Actionable ideas for the busy trader delivered daily right up front
- Friday higher, low confidence.
- ES pivot 1410.17. Holding above is bullish.
- Next week bias uncertain technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader standing aside.
Recap
It was sure looking good for my call lower early on Thursday morning but then the market reversed and wobbled it way higher for the rest of the day to finish up 40 points. It was an interesting move that we'll discuss in the Dow section below as we try to do better on Friday.
The technicals (daily)
The Dow: Everyone knows you can't fight the Fed and you can't fight the tape either. I've been thinking this market was going lower for days now. Only it's not. And today's close was important not just for being up but also for finally cracking the 13,050 resistance zone that had been stopping the Dow for a week now. We also executed a bullish stochastic crossover from a high level today. I've noticed that whenever that happens, we seem to be good for a few more days of upside even thought he indicators are all still overbought. And today's move kept us back inside the rising RTC.
The VIX: At least I was right in not calling the VIX lower today, as it gained 0.73% in an unusual move up on a day when the market was also up. Today's doji ended right on the right hand edge of the rising RTC for a bearish setup. It also caused a bearish stochastic crossover. And while it rose today, the VIX remained entirely within yesterday's candle. So I think now is the time to call the VIX lower for Friday.
Market index futures: Tonight all three futures are up at 1:13 AM EST with ES higher by 0.07%. This is a chart that just doesn't seem to want to fold and after back-to-back green candles, we're still getting more upside in the overnight. So despite overbought indicators, I can't bring myself to call this chart lower. Resistance remains in the 1418-1420 neighborhood but that still leaves a bit of room to run on Friday.
ES daily pivot: Tonight the pivot rises from 1406.58 to 1410.17. We were above before, and remain above the new pivot so that's bullish.
Dollar index: I did get this one right too, writing "My guess is that we could see a move higher here soon." The dollar delivered today with a 0.61% pop for a bullish RTC trigger and a completed bullish stochastic crossover with indicators just rising out of oversold. So all systems are go for more upside here on Friday. It's interesting though that the dollar, like the VIX, rose on a day when the market was up too.
Euro: And I got this much right last night too when I said "expect some more downside here on Thursday". We got plenty, with the euro taking its biggest one day loss since November 2nd. And there's more follow-through in the overnight, including a sudden 0.0015 cent loss in just 20 minutes as I write this. Anyway, the recent two week uptrend is now clearly over and I think there's more downside to come on Friday.
Transportation: Like the VIX, the trans gave us a doji today dropping just 0.09% but remaining above the 200 day MA at 5110 after a successful intraday test of it. And we also just formed a bullish stochastic crossover. And finally, we traded entirely outside the descending RTC so that's a bullish trigger. I'm fairly confident that the trans are going higher from here.
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 7 5 5 0 .583 135
December 2 1 1 0 .667 34
And the winner is...
The charts are in a funny state lately. Take copper. It's put in three consecutive days of red candles but it continues to move higher as each day gaps up over the previous one. This is the sort of thing that vexes me no end. And the TLT's looking toppy too. I call this the rubber ducky market. You try to push it underwater but it just keeps popping back up. So with the Dow now having established support at the 200 DMA and broken resistance at 13,050, I think it's now going to take a poke at its upper BB at 13,173. Therefore I'm going to go out on a limb again and call Friday higher.
ES Fantasy Trader
Ugh, OK, that's it, I've had enough. I finally just had to throw in the towel on what was becoming a too-long running trade for an ugly 18.5 point loss. Like I said, you can't fight the tape.
Portfolio stats: the account now falls back to $188,750 after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12. Tonight we stand aside to regroup.
BOT 10 false ES DEC12 Futures 1414.50 USD GLOBEX 00:43:09
Posts
Michele-
ReplyDeleteI particularly enjoyed watching your trade management the past few days on a very reasonable risk-aversion scenario. From your point of exit, the market (basis the SPX) kind of snerdled sideways to upwards through the US market day. It sits just below a key support/resistance area at 1420 or so which even technicians on Mars can see without a telescope, it’s so obvious. The enticements to the downside were and to some extent still are quite compelling. The market eventually owes us a noteworthy retracement of some HI point of the long upleg from March 2009. Perhaps it began in September.
The Cobra, an experienced market analyst and one of the best at short and ultra-short timing and pattern recognition, has been repeatedly calling for a revisit to the Nov.16 LO, in some fashion that seriously tests it, and shakes out bulls who are nervously watching their YTD bonus money melt away. Not necessarily more than a steep selloff.
This outlook fits well with the traditional December seasonality pattern, which is for the market to lose bouyancy for much of the middle part of the month.
Also, for the duration of your holding to the short position, the J-Trader swing model (which some who read your blog also follow and factor into their analysis), was stubbornly clinging to a zero long/partial short position. Not to mention other more ambient factors like the Nasdaq showing marked weakness compared to other indexes--a strong negative for other than very short periods of over-valuation adjustment. In healthy markets it usually leads.
..And, the simple bad omen of the first day of the month (here, Dec.3) being a down day-- when NOT following a crazy manic upside prior month (and hence monthly-tracked investment vehicles are simply dumping shares to rebalance, post window-dressing)... it’s often a mild harbinger of a weak month to come when the first (statistically strongest) day of a month does not produce gains.
However, there is a phalanx the size of Pharaoh’s army, waiting just above SPX 1420ish to hop on board the “resolution breakout”of the recent trading range. And on Tuesday there’s a Fed meeting where, as the Reuters/Night Owl news service reported before Market Open this past Wednesday.. “..after poking around a bit I think this evening's rise in the futures is due to wire stories that the Fed is expected to announce new bond-buying next week as an antidote to fiscal cliff jitters.”
So a kaboom gap above the 1420 resistance Monday morning could trigger a trend day to the upside; the configuration is such that this is a serious danger to bearish positions.
And, as the same Cobra mentioned above has observed, even if one expects a retest of the 11/16 LO it would be historically rare for it to begin in an environment where market participants await a possible substantive move by the Fed. Such waiting days tend to have a mild low-volatility upward bias, followed by the strong reaction to whatever is or isn't announced. So a stepping aside at this level is really quite prudent, imo.
Thumbs up, Daniel. I couldn't have said it better myself. In fact you said it a lot better than I ever could. Thanks ever so much for your usual great analysis.
ReplyDeleteIt sure seems like literally everyone's talking about 1420 now. In fact when I was at the grocery store yesterday, instead of asking if I had any coupons, the checkout girl asked if I had any 1420s.
Next week should be most interesting to watch.
i used to manage $40m at morgan, but asked for spiritual awakening, formally, its true, and lost it all. i lost the money but got a human heart, and oh, what experience!
ReplyDeleteand if that were not enough, i as a rule never read investment blogs, but willy-nilly, get to places peripatetically. i find that this is a great blog. clear and pithy, like wittgenstein or euclid. that side, i very great appreciate daniel's comment, as clearly pointed to in michelle's post late sunday/early monday.
i am leverate short. vix is a disaster waiting to happen. the only impediment, is the usual upward bias december put money to work, end of year. but window dressing in reverse, favors more aapl liquidation, helping my QID call scenario. apple is soilent green as far as market cap goes.
lastly, and i do mean this, michele's blog help s my chess blog, my real blog, a lot, as i am long winded, but very very greatly appreciate laconic if not aphorismic approaches. the clean position, here is what it is. here is what i see. here are the constituencies. here is what i expect. here is how i feel. here are my results.
ne plus ultra.
i am a new reader. bless you, great job.
Oh my! The Night Owl is blushing. With praise like that my head is going to swell to such proportions that I won't be able to fit in my next anymore :-)
DeleteIf the blog is any good, I have my readers to thank, for they have given me any number of invaluable suggestions for improving both the format and the content. And at the top of that list is Daniel, who was kind enough to provide some insightful criticism when I needed it, and more than once.
AAPL is indeed an interesting case. I've been watching it but not talking about it since I'm not really geared to the Nasdaq, but it may be worth a mention. Ha ha - soylent green AAPL - I like it.
Anyway, thanks for reading!
"..i do mean this, Michele's blog helps my chess blog..."
ReplyDelete--Actually not surprising, because in the months of developing this excellent format, she once compared her weighing of a select handful of factors to the 'point count' method of valuing a hand in bridge, to judge its bidding strength. And as those who have enjoyed both chess and bridge are aware, there are a number of analytical similarities (along w signif. differences) btw the two games...
Good point. Actually, I first got the notion of relating games to the market from (where else) Dr. Brett Steenbarger. I also play Go, which I think may be the ultimate market analogy.
DeleteSimultaneously simple and complex, it is a game where both strategy and tactics come into play in an endless web of intricate patterns - sort of like the stock market.