Friday maybe higher unless ES pivot lost

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

• Friday uncertain, higher if pivot holds.
• ES pivot 1361.83.  Breaking under is bearish..
• Next week bias up technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

It's always gratifying to call the market correctly.  Last night the call was "Thursday higher unless bad Greek news".  Well the news was good and the market went higher.  End of story.  But what of Friday?  Read on for the exciting conclusion...

The technicals

The Dow: Today's 71 point gain almost completely retraced Tuesday's big dump.  From a candlestick point of view, we now have two thirds of a "three white soldiers" pattern.  If we can get another soldier to join the troops on Friday, that will be bullish indeed.  With rising indicators and a stochastic just barely finishing a bullish crossover, that's looking more than a bit likely.

The VIX:  I was also right about the VIX when I wrote "lower VIX Thursday".  We got a big gap-down star to end off 5.87% at 17.95.  With a stochastic just completing a bearish crossover and other indicators headed south, I'd say another down day isn't out of the question.

Market index futures: Just as I began writing this, all three futures were up slightly.  Then suddenly right at 1 AM, ES took a four point dive in less than five minutes.  And this was on huge volume (for this time of night) - 1100 contracts traded at 1:02 AM alone.  The only reason I can see is that this was when the results of the Greek bond swap were announced..  In any case, as of 1:09AM EST, ES is now down 0.11% having found support (so far) at 1364.50.

What's puzzling is that the Greek numbers were actually quite good - 85.8%.  Maybe this was just a "sell the news" reaction.  But CNBC already broadcast the 85% number this afternoon.  Or it could be a reaction like you sometimes see on Fed days when the market takes off in the direction opposite what you'd expect, only to reverse course a few minutes later.  Very odd.

As far as today's action went, it was pretty much the same story as the Dow, but even better, with ES recovering all of Tuesday's losses and a bit more.

ES daily pivot: Tonight the pivot jumped from 1349.42 to 1361.83.  Even with the 1 AM dip and the rise in the pivot, we still remain above it, albeit by only three points.  This now puts the pivot in play.  We really don't want to see ES break under the pivot.

Dollar index: You don't really need to look much beyond what I wrote late night: "dollar lower Thursday -> stocks higher."  It did, and they did.  Today gave us a big gap-down red candle for a 0.73% loss.  But with indicators still just coming off overbought, no recent support in sight, and the stochastic just finishing a bearish crossover, look for lower still on Friday.

Morningstar Market Fair Value Index: Yesterday the index ticked up to 0.94, a positive sign.


History: According to The Stock Traders Almanac, Friday is historically slightly bullish.

     And the winner is...

In closing, I note that the $TRAN transportation average today traded outside its recent declining RTC, posting a 1.42% gain.  Since this pretty much declares the downtrend over, this is quite a bullish development indeed.  In addition, the $RUT Russell 2000 average also traded outside its declining RTC today, a bullish setup.  And finally copper also took a positive turn today, making a bullish stochastic crossover.  There may well be gloom & doom on the horizon, but these three technical bellwethers are not showing it.

ES, 5 minute bars

Despite all this, I'm quite concerned about the sudden turn south in ES which is continuing to move lower as I write.  There's something funny going on here.  Given this odd turn of events, I don't feel good about calling the market higher, which I'd been getting ready to do.  On the other hand, unless ES continues below the pivot, it's not guaranteed we're going to close lower Friday.  So the best I can say tonight is Friday morning watch the ES 1361.83 level and the Dow pivot at 12,816.  Going decisively under either of these will be bad.  Otherwise, we stand a good chance to close higher Friday.


1:30 AM Update: ES seems to be recovering from its 1 AM hiccup, now at 1364.75.  Just look at this strange chart.  The fact that we hit 1363.25 (finding support at Thursday afternoon's lows) and then started recovering is encouraging and makes me a bit more confident that we might close higher Friday.  We'll just have to wait and see.

ES Fantasy Trader

My bet last night on a euro-driven rally paid off nicely today in the form of a decent 10.5 point gain.  Not bad for just under 11 hours work, eh?  Tonight we stand aside in view of the funny business going on with ES right now..

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

SLD    10    ES    false    MAR12 Futures     1365.25    USD    GLOBEX    12:54:21   

BOT    10    ES    false    MAR12 Futures     1354.75    USD    GLOBEX    02:04:25   

 

Thursday higher unless bad Greek news

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

• Thursday higher, low confidence.
• ES pivot 1349.42.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1354.75.

Recap

Last night I was expecting the market to go higher today, which it did, though admittedly a bit more than I thought.  But hey, I'll take it (and did).  Now let's try to figure out if we can recover some more ground Thursday.

The technicals

The Dow: I'd say today's 78 point advance in the Dow was a bit more than a dead cat bounce.  More like only a mildly injured bounce.  And volume on today's gain was higher than on yesterday's dump with both OBV and momentum suddenly turning positive.  This really isn't the look of a chart ready to go lower.

The VIX:  Today the VIX completed a near-textbook evening star, dropping 8.6%.  With indicators now solidly overbought, it looks like a lower VIX Thursday, implying higher stocks.

Market index futures: At 1:57 AM EST all three futures are up but just barely.  ES is up just 0.07% after a solid green candle that retraced almost exactly half of yesterday's losses.  That's definitely more than just a dead cat bounce.  Just the fact that we're not going lower at this late hour seems to suggest an absence of selling pressure.

ES daily pivot: Tonight the index nudged up from 1348.75 to 1349.42.  But thanks to a lift this evening, we're now even higher above the new number than before.  Unless we break under the pivot, things are looking good.

Dollar index: Last night I wrote of the dollar, " we're more likely to see it go lower in the next day or two".  And sure enough, it dropped 0.2% today leaving indicators hooking down from overbought levels and a stochastic just ever so close to making a bearish crossover.  Conclusion: dollar lower Thursday -> stocks higher.

Morningstar Market Fair Value Index: As expected, yesterday the index took a dump to 0.93.  But I wouldn't read too much into that.  Sudden large movements in the market tend to distort all sorts of indicators, so let's let the dust settle a bit before we try to make something of this.


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

     And the winner is...

Thursday's going to depend greatly on, once again, news about Greece.  Technically, I'm seeing more positives tonight than negatives, so on that basis alone I'll call for a higher close Thursday, but keep in mind that it will take just one story in the FT that Mr. Market doesn't like and down we'll go.

ES Fantasy Trader

Tonight I'm taking on a somewhat speculative long position, betting that the people driving the euro higher at 2 AM know something I don't.  So we're in at 1354.75.

Meantime, the account remains $109,500 after 18 trades (13 wins, 5 losses) starting from $100,000 on 1/1.
 

Wednesday small gain possible

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

• Wednesday higher, low confidence.
• ES pivot 1348.75  Breaking above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well so much for the rubber duckie I spoke of last night.  Today out of nowhere emerged a Greek submarine to torpedo the poor guy sending him down 204 points, the Dow's biggest loss since last November.  Every single stock on my watchlist of over 150 names was red today.  At least my call "Tuesday could go lower" was correct, if somewhat of an understatement.

Those freakin' Greeks.  Just when you thought it was safe to go back in the market, here we go again.  Would you please just go bankrupt and get it over with so we can all get on with our lives?  It's really absurd - for four months now Greece simply disappeared off the radar, now all of a sudden, like some horror flick, they're baaack...

At least they finally got the Dow out of its recent trading range - too bad it was to the downside.  Now let's see where we go from here.

And a quick note in passing - I got so involved I completely overlooked the fact that the Night Owl Trader had its second anniversary last month, on February 17th.  I look forward to many more and thank all my readers for coming along for the ride.

The technicals

The Dow: After just meandering aimlessly for ten straight days, the Dow finally broke to the downside today, with a giant red candle that took us clear to the lower BB in one fell swoop.  The RSI also went oversold.  Interestingly though, volume was not particularly high, as you might expect in a drop of this magnitude.  This indicates a lack of panic and makes me question if this decline wasn't just a one day wonder.

VIX daily

The VIX:  And would you just take a look at the VIX today!  This is the chart du jour.  We haven't seen a pop like thsi since last November 1st, up 15.62% on a huge gap-up star.  As I've noted here often, the VIX rarely spends more than one day, (or occasionally two) at its upper BB without going lower.  Note also how the RSI has now moved to overbought (red bar below).

I'd say this chart is much more likely to go lower than higher on Wednesday, which would be good for stocks.  And if it does go lower, then that makes an evening star, which should be good for still lower later.

Market index futures: Whenever you see a big dump on a chart like this, the first thing you think of is "dead cat bounce".  This is especially true when the VIX isn't at crazy levels in the 30's or higher.  And the overnight futures seem to be suggesting that might just be a possibility, with all three up at 1:26 AM EST.  ES is up 0.28%.  Recall last summer when we'd have a terrible down day, it wasn't unusual to see the overnight ES simply continue lower.  We're not seeing that right now.

In addition, today's fall brought us nearly to the lower BB at 1335.90 and brought all the indicators very near to oversold.

ES daily pivot: Tonight, the pivot drops all the way  from 1364.00 to 1348.75.  This brings us within easy striking distance, with ES just three points under that now.  This is going to be one of those times when the pivot is, uh, pivotal.  If we run up to it and bounce off, that's bad.  If ES can break through decisively, that's good.  That will set the tone for the day.

Dollar index: Like the other charts, the dollar today made a big move, in this case gapping up like the VIX to its upper BB and dragging its indicators into overbought territory.  And like the VIX, the dollar has been reluctant to spend much time in the company of its upper BB lately.  I'd say we're more likely to see it go lower in the next day or two than continue higher.

Morningstar Market Fair Value Index: Yesterday the index went right back to 0.96, though I imagine that today's number is going to show a drop.  Looking at the longer view of this chart, I'm finding the failure of the index to climb back to 1.0 after spending time in the 0.8's to be worrisome.  Not good for the bullish case.


History: According to The Stock Traders Almanac, Wednesday is historically just slightly bullish.

     And the winner is...

Tonight, I'm going to go with the dead-cat bounce theory.  The follow-up to big declines is usually small.  Right now the futures seem to be suggesting a move upward, and idea supported by the dramatic move in the VIX.  We've gone from a market just waiting to roll over to an overdone one day sell-off.  The behavior of ES relative to the pivot around the opening will be important.  My best guess is that we'll see a positive close Wednesday.  While I do think there may be more downside to come, as we are now in a new downtrend, it won't necessarily come on Wednesday.

And of course I apparently once again need to throw in the caveat I used so often last summer, that any bad news out of Europe can change this all in an instant.  We're back to the news-driven market, folks.

ES Fantasy Trader

Wow, I'm sure glad I listened to my Owl intuition last night.  That short paid off nicely, realizing 16 points.  Because of the uncertainty surrounding follow-ups to big down moves, we're just going to stand aside again tonight.  Sometimes the best trade is no trade.

The account is now $109,500 after 18 trades (13 wins, 5 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1344.25    USD    GLOBEX    11:38:12    

SLD    10    ES    false    MAR12 Futures     1360.25    USD    GLOBEX    01:41:46

 

Tuesday could go lower

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

• Tuesday lower, low confidence.
• ES pivot 1364.00.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1360.25.

Recap

Unsinkable?

Today, for the tenth straight day we remained stuck in the 12,950-13,000 range in the Dow with just a 15 point loss on the day.  This is what I call a "rubber duckie" market.  You try to push him underwater in the tub, but he just bounces right back up to the surface.  On the other hand, then he just sits there - he can't fly up into the air.  What will it take to get us off of top-dead-center?  Read on...

The technicals

The Dow: Today the Dow gave us a hammer/hanging man type doji.  Without a trend, it's impossible to tell which.  About all I can gather from this chart is that there's more of the same on the way.  The only item of interest here is that the stochastic is exactly on the cusp of forming a bullish crossover.  This pattern does not look bearish, but it requires confirmation before declaring it bullish.  So we remain stuck in neutral here.

The VIX:  We saw a gap-up inverted hammer in the VIX today giving us a 4.4% gain.  But that's not the sort of candle that would lead you to expect follow-through.  Still, it did bring us out of the descending RTC breaking a five day downtrend.  My guess here is that while the VIX may not go higher on Tuesday, it very well might in another day or two.

Market index futures: At 1:28 AM EST we're seeing all three futures in the red with ES losing 0.27%.  Assuming it doesn't manage to recover, that will put ES in a new downtrend.  And importantly, the overnight action takes ES out of its rising RTC back to 2/1.  Assuming we don't recover on Tuesday, that will be a bearish trigger.  Interestingly, we're seeing some divergence here between ES (and the SPX) and the Dow.  The latter remains range-bound.  My theory is that we're starting to see a flight from risk to the dividend paying large caps.  This could be a signal that the downturn is at hand.

ES daily pivot: Tonight the pivot drops from 1370.25 to 1364.00.  Despite this, ES, which spent the day under the pivot, remains below that.  Unless ES can stage a meaningful attack on the pivot by mid-morning Friday, it's not looking good.

Dollar index: Last night I thought the dollar would be going lower soon and today it did, just a bit, hesitating on a doji down 0.12%.  It looks ready to go lower still, which would help out stocks.

Morningstar Market Fair Value Index: Well MS seems to have decided that the index remains at 0.96 after all.  We'll see what tomorrow brings.


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

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

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343  

  8  2/21       44         32        +     1361

  9  2/27       48         24        +     1366

 10  3/5        43         26        +     1370

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 2/6 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 6 for 6.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  The Ticker Sense bloggers continue to bat 1000.

It's worth noting that this week we actually saw both a decline in bullish sentiment and an increase in bearish sentiment - not the sort of thing you want if you're looking for a contrarian top sign.  The most interesting point here is that bullish sentiment is now at its lowest point so far this year.  If you believe that the Ticker Sense crowd is pretty good, then that might be an indication that the rally is nearing its end.  Nevertheless, I voted bullish once again.  Much as I'm thinking this rally is getting long in the tooth, I still don't see a reversal coming on the SPX monthly chart.

     And the winner is...

Well, once again, I'm not feeling any strong sentiment either up or down.  There are some bullish signals in the charts, but also some bearish ones, and those seem to be getting stronger.  The rubber duckie may be about to spring a leak.  So I'm afraid tonight I'm going to have to side with the bears and call for a lower close Tuesday.  But I'm still not particularly confident about that and I'm definitely not looking for a major collapse on Tuesday.

ES Fantasy Trader

I don't know - my Owl intuition is giving me the feeling that a short might work out here, so tonight we go short at 1360.25.

The account remains at $101,500 after 17 trades (12 wins, 5 losses) starting from $100,000 on 1/1.
 

Monday uncertain, maybe lower

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

• Monday lower, low confidence.
• ES pivot 1370.25.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Now I know why last Thursday I couldn't decide on a market direction for Friday - the market couldn't either, with all three major averages finishing within a few points of unchanged.  This now makes six straight sessions the Dow has traded in a narrow range of 12,950-13,000.

The technicals

The Dow: On Friday, the Dow created a Christian doji, but really the candlesticks haven't been of much use to us all year so far.  The Dow continues its lazy stairstep advance.  And although Friday finished essentially unchanged, the stochastic has now declined to the same area from which we've seen the next step up all year long.  The daily upper BB is now at 13,043, suggesting we might manage another 50 points higher without too much trouble, assuming we can cross the 13K Rubicon and stay on the other side.

The VIX:  The VIX actually gained 0.17% on Friday, but this number is deceptive, since it did it on a solid red candle.  While this creates some level of support around 17.25, the VIX remains solidly in a five day descending RTC.  Its stochastic also formed a bearish crossover Friday suggesting lower to come, and that would be good for stocks.

Market index futures: At 12:55 AM EST all three futures are running lower, with ES down a non-trivial 0.31%.  The current level of 1364.50 puts us right on the edge of the rising RTC.  Trading under this on Monday would be a bearish setup.  And on the hourly chart we see that ES is continuing in a downtrend that began at 7 PM on March 1st, almost a week ago. 

ES daily pivot: Tonight the pivot moved a bit from 1369.50 to 1370.25.  And with ES continuing lower in the overnight, we're now six points under the new number.  That does not bode well for Monday.

Dollar index: On Friday the dollar took a big gap up to close a substantial 0.8% higher.  Although still short of its upper BB, this gap is looking to me like its just begging to be filled.  With indicators not quite overbought yet, another day of gains isn't out of the question,, but I'd say the dollar is going to be headed lower by mid-week at the latest, also good for stocks.  This is particularly so in view of the fact that the euro looks ready to rise.

Morningstar Market Fair Value Index: Last Thursday, MS was advertising this number at 0.92.  Now, they're saying it was 0.97.  Unless we can get some reliable data from these guys, I'm going to have to drop this as a daily indicator.


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

     And the winner is...

Yet another night of conflicting signals.  While some of the charts don't look too bad at the moment, I'm concerned about ES, which is not just down, but trending lower.  I'm also concerned about the recent reversal in the price of oil.  While sky-high oil prices are clearly not good for our economy, I note that the last few times when oil has suddenly turned lower, the market also did, either simultaneously or soon after.

However, given the continuing upward momentum so far this year, I still hesitate to call a reversal until I see some confirmation.  And I still don't see that.  So until then, the best I can do is call for some more range-bound trading, with the Dow bouncing around between 12,950 and 13,000.  Right now, I see no compelling indications that we're breaking out either higher or lower.

If I absolutely had to make a wild guess right now, I'd say that Monday might close lower, but I don't have a lot of confidence in that.  If ES can break 1366.50 Monday morning, that increases the odds of a higher close.  That would take ES out of the descending hourly RTC.  But if ES can't recapture the pivot before noon, the odds for a lower close increase greatly.

Watch those two key ES numbers: 1366.50 and 1370.25.  That's about the best I can do from my late-nite perch this time.

ES Fantasy Trader

Faced with another night of uncertainty and no discernible edge, we stand aside once again.

The account remains at $101,500 after 17 trades (12 wins, 5 losses) starting from $100,000 on 1/1.
 

Friday uncertain

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

• Friday uncertain.
• ES pivot 1369.50.  Holding above is bullish.
• Next week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well last night everything was looking down, but sometimes you just can't lose for winning as the Dow turned in a 28 point gain instead of a loss today.  But it somehow still felt like a loss to me, retreating from a mid-day excursion into 13K land on slightly less than average volume.  And so the sideways action continues as we remain stuck in the 12,950-13,000 range.  Let's see if tomorrow might bring more of the same.

The technicals

The Dow:Yesterday's candle looked like a bearish engulfing.  While today did close with a gain, today's close was under yesterday's open, leaving us with a slightly sagging chart.  It certainly has the look and feel of a market about to turn, but it's just not happening.  I really need to see some confirmation before calling this one lower.  And this time I mean it :-)  I'm starting to feel like Charlie Brown who keeps trying to kick the football only to have Lucy yank it away every time.

The VIX:  Yesterday's green candle in the VIX was for naught as today the slide resumed, dropping 6.35% and establishing a new descending RTC.  The indicators also turned back down without ever having reached overbought levels.  Once again, the VIX was unable to put together two consecutive green candles.  Compare this to last July when the VIX rose for 10 out of 12 sessions.  There seems to be no fuel in the VIX tank anymore.

Market index futures: Tonight the NQ is barely up while ES and YM are both barely down, ES dropping 0.05% at 1:26 AM EST.  However, we note that ES has been trending downward slowly since 7:15 PM.  Despite this, we remain at the top of the solid green candle ES put in today and that keeps us solidly inside the rising RTC.

ES daily pivot: Tonight the pivot toook another step up from 1366.17 to 1369.50.  Despite this and the ES drift lower, we remain four points above the pivot.  Unless we break under in the rest of the overnight, it's not looking too bad.

Dollar index: Today the dollar gave us a small doji, forming 2/3 of an evening star.  If it goes lower tomorrow, look for lower still next week which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index fell to 0.92.  The fact that after spending so long stuck at 0.96 the next move was down is negative for stocks.


History: According to The Stock Traders Almanac, Friday is historically neutral for the Dow.  March on the whole ranks as the 5th best month for the Dow.

     And the winner is...

I refuse to kick the football again.  Without solid evidence of a downturn, I'm going to go with the prevailing winds and right now those winds are blowing in an upward direction.  The day-to-day action doesn't seem to be as important as the overall trend so far this year.  It feels like I'm just forecasting the noise.

But I note that the transportation index broke out of its month-long descending RTC two days ago, signaling an end to that trend.  If you believe that a rising $TRAN is good for stocks, that's a point of support.

Unfortunately, when you have a series of small range days with little price movement as we've had lately, producing a technical forecast becomes extremely difficult.  Too hard for me in fact.  So despite my feeling that tomorrow might go a bit higher, I'm making no official call tonight, for the second time this week.  Sometimes that's just how it is.  Watch the ES pivot and see how the market reacts around it for a clue to Friday morning.

Performance

Trading Account

Month    Month % change  YTD % change

Jan.         +7.41%         +7.41%

Feb.         +3.67%        +11.35%       

ES Fantasy Trader

Yesterday's short did not work out in a big way.  I was torn between hanging on, waiting for it to go lower, and just packing it in.  As it turns out, I waited too long and ended up with an even bigger loss.  Oh well.  Tonight, we're standing aside.

The account falls to $101,500 after 17 trades (12 wins, 5 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1359.25    USD    GLOBEX    MAR 1 01:40:27    

BOT    10    ES    false    MAR12 Futures     1372.00    USD    GLOBEX    FEB 28 01:14:08   


 

Thursday lower

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

• Thursday uncertain.
• ES pivot 1366.17.  Holding under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1359.25..

Recap

Last night I wrote "My guess though is that [Bernanke] is going to say something that Mr. Market won't like and that will send us lower."  Well he did and it did, with the Dow dropping 53 points and relinquishing its admittedly tenuous hold on 13K.

The technicals

The Dow: Today's red candle brings us right back into the consolidation area of 12,940-13,000 we've been in since February 21st..  But the indicators have all finally woken up and are now starting to come off their overbought levels.  And we also touched the upper BB at 13,057 today.  And today formed a bearish engulfing pattern.  And today's volume going down was much higher than yesterday's going up.  To me, that all spells lower.

The VIX:  The VIX gained 2.6% today on a classic bullish piercing pattern.  Along with rising indicators, this portends a higher VIX on Thursday, implying lower stocks.

Market index futures: Tonight all three futures are in the red with ES leading the way lower down a non-trivial third of a percent.  Today's red candle pretty much formed a bearish engulfing pattern and the lower numbers in the overnight tend to confirm it.  There's also no support til 1355, five points below where we are at 2 AM EST.

ES daily pivot: The pivot dipped from 1369.92 to 1366.17 tonight.  However, after breaking underneath this afternoon, ES has been holding below and is now drifting lower - not an encouraging sign.

Dollar index: After hitting its lower BB yesterday, the dollar scored its biggest gain since January 13th today, rising 0.63%.  And we've got indicators coming off oversold levels including a stochastic that has just finished a bullish crossover.  This all points to a higher dollar, and therefore lower stocks.

Morningstar Market Fair Value Index: The index graph on the MS web site is all screwed up - it's hard to tell just what the right number is - no nothing to see here tonight.


History: According to The Stock Traders Almanac, Thursday is historically fairly bullish, although the Dow has been down the last four of five years.  And of course the first day of any month is generally bullish.

     And the winner is...

Tonight, the charts pretty much are in agreement.  While the market has admittedly had trouble putting together two losing sessions in a row lately, I'm thinking Thursday may be the day.  I see enough bearish technicals to call for a lower close Thursday.

ES Fantasy Trader

Tonight we go short at 1359.25.

The account remains $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.
 

Wednesday uncertain - listen to Uncle Ben

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

• Wednesday uncertain.
• ES pivot 1370.00.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Finally.  Hallelujah, the Dow managed to close above 13,000.  I was reading an interesting piece by someone who observed that it seems like everyone is now expecting a pullback (and I'll plead guilty to that too) and reminding us that whenever everyone gets on one side of the market, it generally goes in the other direction.

In any case, we just continue to see the same thing we've seen all year so far - a pretty constant grind upward with numerous dojis, stars and hanging men that signal but never quite seem to generate a reversal.  Will Wednesday be the day?  Read on...

The technicals

The Dow: Case in point - yet another star today for a 24 point gain.  Only this time we have 13K below us so that now becomes support.  The indicators are all completely broken, so we have no real technical indication on this daily chart of a reversal.

The VIX:  The VIX, which has had so much trouble putting in a green candle lately failed to do so once again today, dropping 1.26% to close back under 18.  And this despite indicators that are coming off oversold levels.   As with the Dow, these indicators no longer seem to be indicating much.

Market index futures: Unlike last night, all three futures are down at 1:26 AM, though just barely, with ES dropping only 0.04%.Meanwhile, after an unremarkable green candle today, ES remains inside its rising RTC.  Still no indications of any reversal here right now.

ES daily pivot: Tonight the pivot rose from 1363.67 to 1370.00.  Even at that, we continue to hold above the new number, which is good for stocks  at least as long as we hold above.

Dollar index: As expected, the dollar continued lower today and remains inside its descending RTC.  It did hit its lower BB today but that's not seeming to count for much lately.

Morningstar Market Fair Value Index: The index has extended its streak stuck at 0.96 to seven now.


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

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

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343

  8  2/21       44         32        +     1361

  9  2/27       48         24        +     1366

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 1/30 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 6 for 6.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  After six straight weeks of being correct, the contrarian "majority is always wrong" theory is really looking bad.  The Ticker Sense bloggers continue to1000.

This week we see that bullish sentiment gained 4 percent back to the same level as two weeks ago while bearish sentiment dropped 8 percent to the second lowest level this year sp far.  My take is that these still aren't the sort of extreme numbers that precede a reversal.  And for the record, once again I voted bullish.  I'm still not seeing any reversal indicators even on the monthly SPX chart.

     And the winner is...

Technically, I still see no reversal in the daily charts.  But, and this is a big but, Uncle Ben is talking tomorrow and that's what's going to move the market, not the tehnicals.  Since I have no way of knowing what he's going to say, it's tough to make a reasoned call.  My guess though is that he's going to say something that Mr. Market won't like and that will send us lower.  On the other hand, we now have 13K as support for the Dow, though that may not count for much.  I don't often just give up, but tonight's one of those times.  We might get another doji of indecision, but who knows.  Perhaps Wednesday will bring more clarity to the charts.

ES Fantasy Trader

Given the mixed picture and the Bernanke Uncertainty Principle, I'm not putting on any trades tonight.  ES will just have to muddle through without me.

So the account remains $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.
 

Tuesday higher

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

• Tuesday higher, medium confidence.
• ES pivot 1363.67.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well, scratch everything negative I said last night about the market.  Although the Dow did in fact end lower (if you can call a minus 1.44 points a loss) both the S&P and the Naz posted slight gains.  Where does this leave Tuesday?  Read on for my take on it.

The technicals

The Dow: Gosh, I might as well just copy last night's post into this one since everything looks the same.  Yesterday the Dow gave us a doji.  Today we got another, even bigger doji.  Normally, I'd say two dojis like that make a reversal more likely.  But this helium market just refuses to come down to earth.  I'm through calling for a change in direction until I see some proof.  And so far, I don't see it.

The VIX:  As I thought last night, the VIX did go higher today, by 5% but it did it on a gap-up red candle.  And even that five percent bump was not enough to trigger a stock sell-off today.  With the VIX registering a green candle only once in the last seven sessions, it's looking bad for the bears.

Market index futures: Tonight all three futures are up with ES gaining a third of a percent at 1:48 AM EST following news of the German vote on Greece.

ES daily pivot: Tonight the pivot is only slightly down from 1364.42 to 1363.67.  ES broke above the pivot this morning at 11 AM.  Since then, it's only gone higher, extending its gains after midnight.  That's all positive for stocks.

Dollar index: The dollar managed to eke out a tiny gain today but the strengthening euro will put the kibosh on that tomorrow.  And that's another positive for stocks.

Morningstar Market Fair Value Index: Did not update today.


History: According to The Stock Traders Almanac, there's just a small bearish bias to Tuesday.

     And the winner is...

I think I let myself be a bit too influenced by the daily Dow chart which is just moving sideways.  ES is in a clear uptrend now.  Until I see a confirmed reversal sign there, I'm going to have to vote with the bulls.  So for now, I'm going with a higher close Tuesday.

ES Fantasy Trader

Well this short just didn't work out and I'm not sticking around to see about tomorrow, so we took an ugly 10.75 point loss tonight.  Serves me right for trying to anticipate.  Tonight we stand aside while I try to find some more clarity.

The account is now $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1372.00    USD    GLOBEX    01:14:08   

SLD    10    ES    false    MAR12 Futures     1361.25    USD    GLOBEX    FEB 27 00:45:31  
 

Monday looking lower

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

• Monday lower, medium confidence.
• ES pivot 1364.42.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1361.25.

Recap

I was having trouble picking a direction for Friday last Thursday night.  I reluctantly came down on the bullish side.  That was looking good around lunch time but by the close, all our gains evaporated.  Is this finally the sign of the long-awaited pullback?  Tonight we call out the nominees and try to select the winner.

The technicals

The Dow: Friday's 1.74 loss gave us a perfectly balanced doji.  But we've seen this movie many times already this year.  Without confirmation, we cannot strictly call this a reversal indicator.  The stochastic is now flatter than a pancake, suggesting more sideways action rather than a reversal.  Another attack on 13,000 isn't out of the question, but the longer we sit just under that, the more likely the next move is lower rather than higher.

The VIX:  The VIX put in its first green candle in six straight sessions on Friday, rising 3% to give us something approaching a bullish piercing pattern.  And having very nearly touched its lower BB, it looks to me ready to go higher on Monday, which would be bad for stocks.

Market index futures: On Friday, ES put in a true doji for the first time this year.  But again, because of the general rising trend, we really need some confirmation that this is a reversal indicator before calling a top. That said, at 1:25 AM EST all three futures are lower, with ES down 0.17%.  It's obviously still early, but as far as it goes, this is preliminary confirmation of the doji.

ES daily pivot: Tonight the pivot moves from 1359.00 to 1364.42.  Coupled with a slow downward drift in ES, we are now three points under the new value, not a good sign.

Dollar index: The dollar took a big gap down on Friday, breaking through its lower BB to form a stocky hammer.  This doesn't mean it can't go lower still on Monday, but the risk/reward at this level suggests it's more likely to be rising again in the next day or two.

Morningstar Market Fair Value Index: The index has now been stuck at 0.96 for six straight days.  The l;ast time we saw a longter stretch was the period form 12/6 to 12/22 in 2010.  After that... not much happened.  The VIX rose, but the market didn't fall.  I gather from this that we're in some sort of market doldrums, where the trade winds have subsided.  There's not much energy to push us in either direction right now.

Supporting this idea is the SPX Hi-Low index which has been stuck on 100 for 10 days now.  This sort of action makes me think that the next move is down, but where's the impulse to set this snowball tumbling down the hill?

History: According to The Stock Traders Almanac, the rest of the month is historically mildly bearish.

     And the winner is...

Tonight I'm looking at the last doji (OK, it was really a very narrow star) we saw in the Dow on February 9th.  The next day was down.  Given that, plus some other assorted warning signs on the charts, I'm going to hazard a wild guess that Monday's going lower.  I'm not ready to call it the start of a pullback, but it just feels like where we're going.

ES Fantasy Trader

Putting my money where my beak is, tonight we go short at 1361.25.  If this play doesn't work out on Monday, then I expect it will on Tuesday.

The account remains $113,250 after 15 trades (12 wins, 3 losses) starting from $100,000 on 1/1.
 

Tough call - Friday might go higher

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

• Friday higher, low confidence.
• ES pivot 1359.00.  Holding above is bullish..
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Once again the market did not really move the way I expected today, though I did point out that I had some doubts about calling today lower. Instead, the Dow continues to bump up against the 13K line, being unable to cross it so far.  Much has been made recently about the last time we visited this level, back in May of 2008.  But there's one big technical difference.

Back then, the 200 day MA was also right at 13K, providing a sort of double barrier.  The Dow made two attempts to cross 13K in May '08 and then just gave up.  Of course, there were also some major fundamental economic differences back then, but technically, today's chart is in a different place.  First we're considerably above the 200 day MA now and second, instead of taking one quick stab at 13K, we're in a period of consolidation right below it.


I'm also hearing a lot of talk about how a big pullback is imminent, and I'm as guilty as anyone, having painted a gloomy picture just last night.  Now, I'm not so sure.  Read on...
The technicals

The Dow: Our friend the Dow seems to be back in the same mode it was in earlier this month, only now at a slightly higher level - alternating up-down days featuring a variety of reversal candles that don't reverse.  Indeed, we seem to be continuing the stair step advance pattern in place since last December.  Every time we level out for a few days, it gets people thinking the rally is over and we're about to get a pullback - and then the market takes a quick move higher, where the process repeats.

I note too that the stochastic bearish crossover I saw last night unknotted itself today and now is looking more thready and therefore useless as a predictor of anything.

The VIX:  The VIX blew right through its recent support at 17.75 to finish down 7.6% today on a long solid red candle.  It closed on its last support point at 16.80 and is now back in its descending RTC.  The upside move of last week was more of a fake-out than a breakout.  Today's close was the lowest since early last July.  The VIX now has no support until 16.49, the lower BB, and then 15.30.  I see nothing in either the daily VIX or futures to suggest a reversal on Friday, though next week might be a different story.

Market index futures: At 1:35 AM EST, all three futures are up with ES leading the way, gaining 0.17%.  While we did not hit 1369 today, as I figured last night, today's green candle could be taken as both a hammer and a bullish engulfing pattern.  A chart that was looking pretty poor last night isn't looking so bad tonight.  And the lack of negative follow-through in the overnight diminishes the bearish case.

ES daily pivot: Bumped up a bit from 1357.67 to 1359.00 tonight.  After rising all evening, we remain six points above the new number, which is a good sign.

Dollar index: The dollar continues in a somewhat erratic downtrend.  It's now close to support and its lower BB, but not quite there yet.  Although it put in a star today, we could see at least a bit more downside here on Friday.

Morningstar Market Fair Value Index: Yesterday the index extended its streak at 0.96 to four straight days.  The last time we had a streak at this level ended on February 9th at 5 days.  The 10th was down.


Meanwhile, speaking of streaks, the SPX Hi-Low index was stuck on 100 for eight straight days now.  That's quite unusual without a pullback.


History: According to The Stock Traders Almanac, this Friday is historically the weakest day of the week, decidedly bearish.

     And the winner is...

Yet another tough call.  Last night I was feeling pretty negative and it didn't happen today.  This market continues, for the time being at least, to be able to shake off bad technicals.  I still think a pullback is coming but right now it's not looking like it will happen on Friday, especially not with the VIX in decline and now below 17.  So instead, I will call for a slightly higher close on Friday, but once again, I don't have a lot of confidence here - the signals are just not that clear right now.

ES Fantasy Trader

 I said last night that I had a bad feeling about this trade.  That prompted me to close it out right at the open for a one point profit, figuring I'd better get while the getting was good.  I'm glad I did, since the market began rising shortly thereafter.

Tonight I'm simply chickenig out.  While I think we may go a bit higher tomorrow, I'm not confident enough to put on a big ES trade and I'm still not liking the risk/reward ratio at these levels.  Nothing ventured, nothing lost.

The account is now $113,250 after 15 trades (12 wins, 3 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1353.50    USD    GLOBEX    09:30:38

SLD    10    ES    false    MAR12 Futures     1354.50    USD    GLOBEX    FEB 22 20:57:07   

 

Thursday unclear, maybe lower

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

• Thursday lower, low confidence.
• ES pivot 1357.67.  Holding below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1353.50.

Recap

Aside from the small range, today did not really pan out as I had expected.  I'm starting to get a feeling of existential malaise in the markets, and that was only reinforced by some rather sharp observations from alert reader Daniel in a comment to yesterday's post, which I strongly encourage all my readers to check out.  Let's see if the technicals support these ideas.

The technicals

The Dow: In dropping 27 points today, the Dow formed something close to a bearish engulfing pattern.  Today's red candle can also be viewed as bearish confirmation of yesterday's star.  On the indicator side, while RSI is just short of overbought, OBV hit its highest level of the year yesterday and moved lower today..  Money flow also declined today.  And the stochastic is right on the cusp of a bearish crossover.  This is a chart that's looking ready to go lower.

On top of this, the SPX Hi-Low indicator has now been pegged at 100 for seven straight sessions.  That's really looking overdue for a pullback.

Daniel made some comments about $TRAN, the Dow transport index.  This has actually been in decline since February 6th.  However, the Dow itself has not followed suit.  Not yet anyway.  Compare this situation to the second half of last November when the Dow and $TRAN both declined in lockstep.  Something's up here.

The VIX:  After a gap-up open, the VIX then meandered lower to close exactly unchanged, at 18.19 on the dot.  The failure of the VIX to advance could be taken as a non-confirmation of yesterday's star, meaning it could go lower on Thursday, which would be good for stocks.  At the same time, the VIX has found some good support at 17.75, so it's possible it could bounce off that level and then move higher.  Who knows.  The stochastic is now in a position from where a reversal (ie. a move higher) usually occurs in about two days.

Market index futures: Very little guidance from the futures tonight.  At 1:56 AM EST we've got ES flat, NQ up 0.12% and YM up just 0.05%.  However, today's red candle did take us out of the rising RTC for a bearish setup.  ES would have to trade up to 1369 Thursday to get back in.  A failure to hit that number (and I don't think we're going to see 1369) would be a bearish trigger.  In addition, the indicators have now all peaked at overbought levels and are headed lower.  The stochastic completed a bearish crossover today.  None of this is particualrly good news for stocks.

ES daily pivot: Tonight the pivot dropped from 1361.75 to 1357.67.  However, even with that, ES continues to run under the new value, though little changed all evening.  In any event, holding under the pivot is bearish and I see no sign, at least not as of this writing of an attack on it.

Dollar index: The dollar is another chart that did not move the way I expected today, finishing up 0.21% rather than continuing down.  But it did it on a red candle.  We now have two red stars in a row.  With this sort of indecision, I can't really draw any conclusions.  It's really more reflection of the continuing mess in Europe.

Copper: One item Daniel mentioned a while back but not today is copper.  Copper broke out of a declining RTC two days ago, the same day it also climbed back above its 200 day MA.  These both seem to suggest higher copper, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.96 for the third day in a row.  The failure of the index to continue advancing is of concern.

History: According to The Stock Traders Almanac, Thursday is historically actually slightly bullish, the best day of this week

     And the winner is...

There's a fine line between looking at too little data and too much data.  The former leaves you open to poor decision making and the latter just drives you mad.  Right now, I'm looking over my shoulder for the men in the white coats.  Something's up.  To quote noted stock market guru Buffalo Springfield, "There's something happening here, what it is ain't exactly clear".

I'm now seeing signs of a reversal lower everywhere, and yet in the time it took me to write this, ES suddenly jumped from 1355 at 1:40 AM to 1357 at 2:06 AM.  Five straight solid green five minute candles.  And I don't see anything on the news wires to explain it.  This is causing the new ES candle to look like a classic hammer

But since I really hate writing all this stuff and in the end coming to no conclusion, I will move waaay out to the very end of the limb and claim that, given the preponderence of evidence from the charts, Thursday's looking lower, not withstanding this disturbing sudden pop in ES (or the fact that J-Trader is going long).

ES Fantasy Trader

After standing aside yesterday, tonight I went short at 1353.50 at 8:57 PM,  a decision I'm starting to regret.  But you never know,  it may work out in the end.

The account remains  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
 

More small gains possible Wednesday

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

• Wednesday slightly lower, low confidence.
• ES pivot 1361.75 .  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well I said it would be an interesting week and so far it's sure looking that way.  The Dow sent out no fewer than four separate patrols to scout out the 13,000 front around mid-day, but apparently none of them liked what they saw and they were unable to find a break in the enemy's lines.  Will they launch a full-scale assault tomorrow, or order a tactical retreat?  Let's call HQ and see if we can get some orders.

The technicals

The Dow: Today's 16 point gain not only hit the 13K line intraday but also the upper BB at 13,005 to form a star.  However, I don't think this indicates indecision as much as a massing of the troops in preparation for the next attack.  The daily indicators are still not overbought, so given the continuing upward bias I'd be hesitant to call this star a negative sign.

The VIX:  Meanwhile the VIX put in a star of its own, actually rising 2.3% from yesterday's close but down from today's open.  This one could go either way, but the VIX futures seem to be leaning more towards at least a bit lower on Wednesday which would be good for stocks.

Market index futures: Tonight all three are in the green with ES up 0.17% at 1:30 AM EST.  Despite this, today's ES chart is showing some signs of an impending reversal, in the form of a dark cloud cover, overbought indicators, and a stochastic just executing a bearish crossover.  In addition, ES just exactly touched its upper BB today.  Tonight's positive action is coming off the lower end of the daily candle.  I'm seeing more risk than reward on this chart right now.

ES daily pivot: Rose again from 1358.00 to 1361.75 tonight.  This briefly put ES below the pivot right at midnight, but then it broke through and seems to be slowly drifting higher, a positive sign.

Dollar index: The dollar continued a three day decline today and its indicators suggest more room to run lower Wednesday, implying higher stocks.

Morningstar Market Fair Value Index: Morningstar's chart is all screwed up today.  The number they're showing is 0.83 which is obviously wrong, and the chart doesn't go past the 17th.  How hard can it be to update this?

History: According to The Stock Traders Almanac, Wednesday is historically slightly better than Tuesday, but still bearish..

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

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1   1/3        46         21        +    1258    1/1

  2   1/9        56         37        +    1278    2/2

  3   1/17       41         33        +    1289    3/3

  4   1/23       46         32        +    1315    4/4

  5   1/30       48         31        +    1316    5/5

  6   2/6        56         30        +    1345

  7   2/13       48         31        +    1343

  8   2/21       44         32        +    1361

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 1/30 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 5 for 5.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  After five straight weeks of being correct, the contrarian "majority is always wrong" theory is really looking bad.  The Ticker Sense bloggers are batting 1000.

Interestingly, this week's numbers were little changed from last week.  The bulls came down four points and the bears barely budged from the 30-33% band they've been in since the third week of January now.  But I do note that bullish sentiment is on the wane, having declined now for the third straight week.  This makes me think that we could be in for a pullback sometime in the next few weeks.  I note too that the SPX Hi-Low index has now been pegged at 100 for six straight sessions.  It rarely goes this long without a down day following.

     And the winner is...

Another hard one.  I'm seeing both positive and negative signs in the charts.  The SPX weekly chart is now looking quite overbought, and right about the same levels as the highs of last year in May.  We do remain inside the rising weekly RTC though for the time being.  Meanwhile the daily Dow and SPX charts still look like they have some upside left.  Add in that the futures are up, the VIX remains below 20, and there seems to be relative calm on the European front at least temporarily, I'm going to go out on a limb and guess that we just might see some more small gains on Wednesday.  But I'm definitely getting more cautious and not looking to put any money to work at these levels for the time being.  I'm starting to not like the daily ES chart.

ES Fantasy Trader

My decision not to jump in last night was correct.  The big weekend pop we had in ES on the Greek news was all over by the time I got around to it, and even though ES ended the day higher, it was still below the level I was looking at in the overnight trying to find an entry point.

Tonight we do not trade again, as I still don't see an edge for me.  No point just guessing. We're working the market, not playing it.

The account remains  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
 

Tuesday higher

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

• Tuesday higher, medium confidence.
• ES pivot 1366.08 .  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside - entry missed..

Recap

Last Thursday I wasn't quite sure what to make of Friday, expecting a small range doji.  Well we got a small range, with the Dow gaining just 46 points, but it was in the form of a solid green candle.  With a holiday-shortened week ahead, let's see if the technicals can give us a clue as to where we might be going on Tuesday.  With Greek news coming up, it should be an interesting ride.

The technicals

The Dow: Technically, Friday's advance gave no indications of a possible reversal.  In fact, the stochastic completed its bullish crossover on increased volume.  With the upper BB at 12,982 and the psychological 13K level still a bit above us, there's still a bit more room to run before encountering any resistance.

The VIX:  After spending a few days above its descending RTC last week, the VIX dropped right back into it on Friday., losing 7.49% on a second solid red candle.  Its indicators are all in solid declining mode right now too and the lower BB is at 16.81, intimating that we still have close to another point lower to go before a reversal.  We're getting there, but not quite just yet.

Market index futures: The only real guidance we have for Tuesday comes from the futures, which did trade for a while yesterday and today.  And the futures seem to be liking the news out of Europe.  With the announcement of the Greek deal earlier this evening, the futures are all running higher at 1 AM EST with ES up half a percent.

But that still leaves us right around the level from Sunday's open, suggesting that this news was already baked in yesterday.  The US holiday is messing with the charts a bit, but this action is obviously good news.  The only bad news is that I'm now looking at two gap-up stars on the daily ES, and that's a potential reversal.  But being as they came on weekend trading, you have to take them with a grain of salt.


ES daily pivot:Jumped from 1358.00 to 1366.08 tonight.  Despite some up and down over the last two days, we were above the old number and just broke through the new number, another positive sign.

Dollar index: The dollar is pretty much hostage to the euro right now.  And with the big pop the euro took on the Greek news, you can be sure the dollar's going lower on Tuesday, which ought to be good for stocksd.

Morningstar Market Fair Value Index: On Friday the index remained at 0.96 , the same high point it's reached all month.  I'll be looking for it to rise some more to be considered bullish on Tuesday.


History: According to The Stock Traders Almanac, the day after Presidents Day is historically rather bearish.

     And the winner is...

With the European markets applauding the Greek developments and the euro headed higher, I can't really see our market going lower on Tuesday.  The Dow now clearly seems to be gearing up for an assault on 13,000.  I wouldn't be surprised to see that number tomorrow, though perhaps not closing there just yet.  All in all though,m I'm reasonably confident we'll see a higher close Tuesday.

ES Fantasy Trader

 Unfortunately, I missed the major move in ES that happened right at the open on Sunday, so I'm just going to stand aside tonight.  I think most of the money has already been made on this trade.  But that's OK - the market is like a bus - there's always another one coming along you can jump on.

The account remains  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
 

Friday doji possible

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

• Friday uncertain, doji possible.
• ES pivot 1348.75.  Holding under is bearish..
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Sigh - sometimes you just can't win for losing.  Two days ago I said the market would go up, so it went down.  Last night I said the market would go down today... so it went up.  Arrgh!  This is starting to remind me of a mini version of last summer.  Remember when we had four days in a row of triple digit yo-yo action?  We're basically stuck in a consolidation pattern where it's tough to call each individual day.  But for some unknown reason, I keep trying.  Fortunately, the market is like baseball - you can strike out the majority of the time and still be considered pretty good.  Tonight, I'll take another swing at it.

The technicals

The Dow: What a difference a day makes.  Last night the daily Dow was looking pretty gloomy.  Today's 123 point pop changes the picture and brings us right back to the top of the recent 12,800-12,900 trading range.  From a candlestick point of view, we've got a bullish engulfing pattern, which is usually works pretty well.  And the indicators have all hooked back upwards before ever reaching oversold levels.  The stochastic in particular is very close to making a bullish crossover.  On the downside, every time we've been at the 12,900 area since the 7th, the next day has gone lower.  There's no resistance until the upper BB at 12,957.  The only question is how to get there.

The VIX:  Remember last night when I said "You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB."?  Well today the VIX dumped 9%, putting in a big red candle that formed a classic bearish engulfing pattern, one of the strongest bearish reversal patterns around.  I found several instances of a bearish engulfing pattern off the upper BB over the past two years and in every one, the VIX was lower the next day.  The VIX correctly predicted today's market gains, and from the looks of it, it will go lower on Friday.

Market index futures: At 1:15 AM all three futures are essentially flat.  ES is down just a half point.  But unlike in the Dow, today's big green candle decisively took ES out of its recent trading channel.  And its stochastic just barely formed a bullish crossover.  And taking the longer view on the weekly chart, the uptrend is still very much intact.

ES daily pivot: Tonight rose from 1346.08 to 1348.75.  With ES meandering aimlessly in the overnight, this is still bullish but a bit less so.

Dollar index:The dollar chart looks like the VIX - another bearish engulfing pattern, strongly suggesting more dollar downside on Friday, which would be good for stocks.

Morningstar Market Fair Value Index: After spending three days stuck on 0.94 (which I noted was a positive sign), yesterday the index ticked up to 0.95, also encouraging.


History: According to The Stock Traders Almanac, Friday is historically quite bearish, with the Dow down 16 of the last 20, possibly because traders don't want to be invested over the long weekend..

     And the winner is...
Although the charts all seem to suggest more upside possible Friday, I'm just not feeling it.  My problem now is that I think we ran too hard on Thursday and therefore need a day or two to regroup.  And there also seems to be little enthusiasm in the overnight futures.  Therefore I'm going to call for a small-range doji day on Friday - no big moves either up or down ahead of the holiday weekend, though history suggests a downward bias.

ES Fantasy Trader

Today I decided to get while the getting was good and dumped my long from two days ago for a quarter point profit.  At least that was better than selling yesterday at a considerable loss. So now  the account goes to  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.

Tonight without a definitive edge, we simply stand aside.

SLD    10    ES    false    MAR12 Futures     1356.50    USD    GLOBEX    14:34:21   

BOT    10    ES    false    MAR12 Futures     1,356.250    USD    GLOBEX    FEB 15 00:47:54    

 

Thursday looking lower

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

• Thursday lower, medium confidence.
• ES pivot 1346.08 .  Holding under is bearis..
• Friday bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader holding long at 1356.25.

Recap

Hah, serves me right for putting so much faith in the Chicoms and the futures last night.  I was so sure we'd be going higher today.  The Dow actually did post a nice gain today - for all of five minutes.  Then it was all downhill from there, finishing down 97 points.  Tonight the Night Owl is eating humble crow.  Oh well, no point worrying about what's done and over.  Let's move on to Thursday.

The technicals

The Dow: There's two ways of looking at today's loss.  Way one is that we're now at the bottom of a four day trading channel that is more likely to move higher than lower on Thursday.  Way two is that those four days show a gradual downward drift that's due to continue Thursday.  Right now, the indicators seem to support continued downside.

I note here also that the SPX Hi-Low index has now spent three days pegged at 100.  These runs tend to end with a market decline.  Last week, the index was at 100 for four days, the 6th through the 9th.  On the 10th, we had a big drop.

The VIX:  Today's 8.19% jump in the VIX put a crinkle in yesterday's bearish stochastic crossover.  However, it did take us back up to the upper BB.  You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB.  This implies higher stocks to come.

Market index futures: All three are running significantly negative tonight, with ES down a half percent at 1:35 AM EST.  That in itself is a bad sign.  In addition, this downturn appears to signal a negative resolution to the recent indecision in ES.  The bearish exit of the rising RTC now seems to be playing out.  The only good news here is that this pullback is now bringing us close to oversold levels from which an advance might resume.

ES daily pivot: Remained almost unchanged, advancing to 1346.08 tonight.  However, we've been below the pivot most of the day and remain 10 points under in the overnight, not a good sign.

Dollar index: The dollar gained some more ground today but is still neither overbought nor near its upper BB.  I see nothing here suggesting that there isn't more upside left for Thursday, a bad sign for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.94 for the third day in a row.  This is an indication of a lack of weakness in the markets.


History: According to The Stock Traders Almanac, Thursday is historically rather bearish.

     And the winner is...

With mixed technicals, the VIX back above 20 and renewed uncertainty over Europe, it's very difficult to make an informed call tonight.  But I'm detecting some general malaise in the market right now and my general hunch is that we're in for a lower close Thursday.  To hedge my long positions, I picked up some DXD again this afternoon at 13.87.

ES Fantasy Trader

Tonight we're holding on to last night's ill-advised long.  I'm giving this the benefit of the doubt for one more night.  If it doesn't pan out on Thursday then it's done.  In the meantime, t.he account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.

Wednesday higher

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

• Wednesday higher, high confidence.
• ES pivot 1345.83 .  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1356.25.

Recap

Let's look at the last seven sessions: hanging man, star, hanging man, doji, a dump, a retracement of the dump, dragonfly doji - a veritable rogue's gallery of reversal indicators pointing to a pullback.  But the market still refuses to roll over.  How long can this go on?  Let's see...

The technicals

The Dow: My call for a negative bias on the day was working pretty well until some good news on Greece and BTE economic numbers help propel the Dow back to finish just in the green, up 4 points in a late day rally.  It's almost like a spring - every day for seven sessions now, whenever the bears try to push it down, boing, it just pops back up.  The net effect of today's action was simply to bring the indicators down a notch out of overbought territory.  We're now out of the rising RTC, but I have a feeling that we may not be seeing the decline you'd expect on that, at least not just yet.

Daily VIX

The VIX:  Last night I thought the VIX might be going lower, but the VIX had other ideas, gaining instead 2.63%.  But look at the daily chart - you don't even have to be a technician to see that this chart has no idea where it wants to go, taking stabs lower one day and then higher the very next.  The only thing here that makes any sense is the bearish crossover on the stochastic (bottom panel), now complete.  This is usually a good predictor of a lower VIX, implying higher stocks.

Market index futures: After running essentially flat after the close, the futures suddenly took a big pop on news that China is going to expand investment in Europe.  All three futures are now up significantly at 1:07 AM with ES leading the way, up 0.61%.  And that's enough to bust us through the resistance level at 1350 that I mentioned yesterday.  This now sets the stage for an assault on the 1365 area, last year's SPX highs.

ES daily pivot: Fell just a bit from 1348.00 to 1345.83 tonight.  The big China rally at 9:20 PM propelled ES through the pivot and the new value puts us even higher above it, a positive sign for Wednesday. 

Dollar index: I guess the evening star must have been hiddne by clouds, because today the dollar gapped up 0.82% instead of falling.  However, the euro's gain in the overnight will surely push th dollar lower Wednesday, which will also help the market.

Morningstar Market Fair Value Index: After hitting 0.96 last week, the index dropped to 0.94 on Friday where it remained yesterday.  The failure of the index to go any lower is positive for the market.


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

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

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1   1/3        46         21        +    1258    1/1

  2   1/9        56         37        +    1278    2/2

  3   1/17       41         33        +    1289    3/3

  4   1/23       46         32        +    1315    4/4

  5   1/30       48         31        +    1316

  6   2/6        56         30        +    1345

  7   2/13       48         31        +    1343

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 1/23 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 4 for 4.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So far, the contrarian "majority is always wrong" theory still isn't looking too good at all.  Apparently the Ticker Sense bloggers seem to have a lot of, uh, sense.

And I note that while the bullish sentiment is dropped 8 points back to 48%, bearish sentiment continues to remain essentially unchanged after five straight weeks.  So once again we're still not seeing the sort of decline in bearish sentiment that would lead to a contrarian bearish call.  And also once again I voted positive this week.

     And the winner is...

The Night Owl gives four hoots to China for making my job easy tonight.  Until tonight's news, we were pretty much looking at more of the same sort of wishy-washy uncertain doji action that has plagued us for days now in the absence of any good reasons to go either up or down.  Tonight the Chicoms gave us a reason to go up.  So I'm going on record that Wednesday closes higher.

ES Fantasy Trader

Last night we stood aside so the account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.  Tonight we go long at 1356.25.  I'm afraid I didn't get a good entry but what can you do.  I can't sit in frotn of my screen 24/7 waiting for a sudden big move.  I'm guessing there will still be enough upside once we get underway Wednesday to push ES up some more.