More upside for Wednesday

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

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

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

Tonight we go long again at 1110.25.

Tuesday higher on oversold rally

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

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

Recap

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

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

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

The technicals

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

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

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

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

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

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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

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

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

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

Monday going lower

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

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

Recap

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

The technicals

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

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

Dow monthly

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

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

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

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

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

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

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

USD, weekly

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

Tonight, the ESFT goes short at  1118.75.

Friday uncertain, slight bias up

 Greetings to our readers in the UK!

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

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

Recap

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

The technicals

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


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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Thursday bias weakly higher but German vote decides

Приветствую наших читателей в России!

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

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

Recap

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

The Kodak hits the fan

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

The technicals

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

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

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

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

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

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

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

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

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

     And the winner is...

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

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

ES Fantasy Trader

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

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

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

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

Wednesday looking lower

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

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

Recap

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

The technicals

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

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

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

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

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

USD Index, daily

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

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

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

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

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

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

     And the winner is...

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

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

ES Fantasy Trader

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

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

Tonight, we go short at 1164.50.

CNBC Million Dollar Portfolio Challenge stats:

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

Tuesday higher

 G'day to our readers in Australia.

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

• Tuesday higher, high confidence.  Bull-bear ratio is 9:0.
• ES pivot 1144.17.  Current price is above that.
• Rest of week bias uncertain, decline possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader opened new long position at 1160.50.

Recap

Last night I was getting worried about the market futures declining in the overnight on more apparently bad news out of Europe.  Turns out I needn't have as the Dow went on to motor higher by a rewarding 272 points.

And yesterday I wrote a piece on the woes of Eastman Kodak right here.  Today, Kodak was absolutely decimated, suffering a crushing 27% death-drop.  Coincidence?  I don't think so.  Anyone still bullish on Kodak, I have a slightly used bridge in Brooklyn you may also be interested in.

Memo to Antonio Perez: the market no longer believes you.  With your company seemingly bent on committing ritual suicide, now would be a good time to pull the ripcord on your golden parachute.  Disclaimer: I have no stake in EK, long or short and would not touch this stock with a telephoto lens. 

OK, time to round up twice the usual number of suspects, run 'em up the flag pole and see who salutes.

The technicals 

The Dow: Today's gain was just right: big enough to develop some traction but not so big as to invite a major correction the next day, leaving us in the sweet spot.  With a solid green candle that brings us back above 11K, indicators having bottomed in oversold levels, and the stochastic executing a bullish crossover, what's not to like.  This one is clearly +1 bulls.

The VIX: After a gap-up evening star and a spinning top, the VIX finally fell today as I predicted here last night, dropping 5.4%.  Never underestimate those ancient Japanese rice traders, the inventors of the candlestick.  They were pretty wily characters.  With the VIX only now starting to fill the gap and its indicators just peaking at overbought levels and its stochastic executing a bearish crossover, it sure looks like the VIX is going lower Tuesday.  Lower VIX -> higher stocks -> +1 bulls.

VIX futures: Once again, the VIX future chart looks a lot like the VIX itself, providing further support for the theory of a lower VIX tomorrow.  Another +1 bulls.

Market index futures: After a big green candle today the ES indicators are still just coming off oversold.  With all three futures holding onto modest gains this evening (ES up 0.17%), there is nothing negative to see here.  +1 bulls.


ES daily pivot: Now 1144.17.  With ES now at 1160.50 (at 1 AM EDT) I believe we are far enough out of the pivot's gravitational field for it not to be a factor Tuesday.  +1 bulls.

Dollar index: The dollar today put in a second hammer almost identical to yesterday's, right at the top of its big run-up from last Thursday.  With its indicators all quite oversold and two hammers being better than one, the dollar is looking lower for Tuesday which is good for stocks.  +1 bulls.

Oil: As expected, oil did rise today on a second wide-range doji.  Since all its indicators are quite oversold and OBV in particular has bottomed and turned higher, we seem to have more upside in store Tuesday.  Since oil is still in sync with the market, that's +1 bulls.

Morningstar Market Fair Value Index: Unchanged at 0.79.  This number needs to go higher to give a bull-point.  However, I'll note that it's encouraging that at least it didn't drop any further today.  So no points here.

History: While the week as a whole has a bum rap, the middle three days tend to outperform, according to The Stock Traders Almanac, so we give +1 bulls.

Sentiment: The new Ticker Sense Blogger Sentiment Poll  came out today.  Last week's numbers were 50% bearish and only 14% bullish.  As I wrote last week, I consider anything below 20% bullish to be contrarian-bullish.  I voted bullish then and did so again this week.

Apparently I was joined by some other poll participants because this week the results are 21% bullish, 59% bearish.  Despite this, today's readings remain, once again the lowest since March 2007, just before the Dow went on an extended rally.  So I give +1 bulls for that.

     And the winner is...


The bulls, by a convincing 9:0 shut-out in the bull-bear ratio.  I'm pretty confident that there's more upside coming Tuesday.  And of course I have to add the disclaimer that when the VIX is around 40, any piece of news out of Europe, good or bad will trump the technicals.  There's nothing in the charts that can predict J.C. Trichet announcing "Zut alors!  Zis Beaujolais iz not to my liking!" (good for a 2% drop in the Dow).

ES Fantasy Trader

Patience paid off in the end and the ESFT closed out its long trade all the way from last Thursday at 1158.50 for a small 1.25 point profit.  Hey, that sure beats being down nearly $20,000 as I was at one point.  The portfolio stats the account is now $119,500 since inception on 8/18 after 17 trades, 11 wins, 6 losses.:

BOT    10    ES    false    DEC11 Futures     1156.75    USD    GLOBEX    SEP 21 20:05:35

SLD    10    ES    false    DEC11 Futures     1158.50    USD    GLOBEX    SEP 26 16:59:41   

Tonight, we go long again at 1160.50.

Monday weakly higher only if pivot holds

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

• Monday weakly  higher, low confidence.  Bull-bear ratio is 4:4.
• ES pivot 1123.42.  In play: current price is just above.
• Rest of week bias uncertain, market is news-driven..
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader holding long position..

Recap

Last Thursday night I called the market higher on a strong bull-bear ratio.  After a see-saw day, the Dow finally finished up 38 points.  Perhaps more important was simply the fact that it did not extend the horrible losses of the previous two days.  Let's run the bull-bear cases to try to figure out where we go next.

The technicals

The Dow: Friday's candle was not quite a classical hammer but pretty close.  Dead cat bounce or reversal indicator?  Hard to say, but the awful losses on the week put the indicators all squarely in oversold territory.  Every time we've been down here the last two months, the market has rallied.  We also successfully retested the August lows on both Thursday and Friday, so I have to say +1 bulls here.

The VIX: After putting in a big gap up evening star on Thursday, the VIX went on to form a spinning top on Friday that was just a bit higher, but ended up with a red candle.  With the VIX now over its upper Bollinger band it is much more likely that it will go lower Monday.  The VIX rarely spends any more time than this above the BB.  Also the big gap from Thursday will be wanting filling.  Lower VIX, higher stocks, so +1 bulls.

VIX futures: Again, the futures look very similar to the VIX itself, forming an evening star of their own on Friday.  With their indicators quite oversold now, the futures look ready to go lower, implying a lower VIX, so higher stocks.  +1 bulls.

Market index futures: These put in a nice bump earlier Sunday evening on some positive news out of Europe but then reversed course just after 10 PM on, yes you guessed it, some negative news, or should I say noise, out of Europe.  Sigh - I was all set to give out a point to the bulls here but with all three futures in the red this one has to go to the bears right now (1:15 AM EDT).


ES daily pivot: Now is 1123.42.  ES is now just barely above this and falling fast as I write.  If it falls through, that will be +1 bears.

Dollar index: After a huge green candle Thursday, the dollar put in a hanging man Friday.  If this potential reversal is confirmed Monday, then the dollar is going lower.  This is balanced off by the continuing turmoil in Europe, so it's a tie and no points given.

Oil: Had a bad week last week and is now at support having put in a doji on Friday.  With oversold indicators it looks to have more room to run higher than lower.  Oil now being in sync with the market, this is +1 bulls.

Morningstar Market Fair Value Index: Fell again to 0.79, putting the index at its lowest levels since the depths of the October 2008 crash.  This alone is bullish, but I need to see it reverse before awarding a bull point.  And since it's actually still going down for now, that's +1 bears.

History: The Stock Traders Almanac says that the end of September is "prone to weakness", so +1 bears.  Reminder: the new 2012 edition of TSTN is about to come out.  I highly recommend this fascinating book to any active trader.

     And the winner is...


A tie!  The bull-bear ratio sorts out to 4:4.  Friday afternoon, my intuition was that we'd be going higher on Monday but now I'm not so sure.  Since the bulls and bears are so evenly matched, it looks like Monday will be another key pivot day.  If ES breaks under its daily pivot (which it still hasn't yet), then we're going lower.  If it bounces off or just continues higher, then we'll close higher.

Given how oversold everything is looking right now and after the huge dump we took last week, I'd still expect something of a rebound or at least an attempt at a rally on Monday.  If we don't in fact go higher Monday, I become more confident of a gain Tuesday.  We'll see.

ES Fantasy Trader

No news here.  We're still holding onto last Thursday's long position.   CNBC Million Dollar Portfolio game update: the Night Owl gained a bit and is now ranked  97.09%.

Friday higher if ES holds above pivot

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

• Friday higher, fair probability.  Bull-bear ratio is 8:1.
• ES pivot 1129.75.  In play - watch for holding higher.
• Next week bias up unless 200 MA broken.
• Monthly outlook: bias down.
• ES Fantasy Trader holding long..

Recap

I had a bad feeling last night when I wrote my post.  Not that the market was going to tank today, but more of a sort of tactical anomie, a feeling that the Lavalite World was coming home to roost.  Maybe the world really is falling apart.  My highly hedged call for Thursday was simply "bias lower", so that at least was right, but I sure wasn't expecting a 391 point bloodbath, down over 500 at one point.  I offered two theories; one was a big jump higher and the other was a small decline.  Holy moly.  Is there more to come?  Let's take a look.

The technicals

The Dow:  Two consecutive days of big losses have brought us well into oversold territory.  Of note today is that the August lows held.  We also hit the lower Bollinger band, which could signal the end of the decline. Also, every one of the last 5 times we've had big declines in the Dow since the VIX went ballistic have been followed by up days, so +1 bulls even though the candles don't dhow it.  If nothing else, a dead cat bounce is in order.

Daily VIX

The VIX: Pay close attention to the VIX today.  It put in a giant gap up evening star doji that carried it right to its upper Bollinfger band.  Today's close at 41.35 is also right at its recent resistance in the 40-43 area.  And its indicators are all approaching overbought levels.

The evening star is a powerful reversal indicator.  Also, whenever the VIX gaps up to its upper Bollinger band, it rarely spend more than one more day there before falling again.  Lower VIX, higher stocks, so +1 bulls. 


VIX futures:  This chart looks very very similar to the VIX itself.  With this type of pattern, the futures seem to have more room to go lower than higher.  Lower futures -> lower VIX, +1 bulls.

Market index futures: All three looking very healthy (for a change). After recovering a bit into the close, they've been continuing to drift higher all evening.  ES is now up a significant 0.73%.  +1 bulls.

2:15 AM Update: ES has now indeed fallen below the pivot.  If it doesn't return by Friday's open, then all bets are off.

ES daily pivot: Now 1129.75.  We're actually above that now (1:10 AM EDT) but not by much at 1133.25.  That puts the pivot in play.  Holding above this between now and the open is bullish, falling through it is bearish.  +1 bulls for now.

Dollar index:Put in a huge green candle today that took it right up to its upper Bollinger band.  With oversold indicators, technically it looks lower Friday which should be good fot stocks.  +1 bulls.

Oil:Took a huge dump today that took it right to its intermediate term support which held.  Now oversold indicators, especially a stochastic making a bullish crossover and I'm looking for a bounce in oil Friday.  With oil now in sync with the market, that's +1 bulls.

Morningstar Market Fair Value Index: Sank to 0.82 today.  Generally, a declining index is bearish, but we're now just 0.01 away from the lowest reading of the year, hit on 8/8 and 8/19.  On the next day after both of those, the market rallied, so +1 bulls here.

History:Tomorrow, the September post-witching week will mercifully finally be over.  It has certainly lived up to its reputation as dreadful.  And according to The Stock Traders Almanac, Friday is the worst day of this bad week, so +1 bears.

     And the winner is...

The bulls with a bull-bear ratio of 8:1.  You can't argue with that so I'm looking for a higher close Friday.  Of course whenever the VIX is at these insane levels, all it takes is one news story about someone we never heard of quitting their job at the ECB because they didn't like the quiche in the cafeteria to send the market down some more.  But technically at least, we're going up.

ES Fantasy Trader

Going long yesterday was probably my most ill-advised trade of the year.  But rather than give up on it, I'm going to let it ride one more day.  Often patience is a money-making strategy..

Thursday too tough to call, bias lower

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

• Thursday uncertain, bias lower..
• ES pivot 1171.50.  Current price is far below that.
• Weekly bias higher, rebound possible by Friday.
• Monthly outlook: bias down on response toFed.
• ES Fantasy Trader opened new long position at 1156.75..

Recap

Last night I called for the market to go lower today on technicals.  I was somewhat surprised by the viciousness of the downslide, with the Dow dropping 284 points on the Fed announcement.  So Uncle Ben, is tanking my 401-K your idea of saving the economy?  Thanks a lot - for nothing.  One big hoot of derision for today's announcement.

The technicals 

Today's ugly loss  left the Dow near its strong support at 11K.The VIX and VIX futures both shot higher today, suggesting lower stocks tomorrow  However, I'm feeling uneasy suggesting this.  The VIX is now back to the levels it started at back on August 8th when we had those four days of violent up and down swings.  Of course, when the VIX was in the upper 30's on September 9th (the last big Dow dive) the next day produced a small gain.

And the Dow is now back down to near the lower end of its recent trading range.  TNA, in fact is right at the bottom of its recent range.  That chart looks to me to be due for bounce either tomorrow or Friday.  For tomorrow, I see two possibilities:

1. we continue lower on continued jitters, but by a much smaller amount, or
2. we shoot back up again in a volatility rally...

Which will it be?  Who knows.  With the VIX this high, it's really tough to come up with a convincing forecast either way.  I continue to stand aside.  I know J-Trader is doing the same right now, so I'm in good company.  This market is too tough for me.


ES Fantasy Trader


So then  why is the ESFT going long tonight if I think the market is going down on Thursday?  Because I believe today's negative action was due entirely to the Fed statement and that is was overdone.  We could see a turnaround later in the day, or even more likely by Friday.  I think the risk/reward on a swing basis favors the long side right now. 

Wednesday technically lower but watch Fed

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

• Wednesday technically lower but Fed news will determine outcome.
• ES pivot 1198.58.  Pivot in play: staying above is bullish.
• Rest of week bias uncertain, depends on Fed.
• Monthly outlook: bias uncertain, watch Fed meeting for clues.
• ES Fantasy Trader standing aside..

Recap

The Lavalite Market

 I just had to shake my head at today's action.  First the Dow goes up over 100 points, then it comes down over 100 points  All for no particular reason I can fathom.  I'm calling this the Lavalite Market, in honor of the the last book in great Phillip Jose Farmer's classic 1979 World of Tiers sci-fi quintology, The Lavalite World.

You see, the premise of the Lavalite World was that although the planet had a surface, it was always changing like the blobs in a lavalite.  Therefore you had no reference points.  If you left home in the morning, you could come back that afternoon and have no idea where your house had gone.  Supposedly, living there drove you mad.  (And remember, there was no GPS in 1979).

Anyway, that's what this market feels like.  Last night I thought we'd be down today and indeed that's how the Dow got started.  Then it took off.  I thought I'd blown it badly.  Then it wandered around.  Then it ended by giving back all its gains to finish up just 7.65 points.  But the Nasdaq and SPX were down.  No rhyme, no reason, it's like living on a lavalite world.

The technicals

Short form again tonight.  All of the factors that were in play last night are still in play.  It looked like we were going lower today but instead we went up.  And then down.  It may simply be a case of being a day early.  I tend to do that.  Or the lavalite blobs may simply be roving about at random.

In any case, tonight the technicals, oversold as they are don't matter a whole lot because everything will hinge on what the Fed has to say after their meeting on Wednesday.  For what it's worth, the market index futures are busy pricing in good news right now, with ES up nearly half a percent at 1 AM EDT.  But the charts all look overbought.

So where are we going Wednesday?  I haven't the faintest idea.  Tonight is a good night to get some sleep and watch the entertainment tomorrow.  It's one of those days that are just too tough to call.

Trades

I sold my Intel trade today for a nice 2.21 point profit.  I think I've caught most of the latest move.  I'm still holding onto my Ford though.  It's up almost half a point since I bought it at 10, so I can afford to let it run some more.  I'm still trading very little, what with the VIX stubbornly refusing to come down out of the stratosphere.

ES Fantasy Trader

We covered our short this morning at  1191.25 for a small loss.  The account is now $118,875 since inception on 8/18 after 16 trades, 10 wins, 6 losses.   Tonight we are standing aside due to the uncertainty surrounding the Fed's current meeting.

SLD    10    ES    false    DEC11 Futures     1191.25  USD    GLOBEX    SEP 19 02:15:34

BOT    10    ES    false    DEC11 Futures     1188.50  USD    GLOBEX    SEP 19 11:38:45

Tuesday going lower again

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

• Tuesday lower, high confidence.  Bull-bear ratio is 1:8.
• ES daily pivot 1194.33.  In play: staying below is bearish.
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias uncertain, watch Fed meeting for clues.
• ES Fantasy Trader opened new short position at 1190.00.

Recap

Another news driven day for the markets, with a horrible opening on lousy Greek news, followed by a recovery on supposedly good Greek news.  Or rumors.  Or something.  Who the heck can tell anymore.  Since we can only study today's data here and not tomorrow's newswires, take everything below with a grain of salt, or a cup of extra virgin Greek olive oil.

The technicals

So let's run down the usual suspects tonight, awarding bull/bear points along the way.

The Dow: Put in a vaguely disturbing looking hanging man cum bearish engulfing pattern today.  Unable to break through resistance at 11,500 and with its indicators now all solidly in overbought territory, it ain't looking good for tomorrow in Dowville.  +1 bears.

The VIX: Rose 5.65% today but did it on an unusual gap-up red candle.  Having reversed a five day losing streak and with its stochastic about to execute a bullish crossover, it is not unreasonable to expect the VIX to move higher Tuesday.  +1 bears.

VIX futures: Similar story here.  The futures gapped up on a red candle.  However, the case for continued increases here is not as compelling as for the VIX itself, leading me to believe that we're not in for a major downturn in the market on Tuesday.  But +1 bears anyway.

Market index futures: All three are down at 1:53 AM with ES down two thirds of a percent.  ES peaked two days ago but its indicators are still highly overbought.  Nothing here suggests anything but lower futures tomorrow, hence another +1 bears.


ES daily pivot: Now 1194.33.  With ES at 1190, the pivot is in play for Tuesday.  Breaking though it and holding there would be bullish indeed.  A rejected breakout or simply staying beneath would be bearish.  So far the latter seems to be occurring, so +1 bears.

Dollar index:The dollar gained today on the strength of euro woes, crossing back above its 200 day MA.  With its stochastic making a bullish crossover, I look for further dollar strength on Tuesday.  Bad for stocks, so +1 bears.

Oil: Moved to the bottom of its recent trading range today.  Support here has held for a month, so I'd guess oil's going higher tomorrow.  With oil now inversely correlated to the market, this is +1 bears.

Morningstar Market Fair Value Index: Unchanged today at 0.86 after three days of gains, so no points here.

History: The Dow is down this week in 16 of the last 20 years, according to The Stock Traders Almanac, and within the week, all five days are down so +1 bears for that.  Also, we seem to be continuing the 15 day wave action set up in the last two months.

Sentiment: The new Ticker Sense Blogger Sentiment Poll  came out today and the numbers are about as lopsided as they've ever been: 50% bearish and only 14% bullish.  As I wrote last week, I consider anything below 20% bullish to be contrarian-bullish.  Today's readings are, according to the accompanying chart, the lowest since March 2007, just before the Dow went on an extended rally.

With sentiment this divergent, I have to call these results bullish.  For the record, I voted bullish, both on expectations that we'd see the results we got today as well as anticipation that the Fed will make some moves to help out the Street this week.

     And the winner is...


The bears, by a lopsided 1:8 bull-bear ratio.  This would indicate that the market is not done going down yet, so I'm looking for a lower close Tuesday.


ES Fantasy Trader

We covered our short this morning at  1181.50 for a small profit.  The account is now $120,250 since inception on 8/18 after 15 trades, 10 wins, 5 losses.

SLD    10    ES    false    DEC11 Futures     1191.25   USD    GLOBEX    02:15:34
BOT    10    ES    false    DEC11 Futures     1188.50   USD    GLOBEX    11:38:45


Tonight, we go short again at 1190.00.


And in closing, I'm not above some silliness.  I'm playing the CNBC Million Dollar Portolio Challenge, along with seemingly the entire rest of the world.  After one day, I'm ranking 91.77%.  Right now it's kind of tough to make any money here since apparently you can neither short stocks nor buy inverse ETF's in this contest.  Pity.

Monday going lower

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

• Monday lower, high probability
• ES pivot 1207.00. Current price is below that.
• Rest of week bias higher, rebound possible by Thursday.
• Monthly outlook: bias higher, see previous post for details.
• ES Fantasy Trader opened new short position at 1191.25.

Recap

Last Thursday night I called for more upside even after a four day rally in the Dow and we in fact did manage to tack on an additional 76 points to finish off a nicely rewarding week.  The weekly Dow candle in fact made a strong bullish engulfing pattern that took us to the top, or slightly above a trading range that goes back five weeks now.  In addition, the weekly indicators all appear to have bottomed from oversold levels and are turning upward now.  Coupled with much higher volume last week than the week before, this all looks bullish on a weekly basis.

The technicals

Short version again tonight.  That said, the daily charts aren't looking as promising.  The Dow lately has been running on a cycle of about 15 days between peaks.  It's been exactly that long since the last peak.  We're also looking at a 5 day winning streak, the longest since last June.  And the daily indicators are now in overbought territory.  RSI has actually already peaked, a bearish sign.

And the futures are all significantly lower tonight, ES being down by 1.7% at 2:25 AM EDT.  It's also below its new daily pivot of 1207.00.    So while the weekly outlook may be positive, things aren't looking so hot for Monday, especially with more bad news out of Greece again.  So I'm looking for a lower close Monday possibly followed by some recovery later on this week, more than likely on Fed news.  That will clearly trump the technicals this week.

ES Fantasy Trader

I had to cancel my long trade from last Thursday.  I thought the contract would roll over automatically from U to Z, but it didn't leaving my trade in limbo and with no way to fairly value it.  So all I can say is that I was on the right side and it would have made money had I entered the Z contract.  But I'll leave the stats as they were and call this one a wash.  For tonight, we're going short at 1191.25.

Monthly outlook by regression trend analysis

A tale of three regressions

For this Sunday, we take a longer term look at the market. Presented here, for your approval is a monthly chart of the Dow going back seven years (click on the chart to enlarge):

In it, I have drawn three regression trend channels. Recall that the RTC defines the limits of a trend to a given statistical probability. If a candle goes outside the upper or lower trend limits, then there is a 95% chance (according to the parameters I set) that the trend is over. The lower panels are, top to bottom, volume, RSI, momentum, money flow, stochastic, and OBV. These are my favorite indicators.

Let's start with the RTC's. The first is the bull market that ran from 2005 to the all-time market peak in late 2007. The second is the bull run from the post Great Recession crash in March 2009 to the peak in May of this year. The third is a descending RTC that began at the May peak and continues to this day. The other lines on the chart are the Bollinger bands (in blue), Bollinger center line (black), 20 MA (red) and 200 MA (dotted orange).

I don't know about you, but I am struck by the similarites to today's chart and the 05-07 RTC. Notice how both rising RTC's ended with candles dropping from the upper edge on down to the lower edge, where a hammer was put in. Compare January '08 to August '11.

This leaves us at a crossroads. In February '08, the market continued lower, falling out of the RTC and causing a bearish trigger. And you can see how that ended. Right now, the half-baked September candle still has a chance to end up looking like February '08. If so, then history would suggest that we might see a one or two month rally. That dovetails nicely with the historical strength of the fourth quarter.

Right now we're in two RTC's: a rising one from '09, and a shorter descending one from May of this year.  We're on the verge of falling out of the rising one and a long way from exiting the descending one.  That's all bearish.

On the other hand, note how the monthly indicators have all traveled far from their overbought peaks. The RSI and stochastic in particular are near levels from which the 2010 rally started last July. Combine this with strong support at 11,000, I think we have more chance of going higher between now and the end of the year than we do of going lower. However, I'm fairly pessimistic about 2012.  It's possible to have a few months of gains while still remaining inside the third RTC.

There's a limit to how far and how often you can kick the can down the road, and it seems like the world has been kicking a whole recycling center's worth of cans lately.  Everything depends on how much you think now is like 2008.  There are certainly plenty of opinions on both sides.  Personally, I don't think it's that bad, but it's still pretty bad.

More upside possible Friday

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

• Friday higher, medium probability.
• ES pivot 1201.67.  Current price reasonably above that.
• Next week bias uncertain, short term top possible..
• Monthly outlook: bias down, but may change pending Europe news.
• ES Fantasy Trader going long at 1213.00.

Recap

The Dow put in an impressive 186 point gain today still without reaching overbought levels.

The technicals

Short version tonight.  Everything I look at is pointing to the possibility of still more short term upside, though we're approaching some important resistance levels, like 11,717 in the Dow and 1229 SPX.  So we still have a bit more room to run, and without seeing any oversold indicators I have to assume we're going back to take a look at those levels.  And note that tomorrow is historically strong.

So I'm looking for a positive close tomorrow.  That will make Monday a key day to determine what will happen regarding this resistance area.  My guess is we may encounter some trouble getting past it, but with every little news item affecting the market so much lately, anything's possible.

Thursday higher if ES pivot holds

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

• Thursday bias higher, low confidence.  Bull-bear ratio is 5:2.
• ES pivot 1181.75.  Current price is far below that.
• Friday bias uncertain..
• Monthly outlook: bias down, but may change pending Europe news
• ES Fantasy Trader standing aside.

Recap

Tuesday night I called Wednesday lower.  Clearly, the Night Owl laid a great big egg as the Dow ended with a 141 point gain instead.  Oh well - you can't win 'em all, especially with the VIX stubbornly stuck in the stratosphere.

Forget the technicals, today was completely news-driven out of Europe.  Bad at first, then good was all it took to power a big rally even allowing for last minute profit taking from the day traders.  And I'm guessing that more of the same is in store.  The market seems bent on following the Escher roadmap, walking sideways up the down staircase upside-down.

The technicals

The Dow: Put in a wide-range doji today, not really a good reversal indicator and since the indicators are all definitely headed up from oversold now, I have to give this as a +1 bulls.  Also, we exited the latest descending regression trend channel and that's also bullish.

The VIX: Fell under its near-term resistance for a 6 and a quarter percent drop.  Today's red candle plus indicators that are still just coming off overbought suggest a lower VIX tomorrow and that's bullish for stocks.

VIX futures:The futures tried again to go over their upper Bollinger band and again failed.  This chart looks like the VIX itself, so +1 bulls again.

Market index futures: All three are down at 1:20 AM with ES down by a non-trivial 0.38%.  At this point, the action suggests a dark cloud cover in the making, though it's risky making assumptions fro half-baked candles.  Still, +1 bears.

ES daily pivot: Now 1181.75.  We're just above this now at 1183.50, so the pivot is key.  Going under and staying under is bearish.  Bouncing off is bullish.  It's too early to make that call, so no points.

Dollar index: Dropped again today reflecting an improving euro on some calming news out of Europe.  Still oversold and looks to have room to run lower on Thursday.  +1 bulls.

Oil: Kind of wandering around lately, but since it's near the upper end of its recent trading range, the suggestion is for it to move lower.  Because of its current market correlation, that's +1 bears.

Morningstar Market Fair Value Index: Rose to 0.84 today.  +1 bulls.

History: Nothing in particular on the day before triple witching, so no points.

     And the winner is...


The bulls, with a bull-bear ratio of 5:2.  But my intuition is less positive than the numbers would suggest.  So I'm going to watch the pivot again.  If we hold above, that's bullish for the close.  Falling through will mean a lower close.  Keep an eye on ES 1181.75 before the open.

ES Fantasy Trader

Clearly, the ESFT was on the wrong side of this trade, dropping a whopping 21 points for a stinging loss.  The account is now $118,875 since inception on 8/18 after 14 trades, 9 wins, 5 losses.  When I'm that badly wrong, I like to stand aside for a day and figure out why.  When you start losing at the blackjack table, the best thing to do is always to get up and walk away.  ES is no different.

SLD    10    ES    false    SEP11 Futures     1159.25    USD    GLOBEX    SEP 14 00:56:24 
BOT    10    ES    false    SEP11 Futures     1180.25    USD    GLOBEX    SEP 14 12:50:46
 

Wednesday lower on futures, news

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

• Wednesday lower, medium probability.  Bull-bear ratio is 3:6.
• ES pivot 1164.42  Staying below is bearish..
• Rest of week bias uncertain.
• Monthly outlook: bias down, regardless of Fed action in September
• ES Fantasy Trader opened new short position at 1159.25.

Recap

Last night I was calling for a higher Tuesday if ES could stay above its daily pivot.  Well ES did make one vain attempt to bust under around 4 AM but it was rebuffed and everything then just moved higher from there.  The Dow put in a 45 point gain after meandering around in the afternoon, largely on more rumors from Europe.

Escher's map of the debt crisis.

Lately it seems like the market is sent scurrying every time some new story comes out, confirmed or not.  I swear, if tomorrow the FT says that the Chinese basketball team is going to buy Venezualan sneakers, or that the ECB's secretary's dry cleaner has raised its rates, the market will tank.  (Feel free to repeat this important "news").

And a tip of the Hatlo hat to M.C. Escher for his brilliant analysis of the interconnections between the various players in the debt crisis.  This one is even better than the Lego people.  He is right on the money.

The Technicals

The Dow: Monday the Dow exited its descending regression trend channel, which was a bullish setup.  Yesterday traded entirely outside which was the trigger.  Today was the payoff.  Unfortunately, it came in the form of only a 45 point gain in a sort of doji-ish candle that came almost up against resistance at 11,150.  And the indicators are mixed.  RSI and the stochastic are oversold, but money flow, momentum, and OBV are not.  With less than convincing volume today, I'm inclined to give this a +1 bears.

The VIX: Put in another red candle today, as I expected last night,  dropping 4.35%.  But its indicators are just peaking now at overbought levels.  With no near-term resistance in sight, this suggests the VIX has lower to go tomorrow. +1 bulls.

VIX futures: Came down today as expected, though not a lot.  While there is still considerable downside from here and the indicators are oversold, the futures have gone up in the recent past from similar levels.    And today's drop left the futures right at support at 34.95.  I'm not convinced the futures are going lower tomorrow so +1 bears.

Market index futures: At 1:05 AM EDT all three futures are down.  ES in particular is down 1.25%.  The candle it's forming is a bearish engulfing pattern.  OTOH, the indicators are still oversold, although momentum and money flow are decreasing.  Overall this adds up to one for the bears here.


ES daily pivot: Now 1164.42.  Since ES started drifting lower earlier this evening, we are now below this level.  With the overnight trend down, this is bearish.

Dollar index: The other day I noted the exponential run-up in the dollar and said it couldn't go on forever.  It didn't.  Today the $ put in a big bearish engulfing pattern.  This one is high reliability and suggests the $ is going lower on Wednesday.  That's good for stocks.  +1 bulls.

Oil: Continues to edge higher and that's good for stocks lately (oddly enough).  So +1 bulls.

Morningstar Market Fair Value Index: Unchanged today at 0.83, so no points here.

History: Historically, this week is very bad for the Dow, though we sure haven't seen any evidence of that this week.  Since Wednesday is the weakest day of the week, I'm giving +1 bears for this.

News: There's bearish news coming out in the overnight around France and China.  Given how jumpy the market is over these two actors, this get a big +1 bears.

     And the winner is...


The bears.  The new bull-bear ratio is 3:6, suggesting a tip of the balance compared to yesterday.  I put particular weight on the breaking news and am looking for the market to resume it's downward march Wednesday.

ES Fantasy Trader

Today the ESFT closed out its long at 1168.50 for a small 1.75 point gain. The account is now $129,375 since inception on 8/18 after 13 trades, 9 wins, 4 losses.

BOT    10    ES    false    SEP11 Futures     1166.75    USD    GLOBEX    SEP 12 17:22:33

SLD    10    ES    false    SEP11 Futures     1168.50    USD    GLOBEX    13:02:45


Tonight we're going short again at 1159.25.

Tuesday looking higher if ES holds above pivot

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

• Tuesday higher, medium probability.  Bull-bear ratio is 3:1.
• ES pivot 1152.25.  Falling below this becomes bearish..
• Rest of week bias uncertain, end of week lower if Tuesday rallies.
• Monthly outlook: bias down, regardless of Fed action in September
• ES Fantasy Trader opened new long position at 1145.50.

     Recap

We're going this way

Today's Wall St. tug of war featured a total of 14 zig-zags that had the day traders pulling their hair out.  It wasn't a bull market, it wasn't a bear market, it was a bullbear market.  (The BullBear of course is closely related to the species CatDog).


Sunday night I called for a lower close today and indeed we were in triple digit loss mode for most of the day, until the FT published some news, well some rumors more like it, about the Chinese devloping a sudden appetite for Italian bonds, of all things just before the close.  Mama mia, that was all it took to set off a rally that ended with the Dow actually gaining 69 points and reclaiming the 11K level.

The technicals

The Dow: The Dow put in a nice hammer today that just touched its lower Bollinger band which coincidentally is right around the August low support level at 10,800.  Its indicators are now more oversold than overbought and while they haven't yet bottomed, I'm more inclinded to give this pattern a +1 bulls.

The VIX: Today the VIX put in a big dark cloud cover that spanned the 40 level.  The other two times when the VIX had been over 40 and then closed under, it went lower the next day.  Combined with indicators that are now looking overbought, I'm inclined to think the VIX is ready to go lower, so I give +1 to the bulls.

VIX futures: Today saw the futures put in a bearish shooting star.  By itself the shooting star isn't the best reversal indicator, but this one is helped by the gap up.  Lower futures -> lower VIX -> higher sotcks -> +1 bulls.

Market index futures: All three (ES, NQ, YM) are up at 1:20 AM with ES up 0.15%.  What's important here is not so much the amount of the gain as that almost none of the China bond rumor run-up has been retraced.  +1 bulls.

ES daily pivot:  Tuesday's pivot is now 1152.25 and we're now comfortably above that level at 1164.50.  This pivot serves as support.  If we break under that will be bearish, if we bounce off, bullish.  Right now it's looking like +1 bulls.

Dollar index:The dollar, having cleared resistance yesterday continued its relentless upward march today and did not pull back to its 200 day MA.  While looking overbought technically, there's no telling when this will end.  It's all news-driven out of Europe right now.  A strengthening dollar being bad for stocks, this gets a +1 bears.

Oil: After falling for two days, oil rose today to the middle of its recent trading range and stayed right in the Twilight Zone, that region near the center of the Bollinger bands.  No telling where it's headed tomorrow, so no points here.

Morningstar Market Fair Value Index: This doesn't seem to have been updated today, so no points here.

History: Not much in the way of history for tomorrow, but I give +1 bears just because the week as a whole is historically bad.

Sentiment: Finally, we once again make note of the latest  Ticker Sense Blogger Sentiment Poll which came out today.  As I suspected, bearish sentiment increased from last week.  Last week it was running 22% bullish and 44% bearish which was an increased bearish level from the week before.

Today's poll shows that gap has now increased to 21% bullish and 48% bearish.. (For the record, I again voted bearish).  That's getting closer to where I'd award a point to the bulls on a contrarian basis.  As I mentioned last week, the last time the bullish number was this low was in February 2010 at the end of a month-long decline.  The Dow then went on to rally over 1000 points in the following two months.  I really want to see that bullish number drop below 20% to go contrarian bullish.  But this is so close, I'll give it a +1 bulls anyway.

     And the winner is...

The bulls, with a bull-bear ratio of 6:2.  This isn't a new bull market and it probably isn't even a multi-day rally, but I think the market has been looking for an excuse to go up for a day or so now and today's rumor was all the catalyst it needed.  Once the smoke clears, it's probably back down again, but for tomorrow at least I'm looking for a higher close.

ES Fantasy Trader


The ESFT covered last night's trade this morning, prematurely as it turned out at1144.00, settling for a meager 1.5 point profit.  The account is now $128,500 since inception on 8/18 after 12 trades, 8 wins, 4 losses.

SLD    10    ES    false    SEP11 Futures     1145.50    USD    GLOBEX 01:04:55
BOT    10    ES    false    SEP11 Futures     1144.00    USD    GLOBEX 11:09:34   
 
Tonight, we go long at 1145.50.

Monday looking lower on ECB follies

Bonjour a nos lecteurs en France et la Suisse Romande!

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

• Monday lower, high probability.  Bull-bear ratio is very low at 0:8
• ES pivot 1166.25.  Current price is far below that.
• Rest of week bias uncertain, contrarian rebound possible mid-week.
• Monthly outlook: bias down, regardless of Fed action in September
• ES Fantasy Trader opened new short position at 1145.50.

     Recap

Last Thursday night I had a weak bias to the plus side if we could get the ES to go over its daily pivot.  It didn't and we didn't.  The catalyst of course was the abrupt departure of Jurgen Stark, who I had never heard of, from the ECB.  Thanks much for tanking my portfolio with your personal grievances, Jurgen.

We finish off the weekend with just a bit more reading.

   Everything you always wanted to know about the euro but were afraid to ask...

Here's good post from Mike Shedlock in Mish's Global Economic Trend Analysis yesterday explaining just what the heck is going on with the euro: "Euro Death Wish" and Global Finger-Pointing: U.S. Senior Official Blames Eurozone for "75% of the Dark Things Happening in the World" .  It's well worth a look.  Quick summary - it don't look good.

And if that doesn't explain it well enough, then this one from Michael Cembalest of J.P. Morgan should, using Legos: The debt crisis in the European Monetary Union:  I give this one four hoots up.

Of course you can't tell the players without a program so you'll have to read the article for the key.  But hey, this makes as much sense as anything else I've read.

The technicals

Time once again this Sunday night to round up the usual suspects and see who might salute on Monday.

Daily Dow

The Dow: Friday's big drop in the Dow  had several nasty implications.  First, it pretty much killed the whole double bottom idea.  Second, it prevented the establishment of a new rising regression trend channel from the previous three days.  Third, Friday's declining volume was up compared to Thursday.  Fourth, the indicators are not really very oversold looking, even after Friday.  Only the RSI has entered oversold territory, and just barely.

And last, I'm starting to see a head-and-shoulder in there, centered around the peak on 8/31-9/01.  FWIW, in this post, SPX Bearish Head Shoulders underway Target 1056, MarketTrend sees one in the SPX too.

Countering this, at least as of right now is the fact that on the last two oscillations since the lows of 8/09, each one has still put in higher lows and higher highs.

But given all of the above, I have to give this one is +1 bears.


The VIX: Despite a 12% advance on Friday, the daily VIX remains firmly in the Twilight Zone, that gray region around halfway between Bollinger bands.  So we move out to the weekly chart seen here  Several things stand out.  First, the VIX has some strong resistance around 40.  Friday's close at 38.52 leaves it bumping up against that level.  The VIX has only managed to put in a weekly close above 40 twice since March 2009.

Weekly VIX

Next, we got a classic hanging man on last week's candle.  That is at least a potential reversal indicator.  Then notice how the VIX has had an exponential run-up since mid-July.  Since the peak on 8.8, the VIX has been unable to make any further headway and has been simply oscillating in the upper 30's.  That looks like a good sign of lower numbers to come.  So overall, I think the weekly chart is pointing to a decline in the VIX.  I just don't see it happening Monday.  +1 bears.

VIX futures: On Friday the VIX futures gapped up big time and put in a tell green candle but did not pierce the upper Bollinger band.  The technical indicators are mixed, some suggesting further upside, others looking overbought.  In the past, the futures have shown a proclivity for climbing the upper Bollinger band, and given the continued unsettling news out of Europe, I'm going to give this vote to the bears.

Market index futures: All three (ES, NQ, and YM) are down at 1 AM EDT.  ES is down a full percent on a big gap down from Friday as the weekend has done nothing to tamp down the European mess.  ES RSI is now oversold.  OBV is now below levels from which previous rallies occurred.

However, ES has no support until 1121 and so still has room to move lower.  I'd expect an oversold/gap-filling rally at some point, but not Monday.  Maybe later this week.  So +1 bears..

ES daily pivot: Now 1166.25, and with ES far below that at 1145.50 at 1 AM EDT, I don't think this will be a factor tomorrow.  No points.

Dollar index: On Friday, the dollar blasted right through resistance at 54.32 and kept right on going through its 200 day MA at 54.37, also courtesy of the ECB.  (Recall that I'm using the Deutsche Bank US Dollar Index since it's free, unlike the $DXY anymore).  Two consecutive long solid green candles give no indication of any reversal any time soon.  The only caution here is that the dollar is going exponential here.  This sort of parabolic run-up can't go on much longer.  Overall, I see nothing right now pressing against the dollar so this one has to go +1 bears.

Oil: Oil fell out of its daily rising regression trend channel on Friday, a bearish signal.  Since the market is now trading in correlation with oil, this is another +1 bears.

Morningstar Market Fair Value Index: This fell again on Friday to 0.83.  FWIW, the last two reversal we had (on 8.9 and 8.19), this index hit 0.81 both times.  So I'd call this short term bearish (like for Monday) but indicating that we may be near a bottom.

History:  The Monday before Triple Witching is historically bad, according to The Stock Traders Almanac.  Really bad.  In 2001, the Dow dropped a whopping 14.3% this week.  In 2008, it lost 504 points on Monday,  So +1 bears here too.

     And the winner is...

The bears, I'd say, by a knock-out.  The bull-bear ratio is a whopping 0:8, the worst reading since I started computing this number.

ES Fantasy Trader

Tonight the ESFT is going  short tonight at 1145.50.  I'm looking for a contrarian/oversold rally at some point later this week.  I just don't think it will be Monday.