Thursday, November 1, 2012


The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday uncertain.
  • ES pivot 1408.50Holding above is bullish.
  • Friday bias higher technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

After all the assorted and contradictory predictions of either tax selling or window dressing today, it turned out that the markets delivered neither trick nor treat with the Dow down  just 11 points and the SPX up a mere 0.22.  About as exciting as last year's leftover Halloween candy.  All of which pretty much leaves us in the same place we've been for four sessions now - desperately seeking direction.  This seems like the fourth time in three months that Mr. Market just hasn't been able to make up his mind which way he wants to go.  Maybe the charts can give him a hand here, so let's get to it as we munch on the leftover Snickers bars.

The technicals (daily)

The Dow: The Dow has now given us four dojis in a row in continuing sideways trading.  After last weeks' long slide left us so oversold, the logical next move is up.  The only question is when.  Tomorrow, being the first of the month might provide the excuse, though November 1st hasn't been too kind to the Dow in recent years, being down four of the last six.

The VIX:  Hmm, the VIX, which I figured good to move lower today, tricked me and instead gained 4.44% on a big green marubozu that broke back above the 200 day MA and popped out of the latest descending RTC for a bullish setup.  But meanwhile the VIX is right up against its recent resistance at 18.70 and the indicators remain pretty overbought.  So 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.

Market index futures: Tonight all three futures are down at 1:11 AM EDT with ES lower by 0.36%.  ES finished the day essentially flat but did it with a bearish dark cloud cover.  The overnight candle is forming as a gap-down doji but support continues to kick in right at 1400 as it's been doing for a week now.  Es continues to trade in a chaotic congestion range of 1400-1413.  Being as we're now at the bottom of that range and still oversold, I'd expect the next move to be higher.

ES daily pivot: Tonight the pivot rises from 1404.25 to 1408.50.  But with ES trending lower since 11 PM (I'm not sure what happened then - there was some Chinese PMI news, but it was good - you'd think that would drive ES higher)  so anyway, that now puts us below the new pivot, a bearish sign.

Dollar index: Last night I wrote "All these signs point to a lower dollar Wednesday."  And that's just what we got with the $USDUPX ceding 0.21%.  The net effect was to give us a bearish RTC trigger, a bearish stochastic crossover confirmation, and a peak in RSI.  These all point once again, to further dollar declines on Thursday.

Euro: Today the euro formed a tall spindly doji but it traded outside the descending RTC for a bullish trigger.  And while the overnight is basically flat so far, the indicators are all now in sync moving up out of oversold, suggesting more euro gains on the way.

Transportation: At least I got this one right.  The trans today gained another 0.65%  This broke us out of the descending RTC for a bullish setup and confirmed the bullish stochastic crossover.  We have a continuing divergence now of the trans posting three days of solid gains while the Dow goes nowhere.  Further advances for the trans look possible on Thursday.

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

     And the winner is...

All the bullish signs that were in place last night remain in place.  But for some reason this market just isn't gaining any traction and in fact both the futures and currencies are showing some definite weakness in the overnight..  I'm still expecting the next move to be higher, but I just don't know when we're going to get off top dead center so I'm afraid I'm going to have to start off November with a call of Thursday uncertain.

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, waiting for the market to pick a direction to move in..

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