Thursday, September 6, 2012

Thursday uncertain, bias higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday uncertain but bias higher.
  • ES pivot 1403.00Holding above is bullish.
  • Friday bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader holding long at 1407.75.

Last night I called today as "uncertain" out of inability to pick a clear winner.  I'd say a paltry 11.5 point gain in the Dow qualifies, as the market continues to equivocate ahead of the ECB on Thursday.  Looks like the Dog Days of summer just keep on barking.  Let's see if we can teach this market to sit, stay.

The technicals (daily)

The Dow: Arroooh!  Woof woof.  After a less than impressive 50 point loss yesterday, today the Dow managed all of 0.09% up today.  Uncertain indeed.  What we have here, is not a failure to communicate, but rather a developing symmetrical triangle as the daily range just keeps getting squeezed tighter and tighter on a daily basis.  Look for the spring to pop when we get the word from the ECB on Thursday.  And since this triangle was entered from above, look for the break to be higher.  Interestingly, we're also now right at the lower support line of a wide rising RTC from June 5th.  This line was tested once, back on July 24th, and it held - so we do have some support right here.

The VIX:  As expected, the VIX fell again today on a small gap-down green candle for a 1.33% loss.  It drove RSI higher into overbought territory and continued the bearish stochastic crossover.  It also traded entirely outside the latest rising RTC for a bearish trigger.  Despite the green candle, I think the VIX still has lower to go.

Market index futures: Tonight all three futures are up at 12:47 AM EDT with ES higher by 0.2%.  ES gave us a small hanging man today to follow yesterday's doji - the uncertainty continues.  There does, however, seem to be some upside momentum developing in the overnight as the indicators are now clearly rising off oversold levels.  We've also got a symmetrical triangle in progress as the ES range has been narrowing for three days now.  Being as it was entered from below, the odds favor a break to the upside when the pattern completes.  Technically, this should be on Thursday, which oddly enough, is the day we hear from the ECB.

ES daily pivot: Tonight the pivot ticks down from 1403.33 to 1403.00.  After a nice run-up earlier this evening, we're now a good three points above the new level.  That's certainly not out of the woods, but is bullish on the face of it.

Dollar index: The dollar continued flirting with the 200 day MA today, this time closing just under it at 56.06 on the $USDUPX.  The long doji star is almost a carbon copy of yesterday's candle, reflecting the ongoing uncertainty about Europe.  Of note is that the stochastic executed a bearish crossover today, suggesting the next move for the dollar is lower.

Euro: I was wrong about the euro moving lower today.  Instead it moved higher, breaking the 1.2600 level this evening.  The overnight canlde is forming as a star, but there's really no telling where this one is going on Thursday.  It's going to be news-driven.

Transportation: In a striking bit of divergence, the trans had a bad day, dropping 1.14% on a red closing marubozu candle.  Not only did this not exit the descending RTC, it took us clear over to the left edge, as well as the lower BB.  However, the stochastic has completed its bullish crossover from a very oversold level and we're very close to support at 4935.  So although the candles don't show it, I'd be wary of going short here just yet.

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 0      1      1           0        .000     -55
     And the winner is...

The charts tonight generally seem to be pointing towards higher stocks, with the one worrisome exception of the trans.  That said, I believe that tomorrow's close will turn on whatever the ECB has to say rather than tonight's technicals.  Of course it could very well be that the bullish signs we're seeing are simply anticipating some good news from Europe.  So bottom line,  because of the event risk involved I'm not willing to commit either way and I'm going to simply call Thursday uncertain.  However, my wild guess is that we will see this market close higher if the ECB has anything good at all to say about the train wreck that is Europe.  Personally, I've yet to put on a single trade this week.

ES Fantasy Trader

Portfolio stats: the account remains, for the time being at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we remain long at 1407.75.  My bet last night for more sideways action on Wednesday paid off.  Now I'm going to bet that the ECB will provide a pop on Thursday that will save this trade, which is already looking a lot healthier than at this time last night and is almost back to break-even.

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. This comment has been removed by a blog administrator.

  2. Hi RM, I'm always glad to get comments from my readers. First off, I would certainly be interested in hearing anything you may wish to share regarding statistical techniques. I'm always open to learning something new. Feel free to drop me an email if you'd like.

    Good question about the ESFT. The major difference between that and my real trades in my personal portfolio is that I take on more risk in the ESFT in all phases: entries, exits, and holding time. Where I might cut short a loser in my real account, I'll often hold on to that trade in the Fantasy account. The last trade there is a perfect example.

    I do this as an experiment in trading styles. As you can see from my monthly performance reports, my fantasy trades always outperform my real trades. This directly reflects the amount of risk I take with them.

    The other difference is that I put on ESFT trades and then go to bed. I'm afraid I wouldn't be able to sleep if I had that sort of risk hanging over me for real. Still, it does make me wonder, since the ESFT is consistently more profitable than my real account. Perhaps I should find someone who'll let me trade *their* money :-)

    The number of charts I write about is always open to change. I've added and removed various items over the last few years. The line between not enough information and TMI is a fine one and often difficult to discern.

    You don't always need all of the charts to be in agreement to come to a conclusion. To me, the market is like the surface of the ocean. There might be a general wave direction but there can also be waves coming at you side-on. To steer a steady course, you have to keep the total picture in mind.

    It's great to be able to trade your 401K for free. When I had mine, I rarely traded it at all as I just wasn't that interested in the market back then. Once I quit my job and retired, 9 years ago now, I moved it all to an IRA with Interactive Brokers). They let me trade 100 share for $1, which is just about free. And I have no restrictions on what I can buy or sell.

    Good luck with your trading - sounds like you've got a better handle on it than I did 14 years before I packed it in.

  3. Michele,
    I'd like to send you an e-mail however I couldn't find your address. That is the reason why I put my e-mail on your comments. Could you do me a favor and delete my address from the comments, as I am regretting putting it out in the open. Get ahold of me and we can then share some correspondence.

    Talk soon,


  4. As per your request, I have removed your original comment. Blogspot doesn't let me edit comments, so that was the only option. FWIW, the email address you had included wasn't fully formed (missing domain), so I don't think you'll end up on any spam lists. In any case, my email is right at the end of my "About Me" profile on the right side of this page.

  5. Awesome trade, I am learning to always expect the unexpected in this business!

    1. Thanks! That's one of the reasons I like trading so much - it's never boring :-)

  6. Hello Michele.

    I used post TA On Market-watch.

    Anyway, I started my own TA. Blog if you interested let me know and I'll post the link.

    Good luck.

    1. Hi Chalan. Yeah, poor MarketWatch. I used to post comments there occasionally until they decided they needed to fix something that wasn't broken and started requiring people to post with "real names" (there are some pretty odd real names there now :-)

      Anyway, sure - feel free to post your blog link here, and thanks for asking.

    2. Hi Michele.

      I remember you. I got you blog's link from MW.last year.
      I agree on your comment about MW. they had a great community. Oh well.
      Sometimes change is good for some.

      My TA. Is very simple and this blog has daily analysis of the SPY, Qs, the IWM and mighty AAPL from the weekly to the 60 minute chart.
      Basically trend pivot formation and trend analysis.
      It has micro lectures to develop a foundation.

      Let me know what you think. :)

      Thank you Michele and good fortune.


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