Tuesday maybe a bit higher

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

Morningstar Market Fair Value Index: No update given today.

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

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

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1

1/9         56        37        +     1278   2/2

1/17        41        33        +     1289

1/23        46        32        +     1315

1/30        48        31        +     1316

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

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

     And the winner is...

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

ES Fantasy Trader

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

Monday likely lower

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

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

Recap

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

The technicals

Dow daily

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

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

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

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

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

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


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

     And the winner is...

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

ES Fantasy Trader

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

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

Friday likely lower

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

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

Recap

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

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

The technicals

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

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

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

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

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

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


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

     And the winner is...

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

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

ES Fantasy Trader

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

Wednesday uncertain

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

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

Recap

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

The technicals

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

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

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

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

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

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

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


Accuracy:

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


     And the winner is...

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

ES Fantasy Trader

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

Wednesday uncertain, watch Fed

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Tuesday looking lower

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

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

Recap

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

The technicals

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

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

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

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

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

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


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

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1

1/9         56        37        +     1278

1/17        41        33        +     1289

1/23        46        32        +     1315

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

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


     And the winner is...

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

ES Fantasy Trader

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

Monday may move lower

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader





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

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

Friday likely lower

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

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

 

Thursday maybe a bit higher

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

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

Of note


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

Recap

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

The technicals

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

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

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

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

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

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

     And the winner is...

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

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

ES Fantasy Trader

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

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

 

Wednesday looking lower

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

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

Recap

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

The technicals

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

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


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

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

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

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

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

Week   % Bullish  % Bearish  NightOwl SPX

1/3         46        21        +     1258

1/9         56        37        +     1278

1/17        41        33        +     1289

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

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

     And the winner is...

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

ES Fantasy Trader

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



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

Tuesday higher

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

• Tuesday higher, high confidence..
• ES pivot 1285.58.  Holding over is bullish..
• Rest of week bias uncertain pending Tuesday's action.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

No trading today so nothign to recap.  Nonetheless, I find the action in the futures interesting.  Read on.

The technicals

The Dow: With no trading today, I will simply reiterate what I said last night: with now three hanging men in a row, and the last being the largest of the three, I'd say the Dow is trying to tell us something here.  This is not a good sign.

Market index futures: Oddly enough, while the Dow chart is looking ready to roll over, the futures are looking quite strong indeed tonight.  Unlike last night, all three are solidly in the green.  ES is up three quarters of a percent at 1:25 AM EST and NQ is up nearly a full percent.  This is quite unusual for this time of night and the last time we saw such numbers, the following day was up strongly.

With ES now at 1299, we've finally broken above the 1290-1295 resistance level that plagued us last week.  From here, there's just psychological resistance at 1300, then the upper BB at 1313.


ES daily pivot: Dropped from 1290.00 to 1285.58.  But even before that, ES crossed over around 11 PM and never looked back, another good sign..

History: According to The Stock Traders Almanac, historically, the Dow is up 14 of the last 19 on the first day of options expiration week in January.

     And the winner is...

I'm going to completely reverse my opinion from last night and now claim that Tuesday is going higher.  Apparently, today the S&P ratings downgrades didn't bother the Europeans, so I guess the theory is that it isn't going to bother us.  It's always a challenge to call the direction of the market after three days off, but this one is looking pretty good.

ES Fantasy Trader

It's not even 2 AM yet but we've already had quite a run up in ES.  I'm getting the feeling that the overnight window of opportunity has already closed so we're standing aside again tonight.


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

Tuesday looking lower

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

• Tuesday lower, medium confidence..
• ES pivot 1285.58.  Holding under is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last Thursday night I was expecting a turn in the market but I didn't think it would happen on Friday.  Well, it did, in the form of a minor 49 point drop in the Dow.  We're coming up on yet another holiday-shortened week, but it's still worth taking a look at where we might be going on Tuesday.  Here's a quick look with more detail to follow tomorrow.

The technicals

The Dow: Of greater significance than the small decline was the hanging man the Dow put in.  That makes now three hanging men in a row, and the largest of the three.  I'd say the Dow is trying to tell us something here, if you know what I mean.


Market index futures: The stock market may be closed Monday but futures trading resumed Sunday evening and right now at 2:10 AM EST all of the big three are down.  ES is off nearly half a percent after a gap down opening.  With a three day pattern of small hanging man, doji, big hanging man, ES looks ready to move lower still.

ES daily pivot: Moved down from 1290.00 to 1285.58.  However, ES is still trading below that, at 1283.00.  Unless it can break above this level, that only strengthens the bear case.


     And the winner is...

Right now, I'd have to say it's looking like there's more downside risk than upside potential.  Asia was down in their regular hours today and the repercussions of the S&P European ratings downgrades last week may not yet be fully baked into our market.  We'll have a clearer picture tomorrow evening, but at the moment I'm leaning to a lower close on Tuesday.

ES Fantasy Trader

Because of the  typical holiday-induced distortions, we're standing aside again tonight.

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

A bit more upside possible Friday

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

• Friday higher, low confidence..
• ES pivot 1290.00.  Holding over is bullish..
• Next week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Things were looking good for my call for a slightly lower close today until a late day rally hoisted the Dow to a modest 22 point gain.  Nevertheless, the Dow continues to have trouble cracking resistance at 12,500.  Will Friday be the day?

The technicals

The Dow: Today's gain came in the form of a second hanging man in a row.  As we've seen before, one hanging man, bad - two hanging men, real bad.  There's no guidance at all from the indicators which are all still stuck in overbought-broken mode.  But the candlesticks are looking bearish.

The VIX: The VIX has been putting in some strange looking candles the past few days with a big inverted hammer today.  Meanwhile it just continues to trend lower.  There's some support at 20 just below today's close but that's about it.

Market index futures: The futures on the other hand are all running in the green tonight.  At 1:40 AM ES is up a non-trivial 0.23%.

ES daily pivot: Rose nearly five points to 1290.00 tonight but ES just continues to move up up and away.  Rising away from the pivot is a positive sign.  The funny thing is that while the Dow is looking toppy, Es just seems to keep climbing the wall of worry.  After two doji days in a row, we're simply continuing higher.  We've left the 1279 resistance line in the dust.  At this point there is no resistance until the psychological 1300 level and then the upper BB at 1311.

History: According to The Stock Traders Almanac, Friday is only slightly more bullish than today.

     And the winner is...

Hard to say, once again.  I have the feeling that this rally is getting a bit old here.  I have yet to have a losing day this year after eight sessions and my trading account is up 4.7% YTD.  Clearly this is unsustainable.  In fact, it's starting to remind me a bit of the way last year began.  We're getting overdue for a pullback and I expect one sometime over the next few days.

Will it be tomorrow?  I'm guessing not.  I still just don't really see enough technical reversal signs or bad economic news lately.  I think we have one more day of gains possible on Friday before some profit taking sets in.  I'm more cautious about the early part of next week.  We'll just have to see.

ES Fantasy Trader

Tonight we threw in the towel on our short for a loss of 12 points.  We are now going to stand aside for a day to avoid getting whipsawed.

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

BOT 10 ES false MAR12 Futures 1294.75 USD GLOBEX 01:24:23
SLD 10 ES false MAR12 Futures 1282.75 USD GLOBEX JAN 10 20:15:24

Thursday looking a bit lower

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

• Thursday uncertain, weak bias lower..
• ES pivot 1285.67.  Holding over is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader holding short at 1282.75.

Recap

Last night my best guess was that we'd see another doji day today.  We did have some fairly uninspired action, though not a doji.  It was one of those down right out of the gate, then slowly meander back up kind of days.

The technicals

The Dow: While we did end just 13 Dow points down from where we began, it was on a very clear hanging man candle and that is a good bearish reversal pattern.

Market index futures: Like last night, all three futures are down, but tonight it's just barely.  Nonetheless, the overnight's failure to advance so far (at coupled with today's clear hanging man mirroring that of the Dow is a sign to me anyway that this market is running out of steam.  It seems to me that we're overdue for at least a small retrenchment anyway.

ES daily pivot: Rose slightly to 1285.67 tonight.  Even at that, ES is still holding just over that level at 1287.00.  Remaining here is bullish on the face of it.

Morningstar Market Fair Value Index: The index continues to rise, hitting 0.90 yesterday, definitely a positive sign.

History: According to The Stock Traders Almanac, there is no historical edge to Thursday.

     And the winner is...

Well we're still getting a bit of a mixture of messages tonight but the balance seems to be tipping in favor of the bears.  I think we're about due for at least one down day and Thursday may be it.  Probably not a big loss but I'm more bearish than bullish on Thursday right now.

ES Fantasy Trader

Tonight we're hanging on to our underwater short.  Portfolio stats: the account remains $103,375 after 3 trades (2 wins, 1 loss)

Wednesday uncertain

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

• Wednesday uncertain, weak bias lower..
• ES pivot 1284.17.  Holding over is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader went short at 1282.75.

Quote of the Day

"Even in a good market year it is typical to have a 15% drawdown at some point."

                                                    -  Jeff Miller, "A Dash of Insight" (see blog sidebar)

Recap

Last night my call was simply "Tuesday higher" and that's just what happened with a pleasing 70 point gain in the Dow.  Is there any more upside left here?  Let's spin the wheel and find out.

The technicals

The Dow: Today the symmetrical triangle resolved to the upside demonstrating once again what a great pattern this is.  But today's close at 12,462 also left us in the middle of a resistance band from the middle of last July.  From here we have resistance at 12,500 and then the upper BB at 12,531.

Daily VIX

The VIX: Here's an interesting chart I really want to share with you.  First notice the symmetrical triangle I pointed out last week.and how it finally resolved to the downside on January 4th.  Then recall how I mentioned the dark cloud cover last night.  Worked like a charm.  Today the VIX gapped down 1.8%.

Two important things now: first, today's decline came on a green candle and second, notice how the stochastic is just making a bullish crossover (bottom row).  These both suggest the possibility of a higher VIX on Wednesday which would be bearish for stocks.

Balancing this is the fact that today's close of 20.69 still leaves us a bit shy of the lower BB at 19.4.  When declining, the VIX often (but not always) makes it all the way to the lower BB before reversing.

Market index futures: Unlike last night, tonight all three futures are back in the red with EES down 0.19% at 12:45 AM EST.  But today's big green candle finally broke us out of the narrow trading we'd been stuck in for the last five sessions with the triangle here also resolving higher.  What's concerning me in tonight's chart is that OBV has peaked and is now declining after rising since December 19th.  While the other indicators are pretty much stuck in overbought-broken mode, a peak in OBV is often a good bearish reversal signal.

ES daily pivot: Rose to 1284.17 tonight.  This puts ES just under the new value.  And ES just finished an attempt to break through but was rejected.  The longer we hold under the pivot, the more bearish I feel.

Dollar index: Last night I wrote "Today's decline should be followed by more on Tuesday", and so it was, with the dollar gapping down for a 0.35% decline.  And it may still not be over as the $USDUPX is just now making a bearish crossover on its stochastic.

Copper: Very much contrary to my expectations last night, copper took a big gap up today clear to its upper BB.  That alone increases the chances that it will go lower on Wednesday.

Morningstar Market Fair Value Index: Yesterday the index rose to 0.89.  While a rising index is good for stocks, the 0.89 level represents resistance.  We haven't been above this level since last November 8th suggesting that further short term gains may be harder to come by.

History: According to The Stock Traders Almanac Wednesday is historically on the minus side for all three major averages.

     And the winner is...

Not looking as clear to me as the individual components of the analysis might suggest.  Right now I'm seeing some headwinds building but not a lot of downward pressure yet.  As I wrap this up just after 2 AM, I note that ES has broken above its pivot and is trending higher.  If it doesn't come back down by the open, we may very well see at least some more gains on Wednesday.  Otherwise I'm going to go out on a limb and guess we see another doji day on Wednesday.

ES Fantasy Trader

Today we took a profit of 6.5 points just before lunch.  It was one of those cases where it just looked best not to get too greedy, a decision that paid off later on as the day moved lower.  Portfolio stats: the account remains $103,375 after 3 trades (2 wins, 1 loss).  On Tuesday night we go short at 1282.75 at 8:15 PM.

BOT    10    ES    false    MAR12 Futures     1282.00    USD    GLOBEX    01:10:39

SLD    10    ES    false    MAR12 Futures     1288.50    USD    GLOBEX    11:40:00 
 

Tuesday looking higher

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

• Tuesday higher, high confidence.
• ES pivot 1273.50.  Holding above is bullish..
• Rest of week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader went long at 1282.00.

Recap

Last night was a tough call.  I'm glad I paid attention to the VIX to temper my impression that a top might be in, since we did end up going up by 33 Dow points today.  I said "Monday may just give us yet another day like we've been seeing the past four sessions."  Now make that five.  Go for six maybe?  Let's see...

The technicals

Daily Dow

The Dow: With a range of just about half of Friday's, the symmetrical triangle I spoke of last night continued to develop today.  Check it out in this daily chart and see if you don't agree.  It's not perfect, but it's pretty good.

It looks like there's room for maybe one more day of action to compress this spring, and then boiing!  Remember, most often these things resolve in the direction of entry, and here that would be up.  It could happen Tuesday, and if not then, then on Wednesday.

Also, the High-Low index has come down off its highs from the end of the year and that is an encouraging sign too.

The VIX: The VIX actually gained a bit today but did it on a red candle that's actually a good dark cloud cover and that's a high reliability bearish reversal indicator.  A lower VIX should also help stocks on Tuesday.

Market index futures: For once we're getting some non-trivial upside in the overnight.  ES is up just over half a percent at 1:15 AM EST.  It looks like the ascending triangle that's been developing in ES for the last five days is finally starting to resolve to the upside.  ES has been trending up steadily since today's close.  My only concern is that we're right at a resistance line at 1282 now.  This is a level that has stymied the market for five straight days now.  However, Tuesday may just be the day of the breakthrough.

ES daily pivot: The pivot actually dropped a bit to 1273.50.  This puts us comfortably above the pivot which is a bullish sign.

Dollar index: The dollar seems to have peaked short term after two days of gap-up gains that left it quite overbought.  Today's decline should be followed by more on Tuesday, another positive signs for stocks.

Copper: Striking something of a bearish note, copper is now clearly in a downtrend on the daily charts.

Morningstar Market Fair Value Index: Today the index

History: According to The Stock Traders Almanac, Tuesday is basically flat.  Note that despite the widely publicized "January Effect", January is only the 6th best month for the Dow, and 5th best for The S&P.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll.  Starting today we're going to track the poll to see how well it performs.  Here's how things shake out so far:

Week   % Bullish  % Bearish  NightOwl SPX

1/3         46        21        +     1258

1/9         56        37        +     1278

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

Today we note that while bullish sentiment has increased to 46%, interestingly, bearish sentiment has also increased to 37%. The spread is therefore narrower than last week.

     And the winner is...

All things considered, I'd say the bulls have it.  With Asia closing up strongly and the futures trending up significantly in the overnight, this market gives the impression of wanting to go higher.  So absent any new disasters from Europe (which seems to have mysteriously vanished from the news radar in the past few days) I'm going to say that Tuesday goes higher.

Note too that Rob Hanna's great Quantifiable Edges blog gives a historical statistical edge to our present situation.

ES Fantasy Trader

Portfolio stats: the account remains $100,125 after 2 trades (1 win, 1 loss).

Tonight we go long at 1282.00  

Monday uncertain, pivot is key

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

• Monday uncertain, ES pivot is key.
• ES pivot 1274.42.  Breaking over is bullish..
• Rest of week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

One of the possibilities for last Friday that I mentioned was that "any gains will reverse later in the day on week ending profit taking." and that's essentially what happened with the Dow sinking out the gate, then recovering the rest of the morning only to give it all back later to close down a modest 56 points.

The technicals

The Dow: Friday's red candle serves as confirmation to Thursday's long doji.  That said, it looks like we've got another symmetrical triangle forming on the daily chart which should resolve in the next day or two.  And given an entry from below, the exit will most likely be to the upside.

The VIX: The VIX is now flirting with short term support just above 20 but still has a ways to go before hitting its lower BB at 18.93.  And its indicators are not yet in oversold territory.  In fact, the last three days suggest a bearish three black crows pattern.  All of this suggests continued downside risk for the VIX,  If not leading to higher stock prices, I'd expect this at least to put the brakes on any potential market downside.

Market index futures: Right now (2:25 AM EST) all three futures are in the red.  ES is down 0.28%.  However, it has actually been gaining since around 12:35 AM.  After four days of complete indecision we may be getting a break lower tonight.  Inverted hammer, hanging man and two dojis followed by some downside in the overnight all has a bearish feel to it.  The failure of ES to break resistance at 1276 four days running also seems to suggest that we may need to back off and get a running start at it later on.

ES daily pivot: The new pivot has jumped to 1274.42 leaving us now about 3 points under.  Given that ES is actually moving up right now, that puts the pivot in play.  This will be the number to watch before the open.  If ES attacks the pivot and fails to break through, that strengthens the bearish case.

Morningstar Market Fair Value Index: On Friday the index dropped to 0.88.

History: According to The Stock Traders Almanac, Monday is historically negative for the Dow.

     And the winner is...

Another very very tough call tonight.  As I've been writing, ES has continued to gain and is now just a point and a half below the pivot.  Because of a lack of bearish guidance from the VIX and market charts demonstrating more indecision than signs of reversals, and with no new developments out of Europe over the weekend and no major economic news on the calendar for Monday I'm going to guess that Monday may just give us yet another day like we've been seeing the past four sessions.

If ES breaks above the pivot before trading opens, then we definitely could go higher, else lower.  Watch 1274.42.  For the time being anyway, the bias is actually to the upside but I'm not looking for any major moves either way.  That's all, she wrote.

ES Fantasy Trader

Portfolio stats: the account remains $100,125 after 2 trades (1 win, 1 loss).

Tonight we're standing aside.  Once again I see no real reason to put on a trade in either direction until we get out of this ongoing narrow range doji situation.
 

Another doji possible Friday, pivot is key

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

• Friday uncertain, ES pivot is key.
• ES pivot 1270.25.  Breaking under is bearish.
• Next week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last night I called the market lower and I suppose I was right, if you can call a 3 point decline in the Dow as confirmation.  This market is sort of spinning its wheels in the mud right now.  It won't go down but it's not making any headway either.  Is there a tow truck in the house?  Let's figure it out.


The technicals

The Dow: OK, yesterday we got a hanging man, a reversal indicator.  Today we got no reversal but did get a dragonfly doji, another reversal indicator.  You don't see this too often, but when you do get two reversal indicators following a run up, the eventual resolution is most often to the downside.

The VIX: The VIX put in a second solid red candle today in a classic bearish continuation pattern.  Its indicators have all come off overbought levels too.  With no support until 20.70, today's close at 21.48 still leaves some room to run lower.  And as I've often observed, a lower VIX  tends to predict higher stocks in a day or two at the most.

Market index futures: Wow, three days of reversal indicators and still no reversal.  An inverted hammer, a hanging man, and a long-legged doji.  What's holding this market up?  This evening we find a very similar picture to last night around this time (1:10 AM EST): all three futures down with ES lower by 0.27%.  OBV declining again tonight is another bearish indicator.  Also, the SPX High Low indicator remains quite elevated, having topped 90 for an unusual 11 straight sessions.

ES daily pivot: The new pivot is now 1270.25 and we dropped below it just before 11 PM.  ES tried to retrace but that level is now providing resistance.  This sort of action is bearish.

Dollar index: I haven't mentioned this lately but today was interesting.  The dollar took a big gap up to the exact top of its recent range and very close to its upper BB.  There seems to be more chance of it going lower over the next few days than continuing higher.  That would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index not surprisingly held steady at 0.89.

History: According to The Stock Traders Almanac,Friday has a slightly negative historical bias.

     And the winner is...

Once again, hard to say.  Just like last night we have two distinct conflicting messages with both the Dow and ES charts looking ready to roll over but the VIX wanting to push the market higher.  We also have unemployment numbers coming out on Friday and if they're BTE, then that could help push the market higher, in other words a replay of today.  And that's my best guess.  I think we're due for lower at some point soon but I'm not seeing any real pressure in that direction right now.

1:30 AM Update: ES just broke above the pivot.  I can't stay up all night watching this, but if we're still above before the open on Friday and get good economic news, we might very well go higher despite all the overbought indicators.  It's also possible that any gains will reverse later in the day on week ending profit taking.

So I'm just going to call for another doji day on Friday.  I don't see a big decline happening.  Boring for swing traders, great for day traders.  That's all she wrote.

ES Fantasy Trader

Today we took a small one point loss to close out our first trade of the year.  I decided just before noon that the trade was beginning to move the wrong way and I didn't want my profit to turn into a loss, especially with the first trade of the year.  That turned out to be a good idea since ES continued to climb the rest of the day.  Portfolio stats: the account is now $100,125 after 2 trades (1 win, 1 loss).

Tonight we're standing aside.  I see no real reason to put on a trade in either direction until we get out of this ongoing narrow range doji situation.

SLD    10    ES    false    MAR12 Futures     1270.25    USD    GLOBEX    02:05:50

BOT    10    ES    false    MAR12 Futures     1271.25    USD    GLOBEX    12:32:30
 

Thursday possibly lower

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

• Thursday lower, low confidence.
• ES pivot 1270.17.  Holding under is bearish.
• Friday bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going short at 1270.25

Recap

Last night we were getting some mixed messages  with the Dow looking played out but the VIX looking set to go lower, implying higher stocks.  After some debate, I came down on the bear side and was wrong, as the Dow finished by gaining 21 points.  Turns out the VIX, as is so often the case was the better predictor.  Though admittedly, it was a pretty small range day for all the major averages.  And unfortunately, that kind of action doesn't provide much guidance for the following day.  Let's pick through what meager scraps we can find for clues.

But first, for those of you following my saga on the impending death of Kodak, dramatic new developments today with the WSJ reporting that bankruptcy right around the corner for this beleaguered company.  EK immediately dropped from 65 cents to close at 47 cents.  Things aren't looking good.  All the gruesome details in the post here.

The technicals

The Dow: Today's small gain created a classic hanging man and that is a good reversal indicator.  In addition, the Dow remains quite overbought and OBV is running quite high, all bearish signs. However, we do have some fair support at 12,300 and we've just passed an inflection point in the 200 day MA which has (funally) begun to rise again, a good sign.

The VIX: Following yesterday's small doji, the VIX today resolved the symmetrical triangle I pointed out in the down direction with a big bearish engulfing pattern.  Along with a stochastic that just made a bearish crossover, this sure seems to be guiding lower.

Market index futures: All three are running negative in the overnight with ES down 0.18% at 2:10 AM EST.  Today's ES candle formed a cross between a hanging man and a dragonfly doji.  No matter, both are bearish reversal signs.  OBV has also peaked and is declining in the overnight - I find that to be a good indicator of lower prices to come.

ES daily pivot: Drops tonight from 1274.08 to 1270.17.  Notice how ES traded up from its morning lows just about up to today's pivot, but never broke though.  That's a bearish sign.  But now we're trading right around the new pivot.  In fact no fewer than 9 five minute bars have touched this number between midnight at 2:10 AM.

Morningstar Market Fair Value Index: Yesterday the index bumped up from 0.87 to 0.89, a positive sign.

History: According to The Stock Traders Almanac,Thursday is the weakest day of the week.

     And the winner is...

Arrgh - the Night Owl is pulling her hair, uh, feathers out.  Once again we have both the Dow and the VIX seemingly poised to go lower.  This is quite an unusual situation.  I ought to do a correlation of the next day after the VIX goes down but the Dow goes up.

In any event, I am going to claim that the VIX situation will help temper any declines as well as bolster the argument for a rally by Friday, but the Dow will likely go lower on Thursday.  These mixed message days are really tough nuts to crack. 

I should add that with employment and jobless numbers coming out on Thursday, that could easily drive us higher if they're BTE, and it would not surprise me if they were. We'll see. 


ES Fantasy Trader

Today we took a teensy profit of 1.25 points to close out our first trade of the year.  I decided just before noon that the trade was beginning to move the wrong way and I didn't want my profit to turn into a loss, especially with the first trade of the year.  That turned out to be a good idea since ES continued to climb the rest of the day.  Portfolio stats: the acocunt is now $100,625 after 1 trade (1 win, 0 losses).

SLD 10 ES false MAR12 Futures 1269.25 USD GLOBEX 01:56:47

BOT 10 ES false MAR12 Futures 1268.50 USD GLOBEX 11:57:52


 

Wednesday looking likely lower

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

• Wednesday lower, medium confidence.
• ES pivot 1274.08.  Holding under is bearish.
• Rest of week bias higher historically.
• Monthly outlook: bias up.
• ES Fantasy Trader going short at 1269.25.

Recap

It was certainly pleasant to see the year begin with a 180 point advance in the Dow.  If nothing else, today's action give us something to chew on as we contemplate where we're headed Wednesday.  As we run down the usual list of suspects one thing is clear: after just one day of trading, we're already at a crossroads.

The technicals

The Dow: Today's high of 12,480 took us above the upper BB at 12,435.  That level proved unsustainable and we retreated to close at 12,397.  This suggests that we could see a pullback on Wednesday, though remember that we have some support at 12,300.  And note that the 12,400 level is also a resistance line from last summer.  Since the Dow has lately been loath to climb its upper BB, preferring instead to bounce off, it's questionable if we have the oomph to follow through from here.

Daily VIX

The VIX: Interesting chart in the VIX today - check it out.  Looks like we're getting another symmetrical triangle.  But which way will it resolve?  If you think we entered from below, at the bottom on December 22nd, then it will go higher.  If you take the longer view from earlier in December, it will go lower.

In any case, today's doji of indecision was accompanied by a stochastic (bottom row) that sure looks like it's going to make a bearish crossover, sending the VIX lower.

VIX futures: Meanwhile the futures dropped exactly to their 200 day MA support line, with their own stochastic bearish crossover.  A breakdown here would strongly imply a lower VIX and higher stocks.  We're really teeterng on the edge here.

Market index futures: We now have ES trading again, and at 2:05 AM EST, it's trading down 0.2%, along with NQ and YM.  Of particular concern is that this drop is forming an evening star pattern and that's a good bearish reversal indicator.  ES, like the Dow hit is upper BB today also, and this big gap up looks like it may be wanting filling.

ES daily pivot: The pivot jumped from 1254.58 to 1274.08 while ES began sagging just before 1 AM.  Now being under the new pivot is a negative for the market.

Dollar index: The buck broke recent support with a solid red candle to the downside today and its stochastic executed a bearish crossover.  A weakening dollar is good for stocks.

Oil: Took a big spike up today, mainly on childish posturing from the Iranians.  Iran is clearly attempting to thread the needle here, trying to act just belligerent enough to jack up the price of oil enough to hurt the West (and help their own bottom line) without bringing down a military strike on them, an action they could not answer, contrary to their comical  North Korean-esque bombast.  Since oil is now 100% politically driven, it has no technical importance.  However, if its price continues to rise above $100, that will clearly act as a brake on any advance in the market.

Copper: Dr. Cu took a big gap up today that looked a lot like the action last November 30th, right down to the stochastic bullish crossover from a high level.  And back then, what followed was three small-range consolidation days.  Will history repeat itself?

Morningstar Market Fair Value Index: On Friday, the index remained at 0.87, so no guidance here.

History: According to The Stock Traders Almanac, the Dow is up 13 of the last 18 years on this day, and it's the strongest day of the week.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll.  Today we note that bullish sentiment has increased to 46% while bearish sentiment has declined to 21%.  I find it interesting that the bearish sentiment has decreased more than the bullish view has increased.  You could view that as contrarian bullish.

In any case, there are not yet enough bulls to view these numbers as contrarian bearish.  And for the record, I helped the bull case by voting with them this wee, based on my reading of the monthly SPX chart.  We see there that SPX has emerged from its descending RTC and given a bullish trigger with no resistance until 1366.

     And the winner is...

All things considered, I have to say that despite the historical positives for tomorrow and signs that the VIX could go lower, I'm going to call Wednesday lower.  I'm not seeing much technical motivation to drive us higher just at the moment.  And I note that J-Trader is going short and he's been doing quite well for a long time now.

ES Fantasy Trader

Tonight we put on our first trade of 2012 with a short at 1269.25 at 1:57 AM.  Portfolio stats: we begin with $100,000 after 0 trades (0 wins, 0 losses).  

Slight up bias Tuesday

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

• Tuesday higher, low confidence
• Last ES pivot 1253.25.  New value tomorrow..
• Rest of week bias higher historically..
• Monthly outlook: bias up.
• ES Fantasy Trader reset to $100K.

Short Form

Well here comes 2012, ready or not.  This evening's edition is brief, since we're missing any input from the futures.  I'm also having some computer issues this evening that need to be resolved right away.  Suffice it to say that the earlier European, Australian, and Asian trading all seem to be guiding higher for Tuesday.

With all of the last two weeks charts distorted by light holiday trading as well as the year ending, it's tough to make any informed decisions on that either.  Suffice it to say that we're still looking fairly overbought and more downside in not out of the question for the Dow and the SPX.  The first trading day of the new year is also not favorable historically.

But without any futures, this is really just speculation.  Let's see how Tuesday starts off so we can calibrate our charts to the new year.  Wish I could be more specific but I see no real edge in jumping either way right now.

We'll resume the usual complete analysis Tuesday night.  Happy New Year and happy trading!

ES Fantasy Trader

Today the ESFT account resets to $100,000.  Since ES is still closed for the holiday right now, there is no trade tonight.  Reminder, the main purpose of this section is to prove whether or not my market calls are any good, not necessarily for others to trade from.

Annual Performance Review

With the end of 2011, it's time to see how the Night Owl did  Here are the numbers for my trading account, my IRA and the ES Fantasy Trader.

Trading Account

My final annual gross return on my trading account in 2011 was -1.15%, my first losing year since 2008 (I was up 30% in both 2009 and 2010).  I missed my basic goal of turning a profit, and also missed my goal of beating the Dow, which ended with a 5.5% gain.  I also failed to beat the3 SPX which finished flat.  I did at least manage to beat the Nasdaq (down 1.8%), the average of US equity funds, which lost 2.2%, and the Eurkeahedge hedge fund index, down 4.1%.

Clearly 2011 was a difficult year.  It was also a learning experience for me, not having encountered this sort of crazy environment since I began trading full-time in 2004.  In many ways, it was harder than 2008 to be a swing trader.  When you have the Dow up and down by 400 points for four consecutive days, it's really hard to make any money swing trading.

And that was part of the problem - I don't like to trade when the VIX is above 20, and the VIX spent nearly half of 2011 above that level.  By the time it broke 30, I pretty much stopped trading entirely.  So I really only ended up actively trading five months this year.  In addition, I was hampered by a failure to play the short side effectively so I missed a number of good opportunities there.

Also, I was hurt by one very stupid trade.  I had bought CSIQ and held onto it while it did nothing but go down.  I finally threw in the towel on that one but the damage was already done.  Without that one realized loss, I would have managed to equal the Dow for the year.

IRA

My IRA on the other hand did quite nicely, finishing the year with an 8.67% gain.  The big difference here was that my IRA is more heavily weighted to large cap dividend yielders that were in fashion this year.  I also unloaded almost all my shares in silver (SLV) at 44.50 near the April peak, realizing a nice profit there (I had bought in at 13).

ES Fantasy Trader

And finally, the ES Fantasy Trader.  This ended 2011 with a 34.75% gross gain.  I made 48 trades and had 32 winners and 16 losers, for a 2:1 win/loss ratio.  Commissions came to $1920, leaving us with a net profit of 32.83%.  And recall that I began the ESFT only on August 18th, so these are not full-year numbers.

Recall that the point of the ESFT is to put some substance behind my daily market calls.  I generally enter each trade late at night, usually around 1 to 2 AM, based on my call for the next day and then exit the next day (to be precise, later on in the same day) at some point during the regular session.  Very rarely, I'll hold a trade for a few days if that seems warranted.

So why not do this for real?  First, my trading account won't support the sort of leverage that even one ES contract affords, much less the 10 I trade each night.  IB will let me do it, but I'm just not very comfortable with it.

Second, I sleep better not holding futures positions overnight.  Obviously, just about anything can go wrong while my trade is cooking and I'm sleeping, whether it's an earthquake in Japan or some country in Europe going bust.  And since I don't put any stops on these trades, there's the potential for some really nasty surprises when I get up in the morning.

And third, although I regularly put on short ESFT trades, I don't like going short for real.  I'll admit that's just a purely psychological bias on my part and it's something I think I'll put on my New Year's resolutions list.  Still, it's sort of frustrating that my paper trading did so much better than my for-real trading.

Oh and last but not least, readership of The Night Owl Trader was up by an order of magnitude in 2011 over 2010.  Many thanks to all my devoted readers.