Friday higher

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

• Friday higher, low confidence.
• ES pivot 1429.67.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going long at 1431.25..

Recap

Well things were looking good early on in Marketland today.  ES broke above its pivot at 4:15 AM and the Dow opened up nicely.  Unfortunately, it didn't last and all those gains evaporated in the afternoon to finish down 18.6 points, so my call was wrong, even though the SPX did finish higher, just barely.  But I think today's session gave us some more clarity and we will investigate that right now in the nightly chart run-down.

The technicals (daily)

The Dow: After two ugly triple digit down days, today's 19 point drop almost seemed like a victory for the bulls.  It was also a giant inverted hammer which while not the most reliable indicator is at least a reversal candle, unlike what we've been seeing the past three days.  I also note that the stochastic is now quite oversold, with the %K line at 8.59, lower than it's been since May.  I'd say we now have at least the makings of a reversal for the Dow but I'd still like to see some confirmation on Friday.  In any case, this chart now looks considerably brighter than it did 24 hours ago.

The VIX:  At least my VIX call last night was correct when I said "a lower VIX appears to be in the offing here".  The upper BB is like an electric fence to the VIX - one touch and boom, a 4.3% gap down today.  Unfortunately, this left us pretty much in no-man's land between BB's and in the middle of last month's congestion zone.  So while the stochastic is now jockeying to get into position for a bearish crossover, it's not there yet and this chart is not clear enough to call for Friday.

Market index futures: Tonight all three futures are up at 1:19 AM EDT with ES higher by 0.18%.  After giving us a spindly spinning top today, the new candle is forming on top of that and trading outside the declining RTC for the first time all week.  The stochastic is now just about to form a bullish crossover and more importantly at the moment, money flow and OBV have both turned higher

ES daily pivot: For the second time in a week, tonight the pivot is absolutely unchanged, remaining at 1429.67.  There's some positive news here because after a quick dip below right at the close, ES regained the pivot and then made no fewer than four attempts to test its support, all of which succeeded.  I view this as a positive sign.

Dollar index: Today the dollar gave us a near identical star to yesterday's candle on a 0.2% gap down.  That was enough to break out of a four day rising RTC for a bearish setup.    If the doji is confirmed on Friday, the dollar is likely to move lower next week.

Euro: After exactly touching its 200 day MA at 1.2832 today, the euro recovered to form a big bullish engulfing patter, big enough in fact to give us a bullish RTC setup.  And as a bonus, we just got a bullish stochastic crossover.  Although the euro is sort of wandering in the overnight, I'd say it's ready to make a move higher on Friday.  I'm just surprised that today's big move up was not reflected in our market today, though that may kick in tomorrow.

Transportation: After giving us a doji yesterday, today the trans delivered another potential reversal in the form of an inverted hammer, just like the Dow.  Today's small 0.11% loss clearly shows we now have a modicum of support right at 5000.  However, the RSI remains stubbornly overbought and the stochastic is still traveling lower, so no bullish signs there.  Another chart with little guidance.

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  8      6      5           0        .571     -19
October    3      4      2           0        .429    -118


     And the winner is...

Last night I wrote here, " I think the pendulum is at least slowing down and getting ready to swing back the other way.  From the looks of it, I'd expect a move up by Friday.".  Tonight, I'm seeing nothing to change that opinion.  Whereas last week at this time the market was feeling toppy, tonight it's feeling bottomy (is that a word?)  Although it's not a perfect setup by any means, I'm willing to climb out on the limb and call Friday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we're going long at 1431.25 on a trade than is not completely speculative but also less conservative than I've been lately.  I think that if it's not profitable tomorrow, it will be early next week.

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.