Friday, September 14, 2012

Friday uncertain - look for doji

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday uncertain - doji expected.
  • ES pivot 1452.17.  Holding above is bullish.
  • Next week bias lower technically.
  • Monthly outlook: bias uncertain.
  • ES Fantasy Trader standing aside.
Quote of the Day
“I’m healthy and I can work, what more do I need?”
                      -  Philipp Freimann, farmer, Zug, Switzerland, in an article on Bloomberg today entitled Swiss Farmers Clash With Traders as Bubble Builds in Town of Zug, with an interesting existence proof on whether or not lowering taxes helps a society.


Well I'll say one thing - the health of my portfolio certainly improved today.  The Fed spoke and the market jumped.  Thanks, Uncle Ben!  Now that we've finally gotten that bit of uncertainty out of the way, let's figure out how the week might end.

The technicals (daily)

The Dow: The Dow was basically flat this morning until Big Ben dropped his money bomb on the market and then it was up up and away for 206 points of ka-ching, closing at 13,540.  I had to back out all the way to the monthly chart to find out the last time we saw these levels - it was way back in November 2007.  That was just one month after the Dow's all-time high a month earlier and marked the start of the Great Recession with that sickening slide all the way down to 6469 in March of 2009.

Looking on the other side of the 2007 peak, we were also at 13,540 in May 2007,  as we were still moving higher five months before the peak.  Then as now on the monthly chart we were executing a bullish stochastic crossover from a high level.  However, back then OBV was running at 144.5B, whereas today it stands at a much higher 190.27B (not a good thing).

The VIX:  The VIX, as one might expect, took a dump today, down 11% to 14.05.  Its next support is at 13.5 and then at 13.14, its lower BB.  The VIX can be tricky but one possible scenario I can see is that Friday is a reversal day, where the VIX hits  the lower BB and bounces off.

Market index futures: Tonight all three futures are up at 1:32 AM EDT with ES higher by 0.27%.  Although it's started dropping in the last 25 minutes, I'm still surprised to see this much follow-through in the overnight after such a big run-up today.  And today's big green candle for ES punched right through the upper resistance line of the rising wedge.  That's the first time that's happened since the wedge began o May 23rd.    We need to see now if this is a fake-out breakout or if the whole wedge is invalidated.  That answer should come on Friday.

We had a fake-out breakdown of the wedge back in July and that lasted three days.  If ES continues higher on Friday, I'd forget the whole idea.  If ES pulls back below 1447, we're back in business.  It's interesting that ES it a high of 1464.25 today, less than a point shy of the point where the wedge ends next Friday.  Although there's no comparable point on the ES chart, 1465 should serve as some sort of resistance.

ES daily pivot: Tonight the pivot vaults from 1436.08 to 1452.17.  Although it gave up a bit into the close, ES has been trending higher in the overnight, so we're still comfortably above the new level, a positive sign.

Dollar index: The dollar today continued its slide as soon as the Fed announcement came out to remain inside a steep descending RTC.  However, it is now close to year-long support at 54.50 and its indicators are even more oversold now.  While the dollar still has a bit of room to run lower, we'll watch closely to see if it respects this support level or not on Friday.

Euro: And the euro obviously moved higher again today for the same reasons as the dollar declining, leaving the 200 day MA in the dust.  And it's still gaining in the overnight, now at 1.3024, a level last seen on May 8th.  The indicators are now overbought-broken and there's no sign of reversal on the chart, so I'd have to say the euro's going still higher on Friday.

Transportation: As I expected, today the trans managed to squeeze out another advance, gaining 0.54% to stop at 5202, right at resistance established by last month's highs on August 21st..  This was only about 1/3 of the broader market's gains though and with all the indicators now quite overbought we need to see if the trans can remain in their rising RTC or if this is another top.  Friday should tell the tale.

Copper Update: Ha - must read the Night Owl because today they published a piece entitled Copper may soon run out of steam, two days after I wrote a little section called "A copper top" in this post.  Suffice it to say that copper had a big gain today, along with everything else and moved to just under its 200 day MA.  We'll now have to see if Dr. Copper can break through this resistance on Friday.  It just might be the catalyst to send it lower.

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    8      6      8           1        .600     -78
September 3      2      3           0        .600     -62

     And the winner is...

Today's big moves brought a lot of charts very close to a variety of tipping points.  Friday is going to be a key day to determine if we can continue higher or if we've run out of buyers.  My guess is that today's Fed reaction was kind of overdone and that we may just see some profit taking, especially since tomorrow is Friday and traders will want to lock in their gains for the week.  Right now I'm thinking another doji day is in order.  Therefore I can't really make a reasoned call higher or lower and will simply call Friday uncertain as Mr. Market takes a breather and decides what to do next.

With copper looking toppy, an impending reversal in the TLT, and the VIX nearing support, I can't help but feeling that next week's looking lower.

ES Fantasy Trader

Portfolio stats: the account remains at $178,125 after 62 trades (47 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again.  At this point I'd rather risk leaving some money on the table than risk losing a bunch.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

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