Friday due for a bounce

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

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

 Recap

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

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

The technicals

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

 

Futures point to higher Thursday

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

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

Recap

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

The technicals

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Wednesday looking lower

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

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

Recap

Europe explained, by M.C. Escher

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

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

The technicals

Dow daily

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

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

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

VIX weekly

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

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

Japanese candlesticks, Dow 2011 style

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


     And the winner is...

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

ES Fantasy Trader

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

Tuesday too tough to call, watch EU news

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

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

Recap

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

The technicals

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

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

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

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

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

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

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

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

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

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

     And the winner is...

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

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

ES Fantasy Trader

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

Calling Monday cautiously higher

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

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

Recap

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

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

The technicals

Dow monthly

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

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

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

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

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

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

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

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

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

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

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

Copper, weekly

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

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

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

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

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

     And the winner is...

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

ES Fantasy Trader

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

Friday higher if no bad EU news

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

• Friday higher, low confidence.
• ES pivot 1233.58.  Remaining above is bullish.
• Next week bias lower on technicals.
• Monthly outlook: bias uncertain on technicals and Europe.
• ES Fantasy Trader remains long.

Recap

Last night the only thing I wrote that proved to be correct was my closing comment in the ESFT section, "I think today's decline was really overdone and am expecting a bounce eventually.".  Well we did in fact get a bounce today but it had more to do with the S&P's rating on France than yesterday's big decline.  Once again the news trumps the technicals.

Since I seem to be nothing but wrong lately, I'm going to try something a bit different tonight.  I'm only going to review what I think are my best indicators and I'm not going to compute the bull-bear ratio at all.  Given the ongoing volatility and irrational nonsense permeating the entire market lately, there's no point in over-analyzing things just to end up being proven wrong again.

The technicals

The Dow: The Dow shot up right out of the gate this morning and then spent the rest of the day oscillating about its pivot.  With a close of 11,894, the 200 day MA at 11,975 and the 12K psychological level now become resistance.  That's also about the 50% retracement of yesterday's drop.  Assuming that took a lot of sellers out of the fray, I don't think it unreasonable to expect another run at 12K tomorrow.

The VIX: Yesterday I observed that "the VIX rarely spends more than one day at the upper BB without retreating".  I should have had more confidence in my own observations because the VIX did indeed drop 9.26% today.  Tonight I'll add that once the VIX has hit its upper BB and then begun a decline, it most often continues to decline at least one more day.  The VIX has no support until 31.39 from today's close at 32.81 so I'm guessing it still has ate least a bit more lower to go Friday.

VIX futures: The futures also moved lower today putting in a gravestone doji candle but in the wrong place to be a reversal pattern.  I do however think that this sort of indecision favors further downside from here which would be good for the markets.

Market index futures: Tonight all three are solidly in the green at 1:40 AM EST.  ES is up 0.42%.  This sort of follow-through on today's action looks encouraging to me.

     And the winner is...

Looks like the bulls to me.  I'm going to say I see more positive than negative tonight just on the overall gestalt of things, so I'll call Friday higher with the usual caveats about new/rumors out of Europe.  I'll add that J-Trader, who went long yesterday and has been a lot more right than me this week, remains long tonight.

ES Fantasy Trader

We continue to hold the long position from two nights ago.  My decision to hold last night was a good one and we recouped about half of the loss on this trade.  With any luck, and by gosh that's exactly what's driving this market now, we should be able to recoup some more on Friday.

Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K. 
  

Thursday lower technically but EU news will decide

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

• Thursday lower, medium confidence.  Bull-bear ratio is 0:5.
• ES pivot 1240.83.  Holding under is bearish..
• Friday bias lower.
• Monthly outlook: bias down, regardless of Fed action in September
• ES Fantasy Trader holding long.

Recap

Well there go those pesky Europeans again.  Mama mia, this time it's Italy.  It's like we're right back to last summer playing financial Whack-a-Mole.  Just as the Greek mole disappears into his hole, the Italian one pops up, only here it's the market that got whacked.  All of my carefully wrought technical analysis from last night went pfft, right out the window.  I don't know if it's even still worth playing the game since today's seismic moves everywhere threw all the charts into disarray.  But let's give it a shot anyway and see what happens.

The technicals

The Dow: Got crushed for a 389 point loss because the Italians are lousy money managers.  Thanks a lot - for nothing.  The 12K support and 200 day MA support meant zip and the stochastic turned a bearish crossover.  Technically, I'm not liking this chart at all, so +1 bears.

The VIX: Took a big gap up to put in a tall green candle for a whopping 32% increase that went almost exactly to the upper BB and back into Psycholand, the upper 30's.  I've said it before and I'll say it again: the VIX rarely spends more than one day at the upper BB without retreating.  The stochastic formed a bullish crossover today but that may be an artifact of today's big jump rather than a true predictor.  So while there may not be much upside left to the VIX here, it would be premature to say it's coming down Thursday, so no points.

VIX futures: The futures actually went over the upper BB today but further gains are not out of the question.  Another one that's too hard to call, so no points.

Market index futures: Once again, all three are in the red, with ES down 0.27% at 1:35 AM EST.   Today's monster decline stopped at a support line of 1226 but in the overnight we're resuming lower, currently to 1222.  Next support is 1213, then 1193, then 1165 and 1120.  You'd think after such a big drop we might get a dead cat bounce but lately this year whenever we have a big down day, we get another one, so +1 bears.

ES daily pivot: Now 1240.83.  Even after coming down since today, ES is still below this level and falling again.  This looks bad, so +1 bears.

Dollar index: Made the obvious move, shooting right up to its upper BB  Big jumps like this tend to be followed by small dojis so that's what I'd look for on Thursday, but its too uncertain to give any points.

Oil: About the only chart with some semblance of sanity today, oddly enough, oil hit its 200 day MA and retreated on something of a bearish engulfing pattern.  I'd look for lower oil Thursday, so that would be +1 bears.

Copper: Took a big fall today in sync with the rest of the market.  The resulting pattern with that doji star from yesterday looks bearish and now we have a bearish stochastic crossover, so this one goes +1 bears.

Morningstar Market Fair Value Index: Today the index was unchanged again at 0.90, so still no points here.

History: History seems to count for zip right now, so no points.

     And the winner is...

The bears, with a bull-bear ratio of 0:5.  On this basis I will call for a lower close Thursday technically, with the explicit caveat that none of this analysis amounts to a hill of beans in the face of whatever the next rumor/innuendo/scrap of news might come wafting out of Europe tomorrow.  This market is now not merely irrational, it is irrationally irrational. As a consequence, I am completely standing aside until some semblance of sanity returns.  Pull up a chair.

ES Fantasy Trader

Today we are simply holding the long position entered last night.  I think today's decline was really overdone and am expecting a bounce eventually.

Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K. 
 

A bit more upside possible Wednesday

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

• Wednesday higher, medium confidence.  Bull-bear ratio is 7:1.
• ES pivot 1265.67.  Remaining above is bullish.
• Rest of week bias lower..
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 127050.

Recap

Last night I computed a bull-bear ratio of 6:0 but wasn't feeling all that confident about it.  Nevertheless, the BBR came through and Mr. Market delivered a nice up day for us.  I have now completely given up trying to figure out what anything coming out of Europe means anymore, so I will concentrate as always on the technicals.  So let's spin the Wheel of Fortune and see if we can make a fortune on Wednesday.

The technicals

The Dow: Did you notice the role the Dow pivot played today?  After the 10 AM reversal kicked in right one cue, the Dow declined to 12,004, almost exactly the pivot at 12,008.  Then it took off and closed the day up 102.  With a solid green candle, the 200 day MA breached yesterday now providing support at 11,976 and psychological support at 12K, no resistance til 12,225 and the upper BB at 12,316, I think there's still just enough gas left in the tank for one more push higher before we really get overbought, so +1 bulls.

The VIX: Last night I wrote "we're not done yet with declines in the VIX" and the VIX obliged with an almost 8% drop today that broke its support at 30.  With indicators still in decline, solidly in a descending RTC and no support til the lower BB at 25.17 there's nothing here to suggest a higher VIX on Wednesday, so +1 bulls.

VIX futures: The futures chart resembles the VIX itself but is if anything even more bearish and that's good for stocks so +1 bulls.

Market index futures: As last night, all three are running in the red again at 1:07 AM EST, but not badly.  ES is down now just 0.18%.  The triangleI spoke of yesterday resolved nicely to the upside today with a decent green candl that blasted right through the 200 day MA.  That number, 1261.70 now becomes support.  And with no resistance til 1281, the upper BB at 1291 and indicators still rising but not yet overbought, what's not to like?  +1 bulls.

ES daily pivot: Now 1265.67.  Even though this has risen since today, we remain above and after drifting lower this evening, ES has turned around before reaching this level and is headed higher.  This is a positive sign so I give it +1 bulls.

Dollar index: I wasn't feeling confident about the dollar last night and in an unusual move, it resolved its symmetrical triangle down, in the opposite of the entry, falling on a day when the market was up.  This drop helped create a top in the indicators as well as breaking it out of its recent range, so look for lower again tomorrow.  That would be good for stocks (assuming today was a fluke) so +1 bulls.

Oil: After clearing resistance at 94.20 two days ago, oil resumed its upward march until it ran into its 200 day MA today at 97.14.  But with increased volume and remaining solidly within its rising RTC, the MA may not prove much of a barrier.  But I've noticed that lately when oil gets to various "decision points" it often takes two days to make up its mind, so I'm not looking for a big reversal tomorrow - maybe another small advance and that would be +1 bulls.

Copper: I thought copper would go higher today and so it did but it put in a spinning top.  However, there's no reversal sign yet in the indicators.  This mixed message leads me to give no points here.

Morningstar Market Fair Value Index: Today the index remained unchanged at 0.90, so no points.

History: According to The Stock Traders Almanac,Wednesday is a down day so +1 bears.

     And the winner is...

The bulls with a bull-bear ratio of 7:1.  Clearly, we're approaching a short-term top here but I don't think tomorrow is it just yet, so I'm going to call for one more day of gains Wednesday, possibly a doji of indecision.

ES Fantasy Trader


Today we took a profit of 1.5  points.  Portfolio stats: the account is now $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1252.25    USD    GLOBEX    NOV 8 01:33:12

SLD    10    ES    false    DEC11 Futures     1253.75    USD    GLOBEX    NOV 8 11:32:16. 

Tonight we go long at 1270.50.

Tuesday could go higher

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

• Tuesday higher, low confidence.  Bull-bear ratio is 6:0.
• ES pivot 1249.67.  Falling under would be bearish..
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias up on technicals
• ES Fantasy Trader went long at 1252.25.

Recap

My call for a higher Monday was looking good out the gate this morning... then it was looking stupid.. until in the end I was redeemed with an 85 point gain in the Dow.  It wasn't much but I'll take it, especially after having been wrong two days in a row.  I was particularly pleased to read a report on Ticker Sense today to the effect that there are "two prominent technical analysts who say it is too difficult to predict the market direction".  Huh - no kidding.  Welcome to my nightmare.


But just like the Post Office, we can let neither gloom of Greece nor Roman rain deter us from our daily rounds.  So now let's cast the runes and see what Tuesday might hold in store.

The technicals

The Dow: Today's close at 12,068 means that we held not only the important psychological 12K level but the 200 day MA at 11,975 too.  There's also an ascending triangle forming here and that's usually quite bullish.  With that, plus two levels of support just below us and indicators that are now rising off oversold levels, I see no reason to give anything but +1 bulls here.

The VIX: As I thought last night, the VIX did indeed move lower today - a bit.  After moving by gaps for four straight sessions, it has barely budged in the last three.  And just as there's an ascending triangle now in the Dow, here we have a descending triangle.  With indicators coming down off overbought levels and a stochastic that has finished its bearish crossover, I'd think we're not done yet with declines in the VIX, so that would be +1 bulls.

VIX futures: Futures also edged lower today and look if anything even more overbought than the VIX itself.  I'd say they've still got some good downside ahead so that's another +1 bulls.

Market index futures: All three are, as last night, again in the red at 1:10 AM EST.  I take back what I said last night - what we've got going here now looks more like an ascending triangle (just like the Dow) than a symmetrical triangle, so that's even more bullish.  On the other hand, the stochastic is now about to execute a bearish crossover.  The other indicators are mixed.  There's a definite lack of clarity to this chart.  It really could break either way, so I'm not going to give any points here tonight - that's the first time I've done this.

ES daily pivot: is now 1249.67.  Note that we've been slowly drifting lower since 6 PM and are now quite close to the pivot, less than 2 points above.  That makes the pivot critical for Tuesday.  I'm just waiting to see if we're going to bounce off or fall through.  The decline seems to be stopping with the 1:20 AM candle but we'll wait a bit longer. 1:35 AM update: looks like ES veered away from the pivot like a mosquito from DEET.  This is promising, so I'm going to give it +1 bulls.  But still keep an eye out for any retests before the open on Tuesday.

Dollar index: I'm seeing lots of symmetrical triangles lately and this is another one.  The expected resolution here would be higher but the dollar indicators are already highly oversold and look poised to go lower.  With these sorts of mixed messages, I don't feel good about calling it either way so no points.

Oil: Contrary to my expectation last night, oil made an advance today that broke it out of its range going back to October 25th.  Indicators remain quite oversold but we've not yet reached either the upper BB or the looming 200 day MA.  If I had to guess, I'd say oil will try to reach those before putting in a top, so that would be +1 bulls.

Copper: Has been busy forming an ascending triangle for the last three days now.  That's about all I can gather from this chart along with some rising indicators, but that's enough to vote +1 bulls.

Morningstar Market Fair Value Index: On Friday the index remained unchanged at 0.90 so no points here.

History: According to The Stock Traders Almanac,tomorrow is just marginally positive but not enough to vote any points here.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last  week bullish sentiment advanced big time to an outsized 67% while the bears retreated to just 15%.  However, today there was a reversion to the mean with the bulls retreating to 40% and bears advancing to 30%.

Last week I wrote "if next week's poll becomes any more bullish, I might have to reconsider my position.".  Obviously that didn't happen and for the record, I voted bullish again now for the fifth week in a row, still on the basis of my reading of the monthly Dow chart and traditionally bullish fourth quarter seasonality.  But I can't award any points for a 40-30 sentiment ratio.

     And the winner is...

Surprisingly, considering how ambivalent things seem to be in general, it's the bulls by a shut-out with a bull-bear ratio of 6:0.  The overarching gestalt lately seems to be one of underlying resilience, especially given the continued rumblings from Greece and now Italy.  One can easily imagine a prime minister's resignation causing the Dow to plummet just a few months ago, but it just doesn't seem to be having as much effect today.

Maybe people are just getting tired of this farce - I certainly know I am.  But in any case, I'm going way out on the limb tonight and calling Tuesday higher, with the usual caveat about truly bad news trumping the technicals.

ES Fantasy Trader

Today we took a tiny profit of 0.5 points, but hey, a win is a win especially after having been down on this trade last Friday.  Portfolio stats: the account is now $172,750 after 34 trades (25 wins, 9 losses) since inception on 8/18 with $100K.

SLD    10    ES    false    DEC11 Futures     1255.50    USD    GLOBEX    15:48:16

BOT    10    ES    false    DEC11 Futures     1255.00    USD    GLOBEX    NOV 4 01:53:06

Tonight we go long at 1252.25.
. 
 

Monday higher technically but EU news decides

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

• Monday higher, low confidence.  Bull-bear ratio is 7:2
• ES pivot 1248.08.  Falling through would be bearish.
• Rest of week bias higher.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader holding long.

Recap

Well I blew it again.  I thought we were going higher on Friday.  Instead the Dow handed us a 61 point decline.  In my defense I will point out that I made my call conditional on no bad news from Europe, and there was.  Honesty, I'm getting quite sick of these Greeks with their riots and referenda.  Just pack it in and get it over with already.  Sheesh.

Anyway, being as I've now been wrong two days in a row, I'm a bit cautious tonight as I check the charts.  Still, you do what must be done so once more into the breach dear friends...

The technicals

The Dow: Friday's 61 point loss to close at 11,983 came on a low volume hanging man that pretty much got hung up on the daily pivot of 11,982 as well as the 200 day MA at 11,975.  It's a tricky chart because the stochastic has completed a strong bullish crossover.  With two good support points, I think that trumps the bearish looking candle, so I'm going to give this chart +1 bulls.

The VIX: After a tall inverted hammer Thursday the VIX made a bearish engulfing pattern Friday, ending down just over 1%.  And its stochastic just finished a bearish crossover.  The VIX is really looking like it wants to go lower, so +1 bulls.

VIX futures: Same story here as the VIX itself.  Lower futures would also be good for the market, so another +1 bulls.

Daily ES

Market index futures: All three are in the red right now at 1:15 AM EST but not by much.  It looks to me like ES is making a symmetrical triangle - what do you think?  Since these usually resolve in the same direction from which the triangle started, this would imply a pop higher in a day or two.  It really looks to be nearly complete.  Not also the bullish stochastic and OBV now at levels from which we've bottomed recently and I give this chart +1 bulls.

ES daily pivot: Tonight, is 1248.08.  Even though it's up from Friday, we remain above it and in fact just survived a test at 12:35 AM.  As long as we remain above this number, it's bullish so I'm awarding +1 bulls on that basis.

Dollar index: 54.40 or fight - In the last two sessions the Dollar has made two inverted hammers and has been unable to make any headway past 54.40.  And its stochastic is making a definite bearish crossover, which is always a good indicator.  A lower dollar being good for stocks, this is +1 bulls.

Oil: Oil too has been near the top of its recent trading range and unable to go much higher.  Unless some bad news comes out it looks more likely it will go lower Monday, so that's +1 bears.

Copper: Copper is a bit confused here, with a hanging man on Friday offset by a clear bullish crossover on the stochastic.  I think that trumps the candle so I'm calling copper higher Monday and that's good for stocks so +1 bulls.

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

History: Although the first day of  the month is typically bullish for stocks and November is one of the best months, according to The Stock Traders Almanac,the Dow has been down the last 4 out of 5 years on this day, so +1 bears.

     And the winner is...

The bulls with a bull-bear ratio of 7:2.  I almost hesitate calling Monday higher after having been wrong two days in a row now, but I recognize that it's happened to me in the past that I'm often not so much wrong as just a day early.  And even though we've got a clear bull bias going here, the overall picture doesn't look particularly convincing to me.

So as I did on Friday, I have to hedge my call with the disclaimer that everything hinges on what new/rumors/ political intrigue comes out of Europe tomorrow.  All it will take is some negative opinion from some minor functionary no one ever heard of in some country most people can't even find on the map to drive our market down.  As I said last week, there's no charts for that.  We live in funny times.

2 AM Update: News is coming out that the Swiss National Bank may act again to cap the franc, thus driving down the Euro.  This is the sort of bad news I was just talking about and it already sent ES for a tumble under the pivot.  I'm now officially standing aside - Monday is just too hard to call.

ES Fantasy Trader

Tonight we are still holding the long position entered last Thursday.  It went south on us on Friday by a bit but I'm betting we'll make some money Monday.  Portfolio stats: the account remains at  $172,500 after 33 trades (24 wins, 9 losses) since inception on 8/18 with $100K.

Friday higher if no bad EU news

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

• Friday higher, high confidence.  Bull-bear ratio is 9:1.
• ES pivot 1243.00.  Remaining above is bullish.
• Next week bias up..
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1255.00.

Recap

Hoo boy, when I'm wrong I'm really wrong.  My call for a lower close today was effectively torpedoed by the Prime Minister of Greece who announced that there isn't going to be a referendum on whether or not Greeks want to retire 10 years before they begin working after all.

I don't know, maybe tomorrow he'll announce that China has bought the entire country and is having it towed to the South China Sea.  That would make as much sense as anything else I'm hearing these days.  In any case, it was good enough to power the Dow up 208 points on sketchy technicals.  Let's see if I can do any better tonight for Friday.

The technicals

The Dow: Last night I didn't like this chart, tonight I do.  We now have two strong solid green candles, today's close at 12,044 taking us back up over not only the 12K resistance line but also the 200 day MA at 11,974.too.  The indicators are all rising and the stochastic is about to execute a bullish crossover.  No resistance til 12,230 so +1 bulls.

The VIX: For the fifth time in six sessions the VIX moved in gap fashion, today dropping nearly 7%.  While we have now completely retraced the big gap up from Monday, the stochastic is just executing a bearish crossover, suggesting the VIX ca go lower Friday.  Not much in the way of good support here either, so I'm saying +1 bulls.

VIX futures: The futures dropped on a big inverted hammer but have the same bearish crossover stochastic thing going as the VIX itself.  And this gap is only about half filled.  With the other indicators also declining, I'd give this one +1 bulls too.

Market index futures: Little guidance here tonight.  YM is exactly flat, NQ is up 0.06% and ES is down by the same amount at 1:50 AM EDT.  At 1255.25, ES is getting close to its 200 day MA at 1261.84.  Rather than the pivot, I think this will be the number to watch on Friday.  If ES can cross this line successfully, that will be bullish indeed.  The stochastic just finished a bullish crossover and that's good enough for me, so +1 bulls.

ES daily pivot: Now 1243.00.  While is is basically unchanged in the overnight, the pivot moved up.  But even at that we're still 12 points above it and showing no signs of any attraction, so I'll give this one +1 bulls.

Dollar index: The dollar moved lower on an inverted hammer today.  Its indicators have all peaked and are headed lower, suggesting the buck will follow suit Friday, but it is close to its 200 day MA again.  While that provided no obstacle on the way up two days ago, it might provide some support Friday.  But it still has a bit more room to get there, so that's +1 bulls.

Oil: Moved higher today on a hanging man and mixed indicators.  Being at the top of its recent trading range suggests it will go lower Friday which would be bad for stocks so +1 bears.

Copper: At least I got this one right.  Copper did indeed move higher today.  And the indicators are still looking good and no nearby resistance, so +1 bulls.

Morningstar Market Fair Value Index: Today the index bounced right back up from 0.87 to 0.89, so +1 bulls.

History: According to The Stock Traders Almanac says Friday is bullish, so +1 bulls.

     And the winner is...

The bulls, by a bull-bear ratio of 9:1.  This sort of lopsided result is usually pretty accurate - unless of course the FT reports that George Papandreau found a fly in his moussaka or something, which will set off a global financial panic.  There's simply no chart for that.  Assuming these Europeans can keep quiet for a day, we might see some more upside Friday.

ES Fantasy Trader

Today we covered our short for a loss of 8.25 points.  Portfolio stats: the account is now $172,500 after 33 trades (24 wins, 9 losses) since inception on 8/18 with $100K.

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    NOV 2 01:13:12

SLD    10    ES    false    DEC11 Futures     1235.25    USD    GLOBEX    NOV 2 11:45:14   

Tonight we go long at 1255.00.

Thursday likely lower

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

• Thursday lower, medium confidence.  Bull-bear ratio is 4:5.
• ES pivot 1229.83.  Holding below is bearish.
• Friday bias higher, short term oversold...
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1219.25...

Recap

Last night I called for a higher close today and hey presto that's just what we got.  But the past few days I've been noticing something odd.  Almost all the stocks I watch are looking bullish on the daily charts but bearish on the weekly charts.  Hmmm.  Gives you (bear) paws for thought, eh?  (Pun alert).  So can today's recovery carry on into Thursday?  Let's drop a quarter in the machine, pull the lever and see if we can come up with three 7's.

The technicals

The Dow: Today's 178 point gain retraced just over half of yesterday's loss and left us with mixed indicators.  RSI, momentum, and money flow all ticked up today which is nominally bullish but OBV moved to a highly overbought state and the stochastic continued its decline without showing any signs of a bullish crossover yet.  And today's volume was lower than yesterday's.  I'm searching this chart for a reason to be bullish and not finding one so I have to give this one +1 bears.

The VIX: Hey last night I wrote "The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday" and darned if it didn't do just that, dropping nearly 6% today.  But the gap remains less than half filled and while a gap half full might seem ambiguous to some,  this one looks ready for more downside action so +1 bulls.

VIX futures: After yesterday's stratospheric doji, the futures indeed came down today but this gap still has a big way to go so I'm betting they go down again tomorrow and that's +1 bulls.

Market index futures: Tonight all three are in the red and ES is down 1.28% at 12:50 AM EDT.  A loss that size at this hour is enough to warrant a bearish outlook.  But that's also already enough to form a bearish engulfing pattern over Wednesday's green candle.  ES also broke support at 1223 today and has no further support til 1211, then 1194.  Indicators are still falling but have yet to show signs of a reversal so all in all this chart looks like +1 bears.

ES daily pivot: Rose to 1229.83 for Thursday.  ES actually went under the pivot just before 8 PM and has been drifting lower since 6.  With ES already 10 points under the pivot, it ain't looking good, so another +1 bears.

Dollar index: After yesterday's big run-up, the buck today put in a hanging man at the top of the range.  This inability to push forward makes me suspect it might be going lower Thursday and that would be good for stocks, so +1 bulls.

Oil: Has clearly peaked and is headed lower in the short term, so +1 bears.

Copper: Took a bump up today despite indicators not having reached oversold levels.  This sort of action reminds me of the abortive rally attempts we had last summer that kept getting cut off at the knees, only the other way around.  With today's green candle following Tuesday's doji, it look s like copper might go higher from here so that's +1 bulls.

Morningstar Market Fair Value Index: Today the index dropped again, from 0.89 to 0.87, so that's +1 bears.

History: According to The Stock Traders Almanac,Thursday has just a slight positive edge, but not enough to warrant awarding any points.

     And the winner is...

The bears, who just squeak one out with a 4:5 bull-bear ratio.  Overall though, the market is feeling to me more negative than this close ratio would indicate.  With the VIX bouncing around like popcorn and back again over 30 and that utterly incomprehensible European Kabuki Theatre of the Absurd now in it's, what, seems like at least the 275th act with no end in sight, I'm voting Thursday lower.

ES Fantasy Trader

Today we took a profit of 8.25 points.  The market had already put in one peak in the morning and I figured discretion was the better part of valor particular with Bernanke scheduled to talk this afternoon.  Didn't turn out badly at that.  Portfolio stats: the account is now $176.625 after 32 trades (24 wins, 8 losses) since inception on 8/18 with $100K

BOT    10    ES    false    DEC11 Futures     1227.00    USD    GLOBEX    01:13:12
SLD    10    ES    false    DEC11 Futures     1235.25    USD    GLOBEX    11:45:14

Tonight we go short at 1219.25.

Some upside possible Wednesday

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

• Wednesday higher, medium confidence.  Bull-bear ratio is 5:3.
• ES pivot 1227.00.  Holding above is bullish..
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went long at 1227.25.

Recap

Well I thought we were going lower again and we sure did, with the Dow dumping another 297 points to open November with a big fizzle, thanks to those freakin' Greeks and their referendum.  But whining, like hope, is not an investment strategy.  Not like reading the charts which is what we do here, so let's get right to it and see which way they're pointing for Wednesday.

The technicals

The Dow: Ugh, another big dump that not only broke support at 11,694 but played entirely under the 200 day MA and closed on the day's lows.  Indicators are all declining but still a good ways from oversold, though it should be noted that support exists at 11,640, just shy of today's close at 11,657..  Still, it's just an ugly chart that's +1 bears.

The VIX: I was talking about gaps in the VIX last night - well holy moly, after closing yesterday at 29.96, we opened today at 36.03 - that's one heck of a gap up.  And that made a spinning top doji centered right in the 35-36 resistance zone and just short of the upper BB at 38.6.  The pattern lately has been to fill these sorts of gaps the next day, so I'd look for the VIX to move lower Wednesday and that's +1 bulls.

VIX futures: Here we got a giant abandoned baby that's a really good reversal indicator.  No matter what the chart, they have trouble advancing after a doji like this, so I'm calling the futures lower Wednesday and that's +1 bulls.

Market index futures: Finally, all three are running in the green for once.  ES is up 0.37% at 2 AM EDT.  And its looking exactly like the VIX futures chart so the same comments apply and that's also +1 bulls.

ES daily pivot: Now is 1227.00.  ES has been trending up since 7 PM and broke through the pivot just past midnight. Then it made a quick retest that was successful and resumed climbing.  I like the looks of this sort of action, so +1 bulls.

Dollar index: The dollar rocketed up once again today, even more than I expected.  While this might look like a bullish continuation, I note that the peak of the day was right at the 54.61 resistance level, from which it retreated.  While the indicators are not technically oversold, they are at the same level they were at the last peak on October 20th.  So I'd have to say the dollar may be in line to run lower soon, if not tomorrow then even more likely Thursday.  On that basis I'm giving this +1 bulls.

Oil: I mentioned the double hanging man last night and oil indeed sank lower today - and put in a third hanging man, a long spindly one at that.  But after three straight down days, I have to wonder if this isn't now a hammer instead.  The indicators are kind of confused and so am I.  I'm not feeling the love from this chart, so no call and no points.

Copper: The Doc took a big gap down today to end with a hammer in the Twilight Zone, that spooky region halfway between Bollinger bands.  All we're left with are indicators still more overbought than oversold and having now peaked, so that's worth +1 bears.

Morningstar Market Fair Value Index: Today the index dropped to 0.77.  But all the previous numbers on the chart oddly seem to have changed too, so I don't get it.  However, it remains a pattern in decline, so that's +1 bears.

History: According to The Stock Traders Almanac,there isn't much to the second day of November, so no points.

     And the winner is...

The bulls, somewhat surprisingly given all the negativity I've been reading today, by a bull-bear ratio of 5:3.  So I'm cautiously optimistic we might see a turn-around on Wednesday after two big days of declines mostly based on European rumors and non-news.  So the Night Owl is moving about half-way out on the limb ad calling Wednesday higher.

ES Fantasy Trader

Today we took a profit of 22 points.  Portfolio stats: the account is now $172,500 after 31 trades (23 wins, 8 losses) since inception on 8/18 with $100K

SLD    10    ES    false    DEC11 Futures     1238.25    USD    GLOBEX    01:55:14
BOT    10    ES    false    DEC11 Futures     1216.25    USD    GLOBEX    11:48:29
 
Tonight we go long at 1227.25.. 
 

Tuesday lower

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

Overbought.

• Tuesday lower, high confidence.  Bull-bear ratio is 0:9.
• ES pivot 1258.42.  Current price is far below that.
• Rest of week bias lower but rebound possible by Friday.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1238.25.

Recap

Happy Halloween to one and all!  Today the Dow barfed up 276 points as the market rounded out a great October on a down note.  So will this nasty trick be followed on Tuesday by a yummy treat?  Let's paw through our bag of goodies and find out.

The technicals

The Dow: Today's close of 11,955 broke psychological support at 12K and took us just barely past 200 day MA support at 11,974.  Unfortunately, that happened just before the close so if we had been open longer, would the Dow have bounced there?  I'm afraid the chart's not supporting that notion.  The indicators are all still overbought and have now peaked.  OBV in particular put in a top yesterday and that's always a bad sign.  The good news is that there's more support at 11,890.  It's likely we'll revisit that tomorrow.  Then next comes 11,694 though I don't think that's in the cards for tomorrow.  Either way though, it's +1 bears.

Daily VIX

The VIX: Completely filled the big downside gap it made last Thursday on a tall green candle to leave us right back at 30 again.  In fact this candle was a gap-up.  This one is worth a chart because there's something unusual going on here.  In fact, this is now the third time I've used the phrase "something unusual" here in the last week, which is unusual in itself.

See how in the month of October, 5 of the 21 sessions featured the VIX making a gap up or down.  It seems that the volatility of the VIX is increasing - note particularly the action of the last four days.  It has been noted before that when the "VIX of the VIX", essentially the second derivative of the market increases, it signals a longer term trend change.

I view this as a positive for the market over the next two months but I don't think it will help much tomorrow.  The VIX is still just coming off oversold, is still closer to its lower BB than the upper, and isn't near any particular resistance point.  It doesn't have a good reason to go down right away from here so that's +1 bears.

VIX futures: Similar to the VIX itself, this chart actually looks to have even more room left to fill its gap.  Higher futures -> higher VIX -> lower stocks -> +1 bears.

Market index futures: Once again, all three futures are down with ES leading the way with a 0.92% loss at 2 AM EDT.  This bring it right to the lower edge of its latest rising regression trend channel, a bearish setup.  While today's loss took us out of overbought territory, the indicators are all still heading lower and the next support isn't til 1224, so that's +1 bears.

ES daily pivot: Now 1258.42.  Although that's lower than last night, ES has also declined and is now running 20 points below.  That puts the pivot effectively out of play for Tuesday.  Another +1 bears.

Dollar index: The dollar jumped today thanks to the BoJ's yentervention, nearly completely erasing its losses from last Thursday.  Today's close of 53.59 (on $USDUPX) is just short of resistance at 53.77 and the 200 day MA at 53.87 so I think that while further gains may come on Tuesday they'll be more muted than today.  But that's still +1 bears.

Oil: As I thought last night, oil did go lower today.  In fact we now have not one but two hanging men on the daily chart.  I've not seen the "double hanging man" pattern in any chart book, but I believe it's a lot better reversal sign than just one alone, so that plus overbought indicators =  +1 bears.

Copper: Last night I wrote "copper goes lower Monday" and today it took a nearly 5% drop completing an evening star-ish/two crows pattern, both of which are bearish reversals.  And it left us just about at the top of the big upside gap that formed last Thursday.  With all overbought indicators, a stochastic finishing a bearish crossover and that gap wanting filling, it's looking like copper is going down some more Tuesday so that's +1 bears.

Morningstar Market Fair Value Index: For some reason, Morningstar has not updated this number since October 27th, so no points here today.

History: According to The Stock Traders Almanac, while the Dow is up 63% of the time on the first trading day of November, it has been down 4 out of the last 5 years.  So despite November's stellar reputation as a whole, I'm going to give Tuesday +1 bears.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last  week the bulls dropped to 36% while the bears rose again to 39% putting them back into the majority.  This week we had another big reversal in the poll with the bulls getting on board to take a 67% lead compared to just 15% bearish.  You have to go back to November '08 to find such a large bullish number.  But i think it's a bit early to play the contrarian card here.  Still it's worth keeping this number in the back of your mind.

For the record, I voted bullish again now for the fourth week in a row, still on the basis of my reading of the monthly Dow chart and the upcoming bullish fourth quarter seasonality.  But if next week's poll becomes any more bullish, I might have to reconsider my position.

     And the winner is...

The bears with a shut-out for a bull-bear ratio of 0:9.  While J-Trader covered his shorts today, I'm afraid I'm going to have to part company and call Tuesday lower again.

ES Fantasy Trader

Today we took a profit of 19.75 points on last Thursday's short.  Once again, patience paid off.  Rather than taking a small loss on Friday I held short over the weekend and then today, ka-ching.

Portfolio stats: the account is now $161,500 after 30 trades (22 wins, 8 losses) since inception on 8/18 with $100K

BOT    10    ES    false    DEC11 Futures     1262.75    USD    GLOBEX    11:18:43

SLD    10    ES    false    DEC11 Futures     1243.00    USD    GLOBEX    OCT 25 01:38:26

Tonight, we go short again at 1238.25.
 
The reboot of the CNBC Million Dollar Portfolio Challenge was also most kind to the Night Owl.  On the first day of the new contest, my standing jumped significantly from where it was before the shutdown.  However, after reading the revelations of how the top players got to where they were, I've pretty much already given up on winning the big bucks.

Unfortunately, I have a life which means I don't have the time to spend all day long literally glued to my screen executing a trade every 30 seconds for 5 weeks nonstop which is apparently what it takes to bring this one home.  So it ends up being more of a fun thing for me, as in with a few well-placed trades I'm just a bit more than half a percent from the top.  And it only took a few minutes of my time.  So there :-)
 

Out of gas, Monday lower

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

• Monday lower, high confidence.  Bull-bear ratio is 3:5.
• ES pivot 1279.33.  Holding under is bearish..
• Rest of week bias lower, but rebound possible by Friday.
• Monthly outlook: bias up, on technicals
• ES Fantasy Trader remains short at 1276.25.

Recap

Exactly one week ago I wrote "This should be an interesting week ahead.".  And was it ever.  After a shaky start we were rewarded handsomely with some awesome gains on Wednesday and Thursday.  Then I called for a lower market on Friday and while I was wrong on that, it wasn't by much.

The Dow managed to pull off an anemic 22.5 point gain, the SPX was flat, and the Naz actually did lose a hair.  Nevertheless, we remain comfortably inside the rising regression trend channel established on 10/4.  So tonight  let's consult the Racing Form, look over all the horses and see if we can pick a winner for Monday.

The technicals

The Dow: The Dow's little spinning top doji along with decreased volume and overbought indicators all portend a reversal from last week's close at 12231.  This also represents a failure to breach the 12,211 resistance line in a meaningful way and gives every impression of being out of gas, at least for a day or two so it's +1 bears.

The VIX: After a big gap down on Thursday with an inverted hammer, it put in a very unusual bearish engulfing pattern from a low level with oversold indicators on Friday.  This looks to me like it's going lower Monday, although it's got its 200 day MA real close at 23.59 as support.  So that leaves maybe a point of downside from here.  So +1 bulls.

Note that since the start of 2010, the VIX has encountered its 200 day MA from above 9 times.  It only bounced off it 2 times, and those were the first two in early 2010.  The other 7 times we got this close, it went right through the MA.  As a whole I'm inclined to give this one +1 bulls.

VIX futures: After a gap down red candle Thursday, the futures fell again Friday.  And while its indicators have now reached oversold levels, they're not giving a reversal sign yet and we're not up to any support levels.  It's not out of the question that they could continue lower Monday, so that's +1 bulls.

Market index futures: All three are running in the red at 1:30 AM with ES now down a full percent.  After putting in a small doji on Friday, ES was unable to clear resistance at 1282.  With indicators that are all not only overbought but look to have peaked, ES is ready to move lower.  Its next support is its 200 day MA at 1262.45.  We're actually already pretty close to that so that's the key number to watch Monday morning.  If ES doesn't bounce off that, it's headed for 1250.  All things considered, it's clearly +1 bears.

ES daily pivot: Now 1279.33.  ES is now under it at 1268.25 in fairly ugly fashion because not only did the pivot rise but ES has been drifting steadily lower since 9 PM.  That's not a good combination, so this is +1 bears

Dollar index: After a huge dump on Thursday, I wrote "such large downward moves in the past tend to be followed by a dead cat bounce the next day" and that's exactly what we got on Friday with a tiny 0.27% gain.  But tonight's a lot harder to call.  Having hit its lower Bollinger band, it did not bounce off and indeed the lower BB is falling away.  And its indicators are all now broken oversold.  We still have a bit to go before reaching weekly support, so technically Monday could go either way.  I'm not feeling the love, so no points.

Oil: Put in a hanging man on Friday.  Its indicators are quite overbought and its stochastic has just executed a bearish crossover.  Oil is already running lower in the overnight and being as how its now at the upper end of its recent trading range, I'd have to say its going lower Monday.  Since it's now positively correlated with the market, that's +1 bears.

Copper: Finished last week right at a resistance level and its upper Bollinger band.  Its daily indicators are now all quite overbought, so this is looking like copper goes lower Monday, and therefore the market in general too, so +1 bears.

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

History: According to The Stock Traders Almanac, the last day of October is only bullish for the Nasdaq and otherwise has just a slight positive bias.  Nothing really worth awarding any points for.

     And the winner is...

The bears with a bull-bear ratio of 3:5.  This close ratio is typical of reversal points and I tend to believe this one.  In addition, J-Trader is holding short for Monday and the sentiment from several other blogs I respect is also negative.  So I'm reasonably confident to call Monday lower.  That's all she wrote.

ES Fantasy Trader

We went short on Thursday night and decided to hold onto that position on Friday over the weekend.  So far that decision seems to be paying off.

Portfolio stats: the account remains $151.625 after 29 trades (21 wins, 8 losses) since inception on 8/18 with $100K. 
 

Overextended, Friday lower

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

• Friday lower, high confidence.  Bull-bear ratio is 2:6..
• ES pivot 1269.75.  Breaking below is bearish..
• Next week bias up on technicals and economic news.
• Monthly outlook: bias up on technicals.
• ES Fantasy Trader went short at 1276.25

Recap

Well it seems that just as the market spent most of the summer pricing in a Europe-induced recession, it is now spending October un-pricing it.  Today's spectacular 340 point rocket in the Dow broke a bunch of barriers all at once and positioned us well for further gains going into November, but maybe not tomorrow.  Let's take a Delphic journey to consult the Oracle for clues to Friday's direction.

The technicals

The Dow: Today's close at 12,209 was very important for three reasons: first it blasted right through the 200 day MA at 11,971 in convincing fashion, second, it broke the psychological 12K barrier equally easily, and third it broke the 0.618 Fibonacci retracement of the decline that began on July 22nd.  There is now no resistance until 12,400.

That said, one might reasonably expect a pause after one day gain of such magnitude, especially with a Friday coming up, on which traders might be more inclined to lock in gains before the weekend..  Today also brought us to the upper Bollinger band.  And OBV is now running off the map at 24.4B, a number I've never seen before and far above the point at which previous tops have been put in.  The other indicators are similarly overbought.  While I think we still have room to go higher in November, this chart is looking a bit overextended, so +1 bears.

The VIX: The all-important VIX lost almost 15% today on a big gap-down forming an inverted hammer. that took it clear to its lower Bollinger band and almost to its 200 day MA at 23.55.  The VIX generally tends to bounce right off its lower BB whenever it reaches it and its stochastic is jsut about to execute a bullish crossover.  On that basis it's looking like +1 bears.

VIX futures: Pretty much the same story here as the VIX itself.  These sorts of big gaps cry out to be refilled, so that would also be bad for stocks.  Another +1 bears.

Market index futures: All three are down this evening with ES down nearly half a percent at 1:10 AM EDT.  Today's tall green candle gives me the impression of being overextended.  However, since ES also crossed well over its own 200 day MA at 1262.5 today, that becomes a good support level.  But I think we may revisit that area before the next push upward, so +1 bears.

ES daily pivot: Now 1269.75.  With ES at 1276.50, the pivot is making its magnetic attraction felt.  Since ES has been drifting lower since 8 PM, I'd expect it to hit the pivot around 7 AM Friday.  If we bounce off, that's bullish.  Breaking under, bearish.  However, I can't give any points for that right now.  I'll be sleeping when it happens, so a word to the wise: see where ES is before the market open on Friday.

Dollar index: The dollar took a massive dump today that brought it clear to its lower Bollinger band at 52.7 (remember I'm looking at $USDPX, not $DXY).  What's not clear is if that will mark a stopping point.  While the indicators have entered oversold territory, there's no support until the summer lows around 52.11.  However, such large downward moves in the past tend to be followed by a dead cat bounce the next day, so I'm going to call the dollar a bit higher tomorrow and that's bad for stocks, so +1 bears.

Oil: Went back up today.  The oil chart is confused here as is its relationship with the rest of the market, so I'm going to take a pass on this one tonight.

Copper: Today, copper took a big gap-up pop to its upper Bollinger band and beyond.  I've been kicking myself for forgetting to buy some FCX earlier this week.  But now the indicators are all oversold and the stochastic just made a bearish crossover so tonight it's +1 bears.  Tomorrow might be the day to grab that FCX.

Morningstar Market Fair Value Index: Today the index rose from 0.87 to 0.88, so that's +1 bulls.

History: According to The Stock Traders Almanac,the last two days of this week tend to outperform historically and Friday is easily the strongest day of the week, so +1 bulls.

     And the winner is...

The bears, with a bull-bear ratio of 2:6.  And that's about how I'm feeling too.  I note also that J-Trader is bearish on Friday and I agree.  I think we'll see Friday go lower.

ES Fantasy Trader

Today we took a profit of 14.5 points.  Portfolio stats: the account remains at $154,750 after 29 trades (21wins, 8 losses) since inception on 8/18 with $100K.  .

Portfolio stats: the account is now $151.625 after 29 trades (21 wins, 8 losses) since inception on 8/18 with $100K. 

BOT    10    ES    false    DEC11 Futures     1256.25    USD    GLOBEX    01:40:31    

SLD    10    ES    false    DEC11 Futures     1270.75    USD    GLOBEX    11:57:01     

Tonight we go short at 1276.25..