Thursday, April 26, 2012

Thursday maybe lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday lower - low confidence.
  • ES pivot 1381.50Holding above is bullish.
  • Friday bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader goes short at 1386.75.

With the kind of yo-yo market motion we've been seeing lately, it was kind of a leap of faith to call the market higher today, but that paid off in the form of an 89 point gain for the Dow.  The $64 million dollar question now is, with the Dow having been unable to string together more than two advancing days in a row since March 29th, can we go for three on Thursday?  Let us tilt the Market Ouija board and see where the pointer stops.

The technicals

The Dow: The Night Owl hates ambiguity  And yet the Dow persists in handing us just that.  Two nice up days in a row look quite positive.  And yet today's close at 13,091 left us just shy of resistance at 13,115.  But it also broke clear in a big way of the descending RTC, and that is a bullish setup.  And the stochastic today made a bullish crossover but it did it from a high level.    See the winner below for my conclusion.

The VIX:  King VIX took a big 7% gap down today to form an inverted hammer and bring its RSI into oversold territory.  But that still leaves us only halfway between BB's, right in the Twilight Zone.  The last time we had a big gap down after a big down day was in early March.  And then we got three more gap down days taking us right to the lower BB.  In any case, it's impossible to call a reversal here without confirmation, but we do have a reversal warning.

Market index futures: Tonight all three futures are trading just barely in the red, with ES lower by just 0.04%.  The pattern here lately has been that after two big days of gains, we get at least one day of retreat.  With RSI, momentum, and OBV all hooking lower tonight, that's not looking out of the question for Thursday.

ES daily pivot: Tonight the pivot jumps from 1367.42 to 1381.50.  This still leaves us above the pivot, but by a lot less than today.  And with ES drifting lower since around 11:30 PM, it looks like we may encounter the pivot before the open.  Bouncing off, bullish - breaking under, bearish.

Dollar index: The dollar put in its eighth consecutive red candle today, dropping another 0.27% on an inverted hammer like the VIX.  At this level the indicators are just beginning to show oversold.  And the dollar is nearing its lower BB and its 200 day MA, both around 54.70 (on the $USDPX).  That should provide some support.  Still I think the dollar is being driven more by Europe lately than by technicals.

Transportation: The transports had a good day along with the rest of the market, putting in a second green candle with a bullish stochastic crossover like the Dow.  But like the Dow, they're also near some resistance at 13,115.  This is a chart that looks like it's still got some room to run, but only a little.

History: According to The Stock Traders Almanac, Thursday is historically pretty much neutral..

Month right  wrong  no call
April   7      6      2
     And the winner is...

Although the candlesticks seem to suggest further upside, and at the least don't have any reversal indicators, I think tonight I'm going to go with the "two steps forward, one step back" that we've been seeing lately.  That one is three for three since the early March rising RTC was broken.  Even without that, it's common for a big up day to be followed by some consolidation anyway.  So on that basis, I'm calling for a lower close Thursday but I'm not particularly confident about it.  One possibility that would not surprise me is that we rise in the morning until the various resistance levels on these dcharts are hit, and then move lower from there.

ES Fantasy Trader

Even though we missed a good part of the move last night, we were correct to go long, resulting in a nice 6.25 point profit today.  Portfolio stats:  the account now becomes $141,750, after 33 trades (26 wins, 7 losses) starting from $100,000 on 1/1  Tonight we are going short at 1386.75.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

SLD    10    ES    false    JUN12 Futures     1382.25    USD    GLOBEX    10:59:26   
BOT    10    ES    false    JUN12 Futures     1376.00    USD    GLOBEX    01:08:47   

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