Friday, May 13, 2011

Very Strange

 [The following post was originally written Wednesday night.  However, Blogspot went down before I could post it.  Therefore it did not appear until yesterday.  Then Blogspot went down again last night, not only taking this post with it but preventing me entirely from writing my usual late night forecast.  In this post "today" refers to Wednesady, ie. two days ago.

Since there's little point in making a forecast for a session that's already half over, I'll just (try) to republish Wednesday's post here and hope it sticks this time.  One more of these and I'll be looking for a new host for the Night Owl.]

I readily confess I found today's action baffling.  I guess this shows the limits of technical analysis.  By all rights, last night the charts looked ready to move higher today.  Instead, we got slammed, Dow down 130.  I blew this one badly.  And I'm still having trouble figuring out why.  According to the news today, it was the fault of either the dollar, the euro, silver margins, oil speculators, the Greek debt, Chinese inflation, the Mississippi floods, Raj Rajaratnam, J.C. "zut alors" Trichet, head of the ECB, or the phase of the moon.  Take your pick.

Either way, I found it untradeable.  My big fear right now is that we're entering a period something like we say back in the beginning of March, where we got jerked around up and down for eight straight sessions for no real good reason before finally taking a dive all the way down to 11,555 on March 16th.  Even the pattern looks the same: a three day decline followed by what looked to be the start of another uptrend, only to see it cut off well short of where it seemed to be heading.

Given this, I'm not making any market calls tonight.  I'm just not getting any good guidance from my charts tonight.  It's one of those times where the best course is to stand aside until the dust settles.  And I'm also not sounding the all clear on SLV yet either.

Wednesday, May 11, 2011

Still more gains possible

Yesterday I called the market higher for today and that's just what it did, to the tune of nearly Dow 76 points.  After three consecutive days of gains, the question is, can we make it four?  I think we can.  All of the Dow indicators are just coming off oversold readings.  The short stochastic looks particularly bullish.  Todays' green candle took us out of the descending RTC channel too (just as the ES did yesterday) and that is a bullish trigger.

I also note no resistance in the Dow until the 12,850 area from the start of this month.  The Dow's upper Bollinger band is even further away, at 12,962.  And the VIX is still coming down from overbought levels.  Today's drop only brought it back down to the middle of its Bollinger band range.  I see nothing on the VIX chart suggesting a reversal and that is also bullish for stocks.

Finally, all three futures (ES, NQ, and YM) are up right now (1:30 AM EDT), albeit only modestly.  So barring any catasrophic news items overnight, I see no reason why we can't extend the Dow's winning streak one more day on Wednesday.

Tuesday, May 10, 2011

Encouraging signs for Tuesday

Last night I called the market higher today and we did indeed see a nice 46 point gain in the Dow.  That was off its highs for the day, but I 'm always happier to see a string of modest advances than a single big run-up.  In any case, all of the forces that were in play last night appear to be still there this evening at 12:40 AM.  Admittedly the ES is down 0.24% and the NQ and YM are also down, though by lesser amounts.

However, I think I'm going to take my cue tonight from the VIX, which put in a classic bearish engulfing pattern with its long red candle today, in addition to looking rather overbought technically.  This makes me look for a lower VIX tomorrow and VIX down means stocks up.

Oil meanwhile, after rising most of the day is retreating back towards the $100 mark in the overnight.  I view this as positive for stocks too.  So I'm moderately confident we can go at least a bit higher tomorrow.

And finally, silver, in the form of the SLV, which gave a bullish setup on Friday, gave a bullish trigger today.  Sort of.  While it did put in a green candle today, it did so by gapping up rather than by a steady advance and that makes me at least a little nervous.  The market likes to fill gaps.  If this does not happen tomorrow and silver continues higher or holds its own, I intend to take out a partial position.  If it goes lower, I will wait one more day to let it sort itself out.


Today I bought a small position in AK Steel, AKS at 15.17 and that's right where it closed.  AKS has hit a strong support level, is looking quite oversold, and its indicators appear to have bottomed.  I think there is more reward than risk in this play, just as I think the same of the broader market at least for tomorrow.  Once again, I don't think tomorrow is just yet the time to "sell in May".

Monday, May 9, 2011

Support holding, look for higher on Monday

Right now (at 1:50 AM) it's looking like the support level we hit in the ES on Friday is holding and all three futures are trading higher between 0.37% and 0.5%.  Those kinds of numbers are significant.  The ES daily RSI and stochastic in particular are not just in oversold territory, but have turned inflection points and that is a bullish sign.  In addition, today's action (ie. the Sunday evening overnight) brings us fully outside the right edge of the descending RTC channel going back to the peak set on May 2nd and that is a bullish trigger.

The VIX meanwhile, was stymied in its attempt to go over its upper Bollinger band at 18.40 on Friday, just as I had predicted on Thursday night. With oil prices coming down, Bin Laden dead, and reasonable earnings reports coming out, I think the VIX will have trouble going higher tomorrow, implying that stocks will.

Finally, history is on our side.  According to The Stock Traders Almanac, the Dow has been up 12 of the last 15 times on the day after Mother's Day.  I guess all the traders have warm fuzzy feelings about mom that make them want to buy buy buy.  Mondays in general are typically good.

It may yet come time to "sell in May", but I don't think tomorrow is the exact day to do it.