AM.  Five straight solid green five minute candles.  And I don't see anything on the news wires to explain it.  This is causing the new ES candle to look like a classic hammer

But since I really hate writing all this stuff and in the end coming to no conclusion, I will move waaay out to the very end of the limb and claim that, given the preponderence of evidence from the charts, Thursday's looking lower, not withstanding this disturbing sudden pop in ES (or the fact that J-Trader is going long).

ES Fantasy Trader

After standing aside yesterday, tonight I went short at 1353.50 at 8:57 PM,  a decision I'm starting to regret.  But you never know,  it may work out in the end.

The account remains  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
 

More small gains possible Wednesday

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

• Wednesday slightly lower, low confidence.
• ES pivot 1361.75 .  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well I said it would be an interesting week and so far it's sure looking that way.  The Dow sent out no fewer than four separate patrols to scout out the 13,000 front around mid-day, but apparently none of them liked what they saw and they were unable to find a break in the enemy's lines.  Will they launch a full-scale assault tomorrow, or order a tactical retreat?  Let's call HQ and see if we can get some orders.

The technicals

The Dow: Today's 16 point gain not only hit the 13K line intraday but also the upper BB at 13,005 to form a star.  However, I don't think this indicates indecision as much as a massing of the troops in preparation for the next attack.  The daily indicators are still not overbought, so given the continuing upward bias I'd be hesitant to call this star a negative sign.

The VIX:  Meanwhile the VIX put in a star of its own, actually rising 2.3% from yesterday's close but down from today's open.  This one could go either way, but the VIX futures seem to be leaning more towards at least a bit lower on Wednesday which would be good for stocks.

Market index futures: Tonight all three are in the green with ES up 0.17% at 1:30 AM EST.  Despite this, today's ES chart is showing some signs of an impending reversal, in the form of a dark cloud cover, overbought indicators, and a stochastic just executing a bearish crossover.  In addition, ES just exactly touched its upper BB today.  Tonight's positive action is coming off the lower end of the daily candle.  I'm seeing more risk than reward on this chart right now.

ES daily pivot: Rose again from 1358.00 to 1361.75 tonight.  This briefly put ES below the pivot right at midnight, but then it broke through and seems to be slowly drifting higher, a positive sign.

Dollar index: The dollar continued a three day decline today and its indicators suggest more room to run lower Wednesday, implying higher stocks.

Morningstar Market Fair Value Index: Morningstar's chart is all screwed up today.  The number they're showing is 0.83 which is obviously wrong, and the chart doesn't go past the 17th.  How hard can it be to update this?

History: According to The Stock Traders Almanac, Wednesday is historically slightly better than Tuesday, but still bearish..

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 the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1   1/3        46         21        +    1258    1/1

  2   1/9        56         37        +    1278    2/2

  3   1/17       41         33        +    1289    3/3

  4   1/23       46         32        +    1315    4/4

  5   1/30       48         31        +    1316    5/5

  6   2/6        56         30        +    1345

  7   2/13       48         31        +    1343

  8   2/21       44         32        +    1361

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 1/30 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 5 for 5.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  After five straight weeks of being correct, the contrarian "majority is always wrong" theory is really looking bad.  The Ticker Sense bloggers are batting 1000.

Interestingly, this week's numbers were little changed from last week.  The bulls came down four points and the bears barely budged from the 30-33% band they've been in since the third week of January now.  But I do note that bullish sentiment is on the wane, having declined now for the third straight week.  This makes me think that we could be in for a pullback sometime in the next few weeks.  I note too that the SPX Hi-Low index has now been pegged at 100 for six straight sessions.  It rarely goes this long without a down day following.

     And the winner is...

Another hard one.  I'm seeing both positive and negative signs in the charts.  The SPX weekly chart is now looking quite overbought, and right about the same levels as the highs of last year in May.  We do remain inside the rising weekly RTC though for the time being.  Meanwhile the daily Dow and SPX charts still look like they have some upside left.  Add in that the futures are up, the VIX remains below 20, and there seems to be relative calm on the European front at least temporarily, I'm going to go out on a limb and guess that we just might see some more small gains on Wednesday.  But I'm definitely getting more cautious and not looking to put any money to work at these levels for the time being.  I'm starting to not like the daily ES chart.

ES Fantasy Trader

My decision not to jump in last night was correct.  The big weekend pop we had in ES on the Greek news was all over by the time I got around to it, and even though ES ended the day higher, it was still below the level I was looking at in the overnight trying to find an entry point.

Tonight we do not trade again, as I still don't see an edge for me.  No point just guessing. We're working the market, not playing it.

The account remains  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
 

Tuesday higher

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

• Tuesday higher, medium confidence.
• ES pivot 1366.08 .  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside - entry missed..

Recap

Last Thursday I wasn't quite sure what to make of Friday, expecting a small range doji.  Well we got a small range, with the Dow gaining just 46 points, but it was in the form of a solid green candle.  With a holiday-shortened week ahead, let's see if the technicals can give us a clue as to where we might be going on Tuesday.  With Greek news coming up, it should be an interesting ride.

The technicals

The Dow: Technically, Friday's advance gave no indications of a possible reversal.  In fact, the stochastic completed its bullish crossover on increased volume.  With the upper BB at 12,982 and the psychological 13K level still a bit above us, there's still a bit more room to run before encountering any resistance.

The VIX:  After spending a few days above its descending RTC last week, the VIX dropped right back into it on Friday., losing 7.49% on a second solid red candle.  Its indicators are all in solid declining mode right now too and the lower BB is at 16.81, intimating that we still have close to another point lower to go before a reversal.  We're getting there, but not quite just yet.

Market index futures: The only real guidance we have for Tuesday comes from the futures, which did trade for a while yesterday and today.  And the futures seem to be liking the news out of Europe.  With the announcement of the Greek deal earlier this evening, the futures are all running higher at 1 AM EST with ES up half a percent.

But that still leaves us right around the level from Sunday's open, suggesting that this news was already baked in yesterday.  The US holiday is messing with the charts a bit, but this action is obviously good news.  The only bad news is that I'm now looking at two gap-up stars on the daily ES, and that's a potential reversal.  But being as they came on weekend trading, you have to take them with a grain of salt.


ES daily pivot:Jumped from 1358.00 to 1366.08 tonight.  Despite some up and down over the last two days, we were above the old number and just broke through the new number, another positive sign.

Dollar index: The dollar is pretty much hostage to the euro right now.  And with the big pop the euro took on the Greek news, you can be sure the dollar's going lower on Tuesday, which ought to be good for stocksd.

Morningstar Market Fair Value Index: On Friday the index remained at 0.96 , the same high point it's reached all month.  I'll be looking for it to rise some more to be considered bullish on Tuesday.


History: According to The Stock Traders Almanac, the day after Presidents Day is historically rather bearish.

     And the winner is...

With the European markets applauding the Greek developments and the euro headed higher, I can't really see our market going lower on Tuesday.  The Dow now clearly seems to be gearing up for an assault on 13,000.  I wouldn't be surprised to see that number tomorrow, though perhaps not closing there just yet.  All in all though,m I'm reasonably confident we'll see a higher close Tuesday.

ES Fantasy Trader

 Unfortunately, I missed the major move in ES that happened right at the open on Sunday, so I'm just going to stand aside tonight.  I think most of the money has already been made on this trade.  But that's OK - the market is like a bus - there's always another one coming along you can jump on.

The account remains  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
 

Friday doji possible

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

• Friday uncertain, doji possible.
• ES pivot 1348.75.  Holding under is bearish..
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Sigh - sometimes you just can't win for losing.  Two days ago I said the market would go up, so it went down.  Last night I said the market would go down today... so it went up.  Arrgh!  This is starting to remind me of a mini version of last summer.  Remember when we had four days in a row of triple digit yo-yo action?  We're basically stuck in a consolidation pattern where it's tough to call each individual day.  But for some unknown reason, I keep trying.  Fortunately, the market is like baseball - you can strike out the majority of the time and still be considered pretty good.  Tonight, I'll take another swing at it.

The technicals

The Dow: What a difference a day makes.  Last night the daily Dow was looking pretty gloomy.  Today's 123 point pop changes the picture and brings us right back to the top of the recent 12,800-12,900 trading range.  From a candlestick point of view, we've got a bullish engulfing pattern, which is usually works pretty well.  And the indicators have all hooked back upwards before ever reaching oversold levels.  The stochastic in particular is very close to making a bullish crossover.  On the downside, every time we've been at the 12,900 area since the 7th, the next day has gone lower.  There's no resistance until the upper BB at 12,957.  The only question is how to get there.

The VIX:  Remember last night when I said "You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB."?  Well today the VIX dumped 9%, putting in a big red candle that formed a classic bearish engulfing pattern, one of the strongest bearish reversal patterns around.  I found several instances of a bearish engulfing pattern off the upper BB over the past two years and in every one, the VIX was lower the next day.  The VIX correctly predicted today's market gains, and from the looks of it, it will go lower on Friday.

Market index futures: At 1:15 AM all three futures are essentially flat.  ES is down just a half point.  But unlike in the Dow, today's big green candle decisively took ES out of its recent trading channel.  And its stochastic just barely formed a bullish crossover.  And taking the longer view on the weekly chart, the uptrend is still very much intact.

ES daily pivot: Tonight rose from 1346.08 to 1348.75.  With ES meandering aimlessly in the overnight, this is still bullish but a bit less so.

Dollar index:The dollar chart looks like the VIX - another bearish engulfing pattern, strongly suggesting more dollar downside on Friday, which would be good for stocks.

Morningstar Market Fair Value Index: After spending three days stuck on 0.94 (which I noted was a positive sign), yesterday the index ticked up to 0.95, also encouraging.


History: According to The Stock Traders Almanac, Friday is historically quite bearish, with the Dow down 16 of the last 20, possibly because traders don't want to be invested over the long weekend..

     And the winner is...
Although the charts all seem to suggest more upside possible Friday, I'm just not feeling it.  My problem now is that I think we ran too hard on Thursday and therefore need a day or two to regroup.  And there also seems to be little enthusiasm in the overnight futures.  Therefore I'm going to call for a small-range doji day on Friday - no big moves either up or down ahead of the holiday weekend, though history suggests a downward bias.

ES Fantasy Trader

Today I decided to get while the getting was good and dumped my long from two days ago for a quarter point profit.  At least that was better than selling yesterday at a considerable loss. So now  the account goes to  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.

Tonight without a definitive edge, we simply stand aside.

SLD    10    ES    false    MAR12 Futures     1356.50    USD    GLOBEX    14:34:21   

BOT    10    ES    false    MAR12 Futures     1,356.250    USD    GLOBEX    FEB 15 00:47:54    

 

Thursday looking lower

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

• Thursday lower, medium confidence.
• ES pivot 1346.08 .  Holding under is bearis..
• Friday bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader holding long at 1356.25.

Recap

Hah, serves me right for putting so much faith in the Chicoms and the futures last night.  I was so sure we'd be going higher today.  The Dow actually did post a nice gain today - for all of five minutes.  Then it was all downhill from there, finishing down 97 points.  Tonight the Night Owl is eating humble crow.  Oh well, no point worrying about what's done and over.  Let's move on to Thursday.

The technicals

The Dow: There's two ways of looking at today's loss.  Way one is that we're now at the bottom of a four day trading channel that is more likely to move higher than lower on Thursday.  Way two is that those four days show a gradual downward drift that's due to continue Thursday.  Right now, the indicators seem to support continued downside.

I note here also that the SPX Hi-Low index has now spent three days pegged at 100.  These runs tend to end with a market decline.  Last week, the index was at 100 for four days, the 6th through the 9th.  On the 10th, we had a big drop.

The VIX:  Today's 8.19% jump in the VIX put a crinkle in yesterday's bearish stochastic crossover.  However, it did take us back up to the upper BB.  You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB.  This implies higher stocks to come.

Market index futures: All three are running significantly negative tonight, with ES down a half percent at 1:35 AM EST.  That in itself is a bad sign.  In addition, this downturn appears to signal a negative resolution to the recent indecision in ES.  The bearish exit of the rising RTC now seems to be playing out.  The only good news here is that this pullback is now bringing us close to oversold levels from which an advance might resume.

ES daily pivot: Remained almost unchanged, advancing to 1346.08 tonight.  However, we've been below the pivot most of the day and remain 10 points under in the overnight, not a good sign.

Dollar index: The dollar gained some more ground today but is still neither overbought nor near its upper BB.  I see nothing here suggesting that there isn't more upside left for Thursday, a bad sign for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.94 for the third day in a row.  This is an indication of a lack of weakness in the markets.


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

     And the winner is...

With mixed technicals, the VIX back above 20 and renewed uncertainty over Europe, it's very difficult to make an informed call tonight.  But I'm detecting some general malaise in the market right now and my general hunch is that we're in for a lower close Thursday.  To hedge my long positions, I picked up some DXD again this afternoon at 13.87.

ES Fantasy Trader

Tonight we're holding on to last night's ill-advised long.  I'm giving this the benefit of the doubt for one more night.  If it doesn't pan out on Thursday then it's done.  In the meantime, t.he account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.

Wednesday higher

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

• Wednesday higher, high confidence.
• ES pivot 1345.83 .  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1356.25.

Recap

Let's look at the last seven sessions: hanging man, star, hanging man, doji, a dump, a retracement of the dump, dragonfly doji - a veritable rogue's gallery of reversal indicators pointing to a pullback.  But the market still refuses to roll over.  How long can this go on?  Let's see...

The technicals

The Dow: My call for a negative bias on the day was working pretty well until some good news on Greece and BTE economic numbers help propel the Dow back to finish just in the green, up 4 points in a late day rally.  It's almost like a spring - every day for seven sessions now, whenever the bears try to push it down, boing, it just pops back up.  The net effect of today's action was simply to bring the indicators down a notch out of overbought territory.  We're now out of the rising RTC, but I have a feeling that we may not be seeing the decline you'd expect on that, at least not just yet.

Daily VIX

The VIX:  Last night I thought the VIX might be going lower, but the VIX had other ideas, gaining instead 2.63%.  But look at the daily chart - you don't even have to be a technician to see that this chart has no idea where it wants to go, taking stabs lower one day and then higher the very next.  The only thing here that makes any sense is the bearish crossover on the stochastic (bottom panel), now complete.  This is usually a good predictor of a lower VIX, implying higher stocks.

Market index futures: After running essentially flat after the close, the futures suddenly took a big pop on news that China is going to expand investment in Europe.  All three futures are now up significantly at 1:07 AM with ES leading the way, up 0.61%.  And that's enough to bust us through the resistance level at 1350 that I mentioned yesterday.  This now sets the stage for an assault on the 1365 area, last year's SPX highs.

ES daily pivot: Fell just a bit from 1348.00 to 1345.83 tonight.  The big China rally at 9:20 PM propelled ES through the pivot and the new value puts us even higher above it, a positive sign for Wednesday. 

Dollar index: I guess the evening star must have been hiddne by clouds, because today the dollar gapped up 0.82% instead of falling.  However, the euro's gain in the overnight will surely push th dollar lower Wednesday, which will also help the market.

Morningstar Market Fair Value Index: After hitting 0.96 last week, the index dropped to 0.94 on Friday where it remained yesterday.  The failure of the index to go any lower is positive for the market.


History: According to The Stock Traders Almanac, Wednesday is historically quite bullish.

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 the cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1   1/3        46         21        +    1258    1/1

  2   1/9        56         37        +    1278    2/2

  3   1/17       41         33        +    1289    3/3

  4   1/23       46         32        +    1315    4/4

  5   1/30       48         31        +    1316

  6   2/6        56         30        +    1345

  7   2/13       48         31        +    1343

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 1/23 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 4 for 4.  And of course that means that since I voted with the majority back then, 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 at all.  Apparently the Ticker Sense bloggers seem to have a lot of, uh, sense.

And I note that while the bullish sentiment is dropped 8 points back to 48%, bearish sentiment continues to remain essentially unchanged after five straight weeks.  So once again we're still not seeing the sort of decline in bearish sentiment that would lead to a contrarian bearish call.  And also once again I voted positive this week.

     And the winner is...

The Night Owl gives four hoots to China for making my job easy tonight.  Until tonight's news, we were pretty much looking at more of the same sort of wishy-washy uncertain doji action that has plagued us for days now in the absence of any good reasons to go either up or down.  Tonight the Chicoms gave us a reason to go up.  So I'm going on record that Wednesday closes higher.

ES Fantasy Trader

Last night we stood aside so the account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.  Tonight we go long at 1356.25.  I'm afraid I didn't get a good entry but what can you do.  I can't sit in frotn of my screen 24/7 waiting for a sudden big move.  I'm guessing there will still be enough upside once we get underway Wednesday to push ES up some more.
 

Tuesday uncertain, bias lower

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

• Tuesday lower, low confidence.
• ES pivot 1348.00.  Holding below is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

We got the upside move I was expecting for Monday in the form of 72 Dow points, thanks to the Greek austerity vote.  We seem to be back into this European news-driven mode that plagued us so much last year.  And tonight we've got a round of ratings downgrades from Moody's to contend with.  Where will this take this Moody market?  Hmmmm....

The technicals

The Dow: While today's near total retracement of yesterday's loss was welcome, it didn't do much to advance the bulls' cause.  We've got the same bearish RTC trigger here as in ES (see below) and the stochastic has now completed a bearish crossover.  Not so good.

The VIX:  Last night I called the VIX lower and sure enough it lost 8.42% today completing a bearish shooting star pattern.  Its indicators have also peaked from overbought and its stochastic is about to make a bearish crossover.  This all points to a lower VIX, implying higher stocks.

Market index futures: Just as we were up last night on Greek austerity news, tonight we're similarly down on Moody's downgrades, with all three futures trading lower.  ES is down a non-trivial 0.30% at 1:15 AM EST.  ES has been trying to break resistance around 1349-1350 unsuccessfully for four days now, giving us reversal indicators every day but nothing in the way of a real reversal.

However, we have guidance tonight from the RTC.  ES traded across the rising RTC on Thursday - the bearish setup.  Today we traded entirely outside and that was the bearish trigger.  Overnight action provides the confirmation.  I'm not liking this chart.

ES daily pivot: Tonight the pivot jumps from 1340.83 to 1348.00.  Because of this and also since ES has been wandering lower in the overnight, we are now 3 points below this pivot, a negative sign for stocks.

Dollar index: The dollar today completed something akin to an evening doji star, a good bearish reversal pattern.  This would imply a lower dollar and therefore higher stocks Tuesday.

Morningstar Market Fair Value Index: till no update on the MS website.  Don't know what's up with them.

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

     And the winner is...

Despite the bullish indications from the VIX and the dollar, the recent range-bound pattern coupled with today's ratings downgrades and the bearish Dow chart leads me to think that we may go lower Tuesday.  Right now it appears that while the uptrend is broken, no new trend up or down has yet been established.  So I'm pretty much in wait-and-see mode until Mr. Market decides which way he wants to go.  I'm not seeing much guidance either way right now so I'd be wary of going long or short until things sort out.

ES Fantasy Trader

We closed out today's long trade for just a one point profit.  I didn't see much more upside happening and didn't want to risk any potential downside.  Tonight we stand aside, in view of a lack of clear guidance from Mr. Market.  I'm not seeing much of an edge either way for Tuesday.

Portfolio stats: the account increases to $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1348.50    USD    GLOBEX    FEB 13 13:16:56    

BOT    10    ES    false    MAR12 Futures     1347.50    USD    GLOBEX    FEB 13 00:38:37   

 

Monday looking higher

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

• Monday higher, medium confidence.
• ES pivot 1340.83.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1347.50.

Recap

Last Thursday night was one of rare times when I was getting really clear signals on all fronts that we'd be going lower on Friday and that's just what happened with the Dow dropping 89 points.  What was interesting though was that we rallied nearly 60 points from the low of the day and closed strong, despite continued uncertainty over Greece. So now what?  Let's take a look.

The technicals

The Dow: The two major points of interest on the Dow daily chart are 1. we fell out of the rising RTC, a bearish setup (but not a trigger yet) and 2. the indicators have all topped at overbought levels, always a bearish sign.

The VIX:  The VIX futures on Thursday night accurately predicted Friday's 11.6% gain in the VIX.  Not just a gain but a big gap up.  But the candle is interesting.  First, it touched the upper BB and then retreated.  As I've noted before, the VIX rarely spends more than a day or two around the upper BB before reversing.  It also formed two thirds of an evening star pattern.  And third, its indicators are now higher than levels from which reversals occurred the last four times we were here.  These are all arguments in favor of a lower VIX on Monday which would be good for stocks.

Oh yes, and on Friday the futures put in a shooting star, also a bearish reversal pattern.

Market index futures: Tonight the futures are all up significantly, with ES, NQ, and YM trading up 0.455, 0.47%, and 0.42% respectively at 1:15 AM EST, no doubt on the successful austerity vote in Greece this evening.  While ES on Friday put in its biggest red candle of the year taking us out of the rising RTC from February 1st, the lack of follow-through in the overnight makes me cautious about calling for more short-term downside.  Indeed the stochastic looks almost ready to make a bullish crossover from a high level.  We've seen this sort of thing a few times already this year.  In each case, the next day didn't produce big gains, but it didn't go lower either.

ES daily pivot: After rising for eight straight sessions, the ES pivot fell from 1347.25 to 1340.83 tonight.  ES opened exactly up to the former pivot this evening.  With it holding right around that level so far, that now puts us above the new pivot by about 6 points.  Continuing to hold above will be positive for stocks on Monday.

Dollar index: The dollar continues to be driven by the euro which rose over half a percent following the Greek vote Sunday night.  Higher euro -> lower dollar -> higher stocks.

Morningstar Market Fair Value Index: No update from Morningstar.

History: The Stock Traders Almanac points out that while Monday is historically bullish, the Dow has been down on this day 5 of the last 7.

     And the winner is...

I'm playing a hunch here.  Logic would dictate that Friday's downward move was the beginning of a pullback, and Lord only knows everybody's been waiting for one for some time now.  But the political and technical developments over the weekend make me think that maybe what we saw Friday was the pullback.  At least for now.  There may be more downside to come later this week, but for Monday anyway, I'm going to say we go higher.

ES Fantasy Trader

Last Friday's short turned a profit of 7.5 points.  I decided not to hold that one over the weekend against the possibility of good news out of Greece, and now I'm glad I dumped it.  Tonight we go long at 1347.50.   Portfolio stats: the account increases to $112,125 after 12 trades (9 wins, 3 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1337.75    USD    GLOBEX    FEB 10 11:44:17   

SLD    10    ES    false    MAR12 Futures     1345.25    USD    GLOBEX    FEB 9 20:19:11   

 

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.