Friday lower

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

• Friday lower, medium confidence.
• ES pivot 1319.42.  Holding under is bearish..
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1313.75.

Recap

Last night I was sufficiently uncertain about today as to not make any official call on market direction.  As it turns out, the market was somewhat ambivalent too, with the Dow gaining 46 points but both the SPX and Nasdaq trading lower.  One good thing - today's action cleared the air a bit as we shall see in reviewing the charts for Friday.  Read on, McDuff!

The technicals

The Dow: On Thursday the Dow gave us a classic inverted hammer.  This is a reversal signal but one that requires confirmation.  Meanwhile all the indicators continue to rise from oversold levels with the exception of RSI, which declined a bit today leaving us with sort of a mixed picture.  I didn't like the way the action played out today, with all of the gains coming literally in the first two minutes of trading, and then going mostly downhill from there.  This chart gives me the impression that the Dow is running low on gas.

The VIX:  While the VIX dropped 2% today, it did it on a green gap-down candle.  Unfortunately, there's not much I can make of this chart tonight.  There's no real reversal indicators yet and we're stuck in that gray area midways between the BB's.  The futures look pretty much the same, so not much help there either.

Market index futures: All three futures are in the red at 1:30 M EDT with ES leading the way lower, down 0.53%.  Today's inverted tomahawk pattern warned of a reversal and the overnight seems to be confirming that so far.  This is a bit of a concern considering that the indicators have not yet reached overbought levels.

ES daily pivot: Tonight the pivot jumps from 1304.75 to 1319.42.  Add in that ES has been drifting lower in the overnight and we broke under the new number right at midnight by a non-trivial amount - a bearish sign.

Dollar index: The dollar gapped down 0.33% today to form 2/3 of a morning star.  If it moves higher tomorrow, that will be a good indication of a bullish reversal and that would be bad for stocks, assuming the dollar resumes its inverse correlation here.

Transportation: The trans meanwhile dropped just 0.13% today but did it on a tall gravestone doji that caused RSI, momentum, and OBV to move lower.  I would not be surprised to see more downside here on Friday.

History: Reminder: I am no longer quoting the daily historical assessment from The Stock Traders Almanac. I'll still factor their numbers into my forecasts, but I can't continue to print their data on a daily basis. 

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    4      0      1           0           1.000        +313  +$249
     And the winner is...

I don't know - I'm afraid that tonight I'm just not feeling the love.  I think yesterday's enthusiasm was sort of overdone and we may be in for a bit of a retracement here, so I'm calling Friday lower and will be buying some DOG at the market open.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $144,125 after 42 trades (33 wins, 9 losses) starting from $100,000 on 1/1.  Tonight we go short at 1313.75, again in an early evening time frame.

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.