Friday likely lower

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

• Friday lower, medium confidence.
  
• ES pivot 1308.50. Holding under is bearish..
• Next week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1302.75.

Recap

It was close for a while as the Dow spent much of the day climbing back from early losses, but a sharp sell-off in the closing 20 minutes saved my call for a lower close.  With a disappointing May now in the books, let's see how June might start off.

The technicals

The Dow: Today's dip and recovery gave us a tall spinning top that ended perched right on the lower arm of the megaphone I wrote about last night.  Add in today's high volume and that is a bearish sign.  Also, the bearish stochastic crossover is complete and the indicators continue to move down from overbought.  And the 200 day MA remains in striking distance at 12,251.

The VIX:  Like the Dow, the VIX gave us a spinning top today but actually declined 0.33%.  Still, that's a confirmation of the RTC exit and constitutes a bullish trigger.  Absent any overbought indicators, there's no reason the VIX can't run higher on Friday.  And the VIX actually tested its 200 day MA at 25.19 intraday before retreating to close at 24.06.

Market index futures: Tonight, once again all three futures are trading lower with ES down 0.48% at 1:12 AM EDT.  The daily ES chart mirrors the Dow, with a doji, a bearish RTC trigger, and falling indicators all guiding the way lower.

ES daily pivot: Tonight the pivot falls from 1316.92 to 1308.50.  Just like last night, we were below the old number and with ES continuing down, we're under the new number, again a negative sign.

Dollar index: The dollar continued its seemingly unstoppable march higher today in an RTC that has now gone the entire month of May.  And today's close at 57.64 just cracked the 200 week MA at 57.63.  Meanwhile the euro continued its descant, closing at 1.2364.  Unless there is some real positive news from Europe soon, we are definitely headed for 1.20.

Transportation: Today the trans gave us a 0.9% gain.  They've been switching direction every day for the last five sessions.  But the important point here is that despite today's gain, the trade was entirely outside the rising RTC, so that's a bearish trigger.


History: According to The Stock Traders Almanac, Friday is historically very bullish.

Performance:

Here are my performance stats for the first five months of 2012.  The first two columns are for my trading account.  The next, "ESFT", is the ES Fantasy Trader.  Following that I've now added the results for my IRA.  The last is the Dow, my reference benchmark that I try to match or beat.

 Date    Trading, Month  Tr. YTD  ESFT YTD   IRA YTD   Dow YTD

1/31/12       7.41%        7.41%   -0.50%     6.18%     3.41%

2/29/12       3.67%       11.35%    7.88%     9.02%     6.02%

3/31/12       1.76%       13.31%   29.88%    10.05%     8.16%
4/30/12       2.35%       15.97%   41.75%    10.90%     8.17%

5/31/12      -1.92%       14.23%   26.63%     4.91%     1.45%

While it is disappointing to have my first losing month of the year, at least the damage was limited and I'm still outperforming the Dow.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average
April   7      9      2                       .438
May    10      7      3           2           .632

     And the winner is...

With crummy PMI numbers from the Chicoms and charts that if anything look even worse than last night, I'm afraid I have to be bearish once again and call for a lower close Friday.  The only thing that might save the day is that it's the first of a new month and that's historically quite bullish.  But it remains to be seen if history can trump the one-two combo of the technicals and the Europeans.

ES Fantasy Trader

Despite some misgivings last night, today's short trade worked out well enough and we covered for a 6.25 point profit.

Portfolio stats: the account now rises to $126,625 after 39 trades (30 wins, 9 losses) starting from $100,000 on 1/1. Tonight we're going short once again, at 1302.75.

Reminder - you can follow the entries and exits for these trades live on Twitter @NightOwlTrader.

BOT    10    ES    false    JUN12 Futures     1304.25    USD    GLOBEX  11:37:00

SLD    10    ES    false    JUN12 Futures     1310.50    USD    GLOBEX  02:16:49    

CUA (Commonly Used Acronyms)

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