Friday, November 2, 2012

Friday higher unless bad jobs numbers

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher unless bad jobs numbers, low confidence.
  • ES pivot 1415.58Holding above is bullish.
  • Next week bias lower technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

I was right last night in saying  "I'm still expecting the next move to be higher" but it wasn't clear that it would happen today after four consecutive days of fake-outs.  But we finally got a nice pop in the Dow that got us out of that doji swamp.  Now we need to figure out if we can build on this move or not.  Bring on the charts!

The technicals (daily)

The Dow: The RTC worked perfectly here - bullish setup on Friday, bullish trigger yesterday, and payoff today.  Today's 136 point gain nicely completed the bottoming process of the indicators and started them back up toward overbought.  That alone suggests more upside for Friday.

The VIX:  I called the VIX correctly too last night, writing "it's not clear the VIX has enough gas in the tank to capitalize on the RTC breakout and logic would suggest that the next move will be lower."  There wasn't and it did, dropping an impressive 10.27% today to fall solidly back into the descending RTC.  This move also gave direction to the indicators which are now clearly heading off overbought.  I'd expect more downside from the VIX on Friday.

Market index futures: Tonight all three futures are down at 1: 15 AM EDT with ES lower by 0.09%.  Today's big gain caused a rare phenomenon - RSI jumped from very oversold (10.25) yesterday to very overbought (87.64) in just one day.  And the stochastic has now moved into a position from which a bearish crossover could happen within a day or two.  ES is also now right at a resistance line of 1424 making me think that while a further advance is not out of the question, it will probably be much smaller than today, or we could even just go right back down on Friday.  Too much too fast, basically.

ES daily pivot: Tonight the pivot rises from 1408.50 to 1415.58.  With ES nearly flat we're still holding above, though only by half as much as earlier this evening.  Still, it remains a bullish sign.

Dollar index: The dollar continued its chaotic motion of late, rising 0.19% today even as the major averages were also up.  I missed this one today but I still think we're more likely to see a lower dollar on Friday based on the overbought indicators.

Euro: I missed this one too last night as the euro declined today rather than rising.  And it continues lower in the overnight now just forming a bearish stochastic crossover.  With no near-term support in sight, I now think the euro could move lower again on Friday.

$TRAN daily
Transportation: Perhaps the most interesting chart of the day, the trans gained an impressive 1.62% with a big green marubozu that provided a bullish trigger and punctured the 200 day MA in one fell swoop, stopping only at their upper BB at 5171.  Check it out.  This level also tops last month's resistance and the indicators are now clearly rising off of oversold.

Two things concern me though: first the fact that we did hit the upper BB, and also that the trans has been acting like the VIX, reversing soon after reaching that level.  Second, the gains of the last three days have been ever increasing in exponential fashion and that never ends well.  So I'm going to guess we could see the trans move lower on Friday.

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    8      5      8           0        .615     208       
November   0      0      1           0        .000       0

     And the winner is...

Even after today's big jump, the technicals remain mostly bullish.  Note too that Dr. Copper has recovered from his recent malaise and is now looking fit as a fiddle.  And the TLT seems to be tilting lower again.  And the NH/NL index has not quite reached bearish levels.  So I'm going to go out on a limb and call Friday higher (probably not by a lot though) but with an important caveat.  If the jobs number coming out tomorrow are stinko, we're going down.

And BTW, the Dash of Insight blog today has a nice summary of the jobs data collection process in this article here.

ES Fantasy Trader

Portfolio stats:  the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we continue to stand aside, this time because of the uncertainty associated with the jobs numbers.

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