Friday higher

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

• Friday higher, low confidence.
• ES pivot 1329.50.  Holding below is bearish..
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going long at 1333.00.

Recap

Six straight losing days in a row now.  If there's any good signs here it's that the pace of the decline slowed a bit today with the Dow ending down just 31 points.  Is the turnaround at hand?  Let's check the charts.

The technicals

The Dow: The Dow gave us a second hammer today, and a more classic looking one at that.  Two hammers in a row are generally stronger than one.  The stochastic is also very close to making a bullish crossover now and we have now exited the descending RTC, also signaling that the downtrend may be over.

The VIX:  Meanwhile the VIX gained 2.12% today but did it on a small gap-up spinning top.  It is also very close to overbought now and may be signaling a decline on Friday.  And the futures are forming a symmetrical triangle.  Since this was entered from above, the expectation would be a  break under.  Lower futures -> lower VIX -> higher stocks.

Market index futures: Tonight all three futures are finally in the green by non-trivial amounts with ES up 0.21% at 2:17 AM EDT.  It was up higher, but took a dive right at 2 AM, I guess as all the Europeans woke up and started trading.  Today's candle was a fat hammer, RSI is very oversold at just 8.13 and the stochastic is now clearly about to make a bullish crossover.  I'd say that after a protracted decline, we're about due for a bounce here.

ES daily pivot: Tonight the pivot drops again from 1335.50 to 1329.50.  Combined with a rising ES, this finally puts us above the new number and that's a positive sign.

Dollar index: The dollar tacked on some more gains today as it continued to climb the upper BB.  But today it gave us a stubby spinning top and the first red candle in six sessions.  Its indicators remain quite oversold.  And the euro finally just traded outside its latest descending RTC suggesting it may be finding some footing here.

Transportation: Finally an encouraging sign here.  Today the trans gave us a decent hammer that just tested, but rejected the 200 day MA.  The stochastic is now in a good position from which to form a bullish crossover and the RSI is quite oversold.  This chart is now looking ready to move higher.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points trade

April   7      9      2                    .438
May    10      7      3           2        .632 
June    8      6      6           1        .600     632   +$330
July    5      0      3           0       1.000     299
     And the winner is...

It's something of a risk and I may be a day early on this one, but I'm going to go out on a limb (which seems to be a common location for a Night Owl) and call Friday higher.  I'm just seeing too many reversal signs starting to pop up to ignore them.

ES Fantasy Trader

Portfolio stats: the account remains at $153,375 after 50 trades (39 wins, 11 losses) starting from $100,000 on 1/1/12. Tonight we go long at 1333.00.  This trade may be a bit early but I think it will be profitable in a day or two.  Follow these trades live on Twitter @nightowltrader.

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.