Thursday, June 7, 2012

Thursday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday uncertain.
  • ES pivot 1304.75.  Holding above is bullish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

Wow - speaking of "to the moon, Alice", today the Dow rocketed up 287 points giving it its best day of the year (and my best day too).  But I do have to wonder if a move of this magnitude was justified.  George Soros did not announce that he was paying off all of Greece's debts.  Obama did not make a speech where he finally admitted he was unqualified for the job and so was resigning.  No, this rally seems to have been based mostly on hopes and expectations, neither of which is an investment strategy.  So it's back to the charts to do some lie-detecting tonight.

The technicals

The Dow: I did a quick count of the number of times we had a big up day in the Dow back to the end of 2009.  I found 20 of them.  14 times, the next day was either a doji or lower.  The other six were higher.  None of those six were more than a third of the previous day's big move.  So on that basis alone, I'd say we're more likely to see a move lower tomorrow than continued higher.  That said, today's jolly giant green candle blew right back through the 200 day MA and set off a bullish RTC trigger, a powerful combination.

The VIX:  After poking back under its 200 day MA yesterday, it was lookout below for the VIX today, dropping a whopping 10.21%.  The VIX indicators are active again and moving down from overbought levels so that suggests more downside to come

Market index futures: The caution I spoke of in the Dow section above is reflected in the futures tonight.  All three are still up at 1 AM EDT but not by as much as last night.  ES is up just 0.15% and is actually onw trending down after peaking at 10:30 PM.  This isn't the sort of pin action that inspires a lot of confidence for the next day.

ES daily pivot: Tonight the pivot jumps from 1279.75 to 1304.75.  With ES almost flat in the overnight so far, we're still above the new number but less than half as much as before.  So it's still postive but, uh, less than half as much.

Dollar index: After a doji yesterday, today the dollar resumed its inverse correlation with stocks, dropping 0.64%.  The bearish RTC trigger played out textbook perfect and there's still more downside to come.  If the correlation holds up that should be a good sign for stocks.

Transportation: Again today the trans outperformed the majot averages with a smokin' 3.02% pop.  This monster candle took out the 200 day MA here too and also broke the descending RTC for a bullish setup.  And for the icing on the cake, we've got a bullish stochastic crossover  And the rest of the indicators have now clearly bottomed at oversold levels.  All very good signs indeed.

History: I'm making another change tonight.  Effective immediately, I will no longer quote 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.  I'll just urge you to go out and buy a copy of TSTA.  It's not expensive and it's chock full of all sorts of fascinating, useful information.  Every serious trader should have this.  And the disclaimer is that I have no connection with this publication and I don't get any commissions on their sales or anything like that.

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      0           0           1.000        +313  +$249

     And the winner is...

This is a tough one.  There still really aren't any negative signs on the charts tonight  However, historically the market pauses or even reverses after big one day gains and that's what I'm expecting Thursday.  Since I'm looking for a doji day it's hard to call the close as either higher or lower, so officially, there's no call tonight.  Intuitively, I don't expect any major moves Thursday.  I don't think the bull case is necessarily out of gas at this point, but I do think it needs a day to regroup.

ES Fantasy Trader

Once again an early evening entry proved to be more profitable than my usual 1 to 2 AM time frame.  This morning we sold our long for a healthy 18.5 point profit just before lunch.  Reminder - these trades are posted live on Twitter @nightowltrader.

Portfolio stats: the account goes to $144,125 after 42 trades (33 wins, 9 losses) starting from $100,000 on 1/1.  Tonight we are standing aside due to the uncertainty associated with follow-ups to big up days.

SLD    10    ES    false    JUN12 Futures     1307.00    USD    GLOBEX    11:30:53   
BOT    10    ES    false    JUN12 Futures     1288.50    USD    GLOBEX    JUN 5 20:07:40

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. Really glad to see you made great profit!

    I think we shall see some pullback soon, before next move to the north.

    1. Thanks, CZ. So much depends on the daily developments in Europe it's hard to tell which way we may be headed. A pullback followed by more upside is certainly not out of the question.


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