Friday uncertain

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

• Friday uncertain.
• ES pivot 1317.33.  Breaking under is bearish..
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Things were looking pretty good for my call for a lower close today until a sudden turn higher in the last 45 minutes of the day that resulted in a 34 point gain in the Dow - for no real reason I can see.  At least I made some money today since I'm always net long to some extent.  (I never trade the first $25K of my account which I hold in reserve to ensure I don't run afoul of the PDT rules).  So let's figure out now where Friday may go.

The technicals

The Dow: The bearish doji/dragonfly doji combination was not confirmed today.  However, today's gains were in the form of a hanging man, which is also a bearish reversal warning.  But it too requires confirmation, so we're no further ahead tonight than last night.  At least we broke over the 12,500 resistance line and that is undeniably bullish as are the rising indicators just exiting oversold territory.

The VIX:  At least I got this part right in calling for a lower VIX Thursday.  We got another 3.5% decline on the payoff of yesterday's bearish RTC trigger.  With the indicators again in motion lower, there's no reason why the VIX can't move lower again on Friday.

Market index futures: At 1:13 AM EDT all three futures are in the red with ES down 0.28%.Today's green candle surprised me by breaking above the 1316 resistance.  However, we're in the process of retracing those gains right now.  This sort of choppy action is hard to figure and reflects the news-driven nature of this market.  Every time the butler to the third assistant secretary of the vice-chancellor in charge of buffing the conference table at the ECB makes an announcement, like say "dinner is served", the market changes direction.

ES daily pivot: Tonight the pivot rises from 1309.58 to 1317.33.  With ES drifting vaguely lower in the overnight we just nicked this level at midnight but bounced off and are therefore still higher.  I outsmarted myself last night by discounting the power of the pivot (we were above it at this time then too).  Staying above the pivot is a positive sign.

Dollar index: Very interesting.  Thursday saw the dollar gain 0.31% while the Dow also went up, almost as much.  Usually, a rising dollar signals lower stocks.  In any case, the dollar is right back in its month-long rising RTC.  This chart shows no indication of it moving lower on Friday.

But the related chart to watch right now is actually the euro, which is now so beaten down I had to go to the weekly chart to find the last time we were at these levels (and that would be the end of June 2010).  The important thing there is that that level is close to the 2010 low of 1.20, which would provide important support and imply a declining dollar soon.  But if stocks can manage to rise even with the dollar rising too, it looks like a win-win.  Or something funny is going on.

Transportation: The trans gained 0.81% today and in so doing confirmed the RSI bullish trigger.  In fact they are now in a new rising RTC.  And along with rising indicators, this chart looks ready to move higher still on Friday.


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

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     8      7      2           1
 
     And the winner is...

This market's got more chops than a kung-fu movie and I'm getting tired of getting whipsawed and just generally beaten up.  With the mixed messages continuing, no clear trend in sight, no end in sight to the news mania, and a holiday weekend coming up, I'm not playing this game.  So no call for Friday.  It's just too tough.  Happy Memorial Day to all.

ES Fantasy Trader

Tonight I dumped last night's short position.  It was looking pretty good the first half of the day.  Then I had to go out this afternoon and run some errands.  By the time I got home the market had rallied and the trade was a loser.  With the long descending RTC done and a bias higher, I decided to pull the plug on it before it got any worse.  Portfolio stats: the account now falls to at $117,500 after 37 trades (28 wins, 9 losses) starting from $100,000 on 1/1.  Tonight we stand aside to avoid more whipsaw.

BOT    10    ES    false    JUN12 Futures     1321.75    USD    GLOBEX  19:47:50    

SLD    10    ES    false    JUN12 Futures     1310.75    USD    GLOBEX  00:45:33 

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
MA - Moving Average
PDT - Pattern Day Trader
RTC - Regression Trend Channel