Actionable ideas for the busy trader delivered daily right up front
- Friday uncertain, top possible
- ES pivot 1453.00. Holding below is bearish.
- Next week bias lower technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader going short at 1451.25.
I think my call for Thursday worked out pretty well, considering it was for "uncertain". The Dow lost all of eight points and did nothing to change my opinion that we might be seeing a short-term top. Let's see now if there's any confirmation in the charts for tomorrow. Friday being op-ex, things should be interesting.
The technicals (daily)
The Dow: Today the Dow gave us a classic star doji. That makes two dojis in a row, counting yesterday's hanging man. It sure seems like the Dow is trying to tell us something here. But consider that the indicators have still not reached overbought levels and that the Dow remains well within its latest rising RTC. So for the second night in a row, I have to say that we need to see confirmation of these reversal warnings before calling the Dow lower. That's the conservative play. The aggressive play is: two reversal signs, go for it.
The VIX: Today was one of those unusual times when the market went down and the VIX did too, dropping 0.27% and bearing out what I wrote last night, namely "there's a possibility of a lower VIX on Thursday". But this drop also drove the indicators into oversold territory and the candle was a spinning top. The futures are quite oversold and hit their lower BB for the third day running. So I'd say the VIX is due for a bounce if not Friday then early next week.
Market index futures: Tonight all three futures are down, just barely, at 1:49 AM EDT with ES lower by one tick. The important point is that today's red candle was something of a dark cloud cover and the overnight is trading at the bottom end of that. Also RSI is now overbought, money flow and OBV have topped and the stochastic is about to form a bearish crossover. This chart is now looking fairly toppy to me.
ES daily pivot: Tonight the pivot ticks down from 1453.67 to 1453.00 even.After breaking below at 1 PM today we remain under the new number, so that's bearish.
Dollar index: Here's an interesting divergence. While the Dow and SPX moved very little today, the dollar took a big jump, up 0.46% on a green marubozu that neatly filled yesterday's gap down and left the $USDUPX oversold with a stochastic moving into position for a bullish crossover. It also traded outside the latest descending RTC for a bullish trigger. I'd say the $ is ready to continue higher on Friday, and that's bad for stocks.
Euro: And we got confirmation here from the euro which moved lower today, bouncing right off its upper BB to close at 1.3070. The overnight is drifting lower still and the stochastic is right on the cusp of a bearish crossover. So I'd give the euro more chance of moving lower than higher on Friday.
Transportation:While the Dow was basically flat today, the trans managed a fifth straight advance, this time to the tune of 0.15%, handily keeping above the 200 day MA. But the candle was a tall spinning top, RSI hit a very overbought 96.65, and the stochastic flattened out for a bearish crossover. Can the trans go for six up on Friday? To quote noted Scottish stock sage Angus MacTavish, "Ee ha' me doots".
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
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 6 4 4 0 .600 12
And the winner is...
The failure of the Dow to make any headway above 13,555 for three days running concerns me. The SPX is similarly stuck at 1463. And with everything now officially short-term overbought, I'm not sure where the gas is coming from to power us higher tomorrow. Also worth noting is that the Dow is down six straight and seven of the last eight on October op-ex Friday according to The Stock Trader's Almanac. And my good pal J-Trader is now all-in short, and he's been doing pretty well for some time now. The charts in general now look toppy to me so all things considered, I'm going to call Friday lower. I also took out some SPXU this afternoon at 36.85 as a hedge.
ES Fantasy Trader
Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we go short at 1451.25. I think the risk/reward finally favors the short side, so we might as well give it a shot. Reminder - you can follow these trades live on Twitter @nightowltrader.
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.