Thursday, February 17, 2011

Happy Birthday!

Happy Birthday - the Night Owl Trader is one year old today. I really can't believe it's been a year already. It's been work putting together at least a little bit every night, but it's also fun and serves as my trading diary. If anyone else out there gets something out of it, so much the better. And I know I do have some folks out there reading, so I do appreciate that too.

Since starting the blog a year ago, I've added a few features, like the at-a-glance swing trend arrow and little chart snapshots, plus occasional features like the Chart of the Week and Weekend reading. Finding the time to do this on a regular basis is the hard part. I don't know how Dr. Brett Steenbarger managed to do his Trader Feed blog every day.

Anyway, let's move on to tonight's installment. Yesterday I noted that the Dow had put in a bullish engulfing pattern candlestick. This is generally a very high probability pattern, and so it was today with the Dow closing up 30 points despite the fact that most of the economic news today missed expectations. Tomorrow should be interesting, being options expiration Friday.

Modulo that, I quote the Stock Trader's Almanac:
"Day Before President's Day Weekend, S&P Down 16 of Last 19; February Expiration Day, Dow Down 7 of Last 11"
Ouch! That doesn't sound too promising. However, remember that the last few years have featured the worst market since the Depression so that certainly skews the numbers. And judging by the futures, all three of which are up nearly 0.1% right now (at 1:20 AM EST) I'm just not getting any serious negative waves from the market at the moment.

Also, the closes from last Friday through Tuesday formed a support line around 12,275 which you can see in the daily chart here. Yesterday closed above that level and today both opened and closed above it. The VIX meanwhile bumped up against its 40 day MA and retreated. Its own indicators are looking overbought. So all in all, despite tomorrow's historical reputation, I don't see much to be negative about. If we do in fact go higher, I will start a new up trend then.


Today, I sold my entire position in AMD at 9.34 for a small profit. It closed at 9.44. It's had quite a run recently and this was one of my trades that turned into an investment. I was just tired of this name and think I can do better elsewhere. I think it may be pulling back tomorrow anyway.

I also unloaded my AUY at 12.31 for break-even. It closed at 12.36 but put in a hanging man and is looking at least short term overbought to me right here. This trade just wasn't a good entry. I'll be looking to buy it back lower. Meanwhile the gold index $HUI is looking toppy too.

And finally I added a bit more HIMX at 2.55 and ZTR at 3.53 to my low price/high yield portfolio.

Moving higher

There seems to be something wrong with the Blogspot editor this evening. It's not showing the image upload icons for me. And that's a shame, because the Dow today put in a classic bullish engulfing pattern suggesting that there's still more room to run even after today's nice 61 point advance. And that advance took us back over the daily pivot. It would have been a nice chart to show.

Todays positive economic news evidently canceled out the RTC warning signal. I think the only thing that could hold us back now is the fact that the day before options expiration is historically not a good one. Now the thing about the bullish engulfing pattern is that the day after it appears is typically not that good, but a day or two after that is often higher. So I don't think we'll see a major move in either direction tomorrow. The futures, meanwhile are just slightly lower right now (1:30 AM), so there's a bit of a negative bias there. Friday, being expiration day could be interesting.

No trades today,

Wednesday, February 16, 2011

Mixed Signals

Yesterday's small doji in the Dow indicated indecision in the market's ongoing advance and also brought us to the lower edge of an RTC channel going back to the end of last month. That was a bearish setup. Then today's 42 point decline was the trigger. According to this system one should be expecting lower prices tomorrow. I also note that the Dow broke below its daily pivot today on a red candle, also a bearish sign.

And finally, Monday's top exactly hit the upper end of a longer RTC going all the way back to last July. The last time that happened was 11/4/10. What followed then was nine straight days of decline. Accordingly I'm taking the green swing trend arrow down and declaring the shorter uptrend over.

However, there are no fewer than nine pieces of economic news coming out tomorrow and all three futures are up about a quarter of a percent right now (1 AM EST). This is a very tough call. I think if the news comes out better than expected, the market could ignore the RTC and continue higher. And I note that the YM futures have not given a bearish trigger and remain within the rising channel.

In any case, on a purely technical basis, the Dow chart looks poised to go lower. This is just one of those situations where you really do have to wait and see. I think tomorrow is going to be more news-driven than technically driven. Right now, I'm just planning on sitting on the sidelines until I see which way the wind blows.

No trades today.

Tuesday, February 15, 2011

Bearish setup but no trigger yet

I really thought we'd see more out of the Dow today, but today's meager 5 point drop brought us right to the lower edge of the ascending daily RTC. Accordingly, I have to treat this as a bearish setup. If we go lower tomorrow, the trend is broken. I'm also going to refrain from making daily calls this week. Being options expiration week, I should know better. So the swing trend arrow remains green but that's subject to change tomorrow.

Today I added to my position in HIMX at 2.55 and ZTR at 3.53 for my low price/high yield portfolio. HIMX has strong support at 2.50 and ZTR looks to be reversing on the stochastic.

Monday, February 14, 2011

Uptrend resumed

Last Thursday I was totally convinced the market was going lower on Friday. All of the technical indicators seemed to be lined up in that direction. That proved to be the worst call I've made in the six years I've been watching the markets closely. I can only assume that it was our good friend Egyptian former president Mubarek who came to the rescue saved the day for Wall St. by taking a powder at the last minute. Sometimes news just trumps technicals. We just have to live with that.

Anyway, the coming week could be interesting because it's an options expiration week. And historically, the expiration before President's Day is particularly bad. But we're not there yet. Right now I see all three futures up (at 1:30 AM EST) and trending higher, and the VIX unable to make any headway. So I have to take my short hat off and guess that we're going higher tomorrow.

And I also have to put the green trend arrow back up. That will teach me to jump the gun. Last Thursday didn't even give us a true bearish setup, much less a sell signal. When you have a system, you have to follow it.

Performance Update

Despite my dead wrong call for last Friday, I still ended the week up 1.16%, putting me now up 5.99% year to date just about dead even with the Dow's 6.01%. One of my annual goals is to outperform the Dow, but5 I'm not too concerned at this point since the Dow has performed spectacularly so far this year. That 6% gain so far corresponds to an equivalent of nearly 46% per year.

There is no way the Dow can keep that rate up all year long. However, I hope to be able to come in near my past two years return of just over 30%. It's still early in the race, so we'll see how things develop.