Tuesday, September 4, 2012

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, medium confidence.
  • ES pivot 1404.25Holding below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader going long at 1407.75..

You snooze, you lose.  Uncle Ben delivered his speech before I even woke up Friday morning and so the time to unwind my hedges had passed by the time I got up.  I must admit, I don't understand why the Dow gained 90 points on news that wasn't really much of anything particularly new.  But this move did have the positive effect of arresting a four day slump to end the week and the month on a positive note.  Will this carry over into the new holiday-shortened week?  Let's take a look at the charts.

The technicals (daily)

The Dow: On Friday the Dow bounced right off its lower BB and its 0.69% gain caused the indicators to hook up from oversold.  It also bounced off a lower trend line going back to June 4th.  Those are all positive developments. separate

VIX daily
The VIX:  I think this is the most interesting chart of the lot tonight.  Take a look.  First off, we got a big doji star on Friday that traded below the real body of Thursday's candle for a 2% drop.  But more importantly, note how we closed just outside of the rising RTC that began on August 20th.  The VIX has been rising pretty steadily until then.  Now it's giving us a bearish setup.  Exiting the RTC means there is a 95% chance that the recent uptrend in the VIX is over.

Also, note how the stochastic (bottom row) just executed a bearish crossover and how RTC (top row) actually peaked three days ago at overbought and has been slowly declining.  And also note how on Friday the VIX broke through the upper BB intraday but closed well under it.  Once again we see this phenomenon where the VIX does not like to hang around its upper BB very long before retreating.  All of this suggests a lower VIX for Tuesday.

And speaking of the VIX, be sure to check out this post in J-Trader's blog, on the topic of the VIX, XIV, and VXX.  The Night Owl gives it four hoots up.

Market index futures: Tonight all three futures are up at 2:06 AM EDT with ES in the green by 0.18%.  Friday's ES candle looked mostly like a bullish piercing pattern to me, and on increased volume to boot.  The stochastic also completed its bullish crossover and the other indicators are now rising out of oversold.  Overall, this chart is not looking bad at all for Tuesday.

ES daily pivot: Tonight the pivot rises from 1400.00  to 1404.25.  We remain above the new level, which is bullish.

Dollar index: The dollar on Friday gapped down under its 200 day MA for a 0.61% loss.  However, the last time this happened (April 27th), that was pretty much the end of it and two days later it was back above the MA.   What's different here is that we're not quite as oversold yet, so there's at least the possibility of more downside to come.  But overall, this chart is too hard to call.

Euro: The euro, on the other hand, closed at the top of a seven day trading range on Friday on its highest volume since August 3rd.  But in a full day of trading on Monday while out markets were closed, it continued higher, breaking out of the range to hit 1.2613, a level not seen since July 5th.  A higher euro would imply a lower dollar which would imply higher stocks.

Transportation: On Friday the trans finally broke an eight day downtrend with a modest 0.29% gain that bounced off it slower BB.  The indicators are all quite oversold here and while we remain inside the descending RTC, I'd be surprised to see more downside here on Tuesday.  I think sideways or even a small gain is more likely.

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

     And the winner is...

Tonight I'm seeing mostly bullish technical signs in the charts.  I'll add that while September as a whole is typically dreadful, the first trading day of the month is historically quite bullish.  Add in positive moves in $TRAN and a bullish stochastic crossover in copper, and I'm going to call Tuesday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go long at 1407.75.

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.

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