Friday, March 2, 2012

Friday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday uncertain.
  • ES pivot 1369.50.  Holding above is bullish.
  • Next week bias higher technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Well last night everything was looking down, but sometimes you just can't lose for winning as the Dow turned in a 28 point gain instead of a loss today.  But it somehow still felt like a loss to me, retreating from a mid-day excursion into 13K land on slightly less than average volume.  And so the sideways action continues as we remain stuck in the 12,950-13,000 range.  Let's see if tomorrow might bring more of the same.

The technicals

The Dow:Yesterday's candle looked like a bearish engulfing.  While today did close with a gain, today's close was under yesterday's open, leaving us with a slightly sagging chart.  It certainly has the look and feel of a market about to turn, but it's just not happening.  I really need to see some confirmation before calling this one lower.  And this time I mean it :-)  I'm starting to feel like Charlie Brown who keeps trying to kick the football only to have Lucy yank it away every time.

The VIX:  Yesterday's green candle in the VIX was for naught as today the slide resumed, dropping 6.35% and establishing a new descending RTC.  The indicators also turned back down without ever having reached overbought levels.  Once again, the VIX was unable to put together two consecutive green candles.  Compare this to last July when the VIX rose for 10 out of 12 sessions.  There seems to be no fuel in the VIX tank anymore.

Market index futures: Tonight the NQ is barely up while ES and YM are both barely down, ES dropping 0.05% at 1:26 AM EST.  However, we note that ES has been trending downward slowly since 7:15 PM.  Despite this, we remain at the top of the solid green candle ES put in today and that keeps us solidly inside the rising RTC.

ES daily pivot: Tonight the pivot toook another step up from 1366.17 to 1369.50.  Despite this and the ES drift lower, we remain four points above the pivot.  Unless we break under in the rest of the overnight, it's not looking too bad.

Dollar index: Today the dollar gave us a small doji, forming 2/3 of an evening star.  If it goes lower tomorrow, look for lower still next week which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index fell to 0.92.  The fact that after spending so long stuck at 0.96 the next move was down is negative for stocks.

History: According to The Stock Traders Almanac, Friday is historically neutral for the Dow.  March on the whole ranks as the 5th best month for the Dow.

     And the winner is...

I refuse to kick the football again.  Without solid evidence of a downturn, I'm going to go with the prevailing winds and right now those winds are blowing in an upward direction.  The day-to-day action doesn't seem to be as important as the overall trend so far this year.  It feels like I'm just forecasting the noise.

But I note that the transportation index broke out of its month-long descending RTC two days ago, signaling an end to that trend.  If you believe that a rising $TRAN is good for stocks, that's a point of support.

Unfortunately, when you have a series of small range days with little price movement as we've had lately, producing a technical forecast becomes extremely difficult.  Too hard for me in fact.  So despite my feeling that tomorrow might go a bit higher, I'm making no official call tonight, for the second time this week.  Sometimes that's just how it is.  Watch the ES pivot and see how the market reacts around it for a clue to Friday morning.


Trading Account

Month    Month % change  YTD % change

Jan.         +7.41%         +7.41%
Feb.         +3.67%        +11.35%       

ES Fantasy Trader

Yesterday's short did not work out in a big way.  I was torn between hanging on, waiting for it to go lower, and just packing it in.  As it turns out, I waited too long and ended up with an even bigger loss.  Oh well.  Tonight, we're standing aside.

The account falls to $101,500 after 17 trades (12 wins, 5 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1359.25    USD    GLOBEX    MAR 1 01:40:27    
BOT    10    ES    false    MAR12 Futures     1372.00    USD    GLOBEX    FEB 28 01:14:08   


Thursday, March 1, 2012

Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday uncertain.
  • ES pivot 1366.17.  Holding under is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes short at 1359.25..

Last night I wrote "My guess though is that [Bernanke] is going to say something that Mr. Market won't like and that will send us lower."  Well he did and it did, with the Dow dropping 53 points and relinquishing its admittedly tenuous hold on 13K.

The technicals

The Dow: Today's red candle brings us right back into the consolidation area of 12,940-13,000 we've been in since February 21st..  But the indicators have all finally woken up and are now starting to come off their overbought levels.  And we also touched the upper BB at 13,057 today.  And today formed a bearish engulfing pattern.  And today's volume going down was much higher than yesterday's going up.  To me, that all spells lower.

The VIX:  The VIX gained 2.6% today on a classic bullish piercing pattern.  Along with rising indicators, this portends a higher VIX on Thursday, implying lower stocks.

Market index futures: Tonight all three futures are in the red with ES leading the way lower down a non-trivial third of a percent.  Today's red candle pretty much formed a bearish engulfing pattern and the lower numbers in the overnight tend to confirm it.  There's also no support til 1355, five points below where we are at 2 AM EST.

ES daily pivot: The pivot dipped from 1369.92 to 1366.17 tonight.  However, after breaking underneath this afternoon, ES has been holding below and is now drifting lower - not an encouraging sign.

Dollar index: After hitting its lower BB yesterday, the dollar scored its biggest gain since January 13th today, rising 0.63%.  And we've got indicators coming off oversold levels including a stochastic that has just finished a bullish crossover.  This all points to a higher dollar, and therefore lower stocks.

Morningstar Market Fair Value Index: The index graph on the MS web site is all screwed up - it's hard to tell just what the right number is - no nothing to see here tonight.

History: According to The Stock Traders Almanac, Thursday is historically fairly bullish, although the Dow has been down the last four of five years.  And of course the first day of any month is generally bullish.

     And the winner is...

Tonight, the charts pretty much are in agreement.  While the market has admittedly had trouble putting together two losing sessions in a row lately, I'm thinking Thursday may be the day.  I see enough bearish technicals to call for a lower close Thursday.

ES Fantasy Trader

Tonight we go short at 1359.25.

The account remains $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.

Wednesday, February 29, 2012

Wednesday uncertain - listen to Uncle Ben

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1370.00.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Finally.  Hallelujah, the Dow managed to close above 13,000.  I was reading an interesting piece by someone who observed that it seems like everyone is now expecting a pullback (and I'll plead guilty to that too) and reminding us that whenever everyone gets on one side of the market, it generally goes in the other direction.

In any case, we just continue to see the same thing we've seen all year so far - a pretty constant grind upward with numerous dojis, stars and hanging men that signal but never quite seem to generate a reversal.  Will Wednesday be the day?  Read on...

The technicals

The Dow: Case in point - yet another star today for a 24 point gain.  Only this time we have 13K below us so that now becomes support.  The indicators are all completely broken, so we have no real technical indication on this daily chart of a reversal.

The VIX:  The VIX, which has had so much trouble putting in a green candle lately failed to do so once again today, dropping 1.26% to close back under 18.  And this despite indicators that are coming off oversold levels.   As with the Dow, these indicators no longer seem to be indicating much.

Market index futures: Unlike last night, all three futures are down at 1:26 AM, though just barely, with ES dropping only 0.04%.Meanwhile, after an unremarkable green candle today, ES remains inside its rising RTC.  Still no indications of any reversal here right now.

ES daily pivot: Tonight the pivot rose from 1363.67 to 1370.00.  Even at that, we continue to hold above the new number, which is good for stocks  at least as long as we hold above.

Dollar index: As expected, the dollar continued lower today and remains inside its descending RTC.  It did hit its lower BB today but that's not seeming to count for much lately.

Morningstar Market Fair Value Index: The index has extended its streak stuck at 0.96 to seven now.

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

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 updated 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   5/5
  6  2/6        56         30        +     1345   6/6
  7  2/13       48         31        +     1343
  8  2/21       44         32        +     1361
  9  2/27       48         24        +     1366

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 1/30 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 6 for 6.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  After six straight weeks of being correct, the contrarian "majority is always wrong" theory is really looking bad.  The Ticker Sense bloggers continue to1000.

This week we see that bullish sentiment gained 4 percent back to the same level as two weeks ago while bearish sentiment dropped 8 percent to the second lowest level this year sp far.  My take is that these still aren't the sort of extreme numbers that precede a reversal.  And for the record, once again I voted bullish.  I'm still not seeing any reversal indicators even on the monthly SPX chart.

     And the winner is...

Technically, I still see no reversal in the daily charts.  But, and this is a big but, Uncle Ben is talking tomorrow and that's what's going to move the market, not the tehnicals.  Since I have no way of knowing what he's going to say, it's tough to make a reasoned call.  My guess though is that he's going to say something that Mr. Market won't like and that will send us lower.  On the other hand, we now have 13K as support for the Dow, though that may not count for much.  I don't often just give up, but tonight's one of those times.  We might get another doji of indecision, but who knows.  Perhaps Wednesday will bring more clarity to the charts.

ES Fantasy Trader

Given the mixed picture and the Bernanke Uncertainty Principle, I'm not putting on any trades tonight.  ES will just have to muddle through without me.

So the account remains $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.

Tuesday, February 28, 2012

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, medium confidence.
  • ES pivot 1363.67.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Well, scratch everything negative I said last night about the market.  Although the Dow did in fact end lower (if you can call a minus 1.44 points a loss) both the S&P and the Naz posted slight gains.  Where does this leave Tuesday?  Read on for my take on it.

The technicals

The Dow: Gosh, I might as well just copy last night's post into this one since everything looks the same.  Yesterday the Dow gave us a doji.  Today we got another, even bigger doji.  Normally, I'd say two dojis like that make a reversal more likely.  But this helium market just refuses to come down to earth.  I'm through calling for a change in direction until I see some proof.  And so far, I don't see it.

The VIX:  As I thought last night, the VIX did go higher today, by 5% but it did it on a gap-up red candle.  And even that five percent bump was not enough to trigger a stock sell-off today.  With the VIX registering a green candle only once in the last seven sessions, it's looking bad for the bears.

Market index futures: Tonight all three futures are up with ES gaining a third of a percent at 1:48 AM EST following news of the German vote on Greece.

ES daily pivot: Tonight the pivot is only slightly down from 1364.42 to 1363.67.  ES broke above the pivot this morning at 11 AM.  Since then, it's only gone higher, extending its gains after midnight.  That's all positive for stocks.

Dollar index: The dollar managed to eke out a tiny gain today but the strengthening euro will put the kibosh on that tomorrow.  And that's another positive for stocks.

Morningstar Market Fair Value Index: Did not update today.

History: According to The Stock Traders Almanac, there's just a small bearish bias to Tuesday.

     And the winner is...

I think I let myself be a bit too influenced by the daily Dow chart which is just moving sideways.  ES is in a clear uptrend now.  Until I see a confirmed reversal sign there, I'm going to have to vote with the bulls.  So for now, I'm going with a higher close Tuesday.

ES Fantasy Trader

Well this short just didn't work out and I'm not sticking around to see about tomorrow, so we took an ugly 10.75 point loss tonight.  Serves me right for trying to anticipate.  Tonight we stand aside while I try to find some more clarity.

The account is now $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    MAR12 Futures     1372.00    USD    GLOBEX    01:14:08   
SLD    10    ES    false    MAR12 Futures     1361.25    USD    GLOBEX    FEB 27 00:45:31  

Monday, February 27, 2012

Monday looking lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, medium confidence.
  • ES pivot 1364.42.  Holding below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes short at 1361.25.

I was having trouble picking a direction for Friday last Thursday night.  I reluctantly came down on the bullish side.  That was looking good around lunch time but by the close, all our gains evaporated.  Is this finally the sign of the long-awaited pullback?  Tonight we call out the nominees and try to select the winner.

The technicals

The Dow: Friday's 1.74 loss gave us a perfectly balanced doji.  But we've seen this movie many times already this year.  Without confirmation, we cannot strictly call this a reversal indicator.  The stochastic is now flatter than a pancake, suggesting more sideways action rather than a reversal.  Another attack on 13,000 isn't out of the question, but the longer we sit just under that, the more likely the next move is lower rather than higher.

The VIX:  The VIX put in its first green candle in six straight sessions on Friday, rising 3% to give us something approaching a bullish piercing pattern.  And having very nearly touched its lower BB, it looks to me ready to go higher on Monday, which would be bad for stocks.

Market index futures: On Friday, ES put in a true doji for the first time this year.  But again, because of the general rising trend, we really need some confirmation that this is a reversal indicator before calling a top. That said, at 1:25 AM EST all three futures are lower, with ES down 0.17%.  It's obviously still early, but as far as it goes, this is preliminary confirmation of the doji.

ES daily pivot: Tonight the pivot moves from 1359.00 to 1364.42.  Coupled with a slow downward drift in ES, we are now three points under the new value, not a good sign.

Dollar index: The dollar took a big gap down on Friday, breaking through its lower BB to form a stocky hammer.  This doesn't mean it can't go lower still on Monday, but the risk/reward at this level suggests it's more likely to be rising again in the next day or two.

Morningstar Market Fair Value Index: The index has now been stuck at 0.96 for six straight days.  The l;ast time we saw a longter stretch was the period form 12/6 to 12/22 in 2010.  After that... not much happened.  The VIX rose, but the market didn't fall.  I gather from this that we're in some sort of market doldrums, where the trade winds have subsided.  There's not much energy to push us in either direction right now.

Supporting this idea is the SPX Hi-Low index which has been stuck on 100 for 10 days now.  This sort of action makes me think that the next move is down, but where's the impulse to set this snowball tumbling down the hill?

History: According to The Stock Traders Almanac, the rest of the month is historically mildly bearish.

     And the winner is...

Tonight I'm looking at the last doji (OK, it was really a very narrow star) we saw in the Dow on February 9th.  The next day was down.  Given that, plus some other assorted warning signs on the charts, I'm going to hazard a wild guess that Monday's going lower.  I'm not ready to call it the start of a pullback, but it just feels like where we're going.

ES Fantasy Trader

Putting my money where my beak is, tonight we go short at 1361.25.  If this play doesn't work out on Monday, then I expect it will on Tuesday.

The account remains $113,250 after 15 trades (12 wins, 3 losses) starting from $100,000 on 1/1.