Thursday, November 15, 2012

Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday lower, low confidence.
  • ES pivot 1361.42.  Holding below is bearish.
  • Friday bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader remaining long at 1376.25.

Ugh.  Boy, when I blow em, I blow em bad.  The stock market did not go up today.  In fact it went down.  Way down.  With the Dow posting a sickening 185 point loss, really for no other reason that I can think of other than the fact that Mr. Market simply does not like Mr. Obama, and with good cause.  It's not looking good, folks.  We'll go over the charts again tonight, but more out of force of habit than anything else.  Right now it's looking like we're already plunging over the Fiscal Cliff.

The technicals (daily)

The Dow: Today's ugly 1.45% loss, when I was expecting a gain, left the Dow at 12,571, just ever so short of the 12,556 point I mentioned last night as being the cut-off for a bullish trigger.  So technically, now we have that.  But it really feels more like jumping out the window time than bullish trigger time.  And there's absolutely nothing in the recent candles to suggest any sort of turnaround on this chart.

The VIX:  After posting two days of odd declines in the face of stagnating markets, today the VIX took off, gaining 7.63% on a green marubozu that broke back over the 200 day MA with a convincing bullish engulfing pattern and a bullish RTC setup.  With a stochastic now getting ready for a bullish crossover, all signs point to a VIX that could go higher again on Thursday.

Market index futures: Tonight all three futures are up at 1:00 AM EST with ES higher by 0.18%.  But ES is now in a pattern of rising in the overnight only to collapse as the following day goes on, so I'm not getting too excited about this move.  And of course Wednesday's miserable dump didn't help matters any, slicing right through the 200 day MA.  The only good thing here is that the indicators are now quite oversold.  RSI stands at 6.23.  And OBV is actually moving up now, indicating money flowing in.

ES daily pivot: Tonight the pivot drops from 1374.33  to 1361.42.  This still leaves ES under the new pivot but only by six points now.  Still, we'll need to see it mount an attack on this number by morning to make me feel the love.

Dollar index: The dollar did indeed move lower today, if only by 0.05% but that didn't help anyone.  Still, it broke back under the 200 day MA with a doji and left the indicators now finally coming off overbought.  I'd say the dollar could go lower from here.  The conventional wisdom is that this helps stocks.  Now I'm not so sure.

Euro: Last night I wrote "If the euro can manage a close above 1.2732 on Wednesday, that will be a bullish setup."  Well despite the US averages cratering, the euro finished easily above that, closing at 1.2750.  In daily candles, we now have, small doji star, big doji, RTC breakout.  And the overnight is trading higher again.  To me that spells higher euro on Thursday as it's now looking like the nearly month-long downtrend may be over.  I'll note here also that the Swiss franc is tracing a similar move but it even more bullish right now.  These are good signs.

Transportation: And as if the drop in the Dow wasn't bad enough today, the trans were simply obliterated with a 2.55% plummet down to 4926 that punched right through the lower BB and dove right back into the declining RTC leaving the indicators all in oversold-broken mode.  So now there's no telling when a turn-around might happen.  Like Jim Cramer likes to say "Nothing can go lower than zero".

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   3      3      4           0        .500      12

     And the winner is...

Today's sell-off had a hint of panic to it and that's what I like to see.  It's real easy to go "Oh my God!", throw up your hands in despair, and sell everything.  Been there, done that, got my head handed to me.  Because generally when you start getting that feeling, that's exactly the time to buy, not sell.  What's the old saying about the time to buy is when there's blood running in the streets?  Well, I'm seeing a lot of red lately.

Note too that the SPX Hi-Lo index now stands at a meager 19.  Every time we've hit these levels this year, a rally followed soon after.  We hit 19 on July 25th and SPX rallied hard the next two days running.  So while it's tempting to throw in the towel after an awful November since you-know-who got elected, we're going to hang tough and take the heat.  That's part of being a successful trader.

I think that right now we're at a point where it's too late to go short but still too early to go long and I'm not interested in catching this particular falling knife.  So while I do see a few encouraging signs in the currencies tonight, that just hasn't been working lately so I'm simply going to go with the majority and call Thursday lower.  I'll be delighted to be proven wrong.

ES Fantasy Trader

Portfolio stats:  the account remains at $197,375 after 70 trades (55 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we take the heat and remain long at 1376.25.

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