Friday higher

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

• Friday higher, low confidence.
• ES pivot 1381.75.  Breaking above is bullish.
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

The sell-off continued on Thursday with the Dow dropping another 121 points to close on the lows of the day. And to make matters worse, the Nightowl's Internet connection has been flakey all day long.  I'm now getting download speeds more like dial-up than cable which greatly limits my ability to download charts.  And after spending forty minutes on hold listening to a recording telling me how important my call was to them (which is a lie - if my call was important, someone would have answered right away), some clueless script-reader in Bombay told me they had no reports of problems in my area.  Well you've got one now!

Now I don't want to mention any names, but their initials are Time Warner and if they don't fix this soon, I'll be switching to Verizon's 4G LTE, which runs at about double the speed of Roadrunner.  So tonight's data is going to be a bit limited, but I think we'll still get the gist of things.

The technicals (daily)

The Dow: It was disheartening to lose another 0.94% after yesterday's dive, but the bearish stochastic crossover did not lie.  At 12,811 we're now below the lower BB.  And next support isn't until around 12,630.  But at this rate we could easily get there in one day.  And with indicators still not oversold, there's still no reversal signs on this chart.

The VIX:  Really the only bright spot tonight is the VIX, which in an unusual move fell 3.09% even as the major indices also moved lower.  And the harami hanging man looks bearish, an idea supported by the stochastic which formed a bearish crossover.

Market index futures: Like last night at this time, tonight all three futures are up at 12:56 AM EST with ES higher by 0.38%.  Today's further losses dropped ES very near oversold territory and sent the stochastic to a level from which a bullish crossover would be expected, though it's not begun forming yet.  We're also real close to the 200 day MA at 1369.42 now.  But whether the positive overnight action can generate any follow-through on Friday remains to be seen.

ES daily pivot: Tonight the pivot drops again from 1401.58 to 1381.75.  This big drop combined with ES trending higher leaves us just below the new pivot and ES looks like it's getting ready to stage a raid on it.  A successful breach would be bullish.

Dollar index: On Thursday the dollar posted a tiny 0.02% gain but looking at the chart it looks more like a loss with a red candle in a cross between dark cloud cover and bearish engulfing.  The indicators remain overbought and I still think the dollar's due to move lower soon.

Euro: And the euro extended its slide on Thursday, now longer than anything since last May, and remained solidly inside its descending RTC.  However, we do seem to have something completely different tonight as the overnight candle is actually green and forming a bullish engulfing pattern.And at 1.2784, we're now very close to finally exiting the RTC.  If we can close above 1.2794 on Friday, we'll have a bullish setup.  The indicators remain quite oversold, so we're due for it.

Transportation: And finally the trans continued lower on Thrusday as I had expected stopping at 5054 which is a support line.  However, the indicators are only halfway from overbought to oversold so there's no real reversal sign here 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  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   2      1      3           0        .667     193

     And the winner is...

I'm going to go waaaay out on a limb tonight and call Friday higher, mostly on the strength of the futures and the currencies.  I think there's also some good economic news from China, though I can't really access much since my Roadrunner connection finally gave up completely.  I'm finishing this post by tethering my Galaxy S3 to my PC, sort of the information equivalent of running a backup generator.

ES Fantasy Trader

Portfolio stats:  the account remains at $194,250 after 69 trades (54 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again.  I'd like to go long, but I don't see a real compelling edge at this time.