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.

Happy New Year

Happy New Year!

I want to thank all my readers for checking in with the Night Owl this year and wish everyone a safe, happy, and prosperous 2012.  Let's hope it will be better than this year was.  Be sure to stop by again Monday evening for our first call of the new year.

Friday uncertain, ES pivot is key

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

• Friday uncertain, ES pivot is key.
• ES pivot 1253.25, holding above is bullish.. 
• Next week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside.

Recap

Last night we had some very mixed messages with the Dow pointing down but the futures pointing up. The good economic news today provided the deciding vote and helped drive the Dow up 136 points.  That leaves just one more day til 2011 is history.

The technicals

The Dow: Today's solid green candle exactly mirrored yesterday's solid red candle - rather unusual.  The fact that there was no follow-through to Wednesday's bearish setup is bullish even though the indicators remain quite overbought.

The VIX: The VIX was unable to make any headway above yesterday's highs, finishing down 3.7%, and making an almost but not quite dark cloud cover in the process.  This suggests a slight bias lower, which would be good for stocks.

Market index futures: Interesting - as I began writing this, all three futures were in the red.  Then at exactly 1:28 AM EST, they suddenly took off like a rocket - quite unusual for what is usually a pretty quiet time of night.  There was a story on the newswire about China eyeing "pro-growth" economic policies around this time - I don't know if there's any connection.  In any case, we're now looking at small gains rather than losses, which is a positive sign.

ES daily pivot: Rose from 1250.67 to 1253.25.  We were above the former number earlier this evening and are even more above the new higher number now at 2:12 AM.  I view that as a positive.

Morningstar Market Fair Value Index: Yesterday the index dropped form 0.89 to 0.86 - that's bearish.

History: According to The Stock Traders Almanac,the last trading day of the year is historically bearish.

     And the winner is...

Sigh - yet another very tough call.  Tomorrow being a Friday as well as the last trading day of the year we'll be looking at another low volume day with a variety of competing influences.  The charts bear out this mixed picture.  Accordingly, I'm not going to make my usual call tonight.  My wild guess though is that if ES can hold up over its pivot by the open then we stand a chance of closing higher.  But tomorrow is really just a good day to take off and go to the liquor store to stock up for New Year's Eve.

ES Fantasy Trader

Last night's speculative long in the face of a poor looking Dow chart paid off and just after noon today we took a profit of 4.75 points.  Portfolio stats: the account is now  $134,750 after 48 trades (32 wins, 16 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we're standing aside - there's just too much uncertainty and I don't think there will be much money to be made in the overnight trade anyway.

BOT    10    ES    false    MAR12 Futures     1249.75    USD    GLOBEX    01:28:10

SLD    10    ES    false    MAR12 Futures     1254.50    USD    GLOBEX    12:06:20
 

Thursday depends on EU news

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

• Thursday uncertain, depends on Italian news.
• ES pivot 1260.08, holding under is bearish. 
• Rest of week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader going long at1249.75.

Recap

Last night I thought we'd be going lower today.  The only surprise to me was the size of the move.  I wasn't thinking we'd get a 1.14% pullback in the Dow.  But that's the sort of thing that can happen in the waning days of the year.  Moving right along...

The technicals

Dow daily

The Dow: The reversal signal from yesterday's doji was confirmed with today's solid red candle.  This also dropped us out of the rising RTC as you can see here.  That is a bearish setup.  Note also how the stochastic (second lowest panel) has just completed its bearish crossover.  There's nothing on this chart to suggest anything but continued lower on Thursday.

The VIX: Yesterday the VIX broke out of its descending RTC, a bullish setup.  Today it traded entirely outside on a green candle and that is the trigger.  By this system, the VIX should go higher on Thursday and that is bad for stocks.

Market index futures: The futures meanwhile are giving a completely different message from the Dow chart.  All three are up at 1:30 AM EST and ES in particular is up by a significant 0.4%.  In fact it has been slowly rising since the close on Wednesday.  Now why would ES be going up in the overnight when the Dow chart is still looking overbought and technically bearish?

Well from what I read, today's decline was supposedly due to the pricing in of fear about Thursday's coming Italian bond auction.  My guess is that the overnight ES traders know something we don't and are thinking that there's going to be some good news coming.  Of course that's just speculation on my part but you do have to wonder why the futures are advancing in the face of what appears to be the end of an uptrend.


ES daily pivot: Dropped a bit from 1260.08 to 1250.67.  This now puts us very close and ES in fact just made one quick stab at it at 12:40 AM.  That was rejected but I expect another attempt real soon now. 

Morningstar Market Fair Value Index: The index has actually been rising for four straight sessions now, hitting 0.89 yesterday.  That is positive for stocks.

History: According to The Stock Traders Almanac,tomorrow is historically quite positive for the SPX, somewhat less so for the Dow.

     And the winner is...

Another tough one.  The Dow and the VIX are both guiding lower but the futures are looking higher.  It's particularly difficult to say given the characteristics of this low-volume holiday-shortened week.  I think Thursday is going to hinge on news out of Italy.  Good news, we go higher, bad news lower.  All in all, it looks like another good day to go on vacation.  That's all, she wrote.

ES Fantasy Trader

Today we took a profit of 10.25 points.  Portfolio stats: the account is now  $132,375 after 47 trades (31 wins, 16 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we're going out on a limb and entering a highly speculative long at 1249.75.

BOT 10 ES false MAR12 Futures 1249.25 USD GLOBEX 11:19:39
SLD 10 ES false MAR12 Futures 1259.50 USD GLOBEX DEC 27 16:46:05

Wednesday lower

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

• Wednesday lower, medium confidence.
• ES pivot 1260.08, holding under is bearish. 
• Rest of week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader going short at1259.50.

Recap

With a total range of just 36 points to end with a 2 point loss, today was about as quiet a day as you can get, but basically what I expected for this last week of the year sandwiched as it is between two holidays.  Will we see more of the same on Wednesday?  Let's check it out.

The technicals

The Dow: Today's little doji is a potential reversal sign.  And my Fave Five indicators are quite overbought.  The stochastic in fact is now executing a bearish crossover.  I also note that the S&P High-Low Index hit 100 on Friday, generally a sign that a reversal is near.

The VIX: While the VIX gained 5.7% today, it did it on an unusual gap-up red candle.  This may simply be due to the post-holiday lethargy in the market.  While going higher tomorrow is not out of the question, another decline later on in the week is also still on the table.

Market index futures: All three are running in the red at 2 AM EST, with ES down a third of a percent.  This sort of bearish move following today's doji seems to point down for tomorrow.

ES daily pivot: Rose from 1256.58 to 1260.08 tonight.  With ES declining in the overnight, we've now gone below the pivot and that's a bearish sign.

Sentiment: Once again the latest Ticker Sense Blogger Sentiment Poll is out.  Here's how the numbers shake out:

          Bullish Bearish Neutral

Last Week   41%     38%     21%

This Week   46%     21%     33%

Interestingly, while bearish sentiment dropped significantly, bullish sentiment increased very little.  In fact "Neutral" seemed to be the big winner.  Not quite sure just what to make of that.  The fact that some former bears only moved to neutral could be considered contrarian bullish.

     And the winner is...

Speaking of bears, I think we're going lower Wednesday.  We're overbought and it just seems like we're due for a pullback.  Given the lackluster nature of this week, I'm not looking for any big moves, but the bias right now is down.

ES Fantasy Trader

Last night ES was closed so we couldn't enter a new trade.  Tonight we're going short at 1259.50 at  4:46 PM, a bit earlier than usual.

Portfolio stats: the account remains at $127,250 after 46 trades (30 wins, 16 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.

A bit more room to go higher Tuesday

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

• Tuesday higher, low confidence.
• ES pivot from Friday 1244.08. 
• Rest of week bias historically higher.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside - ES closed.

Recap

Last Thursday I thought we still had some room to run higher and Santa delivered one last Christmas present in the form of an additional 124 Dow points.  With a quiet week ahead and the futures still not open for trading again, there's not a whole lot to go on this evening, but let's see what we can do.

The technicals

The Dow: Friday's close of 12,294, albeit on low volume, was still significant in that it finally broke the 12,225 resistance level we've been trying to pass since October.  From here, there's no more resistance until 12,386, the upper BB.  And while the indicators are now in overbought territory, they have not yet given a reversal signal.

The VIX: The VIX meanwhile broke under its support at 21.5 and now has no support til its lower BB at 20.14.  And without a reversal candle it looks like it still has room to test that level.

Morningstar Market Fair Value Index: On Friday the index rose another tick to 0.88, a bullish sign.

History: According to The Stock Traders Almanac,the first trading day after Christmas is quite bullish.

     And the winner is...

Well there's not much to go on here, but I'm going to say we still have a bit more room to go still higher, although the overbought alarm bells are just starting to ring faintly in the distance.  We may see a pullback of some sort this week but I don't think it will be Tuesday.  Absent any new disasters from Europe and assuming continued good news at home, I'm going to call Tuesday higher.

ES Fantasy Trader

Last Thursday night I wrote " I may regret this in the morning, but tonight we're going short at 1232.50."  Well I did and Friday we covered this ill-advised short for a nasty ugly loss of 24 points.  Portfolio stats: the account is now down to $127,250 after 46 trades (30 wins, 16 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier   No trade tonight - ES is still closed..

SLD    10    ES    false    MAR12 Futures     1232.50    USD    GLOBEX    DEC 22 00:40:18
BOT    10    ES    false    MAR12 Futures     1256.50    USD    GLOBEX    DEC 23 01:42:43
 
 

Merry Christmas!

Merry Christmas!

 

Ho ho ho!  The Night Owl wishes everyone a very merry Christmas.

May Santa bring everything you wished for tomorrow morning.

See you again Monday evening!

Still some room to run higher Friday

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

• Friday higher, low confidence.
• ES pivot 1244.08.  Holding above is bullish.
• Next week bias higher if resistance broken.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader standing aside.

Recap

What a difference an hour makes.  In the time it took me to write last night's post, the situation changed dramatically.  Once ES broke through its daily pivot, I canceled my bearish call and I'm glad I did, since the Dow ended gaining a welcome half a percent today.

Tomorrow is not only Friday but the last trading day before Christmas.  Volume will be even lighter than today and all the big players will be home sipping eggnog, skiing in Aspen, or helicoptering to the Hamptons if they haven't already left.  I plan to do the same (well at least the eggnog part).  There's little point in doing a detailed analysis tonight, so let me just say that from what I saw today I think there's still a bit more upside available but we're close to some Dow resistance at 12,225.

However, the handle part of the cup and handle I mentioned earlier this week is finishing off nicely and that's quite a positive indicator.  And with ES having easily broken over its 200 day MA today and continuing nicely positive in the overnight (we're up 0.58% at 2:05 AM EST), I wouldn't be surprised to see at least a bit more upside tomorrow.

On that note I wish happy holidays to all my readers and I'll see you again Monday night.

Thursday uncertain, ES pivot is key

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

• Thursday uncertain, watch ES pivot.
• ES pivot 1236.08.  Breaking above is bullish.
• Rest of week bias higher
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader going short at 1232.50..

Recap

Last night I wrote"I think we may close a bit higher but overall it should be a small range doji day." .  Well a 4.16 point gain in the Dow qualifies as "a bit" higher, don't you think?

The technicals

The Dow: Today's tall dragonfly doji was a classical reversal warning.  However, it does require confirmation.  Still it has to make you wonder if, after such a great two day run, we may not just be due for a pullback on Thursday.  That said, support at 12K was successfully tested today and we've also got the 200 day MA for support close behind that at 11,936.

The VIX: Is in an interesting position tonight.  It gave up its support at 24.5 two days ago and its indicators are now in oversold-broken mode.  The next support here isn't til 17.8.  And the VIX almost but didn't quite touch its lower BB today.  So there's no immediate sign of a reversal here, implying at least some more potential upside for stocks.

Market index futures: Unlike last night, tonight all three are running lower, with ES down a quarter of a percent at 1 AM EST.  Interestingly, ES sent out a scouting party to recon the 200 day MA but this expedition failed.  The resulting doji warns of a reversal just like on the Dow chart.  We seem to be seeing some follow-through already so that's a bearish sign.

ES daily pivot: Rose from 1224 to 1236.08 tonight.  And since ES has been drifting lower through the evening, we've gone from above to below the pivot, a bearish sign.

Copper: My. we're just full of dojis tonight - another one on the copper chart.  Same meaning as the others.

Morningstar Market Fair Value Index: Yesterday the index jumped from 0.83 to 0.86 as I thought it would.  That's bullish for stocks.

History: According to The Stock Traders Almanac,Thursday outperforms historically and is the strongest day of the week.

     And the winner is...

This is actually a tough call but I'm going to go out on a limb and say it's the bears tonight.  Mr. Market ran too hard too fast not to take a breather for a day or too.  Today's dojis all warn of a possible pullback tomorrow.  Since the futures are guiding lower, I have to go with that and call Thursday lower.  Of course, since the doji requires confirmation, it's still possible that there might be more gas in the tank.

Contributing to the difficulty of the call is the fact that we haven't hit any upper BB's yet and there is no near term resistance in sight.  If ES can manage to break through its pivot, then a higher close isn't out of the question.  But for now anyway though, I don't think so.  We'll just have to see.

1:35 AM update:  I see that the futures now seem to be rising and NQ has actually turned positive.  This is starting to weaken my bearish call, but we still need to break through the ES pivot.  Watch the 1236 level closely in the morning.  Either way, with some good support and teh VIX almost down to 20 again, I'm not expecting a major down day.

2:15 AM update:  ES just broke through the pivot.  This means that we may very well go higher on Thursday, but it's too uncertain for me to actually call it.  However, I am striking my earlier call for a lower close.

ES Fantasy Trader

Today we stood aside in the expectation that there would not be much movement either way, and that's just how it worked out.  Portfolio stats: the account now still stands at $139,250 after 45 trades (30 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier     I may regret this in the morning, but tonight we're going short at 1232.50.

 

A bit more upside possible Wednesday

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

• Wednesday higher, low confidence.
• ES pivot 1224.00.  Holding above is bullish.
• Rest of week bias higher
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader standing aside.

Recap

On Dollar, on VIXen!

Ho ho ho!  Just as I was thinking he'd forgotten to set his alarm, Santa Claus finally showed up on Wall St. today and distributed an early Christmas present to all the good little traders in the form of a nearly 3% gain in the Dow and SPX, instantly erasing an entire week's worth of losses in just one day.


The technicals

Dow daily

The Dow: Last night I said "we closed outside the right edge of the descending RTC from December 12.  That is a bullish setup."  And today we got the trigger in a big way.  You can see this in the last descending set of line sin this chart (click on the image to enlarge it).  This marks the end of the downtrend that began on 12/12 and sets the stage for further gains.

Do you see what I see?  No, it's not a star shining in the east, it's a cup & handle formation.  Check it out on this Dow daily chart.  The cup goes from 11/14 to 12/08 and the handle is just finishing up now.

If we can stay even or even advance a bit tomorrow, that will make the case even better.  The cup and handle is one of the better classical (ie. non-candlestick) technical indicators.

In addition, the Dow provides us with the pretty picture of my fave five indicators (top to bottom: RSI, momentum, money flow, stochastic, and OBV) all having bottomed and hooked up, another bullish sign.  And last but not least, today the Dow not only reclaimed the 12K support level but also blew right back through its 200 day MA at 11,936.  Both of these numbers now once again become support.  I'm liking it.

Market index futures: All three futures are running in the green at 1:15 AM EST with ES up 0.18%.  Pretty much everything I said about the Dow applies to ES too: the RTC breakout and the indicators bottoming out on oversold levels.  ES is now just 7 points from its 200 day MA at 1245 and I expect that to provide some resistance just as it did earlier this month.  Also, whenever we have these tall green candle days, they're often followed by small doji days.  I see no reason why that won't happen again on Wednesday.

ES daily pivot: Takes a big jump from 1204.75 to 1224 even tonight.  But ES is still way over that at 1238 providing a good cushion going into Wednesday.

Copper: Copper also broke out of its descending RTC today as well as a four day trading range.  With oversold indicators also turning up, it looks poised to go higher.

Morningstar Market Fair Value Index: Yesterday the index dropped again to 0.83.  Unfortunately, Morningstar gives these numbers one day late.  I'm betting anything that today's number will be higher.  A move up in this index is bullish.

History: According to The Stock Traders Almanac, the rest of this week is considered historically quite positive, being the days of the traditional Santa Claus rally.

     And the winner is...

Tonight I'm giving it to the bulls.  The futures have been drifting slowly higher all evening suggesting that there's still at least some more upside left for tomorrow.  I think we may close a bit higher but overall it should be a small range doji day.  A good day to take off and go do some Christmas shopping.  I find today's developments encouraging for the next few days, in fact.

ES Fantasy Trader

Holding my long from the 16th took a bit of nerve but patience paid off in the end.  Santa's timely arrival today got me out of that hole and today we took a 9.75 point profit shortly before lunch.  I know I left some money on the table, but that doesn't make me feel nearly as bad as holding on and watching a winner turn into a loser.  And we never want to be too piggy, oink oink.

Portfolio stats: the account now stands at $139,250 after 45 trades (30 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier     Tonight we're standing aside with the expectation that there's not going to be much action on Wednesday.

SLD    10    ES    false    MAR12 Futures     1230.00    USD    GLOBEX    11:53:06

BOT    10    ES    false    MAR12 Futures     1220.25    USD    GLOBEX    DEC 16 01:56:34
. 
 

Tuesday likely higher

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

• Tuesday higher, low confidence.
• ES pivot 1204.75.  Failure to hold above is bearish.
• Rest of week bias uncertain
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader holding long at 1220.25.

Recap

We've seen this movie before.  Seems like every day lately the market opens up and begins to rally.  Then at some point during the day, some European opens his mouth and rains on the parade.  Today's downpour courtesy of the ECB cost us another 100 Dow points.  Is there no end to this?

The technicals

The Dow: The good news today was that despite going lower, we closed outside the right edge of the descending RTC from December 12.  That is a bullish setup.

Market index futures: Finally, all three futures are higher at 2:45 AM EDT.  However, ES is playing tag with the new daily pivot at 1214.75.  Although ES is still up 0.42%, I really want to see it break back over the pivot.  On the plus side, I note that ES OBV has turned positive from the lowest levels of the new contract yet, and that's often a good sign.

Sentiment: It's Monday again and the latest Ticker Sense Blogger Sentiment Poll is out.  Here' how the numbers shake out:

          Bullish Bearish Neutral

Last Week   52%     26%     22%

This Week   41%     38%     21%

In this case at least, the contr4arian assumption played out.  The bulls had a two to one advantage last week and the market had a terrible week.  Keep in mind of course that the poll is a 30 day outlook, not the coming week.  Still, I can't help but think that recent events affect peoples' feeling about the future, whether it's 30 days out or 7 days out.

What's interesting is that this week, the bullish sentiment has dropped considerably, creating a virtual bull/bear tie.  This reflects the ongoing tug of war between good economic news at home and a continuing flood of disconcerting noise from Europe.  Until the Europeans figure a way out of their mess, this market schizophrenia is likely to persist.

And for the record, I changed my vote to negative this week, based on my reading of the monthly SPX chart.  After a strong October, November gave us a long legged doji.  December so far at least is confirming that with a basically solid red candle.  That spells lower next month in my book.

     And the winner is...

Tonight, I'm giving it to the bulls.  With ES up nearly half a percent and looking ready to attack the pivot again, and the market in general getting pretty oversold, I think it's time for at least a one day rally before Christmas.  Tuesday may be it.  Assuming those pesky Europeans can keep quiet for that long.

ES Fantasy Trader

As I mentioned last night, on Friday I decided to hold my slightly underwater long over the weekend, a decision I may yet come to regret.  But it is what it is.  We'll see.. Portfolio stats: the account remains at $134,375 after 44 trades (29 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier    

Monday lower unless ES pivot breached

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Monday lower, low confidence.
• ES pivot 1214.75.  Switched to March contract.
• Rest of week bias uncertain
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader holding long at 1220.25.

Recap

Last Thursday I called for Friday to go higher.  As Maxwell Smart used to say, "Missed it by that much!" as the Dow closed with a 2.4 point loss.  Things were looking up right out the gate only to be torpedoed around 11AM by, yawn, more bad news from Europe.  I can't keep track of it anymore.  What was it this time, Italian bonds again?  Whatever, it put the kabosh on what was looking to be a promising rally.  But at least the SPX and the Naz managed to score modest gains.

This week being the week before Christmas, I expect to see more market bumpiness as the big boys go on vacation.  And the market continues to get jerked around by what you'd think would be largely irrelevant news.  Like tonight, it was reported that the North Korean dictator, Kim Jong Il kicked the bucket.  You'd think that would be great news, but ES took a big hit when that came out.

What did people think - that North Korea was going to launch their entire nuclear arsenal in random directions all at once because of this?  Anyway, by 2 AM, it was all forgotten.  But that still left ES down almost half a percent.

Anyway, this week, I'm going to shorten my daily posts a bit since I expect a lot of people will be taking the week off anyway.  I'm also super busy with the holidays and working on my book.  Putting the Night Owl together takes me over an hour every night.  So please forgive me if I go into less detail than usual this week.  The research is still all there.

The technicals

The Dow: Being Sunday night, I like to go to the weekly charts, and I'm definitely not feeling the love here.  After two weeks of gains, we put in a dark cloud cover on much higher volume.  Not a good sign.  The daily doji on Friday clearly shows how the incipient rally was cut short.  Although the daily indicators seem to point to gains on Monday, the overall tenor of this market doesn't seem to support that notion.

Market index futures: Hmm - well in just the last hour (it's 2:15 AM EST right now), ES has made something of a comeback though we're still stuck under the daily pivot of 1214.75.  But this eight point gap is not impossible to close.  And both the ES weekly and daily charts are showing some support not evident on the Dow charts.

     And the winner is...

Hmm - the winner is a big mystery.  Oddly enough, it seems like there's more uncertainty now, with the VIX having fallen back under the 30 level than there was a month ago.  With light volume expected this week, look for any news events to exaggerate market moves.

If Santa Claus is going to show up, right now is the time.  All I can suggest its to watch the ES pivot.  If ES continues its move up in the rest of the night until the open on MOnday and manages to decisively cross the pivot, then the oversold indicators may yet prevail and we can move higher.  If ES reverses course, or even just continues to wander around below the pivot, we're closing lower Monday.  I wish I could be more definite about it all, but you can only play the hand you're dealt.  Tonight we have a bunch of 6's and 7's.

ES Fantasy Trader

On Friday, I decided to hold my slightly underwater long over the weekend, a decision I may yet come to regret.  But it is what it is.  We'll see.. Portfolio stats: the account remains at $134,375 after 44 trades (29 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier

Friday higher

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

• Friday higher, high confidence.
• ES pivot 1210.08.  Switched to March contract.
• Next week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went long at 1220.25.

Recap

Today was very interesting.  We got some good economic news in the morning that sent the market up.  This was followed by some fairly discouraging news out of Europe.  However, unlike past reports this time the negative market reaction was fairly subdued.  In fact, the Dow managed to hang on for a 45 point gain.  Is this a sign of things to come?

The technicals

The Dow: It might very well be.  The 11,819 support line held again today giving us an inverted hammer reversal candle. Also, the stochastic began a bullish crossover and that's always a good indicator.  We were even back above the 200 day MA at 11,940 for a while this morning until the Europeans rained on the parade.  But that suggests another attack in the works for Friday.

The VIX: The VIX, which had gapped up over its 200 day MA yesterday, gapped right back down below it today posting a 3.57% drop.  It closed just above its support at 24.5.  I was wrong about the VIX closing higher today, though I was right about it going higher, opening at 24.38 and closing at 25.11.  These gap-down green candles are always tough to analyze.  I suspect this one was news induced.  There's no telling where it will go on Friday.

Market index futures: Tonight we finally have a bit of clarity in the futures.  All of the futures are in strong rally mode tonight with ES up a significant 0.7% at 2:15 AM EST.  The formation right now is similar (though not quite) a morning star reversal pattern and the overnight action is good enough to take us to the edge of the descending RTC, both bullish signs.  The indicators have all bottomed oversold and hooked back up, another good sign.




ES daily pivot: Now 1210.08 - reminder, we're now looking at the March (H) contract.  We're now more than 10 points above that, another good sign.

History: According to The Stock Traders Almanac,the S&P was up 20 out of the last 28 on this triple witching Friday.

     And the winner is...

I almost hesitate to say anything anymore, having been wrong for two days running.  But the crystal ball has defogged tonight and it looks pretty clear that the bulls take it.  I'm feeling a lot more confident in calling Friday higher.  I'll be truly surprised if we don't get a decent gain to close out the week.

ES Fantasy Trader

Sigh - two days ago I went long and got clobbered.  So last night I went short - and got clobbered again.  This time it was a 12.5 point loss. Portfolio stats: the account drops to $134,375 after 44 trades (29 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier Tonight we go long at 1220.25 at 1:56 AM.

 
SLD 10 ES false DEC11 Futures 1207.25 USD GLOBEX 01:48:57
BOT 10 ES false DEC11 Futures 1219.75 USD GLOBEX 13:08:15

Thursday likely lower

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

• Thursday lower, medium confidence.
• ES pivot 1218.00.  Holding under is bearish..
• Friday bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went short at 1207.25.

Recap

Last night I was thinking we had a shot at going higher today but I did mark it as low confidence and gave the usual warning about Europe.  Well today the Italian bonds went awry and the stock market went down.  I guess it's just a tough time to be a technician.  I know - excuses, excuses.  OK, I was just plain wrong.  As Jack Lemmon told Osgood Fielding III in Some Like It Hot, "Nobody's perfect".

The technicals

The Dow: With three consecutive down days, the Dow is now in a downward swing trend and I've updated the trend arrow to reflect that.  It's not looking good.  Yesterday we gave up the 12,000 support level.  Today the 200 day MA caved in the first few seconds of trading and it was all downhill from there.  We finally stopped at the next support level that I mentioned at 11,819, closing at 11,823.  Again, the next line is at 11,655, then 11,230.  If we don't develop some positive momentum soon, we have a good shot at both these numbers.

VIX daily

The VIX: This one is worth a chart.  Last night I talked about how the VIX had put in a doji and how that was a potential reversal indicator.  Just take a look at this: today we saw exactly that.  But today's candle is also just about a gravestone doji - another reversal indicator!  And notice how the stochastic (bottom graph) is making a bullish crossover.  And the VIX also popped right back up over its 200 day MA today.  All those things would seem to point to a higher VIX Thursday which would be bad for stocks.

VIX futures: The futures are just wandering around with another, tighter doji today.  Not much guidance here.

Market index futures: All three are losing ground again tonight with ES down 0.41% at 1:40 AM EST and remaining solidly inside its descending RTC from 12/8.  That said, having dropped four of the last five sessions, the ES indicators are now solidly oversold.  However, there really isn't a reversal indicator on this chart just yet.

ES daily pivot: Dropped from 1231.50 to 1218 tonight.  We have a lot of ground to make up to get back to this number, so this isn't looking good either.

Dollar index: The dollar is worth noting tonight because it not only continued a rally that began at the end of October, but hit its highest level since the beginning of January today, forming a gap-up inverted hammer that lies entirely above the upper BB.  The dollar rarely spends more than one day above that level and its been there for two days now.  Coupled with some very overbought indicators (RSI above 86) it looks to be due for a reversal real soon now.

And that's supported on the euro chart.  Generally the mirror image of the dollar, I get OBV for the euro (6E #F in eSignal).  Yesterday OBV hit its second lowest level of the year and a point below that from which the last two euro rallies started.  In the overnight, OBV is increasing.  That points to a reversal for the euro on Thursday which would support the idea of the dollar going lower and that would be good for stocks.

Morningstar Market Fair Value Index: Today the index ticked down again from 0.86 to 0.85, another bearish sign.

History: According to The Stock Traders Almanac,both Wednesday and Thursday are historically bearish.  That certainly played out today and doesn't bode well for Thursday.

     And the winner is...

I'm looking hard for a reason to be optimistic and just not finding one tonight, aside from a possible reversal in the dollar.  Accordingly, I have to give this one to the bears.  I am seeing some signs that a reversal may be coming in the next few days, but right now it doesn't look like it will be tomorrow, so I have to call Thursday lower.  And of course, good news from Europe could change that, but there seems to be nothing but gloom & doom emanating from there this entire week.

ES Fantasy Trader

Today we took a nasty 17 point loss on last night's ill-fated long position.. Portfolio stats: the account drops to $140.625 after 43 trades (29 wins, 14 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier Tonight we go short at 1207.25 at 1:49 AM.

BOT    10    ES    false    DEC11 Futures     1228.50    USD    GLOBEX    DEC 14 01:39:32
SLD    10    ES    false    DEC11 Futures     1211.50    USD    GLOBEX    DEC 14 11:28:04
 
 

Wednesday possibly higher

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

• Wednesday higher, low confidence.
• ES pivot 1231.50.  Watch for break above.
• Rest of week bias higher, on technicals.
• Monthly outlook: bias up, on technicals.
• ES Fantasy Trader went long at 1228.50.

Recap

I thought we'd go higher today unless the Fed said something bad.  Well we indeed were higher - right until the Fed spoke.  And even though they essentially said nothing, I guess the market didn't like it so down we went with another bump for a 66 point loss in the Dow.  That's why I marked this call as "low confidence".

The technicals

The Dow: Like the German army retreating from the Trasimene Line to the Gothic Line, today the Dow gave up the 12K psychological support line but held its ground at the 200 day MA.  Today's close of 11,955 is just over that at 11,943.  Next stop on the down elevator is 11,819, the 40 day MA.  Then 11,655 and finally 11,230, the November lows.  Are we headed there tomorrow?  I don't really think so.


The VIX: Punched through its 200 day MA to close just above its 24.5 support line with a doji.  This is an important chart.  If the VIX bounces off this support line Wednesday, it will be quite bearish.  On the other hand, there is no further support below here until 21.5.  A break under would be quite positive on a swing trend basis.  There's no sign yet of a reversal in the indicators and the doji is only a potential reversal sign, so the door is still open for a lower VIX Wednesday and that would be bullish.

VIX futures: The futures are looking even less of the way towards oversold than the VIX itself.  In fact, their stochastic just executed a bearish crossover.  This indicator is highly reliable.  Lower futures -> lower VIX -> higher stocks.

Market index futures: Tonight, all three futures are up, with ES sporting a 0.27% rise at 1:35 AM EST.  But the action is a bit concerning.  After drifting up all evening, ES took a tumble at 1:15 for no immediately obvious reason.

ES daily pivot: Dropped to 1231.50 tonight.  So far, we remain under that number and the fact that ES took at run at it at 1:15 AM and failed is bearish.

Copper: Copper extended yesterday's losses today putting in an even taller red candle extending exactly halfway into the big upside gap created at the end of November.  Nothing to suggest a reversal on this chart.

Morningstar Market Fair Value Index: Yesterday the index took a two tick drop from 0.88 to 0.86.  That's bearish.

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

     And the winner is...

Wow - once again we've got another tough call.  ES is in the middle of its BB's.  It's close to but not quite oversold yet.  The Dow broke one support level but a second one held.  There's next to nothing to go on here.  All things considered, I'm going to go with the VIX futures and the fact that ES is not continuing lower and therefore call Wednesday higher, but with very little enthusiasm.

And as usual lately, any bit of bad news, rumors, whatever from Europe will cancel this call.  To really seal the deal, we need to see ES break over 1231.50..  Watch that number early Wednesday morning.  Happy trading!

ES Fantasy Trader

Today we took a small 4.75 point profit at lunch time ahead of the Fed and I was glad I did.  Sometimes discretion really is the better part of valor..  Portfolio stats: the account remains at $149,125 after 42 trades (29 wins, 13 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier  Tonight we go long at 1228.50 at 1:39 AM.

SLD    10    ES    false    DEC11 Futures     1241.00    USD    GLOBEX    12:30:00
BOT    10    ES    false    DEC11 Futures     1236.25    USD    GLOBEX    DEC 12 19:07:31
 
 

Tuesday higher possible

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

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

Recap

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

The technicals

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Monday may go lower

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

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

Recap

Fasten your seat belts, boys...

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

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

The technicals

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

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

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

ES daily

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

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

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

     And the winner is...

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

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

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

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

ES Fantasy Trader

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

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

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

Tonight we're standing aside again - no trade.