Friday, June 29, 2012

Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1319.00.  Holding above is bullish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

Whoa!  In what has to be the greatest comeback since Lazarus, the Dow which was down 176 points at 2:30 PM and headed lower after an ugly open, rallied furiously to recoup all but 25 points of that in the last 90 minutes of trading, a move that turned my own day from a loser to a winner.  The boards are all atwitter about market manipulation, the PPT, fraudsters and banksters, but I'm just happy that my call for a move higher was (almost) redeemed, and I made some money.  DIA actually did end up on the day, though off just a bit from yesterday's close.  With more interesting developments since the close, it should be a very interesting Friday.

And I'll mention that the Blogspot spell-checker has been on the fritz for two days now, so I apologize in advance for any typos.  I try to proofread my text, but there always seems to be a few that slip by.

The technicals

The Dow: This is what I love about the market - there's always something new cooking.  It wasn't a particularly good day for swing trading, but the day traders must have had a field day.  Anyway, when it was all over, we had a tall hanging man.  This is a reversal sign that definitely requies confirmation.  The stochastic, which finally did execute the bullish crossover I mentioned last night, suggests more upside is possible Friday.

The VIX:  Last night I thought we might see a higher VIX on Thursday and so we did, with a 1.34% gain despite a late afternoon drop.  This left us with an inverted hammer and a big drop in the futures that now suggest we might go lower on Friday, and that would be good for stocks.

Market index futures: Tonight, we've got a big jump in all three futures on the European news that came out this evening with ES up 1.12% at 1:20 AM EDT.  Ordinarily, I'd say this would make Friday a slam-dunk, but it's only a few weeks ago that we had an almost identical setup on Spanish bank bailout news, and the rally the next day lasted all of 10 minutes before ending the day lower.  The difference now is in the indicators which are much more oversold than then and in fact are right about the same level as on June 6th, when ES bounced off its 200 day MA.  Also, we now have a bullish trigger on the exit from the descending RTC.

ES daily pivot: Tonight the pivot steps down from 1322.00 to 1319.00.  We crossed over the old number at 10:50 this evening and are now well above the new number.  This is looking good for Friday.

Dollar index: The dollar gapped up today to form the top of an evening star.  And that also brought its indicators well into overbought territory.  This chart looks ready to roll over on Friday.

Transportation: Last night I was very bullish on this chart and it did not disappoint on Thursday, posting a 0.76% gain as opposed to the Dow's 0.2% loss.  All of the factors at work here last night are still in play, only more so.  In particular, we got a bullish trigger off the exit from the descending RTC.  The downtrend that began on 6/20 is over.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    7      6      6           1            .571        354   +$260

     And the winner is...

Tonight I'm seeing a bunch of positive signs in the charts independent of the big move up in the futures, courtesy of those pesky Europeans.  The only hesitation I have is that Friday is the end of the week, the quarter, and the first half of the year and that is historically a very bearish day for the Dow.  But the setups I'm seeing the the VIX and the trans are sufficiently compelling, even absent the big run-up in ES, that I'm ready to call Friday higher.

ES Fantasy Trader

This morning I was glumly watching last night's long trade slowly go down the toilet so I just walked away from my screen and ran some errands.  When I came back, much to my surprise I was nearly back to break-even.  So I decided to let 'er ride.  Then when I sat down to write this post, lo and behold, I was positive by 10.75 points.  Well that was good enough for me and I decided to get out while the getting was good.  Sometimes ya just gotta know when to hold 'em and when to fold 'em.

Portfolio stats: for now the account rises to $140,375 after 48 trades (37 wins, 11 losses) starting from $100,000 on 1/1  Tonight we stand aside since my usual pattern of entering trades late at night and selling during the day has gotten out of phase.  So that's my last trade of the week and the quarter.  Reminder: you can track these trades live on Twitter @nightowltrader.

SLD    10    ES    false    SEP12 Futures     1337.00    USD    GLOBEX    00:51:56   
BOT    10    ES    false    SEP12 Futures     1326.25    USD    GLOBEX    JUN 28 01:50:58   

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.


  1. Michele-

    Congrats on a great quarter (another great quarter) and thanks always for sharing this superb A+ consistent and focused analysis with your grateful readers.

    For example, "..Ordinarily I'd say this would make Friday a slam-dunk, but it's only a few weeks ago that we had an almost identical setup on Spanish bank bailout news, and the rally the next day lasted all of 10 minutes before ending the day lower. The difference now is in the indicators, which are much more oversold than then--and in fact are right about the same level as on June 6th, when ES bounced off its 200 day MA. Also, we now have a bullish trigger on..."

    Etc. "Ordinarily"... people do ordinary analysis. Then there’s what you do.

    I also noted to myself last nite the close of the Transports above their daily 5day SMA. You've been following them closely, with a sense of their recent importance and relative strength.

    We're all looking fwd to another quarter of great hoots and occasional laughs.

    btw, I am calling the Interpol and having you arrested for insider trading, if you really meant "..Sometimes ya just gotta know when to hold 'em and when to fold 'em." Haha! That Euro Summit announcement was a genuine surprise. It caught the Investing public leaning the wrong way, with expectational skew toward “no hope”; and then word spread rapidly, in advance, with normal leakage diffusion patterns... like when the little nephew makes diarhea poop in the swimming pool... that's how the leak spread thru the late afternoon and the post-market hours.

    If you "knew"...

    haha, you didnt know, you were a lucky "bailed-out bull", like me and the Greeks! Zorba on! With hands held out!

  2. Ha ha ha. Well of *course* I had no advance knowledge of the outcome of the European summit. That's my story and I'm sticking to it :-)

    Now the thing is that the blog is already too long on a daily basis, IMNSHO. It takes me a long time to write it and I worry that people will be turned off, in this age of 140 character tweets, at the prospect of reading more than one browser page worth of my ramblings, so there's a lot I simply elide every night.

    In this case, what I didn't mention was that I had seriously considered pulling the plug on my long ES trade at the close after the spectacular late-afternoon run-up. That would have left me with a small loss, compared to the big loss I had just a few hours earlier.

    But I thought, gee, why the heck did this market suddenly take off like this? *I* may not know anything, but I'm willing to bet that *someone* does. And my bet was that we could very well get more upside in ES if not in the overnight, then on Friday on *some* sort of news especially given the ST oversold nature of the charts. Ergo my decision to "hold 'em".

    Also, I was thinking that there was just too much negativity lately around the Europeans, so that the bar was set pretty low. Everything I read was along the lines of "Oh yeah, Europe, get ready for more too little too late". I figured just about any pronouncement from them would beat expectations and thus send the market higher.

    And so it went. But if I really knew something, I wouldn't have bailed at 1 AM. I left about half the gains on the table with that one. But like I always say, no one ever took a loss leaving money on the table.

    One thing that very much caught me by surprise was the Obamacare decision. I absolutely never expected the Chief Justice of the Supreme Court to put image and personal vanity ahead of the Constitution of the United States.

    But yeah, bottom line - it's always better to be lucky than good, heh heh. Anyway, thanks again for the kind words. Always good to hear from you. And let me thank you again for turning me on to the importance of Dr. Copper and the Trans (gee that could be a band name).

    Nice way to end the day, the week, the month, the quarter, and the first half all rolled into one, no? Have a great weekend.

    1. Michele-

      At times you've posted addendums, notes, and updates, between the Daily formal Hoots and calls.

      Trade management is part of the overall pallet of the investor. Recountings of how a pundit actually 'danced with' a situation is as instructive as the underlying analysis.

      But totally agree to add that to a regular post would make it too long.

      Totally disagree when you write "..the blog is already too long on a daily basis". I think each entry is always exactly the right length.

      Best wishes from all your readers.

  3. Michele,
    I appreciate Daniel's comments - adds to the overall fine quality of this site.
    Kudos on an excellent performance in a market that has displayed paranoia and euphoria - often on the same day. Twisting the lion's tail is a very risky strategy!!
    Yes... you gotta know when to hold them.. know when to fold them.. my fav song.

    I recall from a previous post that you purchased units of a couple of CEF's (NCZ,NCV). Oddly enough, I had been tracking them for my partner's fund and purchased them at the beginning of the month. I was somewhat surprised to read that you had also purchased them. I thought that you were a died in the wool day trader - no time for the slow pokes like the CEF's.
    Proves that you can find opportunities in markets other than the high profile index ETF's.

    1. Thanks for the compliments. First let me say that I'm a swing trader, definitely not a day trader. The only times I'll ever close a position the same day I opened it is if my entry turns out to be dramatically wrong, or it was one of those "what was I thinking" trades. That happens to me a couple of times a year.

      Now about NCV and NCZ. I keep a $25,000 "buffer" in my account that I never trade, just to keep from running afoul of the PDT rules. I know, since I don't day trade, it shouldn't matter. But it makes me feel better.

      These two are going in that pot. I just thought it would be nice to collect some dividends on my buffer and NCV and NCZ looked like they were at a decent buy point.

      That said, it is certainly possible to swing trade these guys. NCZ, for instance closed with a hammer at 7.71 on 5/18. Four days later it closed at 8.10 on a hanging man. 200 shares of that and you just paid for a tank of gas (hi-test).

      Sure, it's not a bases loaded home run, but I'd still take that. And if you're wrong, well you can always just collect that lovely dividend while you're waiting for it to move higher again :-)

  4. Michele,
    Yes... I meant "swing trader" not "day trader". I often get them mixed up. LOL!!

    Uncannily enough, that's the same amount that I set aside for CEF purchases. I play them much like a MM fund - but with a better divvie. Yes.. if it weakens - you have a large enough cushion from the divvie to recover your loss. I'd rather park some of her funds in CEF's and the rest in cash until we get a better trend set up in the major indexes.
    Might be a while.....


    1. OK, got it :-) You definitely have a good strategy going there.


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