Thursday, August 9, 2012

Thursday maybe higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher, low confidence..
  • ES pivot 1396.33Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader stranding aside.

Last night I was figuring that we'd go higher if ES could break above its pivot in the morning.  It took a bit longer than I expected but after several failed attempts, it did break through at 11:10 AM and the Dow closed higher - by a whopping 7 points in a snoozer of a session.  Today's Olympic volleyball games were much more exciting than the market.  Heck, the Olympic thumb-wrestling loser's match was more exciting than this action was.  But it may just be setting us up for some interesting times.  Let's see if the charts agree..

The technicals (daily)

The Dow: OK, the Dow, somewhat surprisingly, continued grinding slowly higher today to gain 0.05% on a small spinning top.  That's the third bearish daily reversal candle in a row.  And the past two were rejected like a bad volleyball hit.  Not only that, but the indicators have now all come down off overbought even as we continue to move higher.  The Dow has now broken past resistance at 12,500, 13K, and 13,150.  There is now no more resistance until 13,260 which is coincidentally also the upper BB.  With the Dow drifting higher like a knuckleball float serve (OK, I've been watching too much volleyball), I am hesitant to call a top until I see the market actually go lower.  And right now I'm not seeing any evidence of that on this chart.

The VIX:  While the Dow and SPX barely budged today, the VIX dropped 4.19% on a tall red candle that's forming a bullish megaphone pattern.  With its indicators now quite oversold, I'd be inclined to expect this pattern to break out to the upside in a day or two.  I note too that the VIX at 15.32 is now getting close to a multi-year support line at 14.50.

Market index futures: While the other charts are looking fairly gloomy, all three futures are in the green at 1:20 AM EDT with ES up a respectable 0.36%.  Like the Dow, ES has been giving off hints of going lower for days now, but then it just goes higher.  And ES just broke through some resistance at 1394 yesterday too.  I'm not playing this game anymore.  I'm afraid I now need to see ES actually go lower before calling an end to this uptrend.

ES daily pivot: Tonight the pivot ticks up from 1395.92 to 1396.33.  With ES taking off earlier this evening, we're now much further above the pivot than before, a positive sign.

Dollar index: Today the dollar gained 0.23% on a small red gap-up spinning top.  But more importantly, it broke out of its descending RTC for a bullish setup and its stochastic is about to form a bullish crossover.  I'd not be surprised to see the dollar move higher Thursday, implying stocks lower.

Euro: Meanwhile the euro lost ground today on a red candle that confirmed Tuesday's bearish spinning top.  However, it's getting a boost in the overnight continuing a rally that began at 2 PM Wednesday.  This is making it difficult to say anything meaningful about where the euro might go Thursday.

Transportation: Today, the trans failed on the 200 day MA for the fourth straight session and in fact moved lower by 0.33%.  This is about the most bearish indicator we've got going at the moment.

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      1      1           1        .800      74

     And the winner is...

I'm not sure why the market continues to insist on going up lately, but like the Fed, the tape is another one of many things you should not fight in this arena.  So as long as we remain inside the rising RTC and continue to put in higher highs and lower lows, I really have no choice but to call Thursday higher.  And I say this not so much because the market has a lot of reasons to go higher, but more because I don't yet see many reasons to go lower (the trans being the one exception right now).  This is the kind of call that will be wrong eventually, but for the time being, I guess you just have to go with the flow.  That's all she wrote.

ES Fantasy Trader

Portfolio stats: the account remains at $174,875 after 56 trades (43 wins, 13 losses) starting from $100,000 on 1/1/12. Tonight I'm going to stand aside once again because although the market continues to grind higher, I think the risk/reward point has now moved against us.  Anyway, there's not much money to be made on these small range days.  The Night Owl does not play penny ante.

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.


  1. "The Night Owl does not play penny ante."

    -What do you mean Michele, you called the market (Dow) to be higher and it was. DIA, the Dow-tracking ETF, was up two cents. A two cent gain on a $131.50 equity is not good enough for you, huh, what are you hoity?

    After a day of active trading today, I’ll have you know my Schwab account was up a total of $4. And don't think I didn't take that 4 bucks and buy a nice falafel sandwich with it! Cmon, Michele--this is the heart of August. Penny ante is the only game in town.

    I have to again say your trio of “uncertain.. mixed signals.. likely range-day” hoots these past three days quietly represents some of the most level-headed, well-considered, and frankly-unpretentious analytical work I read over that same time span.

    Many technicians have been pointing to the various measurements of price compression they track, and have been putting out big move alerts and such, and that may yet happen-- but it did not these past several days, nor were you head-faked.

    But cmon, don't be such a big shot. A 200 share position in DIA today, and you too could have enjoyed a nice falafel sandwich!

    1. Yup, I hear ya - I don't normally post my daily results but I will mention that yesterday I *lost* all of $5 in my trading account.

      What I was trying to say is that I don't delliberately go for trades that don't have a decent chance of providing a non-trivial return. And yup, welcome to the Dog Days of summer. So I spend a lot of time just standing around. At least right now there's the Olympics to watch.

      But I have to say, I'll take this sort of session over what we were getting exactly a year ago when the VIX closed at 48. That just ruffles my feathers.


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