Actionable ideas for the busy trader delivered daily right up front
- Friday lower, low confidence.
- ES pivot 1454.67. Holding below is bearish..
- Next week bias uncertain technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader standing aside.
Last night I called for a doji day today and I think we pretty much got that with a spinning top in which the Dow lost all of 21 points. It wasn't a true star but hey I'll take it. Now that we have a reversal warning, let's see if the charts support that for Friday.
The technicals (daily)
The Dow: The Dow basically did what I figured on Thursday, posting a small range day at the top of Wednesday's monster rally. And although we're still not overbought yet, the spinning top is at least a reversal warning. I'd not be going long at these levels.
The VIX: The VIX continued a bit lower on Thursday, down another 0.82% to form a spinning top of its own. It's indicators are nearing oversold but its stochastic is not yet forming a bullish crossover. We're also a long ways from the lower BB at 13.4. So there doesn't seem to be any real upward pressure on the VIX just yet.
Market index futures: Tonight all three futures are ever so slightly lower at 1:00 AM EST with ES dropping 0.03. Here we got another spinning top, this one parked on ES's upper BB.The indicators still aren't quite overbought but the general feel of the candlesticks is one of tiredness. ES is now looking like it wants to retrace Wednesday's gains. If that happens, look for the 50% Fib retracement at 1450 as a logical stopping point. We're already not too far from that. And just beyond that is that monster Monday-Wednesday gap that's just begging to be filled.
ES daily pivot: Tonight the pivot inches up from 1451.08 to 1454.67. However, combined with ES's meandering in the overnight, that now puts us below the new pivot, a bearish sign.
Dollar index: The dollar defied my expectations by not just moving higher but gapping up a big 0.71% to just reach its upper BB at 55.42. This also brought the indicators even more overbought. The current level is also a resistance line so I'm going to claim once again that the dollar is headed lower soon.
Euro: At least I was right about the euro moving lower on Thursday when it had its biggest fall since last July. This brought the indicators to oversold levels. The overnight trading is forming a morning star around 1.3048 so there are some signs the euro may be headed higher on Friday. That would mesh well with my expectation for a lower dollar.
Transportation: In a bit of divergence, the trans on Thursday rose another 0l63% but formed a bearish inverted hammer in doing so. While this requires confirmation, just looking at this chart makes one think that things are starting to look pretty toppy right about now.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
average points
January 1 0 1 0 1.000 0
And the winner is...
I'd characterize the charts tonight as mildly bearish. The momentum from earlier this week appears to have dissipated and the realization could bring out the profit-takers on Friday. I'm going to go out on a limb tonight and call Friday lower.
ES Fantasy Trader
Portfolio stats: the account remains at $100,000 as we wait for the right moment to enter our first trade of the year. While I do think we're going lower on Friday, I still don't have a good enough edge to warrant going short just yet, so we'll just stand aside again. There's no rush.
Posts
Thanks for the kind words, Michele, in your prior comment reply. You create a safe and serious space for posting such speculations. Nobody jumps down anyone’s throat, very rarely does anyone get razzed or ‘held accountable’ for daring to guess the nearterm direction of the stock market and maybe guessing wrong. But you also inject humor and lightness into all your writings and that encourages comments to do likewise.
ReplyDeleteI understand what you mean by the ancient board game of GO being the closest analogue to short term market ‘swing trading’ and/or ‘intraday scalping’. I never learned to play it but a very close friend was a GO master and he and his wife dedicated a small alcove room right off the living room, in their oddly shaped house (partly built into a hill), to be a beautiful GO room, with a japanese silk screen on the wall and soft lighting, with a board and bags of stones always ready on a low table, and two zafu seats for the players and a love seat for any spectators--often their children.
When my friend explained the basics of the game to me, many years ago, it immediately brought to mind analogies to classic Japanese candle analysis, with their common use of Set Theory and territoriality.
I too learned an entire School of cross-market analysis from Dr. Brett Steenbarger and I was glad that you pointed out to a commentor some nights ago how worthwhile the ‘timeless’ articles on his archival site still are, and that it is by no means a defunct site. I loved his core message (as befitted a shrink, as he is and was), that rather than try to “beat” the market we should rather carefully LISTEN to it... but not like some thunderous voice as would come out of a God of Thunder like Thor... but like as a patient on a couch, with lots of conflicted notions and anxieties...
He used (and taught others how to use) psychoanalysis metaphors and techniques to get at symbolic feelings of what the underlying sentiment or ‘skew’ or expectational set of the majority of market participants might be... and then use that to create distance from the perceived consensus and be appropriately guided whether to fade moves, or pyramid positions into them.
Dr. Brett is and was a unique teacher, who gave much wonderful guidance for years and asked little in return and STILL got heckled by yokels if occasionally he guessed the market direction wrong. (But he was also a zen stoic, and practiced samurai discipline, so such gross embarrassments to planet Earth and humanity as a species just made him chuckle. I know I was far more irked by their unappreciative rudeness than he was.)
Keep your eye on the yen. It continues to be the wild card in the pie, to mix metaphors. In the hieroglyphic language of currencies, the Yen usually is the fixed principle of maximum safety. But a 3-year low in manufacturing output or somesuch has sent the Japanese government and central bankers on a crusade to weaken the currency and help exports. So capital is flooding from the Yen crosses and after the dollar the next hiding place is the Euro, making it seem stronger than it probably really is.
The normally stable yen has broken free and is rolling through the currency solar system like a planet X from the cosmo-mythology of the writer Velikovsky. Correlations are getting wiggly and electromagnetic and not normal, and finally WHAT has gotten into the DAX? What could possibly be so wonderful about the German situation that their stock market has needed to go up 15 days in a row? Much is NOT making sense right now, in terms of correlation analysis.
Hmm, you noticed that too, eh? Maybe it's because the world is ending in a couple of weeks, according to the Mayans. But we've had several odd things lately, like the market, VIX , and dollar all moving together rather than opposite. I'll have to go mull over the DAX and yen, two charts I don't normally look at.
DeleteI especially liked reading Dr. Brett's posts because my dad was a psychiatrist and a very savvy investor. I used to ask him how he decided when to buy or sell and all he would tell me was that he would psychoanalyze the market. TraderFeed echos a lot of those themes.
Of course I was still young and foolish at the time and more interested in other, more trivial pursuits. Now that I'm old and foolish I'm sorry I didn't pay more attention, and of course now it's too late. Perhaps I should add a few books on psychoanalysis to my reading list.
Michele-
ReplyDeleteThis blog has recently seen a wandering planet X, a wandering Planet Yen, and now we are witnessing wandering planet Comments. I was doing a bit of time traveling earlier, so it didn't completely surprise me to come across comments from many days ago (12/11). I've taken printscreen snapshots of the whole kaboodle. Very odd.
When reading the Night Owl blog hot off the presses late in the night, there is always the possibility that one is actually asleep at the desk and dreaming. Nevertheless I do say I agree with everything said prior.
Now, as to my actual prepared comment, I think much scrutiny must be given to the AUD/USD currency cross going forward. Many in Forex believe that the strength of the Australian dollar, against both Yen and Yankee dollar, is the truest measure of the economic strength of China. As long as the Communist ruling regime there plays fast and loose with the truth, some reliable metric need be used, even if it only strongly-correlates, but does not equate.
If the AUD cannot cross resistance at about 106 to the buck, it may call into question exactly how strong this well-stimulated Chinese ‘recovery’ actually is.
That was sort of like deja vu all over again, wasn't it? Blogspot has been acting weird ever since they moved to the new UI. Some nights the spell checker refuses to work, some posts just disappear from the list, it often changes font attributes all on its own, strange stuff.
ReplyDeleteBut that's a most astute observation you made about the AUD and one I hadn't thought of. You and I have discussed before that Chinese numbers aren't necessarily trustworthy (see the comments on my post of June 20, 2012, here: http://nightowltrader.blogspot.com/2012/06/wednesday-uncertain.html).
I'm going to have to look into this more closely. Thanks for the tip.