Tuesday higher possible

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

• Tuesday higher, low confidence, waiting on economic news.
• ES pivot 1240.58  Holding under is bearish.
• Rest of week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went long at 1236.25...

Recap

Bump.  Last night I warned everyone to get ready for a bumpy week.  Today saw the first bump in the form of a 163 point jolt to the Dow.  I was right about the bias lower but wrong about the doji.  With some Fed news coming out on Tuesday, get ready for another bump.  Let's try to see if it will be up or down.

The technicals

The Dow: Two good things about today's big drop: first, the 12K support level held at the close, and second, the 200 day MA held too.  Look at how well that works: the 200 MA is 11,944 and the low for the day was 11,941.  That's good enough for me.  Also, the indicators have now exited overbought territory and are now all headed back down.

We now seem to have something of a trading range going on lately between 12K and 12,200.  And since we closed today at the bottom of that range with two intact support levels close at hand, on that basis alone I'd look for a move higher tomorrow.

Market index futures: Tonight at 2:30 AM EST all three futures are just barely in the green in an overnight session characterized by unusual volatility.  Traders are apparently reacting to every little item coming in over the news wires and trying to position themselves ahead of tomorrow's FOMC.

     And the winner is...

Well tonight I'm going to flip a coin and say the bulls take it.  Basically, I expect Tuesdays economic news to come in BTE and I can't imagine the Fed saying anything to pour cold water on the campfire.  Then there's the strong historical positive bias to this week.  And with at least some technical support from the Dow, there you have it.  Tuesday's going higher, but I'm not really all that confident in saying that.  If I was in Vegas at the blackjack table right now, I wouldn't be walking away but I'd only put down the minimum bet.  That's all she wrote.

ES Fantasy Trader

Today we made no trades.  Portfolio stats: the account remains at $146,750 after 41 trades (28 wins, 13 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier  Tonight we go long at 1236.25.
 

Monday may go lower

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

• Monday lower, low confidence, waiting on economic news..
• ES pivot 1249.25.  Breaking under is bearish.
• Rest of week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside..

Recap

Fasten your seat belts, boys...

If you recall, last Thursday the technicals seemed to be pointing lower.  However, I thought that the market was so news-driven that my call was "Friday lower unless good EU news".  Well come to find out there was good news out of Europe Friday morning, or at least news the market liked, and so we ran higher with the Dow piling on an additional 187 points.

This coming week we have the irresistible force, being a slew of economic news here at home, meeting the immovable object, namely Europe.  And thrown into the mix is the expectation of the imminent arrival of Santa Claus and his yearly rally.  And if that isn't enough, it's another triple witching week.  To paraphrase Mae West, "Fasten your seat belts.boys, it's going to be a bumpy week".

The technicals

The Dow: The Dow remains unable to gain any traction above the 12,165-12,200 resistance zone.  Four swings last week, four misses.  A big move down on Thursday and entirely retraced on Friday.  The daily indicators look overbought but the weekly stochastic is actually executing a bullish crossover.  What does it all mean?  Who the heck knows.  Let's go ask Mr. Vix and see if he knows.

The VIX: Took a big dump on Friday with a 13.76% drop not seen since the beginning of October.  However, unlike then Friday's close at 26.38 left us just above the 200 day MA at 25.55.  If you look at the way the VIX has behaved this year when approaching the 200 MA from above, you'll see that it either bounces right off, or spends a day, not more than two, below and then rises again.  This suggests that we'll at least take a look at 25.5 and that allows for at least a bit more upside in the market early in the week.

VIX futures: The futures look to be guiding lower too, supporting the idea of at least one day of lower VIX.

ES daily

Market index futures: Right now at 1:40 AM EST all three futures are in the red.  ES is down 0.3% and has been drifting lower since 8:30 this evening.  However, there's support at the 200 day MA of 1253.57.  And most interestingly, last Thursday and Friday formed a classic bullish piercing line which is a high reliability pattern.

ES daily pivot: Rose a bit tonight to 1249.25.  We were above the pivot most of Friday and remain above it now.  However, we're only six points off, so the pivot is within striking distance.  Watch this number before the open for any attempts to drive under.  That would be bearish.

History: According to The Stock Traders Almanac,the December triple witching week is quite positive historically.

     And the winner is...

Hard to say.  I was going to suggest a weak bullish bias until I saw an item come through in the news that the FX boys are cutting their forecasts for the euro.  The euro's been in an 8 day downtrend, putting upward pressure on the dollar and that' bad for stocks.  So honestly, at this early hour it could go either way.

I'm going to guess that we'll see another small range doji day as traders wait to get the whisper numbers on Tuesday's economic data, and see what those pesky Europeans have been cooking up over the weekend.  J-Trader is going to a short position but I'm just going to stand aside on Monday again.  Perhaps tomorrow will bring some clarity to the market.

If I had to guess I'd say that if ES breaks the 200 day MA and its daily pivot, we'll close lower, otherwise higher.

2:15 AM Update: ES has just broken under the 200 MA and is now down nearly half a percent, so I'm going to go with a bearish call for Monday.

ES Fantasy Trader

On Friday I had to throw in the towel on my Thursday night short for a 20.25 point loss.  Portfolio stats: the account has dropped to $146,750 after 41 trades (28 wins, 13 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier

SLD    10    ES    false    DEC11 Futures     1233.00    USD    GLOBEX    DEC 9 01:18:28    

BOT    10    ES    false    DEC11 Futures     1253.25    USD    GLOBEX    DEC 9 12:23:22     

Tonight we're standing aside again - no trade.

Friday lower unless good EU news

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

• Friday lower unless good EU news.
• ES pivot 1246.25.  Holding under is bearish.
• Next week bias lower, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader going short at 1233.00.

Recap

So the Europeans disagree amongst each other.  Whoa - big surprise there, eh?  Nevertheless, that was all it took to drive the Dow down nearly 200 points today.  The only good thing I can say about today's action is that it got the charts off of being stuck on top dead center.  Finally the market threw us a freakin' technical bone to chew on.  So without further ado, let's get chompin'.  Yum!

The technicals

The Dow: Looking at it purely technically, today's big red candle was a giant bearish engulfing pattern, one that gobbled up an entire week's worth of gains.  It also served to knock all the indicators out of their overbought-broken torpor and begin the trip back to oversold.  We also fell out of the rising RTC back to 11/28 and that is a bearish trigger.

The only good things here are that the 12K support level basically held ( I count a close within two points as holding) and the 200 day MA was never seriously threatened.  But on the face of it, this still remains an ugly looking chart.  And now that the Europeans have clearly signaled that they are more interested in theatrics than the good of the global economy, the stage is set for further declines on Friday.

The VIX: The VIX, predictably, took a 6.7% jump today.  True to form, after visiting the lower BB last week, that was all it took to begin the march upwards, even before the latest drama from the EU.  The VIX has now completely retraced the big gap down it took last week and is smack in the Twilight Zone - halfway between BB's.  It's indicators are also still looking more oversold than overbought suggesting still more room to run higher on Friday.

VIX futures: Gapped up today - little here to suggest any reversal Friday.  Also still more oversold than overbought.

Market index futures: On a purely technical basis, today's tall red candle skewered the 200 day MA and completed a bearish RTC trigger, just like the Dow did.  With indicators now definitely off overbought peaks, this all looks pretty bad for the market.

You can see just how much Europe is influencing the market by looking at the 5 minute ES chart from about 3 PM through the evening.  It's been getting jerked around every which way as various rumors, twitters, innuendos, and new flashes popped up.  ES has crossed its 4 PM closing value no fewer than 6 times til now (1:05 AM EST).

Currently, all three futures are in the red; ES is down 0.15%.  That alone does not bode well for Friday.  Assuming we do go lower, one likely support point would be the 50% retracement of last Wednesday's big spike, that would be at 1222, which coincidentally (or maybe not) has been a good S/R line back to last summer.

ES daily pivot: Is little changed tonight, now at 1246.25.  Unfortunately, we were below the pivot all day and we're still below it.  Not good.

Copper: Took a big hit today.  This daily chart definitely looks like it's going lower, with all that implies for the broader market.

Morningstar Market Fair Value Index: Yesterday, the index remained at 0.89.  There is no update on the site for today's index.  I suspect it will move lower.  But it has moved little in six straight days.  This suggests the absence of any strong negative pressure on stocks.

History: According to The Stock Traders Almanac, Friday is not a particularly bullish day, so we've got no help from history here.

     And the winner is...

All things considered, technically it looks like the bears take it.  There appears to be about 11 ES points of downside available without too much trouble.  Once again though, it all hinges on Europe.  But if the can-kicking contest we saw today is any indication of what will happen over there tomorrow, then I'm not too optimistic.  So I have to say Friday's going lower.

ES Fantasy Trader

Today we just stood on the sidelines and watched.  Nothing ventured, nothing lost.  Portfolio stats: the account remains at $156,875 after 40trades (28 wins, 12 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier. Tonight we go short at 1233.00 in anticipation of more thumb-twiddling and violin fiddling on Friday from Europe while their economy burns.  

No call for Thursday pending EU news

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

• Thursday uncertain, awaiting EU news
• ES pivot 1258.67.  Holding above is bullish.
• Rest of week bias uncertain, awaiting EU news..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader standing aside pending, yes, EU news.

 Pearl Harbor Day

Tonight, we salute the memory of those who served and who paid the supreme sacrifice protecting our nation and our freedom 70 years ago.  We also use the opportunity to recognize and honor those serving our country today.  My hat is off to you.  Thank you all.

Recap

I went moderately far out on the limb last night in calling the market higher today.  And unlike yesterday, today I got it right, with the Dow handing us a little 46 point bump.  Right now the market is clearly in a holding pattern awaiting the results of the upcoming meetings in Europe Thursday and Friday.  Accordingly there is absolutely no point in even reviewing the technicals.  Which way the market moves for the rest of this week will depend 100% on what news comes out of Europe.

The technicals

The Dow: OK, I can't help myself.  I will make a few comments about the Dow.  Today's little gain actually was significant in one respect - it marks the first time we've closed above the 12,165 resistance line since it was established a month ago.  That number now becomes support.  And remember that there are two more levels close by: the 12K psychological support and the 200 day MA at 11,945.

Also of note was today's high of 12,258, which marks the first scouting party on the 12,255 resistance level from October's high.  If the news from Europe is good, then this one should fall without too much trouble.  Then there's no resistance until 12,400, then 12,745, and finally the high of the year at 12,846.

If the news from Europe is bad, then we still have three good support levels close at hand.


We won't review anything else tonight.  While I'm a firm believer in consistency, I also recognize exercises in futility when I see them.  The futures are all flat and there's really nothing to go on right now.

     And the winner is...

No one.  Honestly, if you're got a bus being driven by an enraged chimpanzee, would you rather be on it, in front of it, or behind it.  Personally, I'd rather be the King of Siam.  If I had to make a guess, I'd say that the news from Europe is not going to be a total disaster, but that's pure speculation at this point. 

So tonight is one of those rare occasions where I do not make a call because there's no way to do so in a meaningful way.  We're just going to pull up a chair, relax, maybe do some Christmas decorating, and wait for the fireworks.

ES Fantasy Trader

Today we managed to snatch defeat from the jaws of victory on last night's long trade with a 9 point loss. Portfolio stats: the account is now $156,875 after 40trades (28 wins, 12 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier. Tonight we are standing aside.

BOT 10 ES false DEC11 Futures 1261.75 USD GLOBEX DEC 7 01:25:01
SLD 10 ES false DEC11 Futures 1252.75 USD GLOBEX DEC 7 12:14:36


 

More gains possible Wednesday

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

• Wednesday higher, medium confidence
• ES pivot 1255.33.  Holding above is bullish.
• Rest of week bias higher unless bad EU news..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went long at 1261.75.

Recap

Last night I said "the market" was going lower today.  It ended up being one of those mixed days you don't see all that often.  The SPX was essentially flat, the Naz did in fact fall just a tad, and the Dow actually gained 0.43%.  So I guess I was wrong, since I base my calls on the Dow.  We'll take a look at how this happened and see if it provides any clues for Wednesday.

Quote of the Day

“the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them... To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment.”

           - Leon Cooperman, Omega Advisers, in an open letter to President Obama

The technicals

The Dow: Today's candle was almost a carbon copy of Monday's.  The Dow made some good progress in its third attack on that pesky 12,165 resistance line, sending out a scouting party to a high of 12,216 and finally closing at 12,150.  The fact that we didn't go down today in the face of three candles that looked like reversal indicators is a positive.  It's also a good lesson of why you wait for confirmation after an inverted hammer, especially when it's not a classical example of that pattern.

Right now, the Dow looks like it's in "climb the wall of worry" mode and that's not a bad thing.   The last three times it took on the 12,165 level  This time we seem to be better positioned to actually break out.

The VIX: The VIX, finally below the 30 level, which I define as the brink of insanity, put in a small hanging man today.  Coming as it does after two strong green candles makes me wonder if the VIX has a lot of gas in the tank to motor any higher Wednesday.

Market index futures: Tonight we're seeing all three futures solidly in the green by over half a percent.  ES is up a decent 0.58% at 1:40 AM EST.  And most significantly, ES is now trading entirely above its 200 day MA at 1254.33.  Watch that number  now for support.  And watch 1265 for some minor resistance.  Then 1275, then 1285.  With yesterday's doji apparently resolving to the upside, it's looking promising here for Wednesday.

ES daily pivot: Dropped a bit today to 1255.33.  ES broke above the pivot just after the close today and has been drifting higher all evening.  With a seven point spread right now, it's looking good.  As long as we can hold above this, I'm encouraged.

     And the winner is...

Tonight it looks like the bulls.  The indicators are all overbought now but they're broken and have lost their predictive power for the time being.  My guess is that they're going to run 'em up guardedly into Friday's EU meetings.  If that works well, then we're going higher, possibly revisiting the July highs.  And if not, then we're going down, simple as that.  So I'm going to say that all things considered it looks like Wednesday's going higher.

ES Fantasy Trader

Today we took disappointing 11.5 point loss on last night's short.  Portfolio stats: the account is now $161,375 after 39 trades (28 wins, 11 losses) since inception on 8/18 with $100K.  Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we go long at 1261.75.. 
 

Tuesday lower

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

• Tuesday lower, medium confidence
• ES pivot 1256.42.  Holding under is bearish.
• Rest of week bias higher if 200 MA breached..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went short at 1249.00.

Recap

Today was another great example of how news-driven this market is.  Good news out of Europe this morning and the Dow shot up.  Bad news from S&P about Europe after lunch and back down we went.  Then at 3:30, a little mini-rally set in for some unknown reason.  But we did hold on for a positive finish, as I had expected last night.  Where next?  Let's see.

The technicals

The Dow: The Dow made another run at the 12,165 resistance line today for the second day in a row, and once again was rejected.  On the other hand, the 12,000 support held nicely, so we remain wedged between these two barriers for the time being.  If you ignore the last two days of small range action, what we saw today is a shooting star.  While that's a reversal indicator, it's not a particularly good one and it really requires confirmation.

The VIX: After three days of tickling its lower BB, the VIX finally came off it with a 1.16% gain today.  And its oversold indicators portend a higher VIX to come, and that's bad for stocks.  Whenever the VIX comes off the lower BB, it usually begins a march back to the other end.  There's clearly more upside to this chart than further downside right now.

Market index futures: Fortunately, the futures trade all the time so we can look for some confirmation there.  And right now they're guiding lower.  All three are in the red and ES is down nearly half a percent at 1:45 AM EST.  Just as the Dow was unable to clear its resistance today, so ES was unable to clear its 200 day MA at 1254.44.

This failure after two doji days and an inverted hammer today makes me think the market may need to back off a bit and get a running start for its next attempt at cracking 1254.  We're also right on the edge of the rising RTC.  Falling out of that would be bearish.

ES daily pivot: Took a jump from 1249.42 to 1256.42 today and that means that we're now below the pivot.  We need to see ES cross back over this level and right now it's not doing it, so that's not encouraging.

     And the winner is...

Hmmm, another tough call but I'm going to give this one to the bears.  After last week's big gains, we've not put in three sessions of mostly wheel-spinning and tonight we're actually seeing some declines fairly late in the overnight.  I'm just not feeling the love here so I'm calling Tuesday lower.  I think there's still more upside to come in December, but just not on Tuesday.

And the usual Europe/news/rumor disclaimer remains in force.

ES Fantasy Trader

Today we took a profit of exactly 10 points.  Just before noon it looked like the getting was good, and after the latest S&P Europe downgrade news hit right after lunch, I was glad I did.  Another good reminder that it never pays to be too greedy.

Portfolio stats: the account is now $167,125 after 38 trades (28 wins, 10 losses) since inception on 8/18 with $100K.  Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we go short at 1249.00.

BOT    10    ES    false    DEC11 Futures     1253.25    USD    GLOBEX    01:09:03

SLD    10    ES    false    DEC11 Futures     1263.25    USD    GLOBEX    11:11:59
. 
 

Monday higher unless bad EU news

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

• Monday higher, medium confidence
• ES pivot 1249.42.  Holding above is bullish.
• Rest of week bias higher if 200 MA breached..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went long at 1253.25.

Recap

Last Thursday night I called the market higher as long as the jobs number was BTE.  Well unemployment did come in better and the market did rally hard early but then spent the rest of the day giving back all those gains to finish essentially flat.  But the whole gestalt of the day didn't really feel all that bearish if you know what I mean.

The technicals

The Dow: The Dow has now spent two days waffling at the top of that big 497 point gain last Wednesday.  The good news is that it's retraced none of that.  The bad news is that we weren't able to clear the resistance at 12,165.  I think that's what Friday's gravestone doji was all about.  Still, without any confirmation, it's premature to call that a reversal sign.  And we do have not one but two support levels real close below: the 12K psychological level and the 200 day MA at 11,946.

The VIX: The VIX found its own support on Friday, bouncing off its 200 day MA of 25.34.  This marked its third day of touching its lower BB and that's fairly unusual.  However, the VIX now has some resistance around 28, just above where it closed Friday.  Thus it is in kind of a squeeze play that tends to reduce its volatility.  Just as cars slow down when two lanes merge into one, this helps to damp down the crazy jumps the VIX has been making of late and that can only be good for the markets, at least for a few days.

Market index futures: This is really the big news on a Sunday night.  All three are solidly in the green with ES up 0.76%.at 1:20 AM EST.  ES mounted an attack on its 200 day MA on Friday and was repulsed.  It appears to be mounting a second charge as I write this.  At 1252.75, we a re just under the MA at 1254.68.

The fact that we are continuing higher in ES after two doji days of indecision is quite positive for the markets.  And another positive is that OBV has come way down from its mid-November highs.  I do note that the stochastic is forming a bearish crossover but I think this is still an artifact of Wednesday's tall green candle.

ES daily pivot: Has now risen to 1249.42 from 1243.42, but with the price continuing to rise we remain above the pivot.  That's another positive sign.

     And the winner is...

Tonight, it's the bulls.  As long as there's no negative news from Europe tomorrow, I'll be looking for a higher close Monday.

ES Fantasy Trader

Friday we took a small profit of 3.75 points.  Portfolio stats: the account is now $162,125 after 37 trades (27 wins, 10 losses) since inception on 8/18 with $100K.  The portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we go long at 1253.25.

SLD 10 ES false DEC11 Futures 1244.00 USD GLOBEX NOV 30 16:47:48
BOT 10 ES false DEC11 Futures 1247.75 USD GLOBEX DEC 2 00:49:20
 

Friday higher if jobs BTE

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

• Friday higher, low confidence
• ES pivot 1243.42.  Holding above is bullish.
• Next week bias lower early, rebound possible later.
• Monthly outlook: bias down, on politics and technicals.
• ES Fantasy Trader went long at 1247.75.

Recap

Exactly as I expected, today we got a small range day with the Dow finishing down just 26 points.  In the absence of any major new announcements from Europe, this is pretty much what one would expect following a spectacular gain like we saw yesterday.  This now leaves us at an important juncture.

So let's get right to the technicals and see how they sort out for Friday.

The technicals

The Dow: More significantly perhaps is the fact that despite a small decline, today the Dow managed to hold above both the 12,000 support level and its 200 day MA at 11,948.  The Dow now has no resistance until 12,190 and two good support points just below today's close at 12,020.  That's not a bad spot to be in.

And while the indicators are now all looking overbought, remember that they become distorted whenever the market makes a sudden large move like we saw yesterday.  I don't think we're truly as overbought right now as the indicators, uh, indicate.

The VIX: The VIX finally broke back under its support at 30 yesterday on a big gap down.  Today it moved lower again, just a bit to close at 27.41.  This makes two days now its been tickling the lower BB.  The VIX rarely spends much longer than that there without rebounding, so I'm looking for it to start moving back up again soon.  This bodes poorly for the early part of next week.

Market index futures: At 1:05 AM EST all three are in the green by non-trivial amounts.  ES is up 0.42% and NQ is up exactly half a percent.  Whenever we see the pattern of big tall green candle followed by tiny doji just hanging at the top of the big gain, one has to wonder if the next move isn't going to be back down again.

ES still has a big barrier right in front of it, the 200 day MA at 1255.08. Next stop would be 1271 and then 1284.  Thing is, the doji is only a potential reversal indicator and requires confirmation.  And so far, we're getting some fairly convincing non-confirmation.  And there's still some room to run before that resistance.

ES daily pivot: Now 1243.42.  Despite taking another big jump up, the continued upward pressure on ES keeps us above the pivot one more night and that continues to be positive.

History: According to The Stock Traders Almanac,December is the no. 1 S&P and no. 2 Dow month of the year.  Then there's the time-honored Santa Claus rally to consider.  Now ol' St. Nick doesn't always show up, and sometimes he just leaves a piece of coal in our stockings, but right now I'm thinking this year he just might be bringing some presents to all the good little traders out there.


     And the winner is...

This is another tough call.  We're at a critical juncture here, poised on the brink of  a breakout but also sitting on some big gains that could easily be retracement fodder.  Today's doji reflects that.  Nevertheless, I'm giving this one to the bulls.  I do think we're going to see some more upside return on Friday, particularly if the jobs numbers come in BTE, which I'm guessing they will.  If not, look for lower.

ES Fantasy Trader

Today the ESFT was on the sidelines.  .With ES finishing the day off down just 0.02%, there wasn't much to be gained trading either way.  With a bit more clarity now, tonight we're going long at 1247.75.

Portfolio stats: the account remains $160,250 after 36 trades (26 wins, 10 losses) since inception on 8/18 with $100K.  The portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.

Thursday tough call, bias lower

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

• Thursday lower, low confidence
• ES pivot 1225.25.  Current price is well above.
• Rest of week bias uncertain, oversold rally not done yet..
• Monthly outlook: bias down, on politics and technicals.
• ES Fantasy Trader standing aside..

Recap

Wow.  I'll say it again: wow.  Today was exactly the reason why last night I wrote:

"I have to add the usual disclaimer that anything coming from Europe will move the markets regardless of what the technicals tell us."

Today Europe said "Jump" and the markets leapt.  The TA said down but we rocketed up almost 500 points for the best day in over two years??  As tycoon Osgood Fielding III said in Some Like It Hot, "Zowie!"

Not that I'm complaining - I'd much rather see that than calling the market up and getting down 500 (that's happened to me too).  Of course I called the market down today and was dead wrong but until Europe gets their act together, that's how it goes. 

Anyway, today's big move greatly complicates tonight's analysis.  Because of the distortions this threw into the charts, I'm just going to concentrate on the Dow and ES to see where we may be headed on Thursday.

The technicals

The Dow:Today was very significant for the Dow because in just one day, or really just the opening 15 minutes, we not only broke the 12K resistance but  punched back through the 200 day MA at 11,949 as well.

That said, the normal market pattern, and the pattern all this year so far except for one, is for any really large jump up to be followed by either a very small doji or hanging man, or else a profit-taking leg down.

Market index futures: The futures are basically unchanged tonight at 2 AM EST.  NQ is up 0.09% while ES is down just 0.12%.  These are the smallest moves at this hour I've seen in quite a while.  The fact that profit-taking has not immediately set in is encouraging in itself.  In fact, something set off a little mini-rally around 11:35 this evening.

This all leaves us in a quandary because while the Dow popped over its 200 day MA today, ES did not.  At 1244.25, it is still 11 points shy, and that number, 1255.46 is still resistance here.

ES daily pivot: Now becomes 1225.25.  Even after taking a big jump, we're still well above this number, so that's positive.

     And the winner is...

Hmm, a tough one.  I'm going to say the bears, mostly on historical comparisons.  We ran too hard, too fast for my comfort today.  I can't see much more upside available on Thursday, though I do think we're headed for a retest of the Dow's 12,170 resistance in the next week or so.  I note also that J-Trader's system is going short and he's been really good lately.  But I don't think we're going to see a major crash tomorrow either.

And yet again, I have to point out that it's all going to hang on what those pesky Europeans say or don't say.  And that's all I have to say.

ES Fantasy Trader

After going long at 1270.50 and regretting it ever since November 9th, I finally decided to use today's gift to dump that dog of a trade at 1244.00.  That leaves us with a 26.5 point loss, and I feel lucky to get that.  It was worse, much worse for a while there.

Portfolio stats: the account now $160,250 after 36 trades (26 wins, 10 losses) since inception on 8/18 with $100K.

Tonight we're going to stand aside and see how things develop Thursday before jumping in again.
 

Wednesday lower

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

• Wednesday lower, medium confidence
• ES pivot 1196.25.  Holding under is bearish.
• Rest of week bias uncertain, oversold rally not done..
• Monthly outlook: bias down, on politics and technicals.
• ES Fantasy Trader stuck long..

Recap

We opened up today as I expected last night, then see-sawed the rest of the session to finish up 33 points.  With no bad numors out of Europe today, the bears couldn't find an excuse to knock 'em down.

Tonight we're going to run the abridged edition of the Usual Suspects again and likely will continue as long as Europe continues to be running our show.

The technicals

The Dow: Today's small gain formed an inverted hammer and after yesterday's big advance that equals a shooting start.  That's a reversal indicator, though not a particularly powerful one.  Still it's worth paying attention to this.  The indecisive intraday zig-zag action gave the distinct impression of a market about to turn, especially considering the decreased volume today compared to Monday..

The VIX: Dropped 4.64% today to close just about its recent support at 30.  The last time it did this under similar chart conditions it popped higher the next day.  It could still go either way but I wouldn't be surprised to see it go higher on Wednesday.

VIX futures: I mentioned last night that the futures looked to be headed lower and they did just that today.  Tomorrow's direction is less clear.  We're still in the middle of the BB's and just at a support point.

Market index futures: All three are down tonight at 1:30 AM EDT.  ES is off a not insignificant 0.8%.  The overnight candle is forming a pattern close to an evening star and that's generally quite bearish.  This reinforces the feeling I get from the Dow's daily chart.

ES daily pivot: Now 1196.25 and we're now below it, having been drifting lower since today's close.  Another bearish sign.

     And the winner is...

Tonight I give it to the bears.  I think there' still more room to run up in the next week or so, just not on Wednesday.  After two decent days of advances, the market seems to be signaling a timeout.  We're due for a bit of profit-taking here.  But once again, I have to add the usual disclaimer that anything coming from Europe will move the markets regardless of what the technicals tell us.  It's not the best time to be s short-term trader.
 

More upside likely Tuesday

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

• Tuesday higher, medium confidence
• ES pivot 1185.50.  Current price is comfortably above that.
• Rest of week bias higher, oversold rally is here..
• Monthly outlook: bias down, on politics and technicals.
• ES Fantasy Trader stuck long..

Recap

Last night it looked like today was going to be up big and so it was, with the Dow up over 300 points for a while and finishing with a 2.59% gain on some positive numors (that's news and rumors) from Europe.  It was one of those days where almost all of the action was over in the first two minutes of trading.  Then it drifted lower most of the afternoon before finishing with another strange little 56 point burst in the final five minutes. 

The technicals

The Dow: Today's solid green candle was enough to propel us right out of the descending RTC from November 14th.  The losing streak is therefore snapped and I'm changing the swing trend arrow to "trend end".  This action signals a bullish setup on the daily chart.  If we close higher again tomorrow, that will be the trigger for even more gains.  Today's big move was eeven more impressive considering that it came on the highest volume of the entire month so far.

The VIX: Gapped down on a very tall doji that left it in the Twilight Zone, halfway between BB's with a 6.79% drop.  It's not clear to me what this means.  The VIX could honestly go either way from here.

VIX futures: While the futures also gapped down today on an odd green candle, there's a bit more clarity here.  They have now fallen out of a rising RTC and their indicators have peaked overbought.  This portends lower, implying a lower VIX and therefore higher stocks.

Market index futures: Once again we've got all three solidly in the green, though not as much as this time last night (1:20 AM EDT).  ES is up 0.6% which is still quite respectable.  We have the same bullish setup as the Dow, with ES trading out of its descending RTC today.  The new candle now forming is solid green indicating decent follow-through.  With its indicators finally coming off oversold levels, I'm liking this chart right here.

ES daily pivot: Now 1185.50.  Even though that's a big jump up from today, ES is still above that at 1198.  The next resistance isn't til 1213, so this is looking good too.

Sentiment: Once again, the new Ticker Sense Blogger Sentiment Poll came out today.  The number of bears is up to 48% while the bulls have decreased to 33%.  I'm sure at least some of this move has to do with last week's Europe mess and the Super Committee's public ritual suicide.  Unfortunately, these numbers aren't quite extreme enough to draw any sort of contrarian conclusions.

In any case, for the second week in a row I voted negative.  Since this is a poll of where the SPX will be 30 days from now, I use the monthly charts to make my decisions.  And what I'm seeing now is the tall green candle from October being overshadowed by a a November candle that's looking almost like a dark cloud cover in November.

That's going to set up an interesting battle in December, historically a strong month.  Santa may show up after all, but this is not the sort of monthly follow-through from October that I'd like to see heading into December.  But the charts may not count for much since out markets are still being controlled by the Europeans.

     And the winner is...

Once again, I have to hand it to the bulls.  The bears have apparently all gone into hibernation.  Right now, it's looking like more gains are in store Tuesday.  If that happens, then the rest of the week bodes well too.  There's been a lot of shorting going on in the broader market over the last few weeks, so I'm sure that there will be some short-covering helping push prices higher at least a bit longer.

ES Fantasy Trader

Nothing to see here - I'm still waiting for the SS Nautilus to come back to the surface.
 

Monday higher

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

• Monday higher, high confidence
• ES pivot 1167.83.  Current price is comfortably above that.
• Rest of week bias uncertain, oversold rally is overdue..
• Monthly outlook: bias down, on politics.
• ES Fantasy Trader stuck long..

Recap

After watching Greece, Spain, Portugal, Italy and then Germany all take turns tanking the market, last Thursday I wrote "how many countries are there in Europe?  I don't think we're going to see an end to this until they're all had a whack at the stock market."  It was mostly in jest, but wouldn't you know it, the next day we got news that Hungarian bonds had bombed and that there was trouble in Belgium.  Belgium?  A country barely larger than Maryland, the 8th smallest state, that I'll bet most people have trouble finding on the map?

OK, well anyway, that's two more down.  Who's next?  Monaco?  Andorra?  The Dutchy of Grand Fenwick?  In any event, Friday was indeed down as I called it, though with such light trading it's hard to draw any conclusions.

The technicals

Tonight though is quite a different story.  There are really only two things that matter here, the Dow and the futures, so let's get right to them.

The Dow: One good thing about Friday's action was the print it left on the chart - a nice inverted hammer with some support just below it at 11,206.  And in extending the Dow's losing streak to 9 (yes, I know there's one day on the 18th when we had a tiny gain), it makes a bounce even more overdue.  I've written about streaks in the past, and 9 is getting up there.

Good news, everyone!

Market index futures: Here's the key.  Right now, at 1 AM EST, all three futures are solidly in the green with ES gapping up to the tune of just over not one but two percent.  Once again it's news and rumors - I'm going to call them numors out of Europe.  Only this time it's good news for a change.

In fact this gain is already large enough to propel us right out the edge of the descending RTC we've been stuck in since November 15th.  That in itself is a bullish setup.

Obviously that can all change at the drop of a hat, but we very seldom see the futures up this much at this hour without having a good day follow.  Mr. Market, like Mikey, likes it. This is worth paying attention to.

ES daily pivot: The pivot has fallen to 1167.83 and ES has finally moved above it at 1177.25.  This is a comfortable edge going into Monday's session.

History: According to The Stock Traders Almanac,the Monday after Thanksgiving is historically positive, as is the entire week for that matter.

     And the winner is...

No need to add 'em up tonight.  It looks reasonably certain to me that we're going higher Monday.  Whether this is the start of an uptrend or just a one-shot remains to be seen, but hey, I'll take it.

Friday lower

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

• Friday lower, high confidence
• ES pivot 1163.00.  Holding under is bearish.
• Next week bias uncertain, oversold rally is overdue..
• Monthly outlook: bias down, on politics.
• ES Fantasy Trader stuck long..

 Happy Thanksgiving!

The Night Owl wishes all my readers a happy Thanksgiving.  And despite all the terrible things happening today in our markets, our country and around the world, we still have a lot to be thankful for in America.

Tonight is going to be an abbreviated holiday edition of the Night Owl Trader mostly because everyone is no doubt either watching TV and digesting turkey, or out battling the Black Friday mobs.  For me, I'm just going to take it easy tomorrow.

Although the market will be open for half a day, there will be little to learn from the action regardless of which way it goes.  All the big players are taking the day off and I firmly believe we should emulate them.

Recap

Tuesday night we were right at a support level but I called Wednesday lower anyway and that's unfortunately what came about with the Dow diving another 236 points.  My screens were literally awash in red.  It was real ugly.

The technicals

The Dow: Closed for Thanksgiving.  That's one way to get a day where the Dow doesn't go down - we can be thankful for that.  Will this one day timeout give the bulls a chance to regroup and drive the market up in Friday's short session as is historically the case?  Let's check the futures for some clues.

Market index futures: Well stocks were closed but the futures soldiered on today, putting in a small doji in the abbreviated Thanksgiving session.  Any hope that might signal a reversal though was dashed when trading resumed this evening and ES promptly resumed its march lower.  This time, apparently Germany was the culprit.  Um, how many countries are there in Europe?  I don't think we're going to see an end to this until they're all had a whack at the stock market.

Anyway, all signs now point to continued lower on Friday.  ES, now at 1153.50 at 1:15 AM EDT has no support til 1122.  The indicators are all lying broken on the floor.  RSI has now hit zero for the second day in a row after 10 straight down days.  And there are still no reversal signs in the candles.  We remain firmly entranced in the descending RTC.  I'm saying we're going lower tomorrow but I'm not even going to bother with it.  I need a break.

Wednesday looking lower on politics

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

• Wednesday lower, medium confidence.
• ES pivot 1187.00.  Holding below is bearish.
• Rest of week bias lower, on US & EU politics.
• Monthly outlook: bias uncertain on politics.
• ES Fantasy Trader remains stuck long.

Recap

Another miserable day on the Street today.  It looked for a while like the ECB might come to my rescue and make the day finish higher as I was calling for but that rally attempt fizzled right after lunch and back down we went for another 54 points lower in the Dow.

The technicals

The Dow: Today's drop took us to quite oversold levels and made two days we're bumping along the lower BB.  The last two times that happened lately, we rallied the next day.  Unfortunately, the time before that was the giant summer swoon from July through August, when the Dow spent a full eleven sessions hugging a lower Bollinger band that kept falling away from the market.  Let's hope this isn't turning into that.  And uh oh, I used the "h" word, something I normally avoid.  When you start pinning your strategy on hope, you're in trouble.  And this market sure looks like it's in trouble right now.

Of course part of the problem is the thin trading due to the holiday week. Volume has been declining for the last three sessions as all the "banksters" pack up and head for the Hamptons to gobble their turkeys.

The VIX: One thing I did get right last night was to call for a lower VIX and sure enough, it went down 2.86% today.  Given the leading indicator qualities of the VIX, this is about the one bright spot I can find in the charts as a lower VIX should mean higher stocks.

ES daily

Market index futures: This is the Chart of the Day, and a thing of beauty it is not.  Nothing but down for almost eight straight sessions now (the 15th saw a puny 2.5 point gain, so that might as well be down).  At this point, it's time to start talking about streaks again.  This down streak is now longer than anything from the waterfall crash back in July and the market is as oversold now as it was after that.  And yet this chart is looking like the market that has fallen and can't get up.  The candles are locked into that descending RTC like a train on rails.

The only good thing here is that 1169 is another support level and that seems to have held in the overnight, so far at least (at 2 AM EDT).  But with all three futures down about a full percent, Wednesday's not looking good.

ES daily pivot: Now 1187.00 but even as the pivot comes down, ES seems to just fall away from it.  We're not going to catch a reversal this way.  Ugh.

     And the winner is...

Europe.  Not the bulls, not the bears, it's all about Europe and the Pain in Spain, which causes no one's gain.  Until we get a hint of good news out of Europe, you can just fuggedabout it.  Technically, we're overdue for a bounce any day now, but it simply doesn't seem to want to happen.

I'm not going to the Hamptons, but I am completely sick and tired of this nonsense.  I'm taking the rest of the week off.  The only good thing here is that eventually, there may be some bargains around but I'll leave the falling knife to the turkey, thank you very much.

ES Fantasy Trader

The ESFT is now underwater in the same way as the Trieste exploring the Marianas Trench.  I can only assume that eventually it will have to come up for air.  In the meantime, well, I'm on vacation.
 

Tuesday higher

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

• Tuesday higher, medium confidence. Bull-bear ratio is 4:0.
• ES pivot 1193.42.  Holding above is bullish.
• Rest of week bias uncertain, on US & EU politics.
• Monthly outlook: bias uncertain on politics.
• ES Fantasy Trader remains long.

Recap

I had a bad feeling about today despite a majority of last night's indicators looking bullish.  Turns out my instincts were correct as the Dow handed us a nasty 249 point dump amid continuing uncertainty in Europe and the comedic antics of our very own Twelve Stooges in Washington.  And you super-committee-ians are earning a paycheck for what exactly?  Where is Donald Trump when you need him to tell you you're all fired?

But before I tell you how I really feel, let's look at the charts to see where Tuesday might lead.  Tonight we again concentrate on just the Big 4.  And I am deliberately excluding the commodities and historical effects I normally consider because of their erratic behavior lately.  I find this helps cut down on the noise when the VIX is at elevated levels. 

The technicals

The Dow: As I suspected, the Dow chart last night was looking a bit queasy.  And so today it barfed up a gob of points to take us right to the lower BB.  The last two times a big drop took us to that level, we rallied the next day.  A stochastic finally making a bullish crossover tends to support that view, so +1 bulls.

The VIX: Put in an unusual dark cloud cover on a gap-up red candle today.  So while the VIX did gain 2.8% today, it was almost all right out the gate with the rest of the day retracing.  I know I called for a lower VIX today and didn't get it but tonight the case is much stronger for lower tomorrow, so +1 bulls

Market index futures: Unlike last night, right now all three are actually in the green by non-trivial amounts, with ES up 0.44% at 1:15 AM EST.  There's support at 1191 and the indicators are all now quite oversold.  The stochastic has completed a bullish crossover and OBV has bottomed.  Having now hit the lower BB, I think we're due for a bounce from here, so +1 bulls.

ES daily pivot: Now 1193.42.  We've finally moved above the pivot, or more to the point, the pivot has moved below the current price of 1195.50.  The pivot is now support, so unless we cross back under, it's looking good for Tuesday.  +1 bulls.

     And the winner is...

It's all bulls, 4:0.  I'm not ready to call it a trend, but I think we're due for an oversold bounce on Tuesday.  That's it in a nutshell.


ES Fantasy Trader

Last Friday I said that sometimes you just have to take the heat.  This trade is starting to get pretty hot though.  Ouch.  Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.  

More downside likely Monday

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

• Monday lower, medium confidence. Bull-bear ratio is 4:2.
• ES pivot 1217.50.  Holding under is bearish.
• Rest of week bias uncertain, on US & EU politics.
• Monthly outlook: bias uncertain on politics.
• ES Fantasy Trader remains long.

Night Owl News

The Night Owl now has email.   If you prefer to contact me directly by email instead of leaving a comment on the blog, just send to nightowltrader (at) gmail.com.   I'll be checking that regularly.

Recap

My call for Friday was correct, with the Dow gaining 25.4 points.  OK so the SPX lost all of half a point, but that's really basically unchanged.  And I don't usually follow the Nasdaq which dropped 0.6%  In any event that sort of decorrelation was sort of to be expected for an expiration day.  In any event, Mr. Market remains totally fixated on Europe.  The latest news is that the Spaniards seem to have given the Socialists the boot.  Let's see if that will give us a boost on Monday.

The technicals

The Dow: Last week's dismal performance took us right back down to recent daily support.   The fact that the bears were unable to push the market below the 11,750 level is encouraging.  On the other hand, the weekly chart isn't looking nearly as good.  All of the indicators have now peaked at overbought levels and are headed down, with the stochastic just finishing  a bearish crossover.  Indeed, the notable factor here is the Dow's continued inability to push much over 12,170 going back four weeks now.

And if that wasn't bad enough, the Dow fell out of its weekly rising regression trend channel.  Note also that the two previous weeks formed a hanging man candle and then this past week, boom - down we went.  I'll say it again, one hanging man, bad; two hanging men, double bad.

But on a daily basis at least, Friday's inverted hammer is a reversal indicator, so +1 bulls.

The VIX: After touching its upper BB on Thursday with a bearish shooting star, the VIX did indeed decline on Friday as I predicted.  The second inverted hammer it formed signals continued downward pressure and the stochastic is executing a bearish crossover.  This points to a lower VIX Monday, so +1 bulls.


VIX futures: This chart is not as clear as the VIX itself.  I see at least a possibility of lower futures Monday but I'm not confident enough to award any points here.

Market index futures: Are all in the red once again at 1 AM EST.  ES is doing the worst, down about three quarters of a percent.  Worse, they gapped down this evening to open under support at 1213.  Next support, psychological at 1200, then technical at 1193.  On the plus side, we've now hit the lower BB and the stochastic is more oversold than it's been since July.  On the minus side, that doesn't guarantee a reversal Monday.  And the depth of the overnight drop makes me pessimistic here, so +1 bears.

ES daily pivot: Now 1217.50.  We're quite below this now at 1203.50.  ES is going to have a tough job breaking through this pivot, so +1 bears.

Dollar index: Put in a big hanging man on Friday that did not manage to advance beyond Thursday's high.  That looks toppish to me.  RSI has peaked at overbought levels and the stochastic is making a bearish crossover.  Absent any new unexpected jerking around by Europe tomorrow, the dollar should go lower and that makes it +1 bulls.

Oil: Following a bearish engulfing pattern Thursday, on Friday oil fell out of its rising RTC from October 4th, stopped only by its 200 day MA at 97.15.  I think oil may have topped here and has plenty of room to run lower Monday.  Unfortunately, oil has lost its market correlation, so no points.

Copper: Hit its lower BB on Friday along with very oversold indicators.  Unfortunately, copper has displayed the ability to slide down the lower BB rather than bounce off it this year, so I'd be cautious about this being a reversal indicator.  I want some confirmation.  If Monday is up, then I think Tuesday will be also.  But no points for now.

Morningstar Market Fair Value Index: Last Friday the index was unchanged at 0.86, so no points here.

History: According to The Stock Traders Almanac,the Thanksgiving holiday week is historically positive and improves as the week goes on, so +1 bulls.

     And the winner is...

The bulls, with a bull-bear ratio of 4:2.  However, with continuing disruptions in Europe and with a looming deadline for the 12 Stooges on our super-committee of fools more interested in playing politics than helping the country here at home, I'm going to exercise my veto over the B-B numbers and call Monday lower.

ES Fantasy Trader
Last Friday I said that sometimes you just have to take the heat.  This trade is starting to get pretty hot though.  Ouch.  Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.  
 

Friday due for a bounce

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

• Friday higher, low confidence. 
• ES pivot 1221.0.  Breaking over is bullish.
• Next week bias uncertain, depends entirely on Europe.
• Monthly outlook: bias up on technicals and seasonality.
• ES Fantasy Trader remains long from last week.

 Recap

Well things were looking good for a while there this morning until those pesky Europeans put the kabosh on the market, sigh, once again.  In true tag-team fashion, the Greeks handed off to the Italians who passed it on to Spain this time.  Meanwhile, our markets sink while they play musical leaders.  Where is R. Lee Ermey when you need him?  I want to send him over there to shout "What is your major malfunction?!"

In the meantime, we managed to snatch defeat from the jaws of victory with yet another loss, this time 135 Dow points.  Let's now run down the few remaining technicals that still seem to make any sense at all to come up with a direction for Friday.

The technicals

The Dow: Today's drop left us just under support at 11,780.  It also left the indicators in a considerably more oversold condition than they were the last two rallies we had this month.  This of course does not mean that we can't still go lower, but it would appear we're closer to a bottom than a top right now.  Today's drop also took us very near the lower BB.

The VIX: In a comment on a recent post, Daniel commented on the power of the Bollinger band.  Well today the VIX shot up, hitting a high of 36.46.  Today's upper BB?  36.54.  Once that level was hit, the VIX turned around and finished with just a 3% gain on the day at 34.51.  Once again I will point out that most often when the VIX touches its upper BB, it goes lower the next day.

There's no reason to think this time will be different, particularly since today's candle was an inverted hammer.  Although my call for a lower VIX today last night was a bit premature, the combination of a hanging man followed by an inverted hammer is a much better reversal indicator than either one alone.  We saw this at the end of June 2010 and the next day gapped down.

Market index futures: All three are running in the red tonight at 1:05 AM EST though not hugely, with ES down 0.14%.  However, there are three factors in play tonight that weren't there last night.  First, the RSI has now reached oversold levels and appears to have bottomed.  The last three times we were in a similar position this year, ES rallied hard the next day.  Second, while we broke the 1222 support level today, the next level down at 1212, held  Third, today's low took us to the lower BB and while we're down from the day's close right now, we have moved off the lower BB.  That is also positive.

     And the winner is...

At the risk of sounding like a broken record, I'm going to call for a higher close Friday.  We're now below levels from which previous rallies have happened after big drops.  It just feels like we're due for one.  Note also that Friday is options expiration and that the Dow is up 6 of the last 8 on this day.  In 2008, in the depths of the Great Recession the Dow gained 494 points on this day according to The Stock Traders Almanac.

ES Fantasy Trader

My decision not to let this one go is proving costly in the short run but I'm going to hang in there.  Sometimes you just have to take the heat.  Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.  

 

Futures point to higher Thursday

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

• Thursday higher, low confidence. 
• ES pivot 1240.08.  Breaking over is bullish.
• Friday bias up, depends entirely on Europe.
• Monthly outlook: bias up on technicals and seasonality.
• ES Fantasy Trader remains long from last Thursday.

Recap

Well we seem to be back on track, for now anyway.  My idea of filtering out some of the noise seems to have helped and as I expected, the Dow did close lower today by 191 points.  So I'm going to continue along these lines tonight, looking more at the forest than the trees to try and figure out which way this market may be hiking.

The technicals

The Dow: Today's close at 11,906 was right at a support level after a very odd session featuring two big cliffs separated by a gentle upslope - all related to Europe i one way or another.  There remains a big symmetrical triangle forming, going back to October 28th.  I'm still expecting a resolution to the upside within a few days.

The VIX: The VIX popped out of its own triangle, but it was to the upside.  This does happen about 25% of the time.  The "exit in the same direction as entry" rule isn't perfect.  However, today's 7.3% pop came in the form of a hanging man which provides at least some expectation of going lower tomorrow which would be good for stocks.

Market index futures: All three are in the green tonight at 2 AM EST by nearly half a percent.  ES has been rising since about 8 PM this evening and looks to be getting primed for a run at the new pivot.  Note also that today's low stopped short of recent support around 1225.  Catching some traction from 1230 is a good sign.  The indicators are also now approaching oversold levels, with the exception of OBV which is running quite high.  Overall though, being as we are now at the bottom of the recent trading range and near support, I'd say ES has a better chance of advancing tomorrow.

     And the winner is...

The bulls.  I'm starting to see various charts moving enough out of the dangerous middle ground to areas from which reversals become more likely.  I can't say this is the start of any trend, but I'm feeling better about our chances for tomorrow so I'm going to call Thursday higher.

ES Fantasy Trader

Gosh, this is the trade that wouldn't die.  We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.  
 

Wednesday looking lower

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

• Wednesday lower, low confidence. 
• ES pivot 1250.08.  Holding below is bearish.
• Rest of week bias uncertain, depends entirely on Europe.
• Monthly outlook: bias up on technicals and seasonality.
• ES Fantasy Trader remains long from last Thursday.

Recap

Europe explained, by M.C. Escher

In a great comment to last night's post, reader Daniel corroborates my feelings that TA is failing us lately.  He also notes that the Italian and Greek situation is very complex, which is about all I've been able to figure out myself.  As far as I'm concerned, it's beyond merely complex; it's positively baffling and incomprehensible.

So tonight I'm bringing back a metaphor I first used on September 14th, also about this very topic.  Since then nothing much seems to have changed.  The players are pretty much all still walking upside down sideways up the down staircase.  Just what exactly is going on over there in Europe anyway?

The technicals

Dow daily

The Dow: Last night was the first time in a long time I just threw up my hands and couldn't make a call.  Turns out not making a call was actually a pretty good call as the Dow put in an extraordinary long symmetrical doji that ended up a mere 17 points after a whole day of bobbing and weaving.  Things don't get any more indecisive than this.

Just look at it: the upper bound was limited by the exact same resistance that stopped us four of the last five sessions (blue line) and the lower bound was just above the 200 day MA.

The other interesting point here is that you can see a developing triangle here too. In his comment, Daniel opines that another move up is in the cards and I tend to agree.  The only question is when.

VIX weekly

The VIX: As an example of how screwy this market is, today the major averages were up and the VIX was also up.  That's quite unusual.  And since the daily charts are such a tough read, I'm once again backing out to the weekly chart.

And look at this: yet another symmetrical triangle on the weekly chart.  These things seem to be popping up everywhere lately.  And since this one was entered from above, one would expect the resolution to be lower, and that would be quite bullish for stocks.

Japanese candlesticks, Dow 2011 style

Due to the recent technical uncertainty, tonight I'm going to take a pass on the rest of the Usual Suspects.  At this point I think we're just dabbling in noise and they're confusing the issue more than they are clarifying it.  The only real guidance I'm seeing tonight is from the futures and they're all headed south.


     And the winner is...

Well we'll still nominate a winner for Wednesday.  Even without computing the bull-bear ratio, the overall impression I'm getting is that technically we're due for a lower close Wednesday.  But I'm also expecting some upward movement pretty soon, maybe by the end of this week.  I guess we'll just have to see if the new leader of Italy can deliver the full Monti.

ES Fantasy Trader

We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.  
 

Tuesday too tough to call, watch EU news

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

• Tuesday uncertain, no confidence.  Bull-bear ratio is 4:4.
• ES pivot 1255.58.  Holding below is bearish.
• Rest of week bias uncertain, depends entirely on Europe.
• Monthly outlook: bias up on technicals and seasonality.
• ES Fantasy Trader remains long from last Thursday.

Recap

Once again, the 12,180 barrier proved too tough a nut for the Dow to crack today, ending with a 75 point loss.  My call last night was indeed derailed by Italian bond yields, or maybe it was Spain - at this point it doesn't really matter much.  I can only point out that I did mention Europe would be the deciding factor, as it's been for quite some time now.  We'll run down the technicals again tonight, though I'm afraid it's getting to be little more than a, ahem, technical exercise.

The technicals

The Dow: Today's 75 point drop made a pretty non-descript candle, not quite hanging man, not quite dark cloud cover.  I'm not really sure what to make of this.  My instinct though is that this could easily get pulled either way depending on, that's right, Europe.  Sorry to be a broken record here but that's just the reality of it.  Accordingly, I can't really award any points here though my personal bias is down on this chart.

The VIX: For the second day in a row, the VIX moved in gap fashion, this time gaining 3.6% to form a tall inverted hammer.  While this pattern isn't the greatest reversal indicator, I note that the stochastic made a bearish crossover today and that is a good indicator.  The whole configuration of this chart really reflects the mood of the market, jumping about every which way every time some news flash or another comes out.  Technically, I'd say the VIX has a shot at going lower from here on Tuesday but being as we're still stuck in the Twilight Zone between the BB's, I'm not real confident about it.  I will though give it +1 bulls anyway.

VIX futures: A similar story to the VIX itself here.  I do see though that often when the futures put in an inverted hammer, the next day is lower.  On that basis, I'll give this one +1 bulls.

Market index futures: All three are in the red at 1:25 AM EST with ES down 0.28%.  Today's action formed a classical dark cloud cover that failed to break over the 200 day MA.  That's not a good sign, so I'm afraid this chart is +1 bears.

ES daily pivot: Actually rose to 1255.58 tonight.  After bumping into the old pivot at 1253.33 at 7:30 this evening, ES has just been drifting around vaguely lower.  It's looking like it's rather lacking in conviction.  As long as ES is unable to mount an effective run on the pivot, that's going to be bearish for Tuesday, so +1 bears as of now.

Dollar index: The dollar continues its herky-jerky ways, rising today almost as much as it fell on Friday, all  for no apparent technical reason.  I said it last night and I'll say it again - I'm not touching this one.  No points for you.

Oil: Last night I wrote "I can only assume oil will go higher again on Monday." and so it did.  Only this time it was not good for stocks.  Oil went up, the market went down.  We may be reaching the price level where rising oil is bad for stocks and it goes into a negative correlation with the market.  In any case, the same factors are in play tonight, so I'm going to look for another rise tomorrow which if my conjecture is correct would now be bad for stocks, so +1 bears.

Copper: Cu continued narrowing its range today, going along with my theory of a symmetrical triangle.  If this triangle is going to pop, it's going to happen soon.  My guess is by Wednesday.  On that basis, it's +1 bulls.

Morningstar Market Fair Value Index: On Friday the index rose from 0.88 to 0.89, so +1 bulls.

History: According to The Stock Traders Almanac,Tuesday has a negative bias, so +1 bears.

     And the winner is...

A tie - with a bull-bear ratio of 4:4.  And that really sums up my feelings about the market right now.  I do note that J-Trader is calling for a strong buy for Tuesday - I'm just not seeing it.  It isn't often that I don't make a market call for the next day but this is going to be one of those times.  This one is just too tough for me.

My best advice is to watch the pivots.  If you like the Dow, that one will be a bit under 12,075.  The SPX somewhere around 1252.  If the market can break above these numbers, we have a shot at a higher close.  If we bounce off, we're closing lower.  And as usual, did I mention that news from Europe is controlling everything right now?

ES Fantasy Trader

We still continue to hold the long position from last week.. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.  

Calling Monday cautiously higher

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

• Monday higher, medium confidence.  Bull-bear ratio is 5:0.
• ES pivot 1253.33.  Remaining above is bullish..
• Rest of week bias uncertain, depends entirely on Europe.
• Monthly outlook: bias up on technicals and seasonality.
• ES Fantasy Trader remains long from last Thursday.

Recap

Well I finally got one right last Friday, although I can't claim too much credit - with this crazy market it's pretty much the luck of the draw.  Today we got a well-written thoughtful comment from alert reader Daniel (see the comments to last Friday's post below) in which he says "Within that range, brave prognosticators such as yourself have tried to discern a pattern from day to day or in short swing timeframes, in a Market where the day-to-day changes could have been sent to StockCharts by a random-number generator."

I don't know if it's bravery or lunacy that brings me to wade into this minefield every day, but all I can do is analyze the charts.  But Daniel is right - with a market that's hanging on every bit of news, every rumor of a rumor, and every hint of a rumor of news out of Europe, doing TA is pretty much a crap shoot.  As long as the news wires remain quiet, we usually do pretty well.  Keep that in mind as you read along this evening.  (And do read Daniel's comment - his analysis is excellent).

The technicals

Dow monthly

The Dow: On Friday the Dow shot up to its resistance point around 12,100, closing near its high.  I can't really fault it for not breaking this level given that it had already advanced 260 points.  But it does leave us in a quandary for Monday.  Two green candles are bullish and we handily broke both the 12K resistance and the 200 day MA at 11,976.  Interestingly, the Dow has visited the 200 MA in 9 of the last 11 sessions.  Each time this happens, it loses some of its character as a barrier, either up or down.  Just mentioning...

But the chart I really want to look at tonight is the Dow monthly here.  This is the basis on which I've been voting bullish in the Ticker Sense weekly sentiment polls lately (and for the record, I did so again in tomorrow's poll).  Note the five consecutive months of declines beginning in May and ending in September.  That coincided with a bottom in the indicators  October broke the decline in a big way and took us just to the right edge of the declining regression trend channel.  The action this month so far at least is a bullish setup.  I know its dangerous making predictions on the basis of a half-baked candle, but that's all we've got right now.

The other big thing about the candles here is that October formed a classic bullish engulfing pattern.  You don't often see this on a monthly chart.  I had to go back to November/December of 1991 to find something similar and that was followed by five months of further gains.

So bottom line, I'm going out on a limb to give this one +1 bulls for Monday because of the resistance on the daily chart, but with the longer term support behind us as well as the end of year seasonality, I'm a bit more confident.  If my system had it, I'd give this one maybe 2/3 bulls.

The VIX: Ah the VIX, the King of indicators.  All hail the VIX!  After touching its upper BB last week, it retreated and gapped down 8.4% on Friday to form a small doji.  That alone raises the possibility of a reversal on Monday.  And if you take out Thursday's odd spiky candle, it's looking like a bullish doji star.  Also, Friday closed right at 30, which has proven to be support recently.

But the VIX also ended right in the center of the Twilight Zone, that area in the middle of the Bollinger bands.  And with the volatility of the VIX itself remaining abnormally high since August, it is premature to call a higher VIX on Monday on this basis.  The best I can say is that we have a bullish reversal sign that requires confirmation.  That should come tomorrow.  So I can't give any points yet.

VIX futures: When the VIX lacks clarity, we seek it from the futures.  Unfortunately, this chart looks a lot like the VIX itself.  Even moving out to the weekly chart is of no help since that is simply a great big doji of indecision.  Too hard to call, no points.

Market index futures: I'm a bit encouraged this evening to see all three futures are up, with ES being up 0.4% at 1:45 AM EST.  Seeing some follow-through after Friday's big gain is a good sign.  So is the fact that ES opened today with a gap up over its 200 day MA of 1261.28.  That's our new support.  The indicators mostly continue to rise (RSI being the exception) but I'm wary of them right now - they tend to get distorted when the market has big swings like we saw last week.  Nevertheless, I'm feeling the love here, so +1 bulls.

ES daily pivot: Now 1253.33.  With ES now at 1268.00 we have a fair cushion against the pivot.  This is the sweet spot - not close enough to risk falling through and not far away enough to be overextended.  I'm liking it, so +1 bulls.

Dollar index: The poor dollar is really getting jerked around by the European brouhaha.  Last week it was up big and down big.  Sorry, I want nothing to do with this chart tonight - no points.

Oil: Broke over its 200 day MA on Thursday and did not retreat on Friday.  Oil remains firmly in a rising regression trend channel from 10/4/11.  There is now no resistance until 100.  With its indicators all broken-overbought, I can only assume oil will go higher again on Monday.  Higher oil is still good for stocks (for the time being anyway), so this one is +1 bulls.

Copper, weekly

Copper: After holding support on Thursday with a stubby doji that held support of its previous low, copper executed a nice bullish piercing pattern on Friday.  And speaking of symmetrical triangles as we've been recently, note the nice one forming on copper's weekly chart here.  Since these tend to resolve in the direction of entry about 75% of the time, this would imply that copper could be due for a breakout as early as this week.

This triangle is getting about as coiled as it can get.  It's looking about ready to blow any day now.  And as alert reader Daniel notes, "triangularity of any kind usually resolves in the prior major direction, and given the kaboom of October that still has to be seen as UP. And that UP must be especially respected as we come into year-end Bonus angst time". 

Note also that last week closed just about at the 50% retracement of the big jump three weeks ago and attempts to drive it lower in the past two weeks failed. On this basis, I give copper +1 bulls.

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

History: According to The Stock Traders Almanac,the Dow was down 7 of the last 11 on the Monday before November expiration.  However, they rate the day bullish.  To me, this sort of cancels out, so I'm not giving any points here.

     And the winner is...

The bulls, with a bull-bear ratio of 5:0.  While the shut-out is impressive, the low score strikes a cautionary note.  In fact, the astute J-Trader closed out his long position on Friday but did not go short.  But the Night Owl rarely equivocates, so tonight we move a bit further out on the limb than usual and call for a higher Monday, modulo the usual noise out of Europe.  That's all she wrote (that's enough!)

ES Fantasy Trader

We continue to hold the long position from three nights ago.  My decision to hold once again on Friday was a good one and we have no recovered almost all of the loss (the Italian job) on this trade. Portfolio stats: the account still remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.