Tuesday possibly higher

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

• Tuesday higher, low confidence.
• ES pivot 1409.75.  Holding above is bullish.
• Rest of week bias higher, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last night I was calling for a higher close today, which we got, but I was expecting us to be bound by the Dow's 13,250 resistance line.  Today's close at 13,264 just breaks that.  Is this significant?  Let's see what's "up" with that.

The technicals

The Dow: I think it is significant.  Today we closed above a level that had been hit only three times intraday so far this year.  We have now comfortably cleared the highs of 2011 and are still not as overbought as we were back then.  The monthly upper BB is at 13,524. I think we've finally cleared out all the people who bought in the spring of 2008, rode the market all the way down and swore they'd sell if they ever got back to even, so there's not much standing in the way of the next 300 or so points.  Then of course there's the big barrier at 14,000 and the Dow's all-time high of 14,198.10 from October 2007.

The VIX:  For the fifth day in a row, we had a VIX that made a large excursion only to return almost exactly to the 15.5 level, closing up 0.9% at 15.64 today.  But this gain came on a big red candle, and its intraday high was lower than the two previous days that moved above 15.5.  The VIX is seemingly unable to gain any real traction here, which is good for stocks.  The futures seem to support this, having gained just 0.05% today on a red hanging man.

Market index futures: All three futures have just turned slightly positive at 1:06 AM EDT.  ES is now up 0.04%.  After today's fat green star, it is encouraging to see the overnight trading around the day's close rather than moving lower.  That said, there's resistance nearby at 1415, then again at today's high of 1417.75, so while some more upside is possible, it may be getting harder to come by than today.

ES daily pivot: Tonight the pivot jumps from 1401.75 to 1409.75.  With ES basically flat since the close, we remain above the new number, though not as much as earlier today.  Still, holding above is positive.

Dollar index: As I expected, the dollar moved lower today, giving up all of Friday's gains and a bit more.  With the lower BB falling away and the dollar stuck in a descending RTC back to March 14th, there's nothing here to suggest a move higher any time soon, also good for stocks.

Morningstar Market Fair Value Index: Beginning tonight, I am no longer going to comment on this number.  It seems to change from day to day (meaning that previous numbers get revised randomly) so I have no use for it.  I think it still makes a reasonable longer term indicator, but there's no point watching it every day, especially if you can't believe the numbers.  Beginning tomorrow, I'll be commenting on the transportation index, $TRAN, in this spot.


History: According to The Stock Traders Almanac, this whole week is historically quite bullish.  In fact, April is number one ranked month of the entire year for the Dow.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371

 12  3/19       46         29        +     1404

 13  3/26       39         29        +     1397

 14  4/2        42         21        +     1408

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 3/5 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 10 for 10.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And as all year long so far, I again voted bullish this week.  With the year now one quarter gone, I'm still not seeing any immediate technical reversal indicators on the monthly SPX chart.  However, I am seeing signs that a turnaround is coming, possibly next month.  This may be a good time to sell in May, as they say.

This week we see that bullish sentiment increased a little, but the big change was the drop in bearish sentiment from 29% to 21%.  Apparently, some of the pessimists are now throwing in the towel and moving to the sidelines.  Is this a contrarian sign of impending doom?  I don't think so.  The 21% bearish is still only equal to the previous low on January 3rd, and the 42% bullish is actually the second lowest bullish reading so far this year.

     And the winner is...

I think there's still some more room to run higher, particularly given the historical bias in the first week of April.  So I'm going to say we close higher Tuesday, though possibly not by much, in view of several resistance levels not too far above current prices.

ES Fantasy Trader

Last night's long was profitable and even though I missed the opening pop we still brought home 3.75 points.  Tonight we're going to stand aside, because I'm not seeing a big edge.

Portfolio stats:  We begin the month and the second quarter with $131,750, after 27 trades (21 wins, 6 losses) starting from $100,000 on 1/1

SLD    10    ES    false    JUN12 Futures     1411.25    USD    GLOBEX    11:37:58   

BOT    10    ES    false    JUN12 Futures     1407.50    USD    GLOBEX    00:47:55   

 

Monday maybe higher

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

• Monday higher, medium confidence.
• ES pivot 1401.75.  Breaking above is bullish.
• Rest of week bias higher, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1407.50.

Link of the Day

How Much Money Does It Take To Be In The Top 1% of Wealth and Net Worth in the United States 
 - Joshua Kennnon Blog


Recap

Last Thursday we faced something of a conundrum with the Dow and dollar charts giving contradictory signals.  I decided to go with the VIX and the futures which were guiding higher and so it was, with the Dow wrapping up the quarter with a decent 66 point gain.  Today is April 1st, but there's no fooling the Night Owl as we figure out what might be in store for Monday.

The technicals

The Dow: Thursday's hammer was confirmed with a nice solid green candle Friday on increased volume.  Window dressing?  Perhaps, but this three day pattern which I call a morning hammer star, is rather bullish.  The indicators too have now reversed course and are headed higher.

The VIX:  Perhaps reflecting my confusion last Thursday, the VIX on Friday put in a green candle right at the bottom of Thursday's tall red candle.  That makes now four straight days of closes right around 15.50.  The VIX seems to get pulled down when it tries to go higher, and up when it tries to go lower.  The futures, on the other hand, sure look like they're going lower, and that would be good for stocks.

Market index futures: At 1:10 AM EDT all three futures are positive, with ES up 0.27% after a gap-up open when trading opened Sunday evening.  After last Thursday's doji, we got a solid green candle on Friday confirming the doji as reversal.  This evening's gap-up open shows good follow-through.  OBV is moving up but not yet at overbought levels and the stochastic just formed a bullish crossover.    I'd say this chart is in pretty good shape.

ES daily pivot: Tonight the pivot rises from 1396.17 to 1401.75.  While ES has been drifting ever so slightly lower since around 7 PM Sunday, we are still five points above the new pivot.

Dollar index: Last Thursday the dollar chart was confusing to me.  Friday provided us with some clarity, with a big gap down that touched the lower BB and eventually closed down 0.28% but on a green candle.  The weekly chart though, with a now completed candle, continues to guide lower with all indicators continuing to come off overbought levels and a now complete bearish stochastic crossover.  This can only be good for stocks.

Morningstar Market Fair Value Index: I don't know what's up with MS and their index, but now they're showing the number as 0.96, unchanged in six straight sessions, whereas last week they were showing numbers up to 0.98.  I'm about ready to drop this as a daily indicator if I can't get consistent believable numbers out of them.

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

     And the winner is...

Tonight I'm seeing more positive signs than negative, so I have to give it to the bulls.  That said, the Dow is still pretty much range-bound in the 13,100-13,250 area and we're closer to the top of that than the bottom.  I'm not sure we're going to have the juice on Monday to break out above this, so while I'm going for a higher close Monday, I'm also thinking the upside is limited.

Performance:

Here are my performance stats so far for 2012.  "ESFT" is the ES Fantasy Trader.  The first two columns are for my trading account.  The next is for the ESFT.  The last is the Dow, my reference benchmark that I try to match or beat.

 Date    Trading Month  Tr. YTD  ESFT YTD   Dow YTD

1/31/12       7.41%       7.41%   -0.50%     3.41%

2/29/12       3.67%      11.35%    7.88%     6.02%

3/31/12       1.76%      13.31%   29.88%     8.16%

ES Fantasy Trader

Thursday night's long was good for merely a single point, but a win is a win, right?

Portfolio stats:  We finish the month and the first quarter with $129,875, after 26 trades (20 wins, 6 losses) starting from $100,000 on 1/1.  Tonight we go long right at Thursday's pivot, 1407.50 at 12:48 AM.

SLD    10    ES    false    JUN12 Futures     1402.50    USD    GLOBEX    MAR 30 11:20:39   

BOT    10    ES    false    JUN12 Futures     1401.50    USD    GLOBEX    MAR 30 01:15:58   

 

Friday higher

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

• Friday higher, low confidence.
• ES pivot 1396.17.  Breaking above is bullish.
• Next week bias higher, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1401.50.

Recap

Well we did finally end up going a bit higher today, though it came right down to the wire.  Still I guess a 19.6 point gain counts.  Of course, the Naz and the SPX did end a bit lower.  I don't think there's much to be learned from this - call the market basically flat today.  Where does this leave us for Friday and the end of the quarter?  Let's try and figure it out.

The technicals

The Dow: Today's close at 13,146 gave us a tall hammer candle.  But it also caused a bearish stochastic crossover.  I can't remember the last time, if ever that I saw a situation like this.  In addition, money flow is going down but the RSI is going up.  They don't come more conflicted than this.  I just throw my hands up over a chart like this.  Let's move on and see if there's something less schizophrenic elsewhere.

The VIX:  After a big gap up this morning, the VIX finished the day with a big dark cloud cover type red candle, ending up just 0.01 on the day.  Going all the way back to last August, the last seven times we had such a big red candle, the next day was lower.  (The eighth time was in the middle of last summer's insanity over Greece, and the VIX went higher the next day).  The futures support this with a similar looking candle pattern.  So going lower Friday isn't out of the question, which would be good for stocks.

Market index futures: Tonight all three futures are trading in the green, and not by trivial amounts, with ES gaining 0.2% at 1:04 AM EDT.  Today's candle was a strange long asymmetrical spindly dojiish star that isn't by itself a reversal warning.  However, the developing overnight candle is coming across as a bullish engulfing pattern, generally very positive.  It's also trading outside the admittedly short but steep three day descending RTC we find ourselves in.

ES daily pivot: Tonight the index dropped from 1401.50 to 1396.17.  This.combined with a mid-evening move up in ES now leaves us above the pivot for the first time in a while, by about five points.  That is reason for encouragement.

Dollar index: Last night, I though the dollar would go higher today, and it did by 0.07%, but in keeping with this crazy day, it did it on a gap-up red candle.  It sure looks like this dollar is not wanting to go higher, but all the indicators have now bottomed at oversold levels and are headed back up.  Another chart I don't know what to make of.

Morningstar Market Fair Value Index: Yesterday the index dropped, not unexpectedly for the third straight day back to 0.96.  This is something of a support level so it will be interesting to see if we can hold this line.


History: According to The Stock Traders Almanac, Friday is historically quite bearish, in fact the weakest day of the week.

     And the winner is...

So what's it gonna be?  Window dressing or profit taking?  Recall that last year we got a small loss on the last day of March.  But by then we were considerably overbought.  We're not at this point this year.  With the Dow and the dollar charts completely opaque, tonight I have to go with the VIX and the futures.  And those are looking like there might be some upside in store Friday.   So I'm going to give this one to the bulls and call for a higher close Friday.

ES Fantasy Trader

Portfolio stats: With no trade once again last night, the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  Tonight we go long right at Thursday's pivot, 1401.50 at 1:16 AM.

Thursday higher if pivot crossed

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

• Thursday possibly a bit higher, low confidence.
• ES pivot 1401.50.  Breaking above is bullish.
• Friday bias uncertain, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last night I was having trouble picking a direction for today so I just said "I think for the next few days we're going to consolidate around the 13,100-13,300 area".  Well today the Dow gave us a range from 13,069 to 13,213, closing at 13,126.  So I'd say that was a reasonable guess.The question now is, having closed near the lower end of the range, will we go higher on Thursday?  The answer's not blowing in the wind, but it may be lurking in the charts.

The technicals

Dow hourly

The Dow: Tonight I'm presenting a chart I don't bring up very often, but I think it has the most insight as to where we may be going on Thursday: the Dow hourly chart.  (The thick black horizontal lines are the previous day range bars; the other panels from top to bottom are volume, stochastic, CCI, RSI, and momentum).

I have added the descending RTC here that began at 3 PM yesterday.  Note how we got a classical hammer in the 2 PM bar (3rd from the right).  That was followed by a green candle that took us outside the RTC - that's a bullish setup.  And the 4 PM bar was entirely outside the RTC - that's the bullish trigger.

Supporting this is the RTC which went oversold at 11 AM, bottomed at 1 PM, and then turned upward.  Also, the last three volume bars are increasing.  To me, this is a pretty good indication that the Dow may be wanting to go higher Thursday.

The VIX:  Today the VIX actually dropped 0.77% on a very tall gravestone doji that took it out the top of its recent trading range but ultimately came right back to finish at 15.47.  The futures showed a similar pattern.  This has the look of a breakout attempt that was cut short.  The indicators are confused here, and so am I, with momentum and RSI now moving lower but the stochastic just making a bullish crossover.  Unless the VIX can manage a breakout of this 13 day range, we're more likely to see it move lower than higher from here, which would be good for stocks.

Market index futures: At 12:53 AM EDT, all three futures a just barely in the green with ES up just 0.04% after basically wandering aimlessly in the overnight.  There is some comfort, I suppose, that after today's red candle, we're not moving any lower now.  There does seem to be a shallow ascent going on from 10 PM.  We'll be curious to see if this continues into the wee hours.

ES daily pivot: Tonight the pivot tumbles from 1410.75 to 1401.50.  With ES just drifting since the close, that now puts us just one point below.  We'll want to see ES break above this line by the open on Thursday.  Failing to do that would be bearish.

Dollar index: Last night I thought the dollar looked ready to go higher and it did today, though only by 0.1% and on a long asymmetrical star, almost a shooting star.  It's not clear though that this signifies another reversal.  The indicators are all still quite oversold and the stochastic just made a bullish crossover today, suggesting a higher dollar again on Thursday, which would be bad again for stocks.

Morningstar Market Fair Value Index: Yesterday the index dropped from 0.98 to 0.97.  To be still above the 0.96 level that provided resistance for so long is positive.


History: According to The Stock Traders Almanac, Thursday is historically neutral for the Dow but distinctly bearish for the S&P..

     And the winner is...

I'm not seeing any real signs that we're due to go higher on Thursday, but I am seeing signs that the declines of the past two days may be close to played out.  Today's tall ES star completely retraced Monday's big gain intraday, suggesting that the bears were unable to hold the low ground.  Meanwhile, there's just two days left to the week, the month, and the quarter.  Some people are looking for window dressing to occur, driving stocks higher, while others expect portfolio rebalancing to drive them lower.

It's all just too confusing for me right now so I'm going to stick to my same range call I made yesterday.  Until we close out this week, I'm expecting the Dow to stay inside the area of 13,100-13,250.  Based entirely on the action on hourly Dow chart though, I will go waaay out on a limb and hazard a guess that we might actually see a positive close Thursday.  The ES pivot will be key - we need to break above 1401.50 and stay there, otherwise all bets are off.

ES Fantasy Trader

Portfolio stats: the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  With an identifiable edge still not present either way tonight, once again we are not trading.
 

Wednesday neutral

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

• Wednesday uncertain..
• ES pivot 1410.75.  Holding below is bearish.
• Rest of week bias uncertain, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

My call last night for a slightly higher close was exactly right - until 3:10 PM when the market fell off a cliff.  OK, a little cliff, but still a modest 44 point loss.  Does this foreshadow a bigger retracement or will the uptrend reassert itself.  Maybe the charts can help answer that question.

The technicals

The Dow: Today's action was fairly typical after a big run up.  The fact that it was a red candle should not be taken as a reversal warning.  The indicators are actually mixed right now: momentum and OBV are decreasing, but money flow is increasing and the stochastic just finished executing a bullish crossover.  I tend to place more weight on the latter.

The VIX:  The VIX gave us its first green candle in four sessions today.  This took us to near the top of an eleven session trading range from 14.25 to 16.  Its rising indicators suggest at least a bit more room to run higher here.  However, I note that the futures put in a solid green candle today for the first time in eight sessions and that does look like a reversal warning.

Market index futures: After giving up the ghost in the last hour of trading, the futures have stabilized somewhat and are now all up marginally.  ES has gained 0.07% at 1:25 AM EDT.  And interestingly, the low we hit this evening, 1404.75 was almost exactly the 50% Fibonacci retracement of yesterday's big gain, at 1404.63.

ES daily pivot: Tonight the pivot rises from 1407.67 to 1410.75.  This now puts us below the pivot, not because ES is fading, but because the pivot has moved above the price.  Either way, it's not what we'd like to see.

Dollar index: Today the dollar put in a small doji centered within yesterday's gap down candle.  With highly oversold indicators, this is looking like a chart ready to reverse, and a higher dollar would be bad for stocks.

Morningstar Market Fair Value Index: Morningstar is having its usual web difficulties.  How hard is it to post one number?  It's either 0.96 oir 0.98.  I can't tell.

History: According to The Stock Traders Almanac, Wednesday is historically basically neutral.

     And the winner is...

I find the lack of further downward follow-through in the overnight futures to be encouraging, particularly having hit the 50% Fib retracement in ES.  Also, the daily Dow chart looks encouraging.  But the VIX does not.  I know some people are clamoring for an immediate pullback, but I'm just not seeing the sort of toppy charts that would support that.  On the other hand, I'm also not seeing a lot of gas in the tank to motor higher.  I think for the next few days we're going to consolidate around the 13,100-13,300 area in the Dow.  That makes picking an exact close for Wednesday too hard.  The best I can guess right now is that we're not in for any major moves on Wednesday.

ES Fantasy Trader

Portfolio stats::the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  With the lack of an identifiable edge either way tonight, once again we are not trading.
 

Tuesday slightly higher

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

• Tuesday slightly higher, medium confidence.
• ES pivot 1407.67.  Holding above is bullish.
• Rest of week bias uncertain, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Sunday night I wrote that I was "cautiously optimistic" about today.  Turns out the caution was unnecessary.  I've got to thank Uncle Ben for turning a cautious day into a roaring bull run.  The big question after a big up day of course is always whether or not it can keep going.  I think the charts will tell us, so let's see what they have to say.  Speak, charts, speak.

The technicals

The Dow: Today we got a big pop right out the gate, and it only got better from there, thanks to Uncle Ben.  The resultant jolly green giant candle took us clear out of the Dow's six session descending RTC, for the mother of all bullish setups.  The indicators have all now clearly bottomed and the important stochastic just completed a bullish crossover today.  This sort of chart is canonically bullish.

The VIX:  Today the VIX gave us a gap-down inverted hammer that brought us right to the bottom of its 10 day range for a 3.78% loss.  But... its indicators are all still on the way down from overbought, including a stochastic that just completed a bearish crossover.  With the futures still stuck in a now-8 day descending RTC, it looks like there's still more downside possible here.  In particular, note that the lower BB is now at 13, over a point away.  I see nothing here not to like.

Market index futures: Today ES provided us with a tall green candle that didn't just retrace last week;s losses, it completely blew the door off the resistance at 1405 that stopped us cold then, as well as providing a major bullish seteup with a dramatic exit from the descending RTC.  As a bonus, we got a completed bullish stochastic crossover today.  Right now, at 1:35 AM EDT, all three futures are in the green with ES up 0.09%.  There's really nothing to dislike on this chart..

ES daily pivot: Tonight the pivot jumps from 1389.92 to 1407.67.  This big gain means that even though ES rose considerably right around the close today, we're now closer to the pivot than before.  But still, a seven point spread isn't bad and still provides a fairly comfortable cushion.

Dollar index: Today the dollar took a big gap down on a solid red candle to lose half a percent.  And yet even at that, we're still not close to either support or the lower BB.  There's still nothing in this chart to suggest a higher dollar, and that's good for stocks.  The indicators are now all in oversold-broken mode and have therefore lost their predictive power.

Morningstar Market Fair Value Index: The index did not update today.  I expect that tomorrow's number will show at least a one tick gain.

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

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370

 11  3/12       46         32        +     1371

 12  3/19       46         29        +     1404

 13  3/26       39         29        +     1397

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 2/27 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 9 for 9.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And once again, I voted bullish this week.  With the year just about one quarter gone, I'm still not seeing any technical reversal indicators on the monthly SPX chart

I find it interesting that while bearish sentiment remained unchanged this week at 29%, bullish sentiment declined to its lowest level of the year, leaving us also with the narrowest point spread of the year - just 10 points.  If you believe that the TS bloggers know what they're talking about (and history this year seems to support that), then it appears that some of them are thinking the rally may be near its end.  On the other hand, market tops are generally accompanied by a major increase in bullish sentiment.  To see bullish sentiment actually decrease like this could be considered contrarian bullish.

     And the winner is...

Often after a big run-up like we saw today, the market will pause and have a small range day the next day.  That's pretty much what I'm expecting tomorrow.  So with no real negative signs on the charts, I'm going to call for a small up day Tuesday.

ES Fantasy Trader

Last night's long turned out well, with a tidy 9.5 point profit. Portfolio stats::the account now goes to $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  Because I'm not seeing a big edge right now either way for Tuesday, tonight we're going to stand aside.  At this stage, I'd rather leave some money on the table than risk a loss of similar size.

SLD    10    ES    false    JUN12 Futures     1404.75    USD    GLOBEX    11:13:30   

BOT    10    ES    false    JUN12 Futures     1395.25    USD    GLOBEX    01:03:00   

 

Monday maybe higher

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

• Monday higher, low confidence.
• ES pivot 1389.92.  Holding above is bullish.
• Rest of week bias uncertain, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1395.25 at 1:03 AM..

Recap

Thursday night I was expecting a doji on Friday - little change, with direction hard to determine.  It was more of a star than a doji but we did get a small move, with the Dow gaining just 35 points to close at 13,081.  What does that mean for the coming week?  Read on...

The technicals

The Dow: One thing I mentioned last wee was that Friday might be a bottoming day and that's just what the chart ended up looking like.  We got a nice green hammer on the day that held support at 13K.  The Dow is now firmly oversold and its stochastic is right at the level from which a bullish crossover appears ready to form.  I'm now liking the look of this chart.

The VIX:  On Friday, the VIX took its biggest tumble in 13 sessions, dropping 4.82% back below the 15 level.  And in so doing it just formed a bearish stochastic crossover.  This implies a lower VIX Monday which would suggest higher stocks.  The futures seem to support this idea, being stuck in a now seven day descending RTC that is showing no sign of reversing.

Market index futures: At 1:15 AM EDT we've got all three futures in the green.  NQ is up a nice 0.22% while ES and YM are lagging a bit, up just 0.05% each.  After three days of losses last week, ES on Friday put in a green hammer, just like the Dow.  The fact that we're now trading around the upper end of that hammer is early confirmation that the downtrend may be over.  This is supported by rising OBV and money flow, and a stochastic that looks to be readying a bullish crossover in the next few days.

ES daily pivot: Tonight the pivot ticks down from 1390.75 to 1389.92.  With ES pretty flat in the overnight after a pop on the open this evening, we're still about five points over the pivot - not a huge number but still encouraging for Monday morning.

Dollar index: On Friday the dollar put in a stubby gap-down star - not really a reversal indicator.  Supposedly the $DXY is continuing lower tonight.  I no longer have access to $DXY since my data provider whom I will not name but their initials are eSignal decided to start charging for it.  So I have to use the Deutsche Bank dollar index $USDUPX.  It's still free but it only updates during regular hours.  So be it - hey eSignal, you already get enough money from me every year.  Well anyway, even though the dollar gapped down and its indicators are all oversold now, there's still more downside room to go, which would be good for stocks.

Morningstar Market Fair Value Index: On Friday, the index remained at 0.96, but it continues to step down from the high of 0.98 reached early last week. This remains at least something of a concern and will bear watching


History: According to The Stock Traders Almanac, Monday is historically slightly bullish, the only really at all bullish day of the week.  The whole last week of March is generally a downer.

     And the winner is...

I'm seeing enough positive signs in the charts tonight to be cautiously optimistic about tomorrow, so I'm going to call for a higher close Monday.  The rest of the week though remains to be seen.  However, I do note that J-Trader is long right now and the great Rob Hanna is seeing a pretty convincing historical bullish edge to the current setup.  That's all she wrote.

ES Fantasy Trader

Since we did not trade Thursday night, the account remains $124,625, after 24 trades (18 wins, 6 losses) starting from $100,000 on 1/1.  Tonight we're going to try a long from 1395.25.
 

Friday doji possible

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

• Friday little change expected, low confidence.
• ES pivot 1390.75.  Holding under is bearish.
• Next week bias higher, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Link of the Day


Are you a One Percenter?

From The Big Picture blog, this is a quick read of a few eye-opening statistics that paint a grim picture of the average American.  Check it out.


Recap

Well we got more downside today, basically what I was expecting.  Now let's see when this downturn might end.

The technicals

The Dow: Today the Dow shed another 78 points to continue a now three day stairstep decline.  The good news is that this was enough to bring the indicators to oversold levels.  And the stochastic is in position to execute a bullish crossover in the next day or two.  Also, the support at the 13K level held up.  So while there's no reversal of the downtrend in the candles (which look fairly close to a three black crows pattern), the worst of this decline may be over.

The VIX:  Today the VIX gapped up for a 2.91% gain, but did it on a stubby shooting star, a fairly good reversal pattern.  Its indicators are also nearing overbought levels.  In addition, the futures today formed a dark cloud cover, suggesting lower on Friday.  This all would seem to portend higher stocks if not tomorrow, then early next week.

Market index futures: At 1:44 AM EDT all three futures are up with ES gaining 0.13%.  ES gave us a long red candle today, with a long lower shadow.  The fact that we're now trading up from today's close rather than continuing lower is encouraging.  Also, the stochastic is now nearing it inflection point where it lines up for a bullish crossover.  And finally, OBV has turned up again after four straight days of declines.

ES daily pivot: Tonight the pivot takes a step down from 1399.17 to 1390.75.  Unfortunately, after rising most of the evening, ES turned south right at midnight and we've just now crossed below the pivot.  Unless ES can manage to retake the pivot before the open, it's not looking good for Friday.

Dollar index: After a doji yesterday, the dollar today gave us a narrow gap-up star.  However, its stochastic also executed a bullish crossover, so this indecision might be resolved in a higher dollar on Friday, bad for stocks.  Also, the euro is quite overbought right now and its stochastic just finished a bearish crossover, suggesting a lower euro (and therefore a higher dollar).

Morningstar Market Fair Value Index: Despite the recent losses in the market, yesterday the index remained at 0.97, near its high for the year.  I consider that it is not going lower to be a good sign.


History: According to The Stock Traders Almanac, Friday is historically quite bearish for the Dow (though bullish for the S&P)..

     And the winner is...

So tonight we've got a scenario setting up of a reversal that's coming soon, but doesn't quite seem to be at hand.  So I'd say Friday will be a bottoming day, possibly in the form of a doji, but in any case clearing the way for a move higher early next week.

ES Fantasy Trader

 Last night's short paid off nicely.  We covered at 10:53 AM for an 11.25 point profit.  With no real discernible edge tonight, we're going to stand aside again.

The account now rises to $124,625, after 24 trades (18 wins, 6 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    JUN12 Futures     1384.75    USD    GLOBEX    10:52:50   

SLD    10    ES    false    JUN12 Futures     1396.00    USD    GLOBEX    00:37:12   

 

Thursday possibly lower

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

• Thursday lower, low confidence.
• ES pivot 1399.17.  Holding under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1396.00.

Recap

Last night I was suggesting that the Dow could close lower today and it did, though it dropped just 46 point in a somewhat half-hearted decline.  Still, this gradual decay has a different feel than last month's sharp one day dump.  It makes one wonder if there's not lower still to come.

The technicals

The Dow: So anyway, today's solid red candle was enough to pull the indicators further down from their recent overbought peak, and to establish a new declining RTC.  When will this end?  These guys will let us know.  And right now, they're not talking.

The VIX:  Yesterday's hanging man was confirmed today with a 2.89% decline that brought us right back to the 15 level, although it happened on a funny gap-down green candle.  With indicators continuing to rise from oversold and today's drop not doing much to raise the market, I'm looking for a higher VIX again on Thursday, and that's a negative for stocks.

Market index futures: After some profit taking in the final hour of trading, the futures began a slow drift back up, until they got knocked down again at 10:30 PM, evidently on some bad news from China.  That leaves all three futures lower at 12:30 AM EDT, with ES down 0.11%.  That said, ES is once again retracing this latest drop, or at least trying to.  That's giving us a star in the making, following today's star and Monday's hanging man, all indicating uncertainty around a general path lower.  The indicators are now clearly on their trip back down and just coming off overbought levels.

ES daily pivot: Tonight the pivot ticks up from 1398.92 to 1399.17.  However, we're now back below it, not a good sign.

Dollar index: Today the dollar formed a perfect doji, closing exactly in the middle of its three day range and forming in the process a symmetrical triangle.  Since these most often resolve in the direction from which they were entered, that would imply a lower dollar soon, which would be good for stocks.  However, one must note that the indicators are only just now coming off oversold levels, suggesting a higher dollar.  So we'll just have to see which way this one turns out.

Morningstar Market Fair Value Index: Yesterday the index dropped back to 0.97.  The failure to advance any higher than 0.98 is somewhat of a concern at this point.


History: According to The Stock Traders Almanac, Thursday is historically quite bearish, almost as bad as Wednesday.

     And the winner is...

Tonight, the majority of the evidence points to a lower close Thursday.  However, a lot will depend on the importance the market attaches to this China manufacturing data.  As I write this, ES is slowly resuming the uptrend it was in before the news hit.  Whether or not it can creep back to the pivot remains to be seen.  But the technicals all seem to be pointing lower, so I'll just have to go with that.

ES Fantasy Trader

Tonight we go short at 1396.00.

The account remains at $119,000 even, after 23 trades (17 wins, 6 losses) starting from $100,000 on 1/1.
 

Wednesday may go lower

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

• Wednesday possibly lower, low confidence.
• ES pivot 1398.92.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

It seemed to me last night like we had a chance to go lower today and so we did, with the Dow shedding 69 points, just its second losing session in 10 straight.  Since 2012 began, the Dow has only had one instance of a two day losing streak, one of three days, and one of four days.  Which path is Wednesday on?  Follow the Night Owl and get the hoot.

The technicals

The Dow: Today's drop was expected and I took a profit in my DXD trade from yesterday.  The indicators are all now coming off overbought, suggesting lower to come after today's long red candle.

The VIX:  Last night I wrote "there's more upside to come" and the VIX delivered today in the form of a 3.59% gap up.  But it was a red hanging man.  So this leaves us wondering if Wednesday will follow lower or if the rising indicators will prevail.  Falling VIX futures today would suggest the former, which would be good for stocks.

Market index futures: Unlike last night at this time, tonight all three futures are in the green at 1:24 AM EDT with ES leading the way, up 0.18%.  Nevertheless, we are now trading outside the rising RTC and that is a bearish setup.  Coupled to highly overbought indicators, and today's candle in the shape of a hanging man, this has the feel of a market ready to go lower.

ES daily pivot: Tonight the pivot falls from 1401.83 to 1398.92.  We had a pop in ES earlier this evening that broke through the old pivot and despite a gradual drift lower after 10:30 PM, we're still four points over the new number, a good sign - while it lasts.

Dollar index: Today the dollar actually gained 0.14% on a funny homing pigeon pattern you don't see very often.  This is a bullish reversal pattern and with indicators approaching oversold, we might see a higher dollar in the next few days, if not Wednesday.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.98, the highest level of the year.  I'll take the fact that the index managed to break the 0.96 level last week as a positive sign.


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

     And the winner is...

More mixed messages tonight.  The Dow and ES charts look ready to go lower but the VIX and ES trend suggest higher.  What to do, what to do...  OK, what this feels like to me is a market that still wants to go higher but needs one more day of lower prices before resuming the uptrend.  We are also entering the weakest three days of the month.  So tonight is one of those times that I'm going to disagree with the futures, possibly at my own peril, and claim that Wednesday goes lower again.

ES Fantasy Trader



Last night's short paid off, not spectacularly, but I'll take a 4.75 point profit any day. Tonight, we're standing aside again.  While I do think the market's going lower Wednesday, the edge right now isn't compelling enough for me to jump in here.  With the account up 19% YTD, I think I can afford to take a pass on days like this.

So our balance now rises to $119,000 even, after 23 trades (17 wins, 6 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    JUN12 Futures     1397.25    USD    GLOBEX    10:51:59    

SLD    10    ES    false    JUN12 Futures     1402.00    USD    GLOBEX    00:58:28   

 

Tuesday possibly lower

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

• Tuesday lower, low confidence.
• ES pivot 1401.83.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1402.00.

Recap

Last night I suggested that we might go higher today and so we did, although I have to point out something interesting.  The S&P gained 0.4% and the Naz jumped 0.75% while the Dow advanced a mere 0.05%.  When I see divergences like this, it's time for the Night Owl to do a head swivel and pay extra attention.  Read on...

The technicals

The Dow: The Dow put in a symmetrical doji today, give or take, to follow Friday's inverted hammer.  That's two consecutive reversal indicators.  And the Dow is clearly having trouble with the 13,250 resistance zone.  And the indicators are all starting to come alive from their highly overbought levels, with the stochastic just completing a bearish crossover.  This all suggests a down day Tuesday, albeit still eminently within the ongoing rising RTC.

The VIX:  The all-important VIX has been ping-ponging around in a range of 14-16 lately.  Today it gained 3.94% to close right on its long-term support line of 15 with a hanging man type candle, although there's not really a trend in place.  Meanwhile, its indicators have now all bottomed at oversold levels implying that there's more upside to come, which is bad for stocks especially given that we didn't see a lower close in the markets today.

Market index futures: At 12:45 AM EDT, all three futures are again back in the red, at least a little.  ES is down 0.09% after putting in a third straight decent green candle today.  The new candle developing is developing as a star drooping off the close of today's bar.  Of course, all year long so far these sorts of reversal warnings haven't counted for much without confirmation, and ES hasn't been able to put together more than one down day in a row since March 6th.  So this is something to watch, but we can't really pull the dive alarm on this basis alone.

ES daily pivot: Tonight the pivot rises once again from 1397.67 to 1401.83.  With ES dipping ever so slightly since the close, we're now less than a point away from this new number.  I'm thinking there's now a good chance ES could drive under the pivot before the open on Tuesday, which would be a negative for stocks.

Dollar index: Last night I wrote "this chart is looking for a lower dollar again on Monday".  And so it was once again, with the dollar giving up another 0.46%.  And in doing so it gave us a bearish three black crows pattern suggesting even more losses to come, which would again be good for stocks.  Supporting this notion is the stochastic, still descending from overbought levels.

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


History: According to The Stock Traders Almanac, Tuesday is historically a bit more bullish than Monday.

Sentiment: Once again it's time for the latest TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366

 10  3/5        43         26        +     1370

 11  3/12       46         32        +     1371

 12  3/19       46         29        +     1404

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 2/21 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 8 for 8.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And once again, I voted bullish this week.  I'm still not seeing any technical reversal indicators on the monthly SPX chart.

This week we note that while bearish sentiment dipped 3 points,  bullish sentiment remained the same as last week.  Still not the sort of extreme readings that might signal a reversal.

     And the winner is...

More mixed messages.  Both the Dow and SPX charts are quite oversold, yet the candle pattern on the SPX looks a lot healthier than the Dow.  In fact, I again took out a DXD position (at 12.75).  I guess tonight the overall evidence just makes me feel Tuesday is more likely to go lower than higher.  I really hate making these counter-trend calls, but I just have to calls 'em like I sees 'em.  Unless and until we drop out of a few rising RTC's, the overall trend will remain up.

ES Fantasy Trader

Tonight we go short at 1402.00 at 12:58 AM.  I'm planning on a short short, as it were.  I'll be exiting this one on Tuesday, win, lose or draw.

In the meantime, the account remains at $116,625 after 22 trades (16 wins, 6 losses) starting from $100,000 on 1/1.
 

Monday higher

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

• Monday higher, low confidence.
• ES pivot 1397.67.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last Thursday I was looking for some small gains for the Dow on Friday.  While the Dow was looking good early on only to end up losing 20 points, the S&P instead did deliver, up 0.11%.  Is this a sign the rally is out of gas or is there still more upside to come?  Read on...

The technicals

The Dow: Three things about last Friday's action: first the Dow had its first losing day in seven sessions, second it formed an inverted hammer reversal warning, and third, it did it on greatly increased volume/  In fact this was the biggest volume day since last September.  Add to this mix some very overbought daily indicators that actually appear to have peaked on Friday, plus a stochastic that just executed a bearish crossover, and you have to wonder if this market may be just about ready to roll over.  At least that's what this chart looks like.

The VIX:  Meanwhile, the VIX gave us a large doji centered around its recent lows near 14.5.  This makes five straight days the VIX has played tag with its lower BB - very unusual.  With the VIX now at a multi-year support level, the prudent bet would be that it's going higher before it goes any lower, and that would be a negative for stocks.

Market index futures: All three futures are in the green at 1:15 AM EDT with ES now up 0.2%.  Unlike the daily Dow chart, ES looks quite healthy.  It remains solidly inside its rising RTC and the green candle being formed now represents good follow-through to Friday's smaller gain.  That's really all we've got to go on since the indicators are now all pegged in "overbought broken" mode and therefore unable to predict anything.

ES daily pivot: Tonight the pivot rises once again from 1392.75 to 1397.67.  After a gain earlier this evening, ES remains above the new level, though now only by 3 points.  Nevertheless, unless ES breaks under the pivot and stays under, this is a good sign for Monday.

Dollar index: Last Thursday I wrote "There's nothing on this chart to suggest anything but a lower dollar Friday".  And the dollar was happy to oblige, dropping even more on Friday for a half percent loss in a deep red candle.  Even at that, the indicators are still just coming off overbought and the dollar has no immediate support in sight, so I'd say this chart is looking for a lower dollar again on Monday which would be good for stocks.

Morningstar Market Fair Value Index: On Friday the index hit 0.98 for the first time this year, finally breaking above the 0.97 barrier.  This is quite a positive development.


History: According to The Stock Traders Almanac, Monday is historically fairly bullish, and the week as a whole is quite bullish with the Dow rising in 6 of the last 8.

     And the winner is...

Another difficult choice.  On the one hand, the Dow and the VIX both point to a lower Monday, but the dollar and the futures indicate higher.  And all four of these are usually good signposts for the market.  What I've noticed lately is that when the Dow telegraphs a possible top, it usually takes one day longer to roll over than you'd think.  With the futures and dollar being more recent than last Friday's closes of the Dow and VIX, I'm going to have to go with that and opine that we close higher Monday. But being so close to the ES pivot makes me nervous.  If we drop below 1397.67, a lower close is much more likely.  On the other hand, I'm not seeing much in the way of negative news on the horizon for Monday, so that should help the bull cause.  I guess we'll see soon enough.

ES Fantasy Trader

Last Thursday night's long idea played out nicely on Friday, resulting in a decent 3.75 profit, not too shabby on a small range day.  Due to the mixed messages I'm getting tonight, I think it's more prudent to simply stand aside than place a possibly low probability bet.  I'd rather wait for something with a bit more of an edge.  And of course waiting is always just as much of a decision and buying or selling.

So now the account increases to $116,625 after 22 trades (16 wins, 6 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    JUN12 Futures     1399.00    USD    GLOBEX    MAR 16 11:17:27    

BOT    10    ES    false    JUN12 Futures     1395.25    USD    GLOBEX    MAR 16 01:25:57   

 

Friday could go a bit higher

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

• Friday higher, low confidence.
• ES pivot 1392.75.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1395.25.

Recap

What did they call me?

Last night I suspected we'd go higher today if the ES pivot held.  It did and we did, with the Dow tacking on another 59 points extending its winning streak to seven straight sessions.  Can we go for eight?  Let's sort it all out.

The technicals

The Dow: Today's close at 13,253 brings us so high I had to back out to the monthly chart to find the last time we were up here.  It was way back in January of 2008, when the Great Recession was just getting underway.  The last time we climbed up to this level was even earlier: May 2007.  And speaking of streaks, the Dow is working on six straight months of gains, something we haven't seen since 2006.

The important point here is that we've now just about completely cleared out the backlog of sellers who rode the market to the bottom in 2009 after buying in on the way down and swore that they'd get out if they ever got back to even.  From here, there's no real resistance until 14,000, and then the all-time high of 14,198 set in October 2007.  Even the current monthly upper BB is at 13,525, leaving us another 250 points of upside possible.

On a daily basis though, the RSI, stochastic and OBV have reached overbought levels, but money flow is still in pretty good shape - rising but not overly high.  We have hit the daily upper BB at 13,202 though.  But unlike the VIX, the Dow is known to sometimes just crawl right up the BB when it's in rally mode, and we certainly still seem to be in rally mode.  And we remain firmly inside the rising RTC of March 7th.  So no reversal signs here just yet.

The VIX:  Last night it looked like the VIX might go higher today and it did, slightly, adding 0.72%.  But it also made a nice doji in the process.  Does this signal a reversal/  Well the VIX futures also rose today but did so on a red candle, so I'd say it's not out of the question that the VIX may be stalling out here, despite its oversold indicators.

Market index futures: At 1:11 AM EDT we've got all three futures in the red, just barely.  ES is lower by 0.09%.  This seems to be following the recent stair step pattern of gains one day followed by a pause the next.  At this point the indicators are all stuck at overbought levels and have thus lost their predictive power.  That leaves us with an ES still solidly inside its rising RTC and a tiny little developing candle.  Not much to go on tonight.  At least there's no indication of a big dump on the way.

ES daily pivot: Tonight the pivot rises again, but just a bit from 1389.08 to 1392.75.  Since ES has been essentially flat in the overnight, we're now closer to the pivot than before.  Remaining above is still bullish, but with just a 2.5 point cushion, we'll need to watch this number Friday morning.

Dollar index: The dollar bounced off its upper BB today as I figured, ad exited it most recent rising RTC in the process.  There's nothing on this chart to suggest anything but a lower dollar Friday, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.97, tying its highest level of the year so far.  If we can break above this that will definitely be a bullish sign. 
 
History: According to The Stock Traders Almanac, Friday's triple witching day is historically quite bullish although the Dow has been down three of the last five years.

     And the winner is...

Friday is tough to call because of the triple witching.  But there's little in the charts to suggest a reversal is at hand right now, so on that basis I'm going to call Friday's close higher, though probably not by a lot.

ES Fantasy Trader

Tonight we go long at 1395.25, less out of conviction that we're going higher than belief that we're not going lower.

For now the account remains at $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.
 

Thursday higher if pivot holds

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

• Thursday higher, low confidence..
• ES pivot (M contract): 1389.08.  Holding above is bullish..
• Friday bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last night I was thinking we'd see a small-range doji today, possibly ending lower.  Well we got the small range, but the Dow finished higher, though by only 16.4 points on something like a fat little star, so that's pretty close.  But that's still in the ballpark for a follow-on to a big up day.  The question now is, will the uptrend continue or are we topping?  Read on...

The technicals

The Dow: Today's little tail perched on top of yesterday's dramatic rise was just about what might be expected.  Closing entirely outside the upper BB though is worrisome.  History says that from here we could go any direction, but with the upper BB hit, down is more likely than up.

The VIX:  Today's 3.45% move higher in the VIX was the confirmation I was looking for last night   The pattern is reminiscent of a morning star and with a stochastic just about to execute a bullish crossover, I have to think the VIX is going higher Thursday, which would be a bad sign for stocks.

Market index futures: Tonight we switch over to the "M" contracts and at 12:55 AM EDT, all three are running higher, with ES up a quarter of a percent in a steady uptrend since about 5 PM.  This, at least for now, is not confirming today's small doji as a reversal indicator.  And we remain solidly inside the latest rising RTC, so that's good too.

ES daily pivot: Tonight the pivot rises from 1382.67 to 1389.08.  However, with the steady upward drift of ES in the overnight, we are still above the new number and that's a good sign.

Dollar index: While yesterday the dollar touched its upper BB, today it closed on it.  We didn't get the reversal I thought might happen today, but now it's looking for likely for Thursday, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index rose to 0.97, tying its highest level of the year.  It will be bullish if we can push this number higher, otherwise bearish.

History: According to The Stock Traders Almanac, both Wednesday and Thursday are historically quite bullish.

     And the winner is...

While there was an inkling of a bull case in the charts last night, the same factors are in play tonight, only stronger.  Unfortunately, we've got some mixed messages in the charts again, with the Dow and VIX looking negative, but the dollar and futures looking positive.  Whenever that happens, I tend to lean in the direction the futures are running, since they seem to be a pretty good predictor.  This week is also historically a good one and that should never be discounted.  However, I do think a rising VIX will eventually catch up with us, so that might come into play early next week.  But for now, assuming ES doesn't break below its pivot  before mid-morning I'm going to call Thursday higher.  Keep an eye on 1289.08.

ES Fantasy Trader

Tonight we're standing aside again, because although I do think the market's going higher Thursday, I also think most of the gains in ES have already been made.  I normally enter trades sometime after midnight, but the ideal entry here would have been earlier this evening.  Oh well, the stock market is like the bus, as they say - there's always another one coming along soon.

So for now the account remains at $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.
 

Small doji Wednesday, maybe a bit lower

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

• Wednesday lower, low confidence..
• ES pivot 1388.25.  Holding above is bullish..
• Rest of week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Holy moly.  Last night I wrote "we might be set for at least a small gain Tuesday."  That turned out to be the understatement of the year as the Dow jumped 218 points for its biggest gain of the year so far.  The Naz and S&P gained even more percentage-wise.  Nice.  So does this mean profit-taking is on the way or are we on a roll?  Read on...

The technicals

The Dow:Today's tall green candle in one fell swoop took us decisively out of the 12,950-13,000 range that has plagued us all year so far.  Interestingly, it happened on higher than average volume.  And even after today, the indicators are still not overbought, although we did bust right through the upper BB.  That's the one point that might argue against a continuation of this rally on Wednesday.

The VIX:  The VIX today extended its recent waterfall decline to four straight days, this time with a gap down inverted hammer.  Notably, its close of 14.80 was under the lower BB, and so low I had to go to the weekly chart to find the last time we were down here (it was just about a year ago, the week of April 25th, 2011).  It's worth noting that the VIX has multi-year support at these levels going back to 2008.  The last time we were substantially lower than this was in the 2005-2007 rally.

So now we're at an interesting crossroad.  The daily chart suggests a VIX reversal any day now, but the weekly chart now offers no further support until its lower BB all the way down at 11.22.  In view of the fact that the VIX, though gapping down, did put in a green candle today, the first time its managed to do that in five sessions.  But like the other charts so far this year, any reversal warning requires confirmation.  Right now the VIX may want to go higher tomorrow, but I'll believe it when I see it.

Market index futures: At 1:30 AM EDT, we've got a mixed picture, with ES and NQ running a bit lower (ES down just 0.05%) and YM higher by only 0.03%.  Let's call it essentialy flat.  But today's tall green candle decisvely busted the 1375 resistance level that plagued us last month.  It also closed way above its upper BB.  Seeing this and after such a big one day gain, it would not be unreasonable to expect a pause while the market catches its breath and digests its gains.  The small overnight doji being formed certainly seems to support that idea.  Even at that, the indicators are still only close to, but still not yet at overbought levels.

ES daily pivot: Tonight the pivot took a big jump from 1370.42 to 1388.25.  Some basically sideways action in the overnight keeps us above even the new level, though not as much.  Still, 7 points is a respectable distance, and a positive sign.

Dollar index: Today the dollar ut in a gap-up doji that just managed to touch the upper BB at its intraday high.  With overbought indicators, this portends a lower dollar Wednesday which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.96.  Given today's big run, I'll expect it to (finally) go higher tomorrow.  That would be a positive sign.


History: According to The Stock Traders Almanac, both Wednesday and Thursday are historically quite bullish.

Sentiment: Once again it's time for the latest TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361

  9  2/27       48         24        +     1366

 10  3/5        43         26        +     1370

 11  3/12       46         32        +     1371

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 2/13 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 7 for 7.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And once again, I voted bullish this week.  I'm still not seeing any technical reversal indicators on the monthly SPX chart.

Interestingly, both bullish and bearish sentiment increased this week, apparently at the expense of the fence-sitters.  But since bearish sentiment gained more, the bull-bear ratio is actually smaller this week than last.  Hardly the sort of contrarian extreme sentiment reversal indicator one would expect in anticipation of a top.   In fact, for five weeks of the 11 so far this year, there was actually more bullish sentiment than this week.

     And the winner is...

I'm going to say that on Wednesday we're going to get a small range doji that's typical of the day adfter a big gain when the VIX is under 20.  There still seems to be room to run higher on the weekly charts (the Dow's upper BB is at 13,416), but I'd be surprised if we got an immediate push higher.  If nothing else, the fact that today we busted so many Bollinger bands makes me think that we might go at least a little lower Wednesday.

ES Fantasy Trader

Despite Fed-related uncertainty, I'm glad now I decided to go long last night, even though I left the party much too early and left some cash lying on the table.  Nevertheless, we still booked a 1.5 point gain.

Tonight, I'm not seeing a big edge either way, so we're standing aside.

The account is now $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1380.25    USD    GLOBEX    11:07:55   

BOT    10    ES    false    MAR12 Futures     1378.75    USD    GLOBEX    01:44:50   

 

Tuesday maybe higher but watch Fed

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

• Tuesday possibly higher, unless torpedoed by Fed.
• ES pivot 1370.08.  Holding above is bullish..
• Rest of week bias mixed technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1378.75.

Recap

Well I was wrong last night - after looking at some mixed messages on the charts, I ended up picking the wrong message.  I thought we were going lower today, and although the Naz did drop 0.16%, the Dow gained 38 points.  Let's see if we can get this straightened out for Tuesday.

The technicals

The Dow: Today the Dow completed its total retracement of its big dump from a week ago.  And its close of 12,960 drops us right back into the congestion zone of 12,950-13,000 in which we spent so much time wandering around the last half of February.  Yesterday's shooting star was a false alarm.  That's why this pattern always requires confirmation.  Today's green candle cancels that and presents not even a potential reversal.  The indicators are also only about halfway up their trip from oversold to overbought.  If anything, the Dow appears to be setting up another assault on 13K.

Daily VIX

The VIX:  Once again, the chart du jour is the daily VIX.  Look at how we've now had a waterfall of three consecutive gap-down dojis here.  Today's blasted right through its ST support and took us exactly to the lower BB (and even lower intraday).  That's a remarkably quick five day trip from upper to lower BB.  And of course that means, as I always say, that the VIX doesn't like to spend more than a day or two hanging out on its BB's.

However, while a higher VIX is possible in the next day or two, a wider look at the weekly chart shows that today's drop broke support going back to January 23rd and we're now close to last year's low at 14.75.  And the weekly lower BB isn't until 12.98.  So although we may be in for a short bounce, there's still plenty of room to run lower in the coming weeks.

And finally, I note that the VIX generally has a kind of manic-depressive character to it.  When it shoots up, it tends to stay high for a while.  And the higher it goes, the harder it becomes for it to come back down.  Same thing in the other direction.  When the VIX is down, it gets depressed and that makes it harder for it to get back up again.  With the recent inability of the VIX to break back over 20 and in fact moving lower, we may be headed for one of these depressive periods.  And that's good for stocks.  At the very least, I don't think we have to worry about four consecutive days of up 400, down 400 like last summer.

Market index futures: What a difference a day makes.  After looking rather poor last night,  ES ended up staying in its rising RTC today.  True, it put in a long dragonfly doji, but we've seen so many of these false alarms this year, it really requires confirmation.  And at 1:50 AM EDT we're not seeing any, with all three futures in the green and ES up a decent 0.44%.  There's not much to dislike in this chart.

ES daily pivot: Tonight the pivot barely ticks up from 1370.08 to 1370.42.  Coupled with an uptrend that began at 1 PM Monday and continues in the overnight, we're now now a good nine points above, which is a positive sign.

Dollar index: After two big  days of gains, the dollar took a rest today, dropping 0.21%.   That might suggest a reversal lower, but we're right in the middle of the Twilight Zone (the region midway between BB's), so anything could happen Tuesday.  This chart is too tough for me.

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

History: According to The Stock Traders Almanac, Tuesday is historically fairly bearish and the weakest day of the week.

     And the winner is...

Technically I'd say it looks like we might be set for at least a small gain Tuesday.  Unfortunately, tomorrow is a Fed day, so I think the close will be more influenced by that than the technicals.  I suspect that the Fed will not throw any cold water on the market but one can never really be sure.  So no official call tonight - I don't pretend to know what Uncle Ben might be planning to say.

ES Fantasy Trader

Last night's short just wasn't working so I dumped it today for a small 1.5 point loss.  Despite my caveats above, tonight we're going to take a speculative long at 1378.75, with the intention of exiting before the Fed speaks.

The account is now $114,000 after 20 trades (14 wins, 6 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1369.00    USD    GLOBEX    11:16:40   

SLD    10    ES    false    MAR12 Futures     1367.50    USD    GLOBEX    01:40:59   

 

Monday looking lower

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

• Monday lower.
• ES pivot 1370.08.  Holding under is bearish..
• Rest of week bias mixed technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1367.50..

 Quote of the Day

"Personally, I think that it is just naturally human to like to see that you have wealth, and more wealth feels better than less."

- David Van Knapp, Seeking Alpha

Recap

Last Thursday night, I got spooked by a sudden downward blip in ES that seemed to run counter to otherwise positive looking charts.  Nevertheless, the pivot held and the market finished  a bit higher with the Dow gaining 14 points.  With a triple witching and a Fed meeting coming, this should be another interesting week.  Let's try and figure out where it might take us.

The technicals

The Dow: On Friday the Dow finished retracing its big dump from last Tuesday but then closed off its high to give us a classic shooting star.  This is a reversal warning, albeit not a highly accurate one.  With indicators just coming off oversold and a stochastic just finishing a bullish crossover, we'd definitely want to wait for confirmation before calling this a reversal.

The VIX: Meanwhile, the VIX formed a nice gap-down doji with a 4.68% loss that took it right to its recent support at 16.70 before closing a bit higher.  While this doji also warns of a possible reversal, we note that the lower BB is at 16.02, leaving about a point of possible further downside.  Though the VIX could turn right here, the indicators, still headed lower, suggest the possibility of one more day of downside, which would be good for stocks.

Market index futures: At 1:30 AM EDT, all three futures are lower with ES leading the way down, off 0.36%.  The failure of any follow-through to the excellent three day run last week is concerning.  The overnight candle so far is looking like a dark cloud cover.

ES daily pivot: Tonight the pivot rises from 1361.83 to 1370.08.   This jump, coupled with a sagging ES puts us below the pivot, though only by a few points for now.  Still this is a worrisome sign.

Dollar index: The dollar had a big gain Friday taking it nearly to its upper BB.  Though this tall green candle does not suggest a reversal, the bearish crossover in the stochastic does.  The dollar looks to have more downside potential than up right now.  The euro, meanwhile is in a support band around 1.30-1.31.  The last three downtrends in the euro have stopped here.  This also suggest a lower dollar is possible Monday.

Morningstar Market Fair Value Index: On Friday the index rose right back to 0.96 where it has stalled so far this year.  The continuing inability of the index to go above this level weakens the bull case.


History: According to The Stock Traders Almanac, Monday has a slight historical bullish bias.

     And the winner is...

Tonight I'm going to go with the Dow shooting star and the steadily declining overnight ES and vote with the bears.  The market just has a tired feel to it right now, as though it's all worn out from that slow grind back from last Tuesday's big fall.  I note also that J-Trader is going short.  So unless we can break above the ES pivot by mid-morning, I say we close lower on Monday.

ES Fantasy Trader

After skipping a trade on Friday, tonight we go short at 1367.50.

So far the account remains at $114,750 after 19 trades (14 wins, 5 losses) starting from $100,000 on 1/1.