Friday, January 27, 2012

Friday likely lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday slightly lower, medium confidence.
  • ES pivot 1318.08.  Holding above is bullish..
  • Next week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader remains short.

Well it was more of a star than a doji, but I think I had the right idea when last night I called for today to run slightly lower and that's just what the Dow gave us with a 22 point loss.

And I apologize for screwing up the blog.  Due to a slip of the mouse, I somehow managed to delete yeterday's post (Wednesdy night's call for Thursday).  Which is a shame, because I was right abour today.

The technicals

The Dow: Today's not-quite-a doji candle is another reversal warning.  But as I mentioned yesterday, we've seen many of these for over a month now and none of them has generated a reversal.  More telling is the fact that we traded entirely outside the rising RTC for a second day now.  That is a much better indicator that the uptrend may be at an end.  In either case, I now see more risk than reward in the Dow daily chart.

The VIX:  The VIX has now spent six straight sessions touching it lower BB - highly unusual.  But today it put in its first green candle since January 17th, forming an almost-hammer.  With a bullish stochastic crossover, the VIX is now giving some good signs that it may be ready to move higher again tomorrow.

Market index futures: Tonight at 1:30 AM all three futures are again in the red with ES down a quarter percent.  The star ES put in today was a reversal warning and took us right to the edge of the rising RTC from .January 5th.  The overnight trade is now happening entirely outside the RTC.  This is a bearish setup.

ES daily pivot: Tonight the pivot rose from 1316.00 to 1318.08.  We made a failed attempt to break over the pivot at the close and have been drifting lower ever since.  The movement of the pivot higher places us even further below it now.  This is all bearish.

Dollar index: Today the dollar dropped 0.26% on a gap-down green candle that took it right to its lower BB.  This is at least a suggestion that we may see a higher dollar on Friday and that would be bad for stocks.

Morningstar Market Fair Value Index: Yesterday the index actually moved up a notch to 0.94, a positive sign for stocks.

History: According to The Stock Traders Almanac, Friday has a slight historically bullish.edge.

     And the winner is...

I have to say, I'm starting to get nervous.  January is now nearly over and I've only had one losing day so far.  In fact, this has been my best month ever.  I'm up 7.75% YTD.  And it's starting to remind me of last year when I also started out strong.  In 2011 I was up 8.32% by February 10th.  I then lost 2.5% over the following week.  Clearly, gains of 8% per month are not realistically sustainable.  That would be a a 96% annualized gain.  Ain't gonna happen.  Accordingly, I have started to scale back some of my positions.  In the past week, I've sold  my positions in GLW (two days before it dove), LOW, and F to raise some cash.

Let's not forget that last year January started off with a great run too, until the day before the last day of the month when the Dow dropped 189 points.  I don't know if history will repeat itself, but I'm beginning to feel we're overdue for at least some sort of pullback.  Right now, I see Friday going lower.

ES Fantasy Trader

Tonight we're still hanging onto our short from four nights ago.  I think this trade is about to come in.  Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)

Thursday, January 26, 2012

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1871.17Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

I guess it could have gone either way.  An "uncertain" call seemed logical last night though in retrospect there were certainly signs of a move higher.  But then again everyone has 20./20 hindsight.  So nothing ventured, nothing lost and we simply move on to Wednesday.

The technicals

The Dow: Frustratingly enough, we seem to be in the same spot here as last night - right on the very edge of a rising RTC.  Only now the indicators are even more overbought and the stochastic is pinching in for a bearish crossover Real Soon Now.  With a vague inverted hammer candle at this point I have to think a move lower is coming soon.

The VIX:  Last night I wrote "I'd say the VIX is going to take a peek at [13] on Tuesday."  Well a low of 12.90 and a close of 13.19 sure qualifies as a peek in my book.  The resulting doji leaves the indicators oversold and the stochastic flattening out for a bullish crossover.  We also bounced off support at 12.91.  It still requires confirmation, but I think there's a move higher in the offing here.

Market index futures: Tonight the futures are mixed at 1:19 EDT, with ES down just one tick buy YM up 0.02%. Call it basically flat.  After a nice run on Tuesday, tonight ES is sitting right on the ragged edge of its rising RTC for a bearish setup, a theory that is supported by a very overbought RSI of 99.2.  The stochastic is moving into position for a bearish crossover and OBV already looks to have rolled over.  The upper BB is at 1893 but it's looking to me like we're about out of gas right here.  And yet as we've seen in the past year, the market can get very overbought and still go up.

ES daily pivot: Tonight the ES daily pivot rises again from 1862.17 to 1871.17. And once again we remain above the new pivot so this indicator continues to be bullish.

Dollar index: Last night I thought we were going higher - well the candle was green but the net effect on Tuesday was a modest 0.04% loss.  It now looks like the overbought indicators and the stochastic about to form a bearish crossover are asserting themselves.  So I'm changing my prediction to bearish here.

Euro: At least I got the euro right when I said a reversal was coming as the euro put in a green candle to close at 1.3801 on Tuesday. With a spinning top in place, oversold indicators and a stochastic about to form a bullish crossover, I'm now claiming the euro goes higher on Wednesday.

Transportation: The trans have been on fire-o, with a now six day winning streak that outperformed the Dow on Tuesday and busted right through resistance at 7700 like it wasn't even there.  We remain in a rising RTC but having just touched the upper BB and with a stochastic that is >< that close to forming a bearish crossover, I think we're overdue for a move lower here.


Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      6           0       0.333
February   5       2      2           1       0.750    107

March     12       3      6           0       0.800    431
April      7       2      4           0       0.778    342

     And the winner is...

After a long winning streak like this I get nervous trying to call a top, and yet I'm starting to see some bearish signs in the charts.  I certainly wouldn't be going long right here.  But we also don't have enough evidence to just go out and out short.  I do think we're right on the cusp of a reversal lower but I'm going to content myself with another call for Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $105,625 after two trades in 2014, staring with $100,000.  We are now 2 for 2 total, 2 for 2 long, 0 for 0 short.  Tonight we stand aside again with another uncertain call.

Wednesday, January 25, 2012

Wednesday uncertain, watch Fed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain, pending Fed..
  • ES pivot 1311.42.  Holding above is bullish..
  • Rest of week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader remains short.

Today we got pretty much what I was expecting - a small decline, with the Dow dropping just 33 points.  After a 75 point dump out the gate, we retraced half that and just wandered aimlessly the rest of the day.  Clearly the market  was anticipating the Fed on Wednesday, and to a lesser extent, the Empty Suit's speech tonight.  We'll run down some technicals tonight, although I don't think they'll be the primary  market driver on Wednesday.

The technicals

The Dow: Today's action formed a classic hanging man.  Coupled to yesterday's doji, this is quite a bearish looking pattern.  Also, the bearish stochastic crossover is now complete.

The VIX:  Last night I noted the odd action of the VIX, which closed higher yesterday on a red candle.  Well, today it did it again, gaining 1.29% this time on another, longer red candle.  A pair of rising red candles off a bottom like this is a fairly good bullish sign, suggesting a higher VIX on Wednesday which would be bad for stocks.

Market index futures: By contrast, tonight all three futures are in the green, with ES up a non-trivial 0.34%.  NQ is actually up just over a percent at 1:45 AM EST, no doubt a reflection of today's Apple news.  But today's action formed a dragonfly doji, a bearish reversal candle.

On the other hand, since the current rally began on December 20th, the path upward has been littered with various dojis and hanging men, without any reversals following.  In short, the candlesticks don't seem to be working too well here right now.  One thing that usually works great though is the regression trend channel and we remain solidly inside the rising RTC bounding this rally.

ES daily pivot: Moved down again tonight from 1311.42 to 1308.25.  Since ES broke over the pivot at today's close and has been pretty much just meandering ever since, this puts us even higher above the pivot now and that's a good sign.

Morningstar Market Fair Value Index: Yesterday the index held at 0.93, consistent with its recent upward trend.  Still a positive sign.

History: According to The Stock Traders Almanac, the last three days of this week are historically actually positive.

     And the winner is...

Much too hard to call.  We've got some serious mixed messages in the charts tonight, with the Dow looking toppy and the VIX guiding lower but the futures marching higher.  But in the end, it's all moot because tomorrow's going to be news driven, partly in reaction to tonight's State of the Union address and partly in reaction to whatever pronouncements the Fed has to make.  So no official call tonight.  We'll just have to see how this one plays out.  Wednesday's going to be a good day to stay on your toes and watch the news.

ES Fantasy Trader

Tonight we're hanging onto our short from two nights ago.  I'm going to hang on to this one a while longer. Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)

Tuesday, January 24, 2012

Tuesday looking lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday lower, medium confidence..
  • ES pivot 1311.42.  Holding under is bearish..
  • Rest of week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

After something of a mini-roller coaster day, the Dow saved my call for the day by ending down a mere 11.7 points.  What does this mean for Tuesday?  Read on, McDuff...

The technicals

The Dow: Today's amusement park ride produced a classic doji, the first one we've seen since December 27th.  This is often a good reversal indicator (the market did indeed fall on December 28th).  And after spending several days at highly overbought levels, today the Dow's stochastic made a bearish crossover.  In addition the S&P High-Low index hit 100 today, also a bearish sign.

The VIX:  The VIX actually closed up 2.13% today but did it on a fourth consecutive red candle.  Meanwhile its indicators continue to travel from overbought to oversold but aren't there yet.  Nevertheless, we touched the lower BB at 18.55 for the second day in a row.  The VIX tends to not spend more than two days playing tag with the lower BB so there's at least the possibility of moving higher Tuesday.

Market index futures: Like last night, all three futures are running lower, with ES down 0.21% at 1:50 AM EST.  Today's inverted hammer clearly demonstrates the resistance we've got at 1311.  It also took us to the right edge of the current rising RTC from January 5th, another bearish sign.

ES daily pivot: Moved up from 1309.08 to 1311.42 still leaving us a few points below.  But just like last night, we're seeing ES gradually rising, this time starting at 11 PM.  This sort of price movement does not look particularly bearish to me.

Morningstar Market Fair Value Index: Didn't post a new number today.

History: According to The Stock Traders Almanac, this whole week is historically pretty bad.  Wednesday "has been down big 9 of the last 13".  Tuesday is still bearish, though not as bad as Monday.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's how things stack up so far this year:

Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

1/3         46        21        +     1258   1/1
1/9         56        37        +     1278
1/17        41        33        +     1289
1/23        46        32        +     1315

The SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  Since that moment is now at hand, I note that my bullish call on 1/3 was correct, the S&P now being higher than then.  So now I'm adding an extra column "Accuracy" to track my calls.  For now, I'm 1 for 1.  And of course that means that since I voted with the majority, the poll as a whole was correct that week.

We note that this week while bearish sentiment remains unchanged, bullish sentiment advanced 5% to the same level as the start of January.  And for the record, I voted bullish yet again this week, once again on the basis of my reading of the monthly SPX chart as well as on seasonality.

     And the winner is...

And once again, I'm going to say the bears, in part because of the technicals on the charts as outlined above, but also partly because we're getting some noise from Europe again and in part because of the Fed on Wednesday.  I don't think there's going to be much enthusiasm for a big rally ahead of that. n So there you have it - Tuesday lower.  OTOH, also once again I'm not looking for a major decline.

ES Fantasy Trader

Tonight we're hanging onto our short from last night.  It's just a couple of points under water, and I still believe in this trade.. Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)

Monday, January 23, 2012

Monday may move lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, medium confidence.
  • ES pivot 1309.08.  Holding under is bearish.
  • Rest of week bias uncertain pending Fed.
  • Monthly outlook: bias up.
  • ES Fantasy Trader short at 1305.75.

Friday was a very strange day.  I had called it lower, and while the Nasdaq did indeed end down 0.06%, the Dow motored to a 0.76% gain, propelled by large moves in IBM, HPQ and MSFT.  And I made money on my ESFT short, even though the S&P closed up 0.07%.  It was sort of like one of those days when it's raining while the sun is out.  But what of tomorrow?  Will the sun come out again?  Let's figure it out.

The technicals

The Dow: The Dow continued its winning ways with what's looking a lot like a Three White Soldiers pattern, and those guys are bull bull bullish.  But it might have been too much of a good thing with the close of 12,720 actually exceeding the upper BB at 12,693.  Volume though was running higher than normal, showing continued buying interest.

The VIX:  The VIX meanwhile just plunged below the important 20 level to close down a big 8% at 18.28.  The VIX now has only minor support around 17, and that goes all the way back to last July.  And its indicators are still not even to oversold levels yet, implying the possibility of still lower to come which would be good for stocks.

Market index futures: Tonight everything's in the red with ES leading lower, down 0.31% at 1:35 AM EST  But we've seen this movie before several times last week and the market then went on to rally the next day.  Will this happen again Monday?  I'm not so sure.  Friday ES put in a classic hanging man.  Tonight's trading opened with a gap down.  Taking that as confirmation of the hanging man, it seems to be guiding lower.  In addition, all of my Fave Five indicators have now put in peaks at quite overbought levels.

ES daily pivot: Rose from 1307.08 to 1309.08 tonight.  That means we're now below the pivot.  That is bearish on the face of it although I note that we've been slowly creeping higher since 9 PM.

Dollar index: The buck is at a critical juncture, having dropped right to the bottom of its rising RTC on Friday.  It has no support here.  Tomorrow will be key - if the dollar goes lower, look for a big rally in stocks.  Otherwise, we may see a down day or two.

Copper: Ah, the good Doctor struck a sour note on Friday, declining for the first time in three sessions on an ugly sagging red candle.  It gives every indication of having peaked, including very overbought indicators.  Look for lower copper on Monday.

Morningstar Market Fair Value Index: Continues a gradual uptrend that began on December 27th, to hit 0.93 last Friday.  This type of movement is bullish.

History: According to The Stock Traders Almanac, Monday is historically very bearish, though things improve as the week goes on.

     And the winner is...

I'm going to say it's the bears for Monday.  I'm still optimistic for the next few weeks at least but there are clearly a number of reversal indicators worth paying attention to right now.  I note also that the Greece fire seems to be at least sputtering on the back burner over the weekend and that could dampen things on Monday.  So I'm going to call the close lower Monday.  I'm not looking for a spectacular dive, but lower nonetheless.

ES Fantasy Trader

On Friday we took a profit of 3.75 points.  It was an odd day - the S&P closed higher, but I made money on a short anyway.  Portfolio stats: the account now becomes $99,250 after 5 trades (3 wins, 2 losses)   Tonight we go short at 1305.75.

BOT   10    ES    false    MAR12 Futures     1306.75    USD    GLOBEX JAN 20 12:13:11
SLD   10    ES    false    MAR12 Futures     1310.50    USD    GLOBEX    JAN 20 01:38:22