Friday lower

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

• Friday lower, low confidence..
• ES pivot 1399.33.  Holding below is bearish.
• Next week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going short at 1395.00..

Recap

The Dog Days of Summer

I wasn't real confident about it, but I did think the Dow would close higher today.  It turned out to be just another sleepy low-volume nothing mid-summer day with the Dow losing 10 points and the SPX up by just over half of one point.  Clearly, this market is stuck in the doldrums.  We now scan the horizon for any signs of wind, whether from the north or the south.

The technicals (daily)

The Dow: Another day, another doji.  This one though nudged the indicators back up almost to overbought again.  And it also gave us one more failure to cross resistance at 13,175.  It's frustrating, but we know this kind of drifting (I hesitate to even call it consolidation) can go on for days, like back in February when we got 10 sideways days in a row before a big break.  Doing some curve-fitting to the daily chart, it does appear that we may be getting ready for a move soon, and it may be to the downside.

The VIX:  Today the VIX moved lower again, but this time only by 0.26% on an inverted hammer.  That's a reversal warning, but one that requires confirmation.  I continue to think we're due for a higher VIX soon but this isn't really quite the setup yet.

Market index futures: Tonight all three futures are lower with ES down 0.37% at 1:22 AM EDT.  After two days of kitty corner dojis we may be about to see a break.  ES at 1395 is sitting right on the edge of the rising RTC for the first time in five days.  Also, the indicators have now turned downward off overbought levels, though the stochastic remains threaded.  But this chart now seems to have a different flavor than the last few days and to me it tastes a lot like ... bear.  Yum!

ES daily pivot: Tonight the pivot rises from 1396.33 to 1399.33.  But with ES trending lower since 7 PM, we broke decisively under the old number at 11 PM and are now even further under - a bearish sign.

Dollar index: Here we got a second gap up spinning top in a row, this one green as the dollar gained 0.33% on the $USDUPX.  This also served as the bullish RTC trigger.  And the stochastic bullish crossover is now complete, so everything seems to be lining up for continued higher on Friday, which would be bad for stocks.

Euro: Meanwhile in euro-land, the currency continues a two day slide and confirms yesterday's bearish stochastic crossover.  We also now have a bearish RTC trigger here too.  This meshes nicely with the rising dollar and is also bad news for stocks.

Transportation: Perhaps the most telling chart tonight is the trans.  After attacking the 200 day MA for three straight days, the trans appear to have simply given up, putting in what is now two straight red candles in a row, with today's down 0.54%.  Today's also completed the bearish stochastic crossover.  With these sorts of declines, I'd expect the Dow to take notice and start following suit any day now.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  3      2      1           1        .667      64
     And the winner is...

Zzzz... zzz...zzzzz...huh?  Oh 'scuse me, I must have dozed off there.  This less-than-thrilling action of the past few days is just putting me to sleep.  But help may be on the way!  It sure looks like my bearometer is starting to indicate some gathering storm clouds on the horizon, particularly in the futures and the $TRAN.  And also Dr. Copper has been making smaller and smaller gains for three days now and finally hit a resistance line today.  And I note that the SPX hi-low index ratio hit 100 today, a level that usually precedes a fall.  Finally I'll add that the TLT put in a big hammer today after five days of losses and is also just about to make a bullish stochastic crossover.  To me that spells money about to head for bonds and away from stocks.  Therefore all things considered (and I always do), I am calling Friday lower.

ES Fantasy Trader

Portfolio stats: the account still remains at $174,875 after 56 trades (43 wins, 13 losses) starting from $100,000 on 1/1/12. Tonight we're going short at 1395.00.  I missed the ideal entry point earlier this evening first due to dinner and then the Olympics, but I think there's still more money to be made on this trade on Friday.  I believe the risk/reward profile now favors the downside.

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.  Act accordingly.