Friday doji possible

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Friday little change expected, low confidence.
• ES pivot 1390.75.  Holding under is bearish.
• Next week bias higher, technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Link of the Day


Are you a One Percenter?

From The Big Picture blog, this is a quick read of a few eye-opening statistics that paint a grim picture of the average American.  Check it out.


Recap

Well we got more downside today, basically what I was expecting.  Now let's see when this downturn might end.

The technicals

The Dow: Today the Dow shed another 78 points to continue a now three day stairstep decline.  The good news is that this was enough to bring the indicators to oversold levels.  And the stochastic is in position to execute a bullish crossover in the next day or two.  Also, the support at the 13K level held up.  So while there's no reversal of the downtrend in the candles (which look fairly close to a three black crows pattern), the worst of this decline may be over.

The VIX:  Today the VIX gapped up for a 2.91% gain, but did it on a stubby shooting star, a fairly good reversal pattern.  Its indicators are also nearing overbought levels.  In addition, the futures today formed a dark cloud cover, suggesting lower on Friday.  This all would seem to portend higher stocks if not tomorrow, then early next week.

Market index futures: At 1:44 AM EDT all three futures are up with ES gaining 0.13%.  ES gave us a long red candle today, with a long lower shadow.  The fact that we're now trading up from today's close rather than continuing lower is encouraging.  Also, the stochastic is now nearing it inflection point where it lines up for a bullish crossover.  And finally, OBV has turned up again after four straight days of declines.

ES daily pivot: Tonight the pivot takes a step down from 1399.17 to 1390.75.  Unfortunately, after rising most of the evening, ES turned south right at midnight and we've just now crossed below the pivot.  Unless ES can manage to retake the pivot before the open, it's not looking good for Friday.

Dollar index: After a doji yesterday, the dollar today gave us a narrow gap-up star.  However, its stochastic also executed a bullish crossover, so this indecision might be resolved in a higher dollar on Friday, bad for stocks.  Also, the euro is quite overbought right now and its stochastic just finished a bearish crossover, suggesting a lower euro (and therefore a higher dollar).

Morningstar Market Fair Value Index: Despite the recent losses in the market, yesterday the index remained at 0.97, near its high for the year.  I consider that it is not going lower to be a good sign.


History: According to The Stock Traders Almanac, Friday is historically quite bearish for the Dow (though bullish for the S&P)..

     And the winner is...

So tonight we've got a scenario setting up of a reversal that's coming soon, but doesn't quite seem to be at hand.  So I'd say Friday will be a bottoming day, possibly in the form of a doji, but in any case clearing the way for a move higher early next week.

ES Fantasy Trader

 Last night's short paid off nicely.  We covered at 10:53 AM for an 11.25 point profit.  With no real discernible edge tonight, we're going to stand aside again.

The account now rises to $124,625, after 24 trades (18 wins, 6 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    JUN12 Futures     1384.75    USD    GLOBEX    10:52:50   

SLD    10    ES    false    JUN12 Futures     1396.00    USD    GLOBEX    00:37:12   

 

Thursday possibly lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday lower, low confidence.
• ES pivot 1399.17.  Holding under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1396.00.

Recap

Last night I was suggesting that the Dow could close lower today and it did, though it dropped just 46 point in a somewhat half-hearted decline.  Still, this gradual decay has a different feel than last month's sharp one day dump.  It makes one wonder if there's not lower still to come.

The technicals

The Dow: So anyway, today's solid red candle was enough to pull the indicators further down from their recent overbought peak, and to establish a new declining RTC.  When will this end?  These guys will let us know.  And right now, they're not talking.

The VIX:  Yesterday's hanging man was confirmed today with a 2.89% decline that brought us right back to the 15 level, although it happened on a funny gap-down green candle.  With indicators continuing to rise from oversold and today's drop not doing much to raise the market, I'm looking for a higher VIX again on Thursday, and that's a negative for stocks.

Market index futures: After some profit taking in the final hour of trading, the futures began a slow drift back up, until they got knocked down again at 10:30 PM, evidently on some bad news from China.  That leaves all three futures lower at 12:30 AM EDT, with ES down 0.11%.  That said, ES is once again retracing this latest drop, or at least trying to.  That's giving us a star in the making, following today's star and Monday's hanging man, all indicating uncertainty around a general path lower.  The indicators are now clearly on their trip back down and just coming off overbought levels.

ES daily pivot: Tonight the pivot ticks up from 1398.92 to 1399.17.  However, we're now back below it, not a good sign.

Dollar index: Today the dollar formed a perfect doji, closing exactly in the middle of its three day range and forming in the process a symmetrical triangle.  Since these most often resolve in the direction from which they were entered, that would imply a lower dollar soon, which would be good for stocks.  However, one must note that the indicators are only just now coming off oversold levels, suggesting a higher dollar.  So we'll just have to see which way this one turns out.

Morningstar Market Fair Value Index: Yesterday the index dropped back to 0.97.  The failure to advance any higher than 0.98 is somewhat of a concern at this point.


History: According to The Stock Traders Almanac, Thursday is historically quite bearish, almost as bad as Wednesday.

     And the winner is...

Tonight, the majority of the evidence points to a lower close Thursday.  However, a lot will depend on the importance the market attaches to this China manufacturing data.  As I write this, ES is slowly resuming the uptrend it was in before the news hit.  Whether or not it can creep back to the pivot remains to be seen.  But the technicals all seem to be pointing lower, so I'll just have to go with that.

ES Fantasy Trader

Tonight we go short at 1396.00.

The account remains at $119,000 even, after 23 trades (17 wins, 6 losses) starting from $100,000 on 1/1.
 

Wednesday may go lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Wednesday possibly lower, low confidence.
• ES pivot 1398.92.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

It seemed to me last night like we had a chance to go lower today and so we did, with the Dow shedding 69 points, just its second losing session in 10 straight.  Since 2012 began, the Dow has only had one instance of a two day losing streak, one of three days, and one of four days.  Which path is Wednesday on?  Follow the Night Owl and get the hoot.

The technicals

The Dow: Today's drop was expected and I took a profit in my DXD trade from yesterday.  The indicators are all now coming off overbought, suggesting lower to come after today's long red candle.

The VIX:  Last night I wrote "there's more upside to come" and the VIX delivered today in the form of a 3.59% gap up.  But it was a red hanging man.  So this leaves us wondering if Wednesday will follow lower or if the rising indicators will prevail.  Falling VIX futures today would suggest the former, which would be good for stocks.

Market index futures: Unlike last night at this time, tonight all three futures are in the green at 1:24 AM EDT with ES leading the way, up 0.18%.  Nevertheless, we are now trading outside the rising RTC and that is a bearish setup.  Coupled to highly overbought indicators, and today's candle in the shape of a hanging man, this has the feel of a market ready to go lower.

ES daily pivot: Tonight the pivot falls from 1401.83 to 1398.92.  We had a pop in ES earlier this evening that broke through the old pivot and despite a gradual drift lower after 10:30 PM, we're still four points over the new number, a good sign - while it lasts.

Dollar index: Today the dollar actually gained 0.14% on a funny homing pigeon pattern you don't see very often.  This is a bullish reversal pattern and with indicators approaching oversold, we might see a higher dollar in the next few days, if not Wednesday.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.98, the highest level of the year.  I'll take the fact that the index managed to break the 0.96 level last week as a positive sign.


History: According to The Stock Traders Almanac, Wednesday is historically very bearish.

     And the winner is...

More mixed messages tonight.  The Dow and ES charts look ready to go lower but the VIX and ES trend suggest higher.  What to do, what to do...  OK, what this feels like to me is a market that still wants to go higher but needs one more day of lower prices before resuming the uptrend.  We are also entering the weakest three days of the month.  So tonight is one of those times that I'm going to disagree with the futures, possibly at my own peril, and claim that Wednesday goes lower again.

ES Fantasy Trader



Last night's short paid off, not spectacularly, but I'll take a 4.75 point profit any day. Tonight, we're standing aside again.  While I do think the market's going lower Wednesday, the edge right now isn't compelling enough for me to jump in here.  With the account up 19% YTD, I think I can afford to take a pass on days like this.

So our balance now rises to $119,000 even, after 23 trades (17 wins, 6 losses) starting from $100,000 on 1/1.

BOT    10    ES    false    JUN12 Futures     1397.25    USD    GLOBEX    10:51:59    

SLD    10    ES    false    JUN12 Futures     1402.00    USD    GLOBEX    00:58:28   

 

Tuesday possibly lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Tuesday lower, low confidence.
• ES pivot 1401.83.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1402.00.

Recap

Last night I suggested that we might go higher today and so we did, although I have to point out something interesting.  The S&P gained 0.4% and the Naz jumped 0.75% while the Dow advanced a mere 0.05%.  When I see divergences like this, it's time for the Night Owl to do a head swivel and pay extra attention.  Read on...

The technicals

The Dow: The Dow put in a symmetrical doji today, give or take, to follow Friday's inverted hammer.  That's two consecutive reversal indicators.  And the Dow is clearly having trouble with the 13,250 resistance zone.  And the indicators are all starting to come alive from their highly overbought levels, with the stochastic just completing a bearish crossover.  This all suggests a down day Tuesday, albeit still eminently within the ongoing rising RTC.

The VIX:  The all-important VIX has been ping-ponging around in a range of 14-16 lately.  Today it gained 3.94% to close right on its long-term support line of 15 with a hanging man type candle, although there's not really a trend in place.  Meanwhile, its indicators have now all bottomed at oversold levels implying that there's more upside to come, which is bad for stocks especially given that we didn't see a lower close in the markets today.

Market index futures: At 12:45 AM EDT, all three futures are again back in the red, at least a little.  ES is down 0.09% after putting in a third straight decent green candle today.  The new candle developing is developing as a star drooping off the close of today's bar.  Of course, all year long so far these sorts of reversal warnings haven't counted for much without confirmation, and ES hasn't been able to put together more than one down day in a row since March 6th.  So this is something to watch, but we can't really pull the dive alarm on this basis alone.

ES daily pivot: Tonight the pivot rises once again from 1397.67 to 1401.83.  With ES dipping ever so slightly since the close, we're now less than a point away from this new number.  I'm thinking there's now a good chance ES could drive under the pivot before the open on Tuesday, which would be a negative for stocks.

Dollar index: Last night I wrote "this chart is looking for a lower dollar again on Monday".  And so it was once again, with the dollar giving up another 0.46%.  And in doing so it gave us a bearish three black crows pattern suggesting even more losses to come, which would again be good for stocks.  Supporting this notion is the stochastic, still descending from overbought levels.

Morningstar Market Fair Value Index: No update appeared on the MS web site today.


History: According to The Stock Traders Almanac, Tuesday is historically a bit more bullish than Monday.

Sentiment: Once again it's time for the latest 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   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366

 10  3/5        43         26        +     1370

 11  3/12       46         32        +     1371

 12  3/19       46         29        +     1404

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 2/21 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 8 for 8.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And once again, I voted bullish this week.  I'm still not seeing any technical reversal indicators on the monthly SPX chart.

This week we note that while bearish sentiment dipped 3 points,  bullish sentiment remained the same as last week.  Still not the sort of extreme readings that might signal a reversal.

     And the winner is...

More mixed messages.  Both the Dow and SPX charts are quite oversold, yet the candle pattern on the SPX looks a lot healthier than the Dow.  In fact, I again took out a DXD position (at 12.75).  I guess tonight the overall evidence just makes me feel Tuesday is more likely to go lower than higher.  I really hate making these counter-trend calls, but I just have to calls 'em like I sees 'em.  Unless and until we drop out of a few rising RTC's, the overall trend will remain up.

ES Fantasy Trader

Tonight we go short at 1402.00 at 12:58 AM.  I'm planning on a short short, as it were.  I'll be exiting this one on Tuesday, win, lose or draw.

In the meantime, the account remains at $116,625 after 22 trades (16 wins, 6 losses) starting from $100,000 on 1/1.
 

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Monday higher, low confidence.
• ES pivot 1397.67.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last Thursday I was looking for some small gains for the Dow on Friday.  While the Dow was looking good early on only to end up losing 20 points, the S&P instead did deliver, up 0.11%.  Is this a sign the rally is out of gas or is there still more upside to come?  Read on...

The technicals

The Dow: Three things about last Friday's action: first the Dow had its first losing day in seven sessions, second it formed an inverted hammer reversal warning, and third, it did it on greatly increased volume/  In fact this was the biggest volume day since last September.  Add to this mix some very overbought daily indicators that actually appear to have peaked on Friday, plus a stochastic that just executed a bearish crossover, and you have to wonder if this market may be just about ready to roll over.  At least that's what this chart looks like.

The VIX:  Meanwhile, the VIX gave us a large doji centered around its recent lows near 14.5.  This makes five straight days the VIX has played tag with its lower BB - very unusual.  With the VIX now at a multi-year support level, the prudent bet would be that it's going higher before it goes any lower, and that would be a negative for stocks.

Market index futures: All three futures are in the green at 1:15 AM EDT with ES now up 0.2%.  Unlike the daily Dow chart, ES looks quite healthy.  It remains solidly inside its rising RTC and the green candle being formed now represents good follow-through to Friday's smaller gain.  That's really all we've got to go on since the indicators are now all pegged in "overbought broken" mode and therefore unable to predict anything.

ES daily pivot: Tonight the pivot rises once again from 1392.75 to 1397.67.  After a gain earlier this evening, ES remains above the new level, though now only by 3 points.  Nevertheless, unless ES breaks under the pivot and stays under, this is a good sign for Monday.

Dollar index: Last Thursday I wrote "There's nothing on this chart to suggest anything but a lower dollar Friday".  And the dollar was happy to oblige, dropping even more on Friday for a half percent loss in a deep red candle.  Even at that, the indicators are still just coming off overbought and the dollar has no immediate support in sight, so I'd say this chart is looking for a lower dollar again on Monday which would be good for stocks.

Morningstar Market Fair Value Index: On Friday the index hit 0.98 for the first time this year, finally breaking above the 0.97 barrier.  This is quite a positive development.


History: According to The Stock Traders Almanac, Monday is historically fairly bullish, and the week as a whole is quite bullish with the Dow rising in 6 of the last 8.

     And the winner is...

Another difficult choice.  On the one hand, the Dow and the VIX both point to a lower Monday, but the dollar and the futures indicate higher.  And all four of these are usually good signposts for the market.  What I've noticed lately is that when the Dow telegraphs a possible top, it usually takes one day longer to roll over than you'd think.  With the futures and dollar being more recent than last Friday's closes of the Dow and VIX, I'm going to have to go with that and opine that we close higher Monday. But being so close to the ES pivot makes me nervous.  If we drop below 1397.67, a lower close is much more likely.  On the other hand, I'm not seeing much in the way of negative news on the horizon for Monday, so that should help the bull cause.  I guess we'll see soon enough.

ES Fantasy Trader

Last Thursday night's long idea played out nicely on Friday, resulting in a decent 3.75 profit, not too shabby on a small range day.  Due to the mixed messages I'm getting tonight, I think it's more prudent to simply stand aside than place a possibly low probability bet.  I'd rather wait for something with a bit more of an edge.  And of course waiting is always just as much of a decision and buying or selling.

So now the account increases to $116,625 after 22 trades (16 wins, 6 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    JUN12 Futures     1399.00    USD    GLOBEX    MAR 16 11:17:27    

BOT    10    ES    false    JUN12 Futures     1395.25    USD    GLOBEX    MAR 16 01:25:57