Friday, February 17, 2012

Friday doji possible

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday uncertain, doji possible.
  • ES pivot 1348.75Holding under is bearish..
  • Next week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Sigh - sometimes you just can't win for losing.  Two days ago I said the market would go up, so it went down.  Last night I said the market would go down today... so it went up.  Arrgh!  This is starting to remind me of a mini version of last summer.  Remember when we had four days in a row of triple digit yo-yo action?  We're basically stuck in a consolidation pattern where it's tough to call each individual day.  But for some unknown reason, I keep trying.  Fortunately, the market is like baseball - you can strike out the majority of the time and still be considered pretty good.  Tonight, I'll take another swing at it.

The technicals

The Dow: What a difference a day makes.  Last night the daily Dow was looking pretty gloomy.  Today's 123 point pop changes the picture and brings us right back to the top of the recent 12,800-12,900 trading range.  From a candlestick point of view, we've got a bullish engulfing pattern, which is usually works pretty well.  And the indicators have all hooked back upwards before ever reaching oversold levels.  The stochastic in particular is very close to making a bullish crossover.  On the downside, every time we've been at the 12,900 area since the 7th, the next day has gone lower.  There's no resistance until the upper BB at 12,957.  The only question is how to get there.

The VIX:  Remember last night when I said "You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB."?  Well today the VIX dumped 9%, putting in a big red candle that formed a classic bearish engulfing pattern, one of the strongest bearish reversal patterns around.  I found several instances of a bearish engulfing pattern off the upper BB over the past two years and in every one, the VIX was lower the next day.  The VIX correctly predicted today's market gains, and from the looks of it, it will go lower on Friday.

Market index futures: At 1:15 AM all three futures are essentially flat.  ES is down just a half point.  But unlike in the Dow, today's big green candle decisively took ES out of its recent trading channel.  And its stochastic just barely formed a bullish crossover.  And taking the longer view on the weekly chart, the uptrend is still very much intact.

ES daily pivot: Tonight rose from 1346.08 to 1348.75.  With ES meandering aimlessly in the overnight, this is still bullish but a bit less so.

Dollar index:The dollar chart looks like the VIX - another bearish engulfing pattern, strongly suggesting more dollar downside on Friday, which would be good for stocks.

Morningstar Market Fair Value Index: After spending three days stuck on 0.94 (which I noted was a positive sign), yesterday the index ticked up to 0.95, also encouraging.

History: According to The Stock Traders Almanac, Friday is historically quite bearish, with the Dow down 16 of the last 20, possibly because traders don't want to be invested over the long weekend..

     And the winner is...
Although the charts all seem to suggest more upside possible Friday, I'm just not feeling it.  My problem now is that I think we ran too hard on Thursday and therefore need a day or two to regroup.  And there also seems to be little enthusiasm in the overnight futures.  Therefore I'm going to call for a small-range doji day on Friday - no big moves either up or down ahead of the holiday weekend, though history suggests a downward bias.

ES Fantasy Trader

Today I decided to get while the getting was good and dumped my long from two days ago for a quarter point profit.  At least that was better than selling yesterday at a considerable loss. So now  the account goes to  $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.

Tonight without a definitive edge, we simply stand aside.

SLD    10    ES    false    MAR12 Futures     1356.50    USD    GLOBEX    14:34:21   
BOT    10    ES    false    MAR12 Futures     1,356.250    USD    GLOBEX    FEB 15 00:47:54    


Thursday, February 16, 2012

Thursday looking lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday lower, medium confidence.
  • ES pivot 1346.08 Holding under is bearis..
  • Friday bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader holding long at 1356.25.

Hah, serves me right for putting so much faith in the Chicoms and the futures last night.  I was so sure we'd be going higher today.  The Dow actually did post a nice gain today - for all of five minutes.  Then it was all downhill from there, finishing down 97 points.  Tonight the Night Owl is eating humble crow.  Oh well, no point worrying about what's done and over.  Let's move on to Thursday.

The technicals

The Dow: There's two ways of looking at today's loss.  Way one is that we're now at the bottom of a four day trading channel that is more likely to move higher than lower on Thursday.  Way two is that those four days show a gradual downward drift that's due to continue Thursday.  Right now, the indicators seem to support continued downside.

I note here also that the SPX Hi-Low index has now spent three days pegged at 100.  These runs tend to end with a market decline.  Last week, the index was at 100 for four days, the 6th through the 9th.  On the 10th, we had a big drop.

The VIX:  Today's 8.19% jump in the VIX put a crinkle in yesterday's bearish stochastic crossover.  However, it did take us back up to the upper BB.  You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB.  This implies higher stocks to come.

Market index futures: All three are running significantly negative tonight, with ES down a half percent at 1:35 AM EST.  That in itself is a bad sign.  In addition, this downturn appears to signal a negative resolution to the recent indecision in ES.  The bearish exit of the rising RTC now seems to be playing out.  The only good news here is that this pullback is now bringing us close to oversold levels from which an advance might resume.

ES daily pivot: Remained almost unchanged, advancing to 1346.08 tonight.  However, we've been below the pivot most of the day and remain 10 points under in the overnight, not a good sign.

Dollar index: The dollar gained some more ground today but is still neither overbought nor near its upper BB.  I see nothing here suggesting that there isn't more upside left for Thursday, a bad sign for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.94 for the third day in a row.  This is an indication of a lack of weakness in the markets.

History: According to The Stock Traders Almanac, Thursday is historically rather bearish.

     And the winner is...

With mixed technicals, the VIX back above 20 and renewed uncertainty over Europe, it's very difficult to make an informed call tonight.  But I'm detecting some general malaise in the market right now and my general hunch is that we're in for a lower close Thursday.  To hedge my long positions, I picked up some DXD again this afternoon at 13.87.

ES Fantasy Trader

Tonight we're holding on to last night's ill-advised long.  I'm giving this the benefit of the doubt for one more night.  If it doesn't pan out on Thursday then it's done.  In the meantime, t.he account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.

Wednesday, February 15, 2012

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, high confidence.
  • ES pivot 1345.83 Holding above is bullish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1356.25.

Let's look at the last seven sessions: hanging man, star, hanging man, doji, a dump, a retracement of the dump, dragonfly doji - a veritable rogue's gallery of reversal indicators pointing to a pullback.  But the market still refuses to roll over.  How long can this go on?  Let's see...

The technicals

The Dow: My call for a negative bias on the day was working pretty well until some good news on Greece and BTE economic numbers help propel the Dow back to finish just in the green, up 4 points in a late day rally.  It's almost like a spring - every day for seven sessions now, whenever the bears try to push it down, boing, it just pops back up.  The net effect of today's action was simply to bring the indicators down a notch out of overbought territory.  We're now out of the rising RTC, but I have a feeling that we may not be seeing the decline you'd expect on that, at least not just yet.

Daily VIX
The VIX:  Last night I thought the VIX might be going lower, but the VIX had other ideas, gaining instead 2.63%.  But look at the daily chart - you don't even have to be a technician to see that this chart has no idea where it wants to go, taking stabs lower one day and then higher the very next.  The only thing here that makes any sense is the bearish crossover on the stochastic (bottom panel), now complete.  This is usually a good predictor of a lower VIX, implying higher stocks.

Market index futures: After running essentially flat after the close, the futures suddenly took a big pop on news that China is going to expand investment in Europe.  All three futures are now up significantly at 1:07 AM with ES leading the way, up 0.61%.  And that's enough to bust us through the resistance level at 1350 that I mentioned yesterday.  This now sets the stage for an assault on the 1365 area, last year's SPX highs.

ES daily pivot: Fell just a bit from 1348.00 to 1345.83 tonight.  The big China rally at 9:20 PM propelled ES through the pivot and the new value puts us even higher above it, a positive sign for Wednesday. 

Dollar index: I guess the evening star must have been hiddne by clouds, because today the dollar gapped up 0.82% instead of falling.  However, the euro's gain in the overnight will surely push th dollar lower Wednesday, which will also help the market.

Morningstar Market Fair Value Index: After hitting 0.96 last week, the index dropped to 0.94 on Friday where it remained yesterday.  The failure of the index to go any lower is positive for the market.

History: According to The Stock Traders Almanac, Wednesday is historically quite bullish.

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 the cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1   1/3        46         21        +    1258    1/1
  2   1/9        56         37        +    1278    2/2
  3   1/17       41         33        +    1289    3/3
  4   1/23       46         32        +    1315    4/4
  5   1/30       48         31        +    1316
  6   2/6        56         30        +    1345
  7   2/13       48         31        +    1343

Again, 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.  This week we see that my bullish call on 1/23 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 4 for 4.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So far, the contrarian "majority is always wrong" theory still isn't looking too good at all.  Apparently the Ticker Sense bloggers seem to have a lot of, uh, sense.

And I note that while the bullish sentiment is dropped 8 points back to 48%, bearish sentiment continues to remain essentially unchanged after five straight weeks.  So once again we're still not seeing the sort of decline in bearish sentiment that would lead to a contrarian bearish call.  And also once again I voted positive this week.

     And the winner is...

The Night Owl gives four hoots to China for making my job easy tonight.  Until tonight's news, we were pretty much looking at more of the same sort of wishy-washy uncertain doji action that has plagued us for days now in the absence of any good reasons to go either up or down.  Tonight the Chicoms gave us a reason to go up.  So I'm going on record that Wednesday closes higher.

ES Fantasy Trader

Last night we stood aside so the account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.  Tonight we go long at 1356.25.  I'm afraid I didn't get a good entry but what can you do.  I can't sit in frotn of my screen 24/7 waiting for a sudden big move.  I'm guessing there will still be enough upside once we get underway Wednesday to push ES up some more.

Tuesday, February 14, 2012

Tuesday uncertain, bias lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday lower, low confidence.
  • ES pivot 1348.00.  Holding below is bearish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

We got the upside move I was expecting for Monday in the form of 72 Dow points, thanks to the Greek austerity vote.  We seem to be back into this European news-driven mode that plagued us so much last year.  And tonight we've got a round of ratings downgrades from Moody's to contend with.  Where will this take this Moody market?  Hmmmm....

The technicals

The Dow: While today's near total retracement of yesterday's loss was welcome, it didn't do much to advance the bulls' cause.  We've got the same bearish RTC trigger here as in ES (see below) and the stochastic has now completed a bearish crossover.  Not so good.

The VIX:  Last night I called the VIX lower and sure enough it lost 8.42% today completing a bearish shooting star pattern.  Its indicators have also peaked from overbought and its stochastic is about to make a bearish crossover.  This all points to a lower VIX, implying higher stocks.

Market index futures: Just as we were up last night on Greek austerity news, tonight we're similarly down on Moody's downgrades, with all three futures trading lower.  ES is down a non-trivial 0.30% at 1:15 AM EST.  ES has been trying to break resistance around 1349-1350 unsuccessfully for four days now, giving us reversal indicators every day but nothing in the way of a real reversal.

However, we have guidance tonight from the RTC.  ES traded across the rising RTC on Thursday - the bearish setup.  Today we traded entirely outside and that was the bearish trigger.  Overnight action provides the confirmation.  I'm not liking this chart.

ES daily pivot: Tonight the pivot jumps from 1340.83 to 1348.00.  Because of this and also since ES has been wandering lower in the overnight, we are now 3 points below this pivot, a negative sign for stocks.

Dollar index: The dollar today completed something akin to an evening doji star, a good bearish reversal pattern.  This would imply a lower dollar and therefore higher stocks Tuesday.

Morningstar Market Fair Value Index: till no update on the MS website.  Don't know what's up with them.

History: According to The Stock Traders Almanac, Tuesday is historically fairly bearish.

     And the winner is...

Despite the bullish indications from the VIX and the dollar, the recent range-bound pattern coupled with today's ratings downgrades and the bearish Dow chart leads me to think that we may go lower Tuesday.  Right now it appears that while the uptrend is broken, no new trend up or down has yet been established.  So I'm pretty much in wait-and-see mode until Mr. Market decides which way he wants to go.  I'm not seeing much guidance either way right now so I'd be wary of going long or short until things sort out.

ES Fantasy Trader

We closed out today's long trade for just a one point profit.  I didn't see much more upside happening and didn't want to risk any potential downside.  Tonight we stand aside, in view of a lack of clear guidance from Mr. Market.  I'm not seeing much of an edge either way for Tuesday.

Portfolio stats: the account increases to $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1348.50    USD    GLOBEX    FEB 13 13:16:56    
BOT    10    ES    false    MAR12 Futures     1347.50    USD    GLOBEX    FEB 13 00:38:37   


Monday, February 13, 2012

Monday looking higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, medium confidence.
  • ES pivot 1340.83.  Holding above is bullish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1347.50.

Last Thursday night was one of rare times when I was getting really clear signals on all fronts that we'd be going lower on Friday and that's just what happened with the Dow dropping 89 points.  What was interesting though was that we rallied nearly 60 points from the low of the day and closed strong, despite continued uncertainty over Greece. So now what?  Let's take a look.

The technicals

The Dow: The two major points of interest on the Dow daily chart are 1. we fell out of the rising RTC, a bearish setup (but not a trigger yet) and 2. the indicators have all topped at overbought levels, always a bearish sign.

The VIX:  The VIX futures on Thursday night accurately predicted Friday's 11.6% gain in the VIX.  Not just a gain but a big gap up.  But the candle is interesting.  First, it touched the upper BB and then retreated.  As I've noted before, the VIX rarely spends more than a day or two around the upper BB before reversing.  It also formed two thirds of an evening star pattern.  And third, its indicators are now higher than levels from which reversals occurred the last four times we were here.  These are all arguments in favor of a lower VIX on Monday which would be good for stocks.

Oh yes, and on Friday the futures put in a shooting star, also a bearish reversal pattern.

Market index futures: Tonight the futures are all up significantly, with ES, NQ, and YM trading up 0.455, 0.47%, and 0.42% respectively at 1:15 AM EST, no doubt on the successful austerity vote in Greece this evening.  While ES on Friday put in its biggest red candle of the year taking us out of the rising RTC from February 1st, the lack of follow-through in the overnight makes me cautious about calling for more short-term downside.  Indeed the stochastic looks almost ready to make a bullish crossover from a high level.  We've seen this sort of thing a few times already this year.  In each case, the next day didn't produce big gains, but it didn't go lower either.

ES daily pivot: After rising for eight straight sessions, the ES pivot fell from 1347.25 to 1340.83 tonight.  ES opened exactly up to the former pivot this evening.  With it holding right around that level so far, that now puts us above the new pivot by about 6 points.  Continuing to hold above will be positive for stocks on Monday.

Dollar index: The dollar continues to be driven by the euro which rose over half a percent following the Greek vote Sunday night.  Higher euro -> lower dollar -> higher stocks.

Morningstar Market Fair Value Index: No update from Morningstar.

History: The Stock Traders Almanac points out that while Monday is historically bullish, the Dow has been down on this day 5 of the last 7.

     And the winner is...

I'm playing a hunch here.  Logic would dictate that Friday's downward move was the beginning of a pullback, and Lord only knows everybody's been waiting for one for some time now.  But the political and technical developments over the weekend make me think that maybe what we saw Friday was the pullback.  At least for now.  There may be more downside to come later this week, but for Monday anyway, I'm going to say we go higher.

ES Fantasy Trader

Last Friday's short turned a profit of 7.5 points.  I decided not to hold that one over the weekend against the possibility of good news out of Greece, and now I'm glad I dumped it.  Tonight we go long at 1347.50.   Portfolio stats: the account increases to $112,125 after 12 trades (9 wins, 3 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1337.75    USD    GLOBEX    FEB 10 11:44:17   
SLD    10    ES    false    MAR12 Futures     1345.25    USD    GLOBEX    FEB 9 20:19:11