Friday, March 30, 2012

Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1396.17Breaking above is bullish.
  • Next week bias higher, technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1401.50.

Well we did finally end up going a bit higher today, though it came right down to the wire.  Still I guess a 19.6 point gain counts.  Of course, the Naz and the SPX did end a bit lower.  I don't think there's much to be learned from this - call the market basically flat today.  Where does this leave us for Friday and the end of the quarter?  Let's try and figure it out.

The technicals

The Dow: Today's close at 13,146 gave us a tall hammer candle.  But it also caused a bearish stochastic crossover.  I can't remember the last time, if ever that I saw a situation like this.  In addition, money flow is going down but the RSI is going up.  They don't come more conflicted than this.  I just throw my hands up over a chart like this.  Let's move on and see if there's something less schizophrenic elsewhere.

The VIX:  After a big gap up this morning, the VIX finished the day with a big dark cloud cover type red candle, ending up just 0.01 on the day.  Going all the way back to last August, the last seven times we had such a big red candle, the next day was lower.  (The eighth time was in the middle of last summer's insanity over Greece, and the VIX went higher the next day).  The futures support this with a similar looking candle pattern.  So going lower Friday isn't out of the question, which would be good for stocks.

Market index futures: Tonight all three futures are trading in the green, and not by trivial amounts, with ES gaining 0.2% at 1:04 AM EDT.  Today's candle was a strange long asymmetrical spindly dojiish star that isn't by itself a reversal warning.  However, the developing overnight candle is coming across as a bullish engulfing pattern, generally very positive.  It's also trading outside the admittedly short but steep three day descending RTC we find ourselves in.

ES daily pivot: Tonight the index dropped from 1401.50 to 1396.17.  This.combined with a mid-evening move up in ES now leaves us above the pivot for the first time in a while, by about five points.  That is reason for encouragement.

Dollar index: Last night, I though the dollar would go higher today, and it did by 0.07%, but in keeping with this crazy day, it did it on a gap-up red candle.  It sure looks like this dollar is not wanting to go higher, but all the indicators have now bottomed at oversold levels and are headed back up.  Another chart I don't know what to make of.

Morningstar Market Fair Value Index: Yesterday the index dropped, not unexpectedly for the third straight day back to 0.96.  This is something of a support level so it will be interesting to see if we can hold this line.

History: According to The Stock Traders Almanac, Friday is historically quite bearish, in fact the weakest day of the week.

     And the winner is...

So what's it gonna be?  Window dressing or profit taking?  Recall that last year we got a small loss on the last day of March.  But by then we were considerably overbought.  We're not at this point this year.  With the Dow and the dollar charts completely opaque, tonight I have to go with the VIX and the futures.  And those are looking like there might be some upside in store Friday.   So I'm going to give this one to the bulls and call for a higher close Friday.

ES Fantasy Trader

Portfolio stats: With no trade once again last night, the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  Tonight we go long right at Thursday's pivot, 1401.50 at 1:16 AM.

Thursday, March 29, 2012

Thursday higher if pivot crossed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday possibly a bit higher, low confidence.
  • ES pivot 1401.50Breaking above is bullish.
  • Friday bias uncertain, technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Last night I was having trouble picking a direction for today so I just said "I think for the next few days we're going to consolidate around the 13,100-13,300 area".  Well today the Dow gave us a range from 13,069 to 13,213, closing at 13,126.  So I'd say that was a reasonable guess.The question now is, having closed near the lower end of the range, will we go higher on Thursday?  The answer's not blowing in the wind, but it may be lurking in the charts.

The technicals

Dow hourly
The Dow: Tonight I'm presenting a chart I don't bring up very often, but I think it has the most insight as to where we may be going on Thursday: the Dow hourly chart.  (The thick black horizontal lines are the previous day range bars; the other panels from top to bottom are volume, stochastic, CCI, RSI, and momentum).

I have added the descending RTC here that began at 3 PM yesterday.  Note how we got a classical hammer in the 2 PM bar (3rd from the right).  That was followed by a green candle that took us outside the RTC - that's a bullish setup.  And the 4 PM bar was entirely outside the RTC - that's the bullish trigger.

Supporting this is the RTC which went oversold at 11 AM, bottomed at 1 PM, and then turned upward.  Also, the last three volume bars are increasing.  To me, this is a pretty good indication that the Dow may be wanting to go higher Thursday.

The VIX:  Today the VIX actually dropped 0.77% on a very tall gravestone doji that took it out the top of its recent trading range but ultimately came right back to finish at 15.47.  The futures showed a similar pattern.  This has the look of a breakout attempt that was cut short.  The indicators are confused here, and so am I, with momentum and RSI now moving lower but the stochastic just making a bullish crossover.  Unless the VIX can manage a breakout of this 13 day range, we're more likely to see it move lower than higher from here, which would be good for stocks.

Market index futures: At 12:53 AM EDT, all three futures a just barely in the green with ES up just 0.04% after basically wandering aimlessly in the overnight.  There is some comfort, I suppose, that after today's red candle, we're not moving any lower now.  There does seem to be a shallow ascent going on from 10 PM.  We'll be curious to see if this continues into the wee hours.

ES daily pivot: Tonight the pivot tumbles from 1410.75 to 1401.50.  With ES just drifting since the close, that now puts us just one point below.  We'll want to see ES break above this line by the open on Thursday.  Failing to do that would be bearish.

Dollar index: Last night I thought the dollar looked ready to go higher and it did today, though only by 0.1% and on a long asymmetrical star, almost a shooting star.  It's not clear though that this signifies another reversal.  The indicators are all still quite oversold and the stochastic just made a bullish crossover today, suggesting a higher dollar again on Thursday, which would be bad again for stocks.

Morningstar Market Fair Value Index: Yesterday the index dropped from 0.98 to 0.97.  To be still above the 0.96 level that provided resistance for so long is positive.

History: According to The Stock Traders Almanac, Thursday is historically neutral for the Dow but distinctly bearish for the S&P..

     And the winner is...

I'm not seeing any real signs that we're due to go higher on Thursday, but I am seeing signs that the declines of the past two days may be close to played out.  Today's tall ES star completely retraced Monday's big gain intraday, suggesting that the bears were unable to hold the low ground.  Meanwhile, there's just two days left to the week, the month, and the quarter.  Some people are looking for window dressing to occur, driving stocks higher, while others expect portfolio rebalancing to drive them lower.

It's all just too confusing for me right now so I'm going to stick to my same range call I made yesterday.  Until we close out this week, I'm expecting the Dow to stay inside the area of 13,100-13,250.  Based entirely on the action on hourly Dow chart though, I will go waaay out on a limb and hazard a guess that we might actually see a positive close Thursday.  The ES pivot will be key - we need to break above 1401.50 and stay there, otherwise all bets are off.

ES Fantasy Trader

Portfolio stats: the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  With an identifiable edge still not present either way tonight, once again we are not trading.

Wednesday, March 28, 2012

Wednesday neutral

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain..
  • ES pivot 1410.75Holding below is bearish.
  • Rest of week bias uncertain, technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

My call last night for a slightly higher close was exactly right - until 3:10 PM when the market fell off a cliff.  OK, a little cliff, but still a modest 44 point loss.  Does this foreshadow a bigger retracement or will the uptrend reassert itself.  Maybe the charts can help answer that question.

The technicals

The Dow: Today's action was fairly typical after a big run up.  The fact that it was a red candle should not be taken as a reversal warning.  The indicators are actually mixed right now: momentum and OBV are decreasing, but money flow is increasing and the stochastic just finished executing a bullish crossover.  I tend to place more weight on the latter.

The VIX:  The VIX gave us its first green candle in four sessions today.  This took us to near the top of an eleven session trading range from 14.25 to 16.  Its rising indicators suggest at least a bit more room to run higher here.  However, I note that the futures put in a solid green candle today for the first time in eight sessions and that does look like a reversal warning.

Market index futures: After giving up the ghost in the last hour of trading, the futures have stabilized somewhat and are now all up marginally.  ES has gained 0.07% at 1:25 AM EDT.  And interestingly, the low we hit this evening, 1404.75 was almost exactly the 50% Fibonacci retracement of yesterday's big gain, at 1404.63.

ES daily pivot: Tonight the pivot rises from 1407.67 to 1410.75.  This now puts us below the pivot, not because ES is fading, but because the pivot has moved above the price.  Either way, it's not what we'd like to see.

Dollar index: Today the dollar put in a small doji centered within yesterday's gap down candle.  With highly oversold indicators, this is looking like a chart ready to reverse, and a higher dollar would be bad for stocks.

Morningstar Market Fair Value Index: Morningstar is having its usual web difficulties.  How hard is it to post one number?  It's either 0.96 oir 0.98.  I can't tell.

History: According to The Stock Traders Almanac, Wednesday is historically basically neutral.

     And the winner is...

I find the lack of further downward follow-through in the overnight futures to be encouraging, particularly having hit the 50% Fib retracement in ES.  Also, the daily Dow chart looks encouraging.  But the VIX does not.  I know some people are clamoring for an immediate pullback, but I'm just not seeing the sort of toppy charts that would support that.  On the other hand, I'm also not seeing a lot of gas in the tank to motor higher.  I think for the next few days we're going to consolidate around the 13,100-13,300 area in the Dow.  That makes picking an exact close for Wednesday too hard.  The best I can guess right now is that we're not in for any major moves on Wednesday.

ES Fantasy Trader

Portfolio stats::the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  With the lack of an identifiable edge either way tonight, once again we are not trading.

Tuesday, March 27, 2012

Tuesday slightly higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday slightly higher, medium confidence.
  • ES pivot 1407.67Holding above is bullish.
  • Rest of week bias uncertain, technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Sunday night I wrote that I was "cautiously optimistic" about today.  Turns out the caution was unnecessary.  I've got to thank Uncle Ben for turning a cautious day into a roaring bull run.  The big question after a big up day of course is always whether or not it can keep going.  I think the charts will tell us, so let's see what they have to say.  Speak, charts, speak.

The technicals

The Dow: Today we got a big pop right out the gate, and it only got better from there, thanks to Uncle Ben.  The resultant jolly green giant candle took us clear out of the Dow's six session descending RTC, for the mother of all bullish setups.  The indicators have all now clearly bottomed and the important stochastic just completed a bullish crossover today.  This sort of chart is canonically bullish.

The VIX:  Today the VIX gave us a gap-down inverted hammer that brought us right to the bottom of its 10 day range for a 3.78% loss.  But... its indicators are all still on the way down from overbought, including a stochastic that just completed a bearish crossover.  With the futures still stuck in a now-8 day descending RTC, it looks like there's still more downside possible here.  In particular, note that the lower BB is now at 13, over a point away.  I see nothing here not to like.

Market index futures: Today ES provided us with a tall green candle that didn't just retrace last week;s losses, it completely blew the door off the resistance at 1405 that stopped us cold then, as well as providing a major bullish seteup with a dramatic exit from the descending RTC.  As a bonus, we got a completed bullish stochastic crossover today.  Right now, at 1:35 AM EDT, all three futures are in the green with ES up 0.09%.  There's really nothing to dislike on this chart..

ES daily pivot: Tonight the pivot jumps from 1389.92 to 1407.67.  This big gain means that even though ES rose considerably right around the close today, we're now closer to the pivot than before.  But still, a seven point spread isn't bad and still provides a fairly comfortable cushion.

Dollar index: Today the dollar took a big gap down on a solid red candle to lose half a percent.  And yet even at that, we're still not close to either support or the lower BB.  There's still nothing in this chart to suggest a higher dollar, and that's good for stocks.  The indicators are now all in oversold-broken mode and have therefore lost their predictive power.

Morningstar Market Fair Value Index: The index did not update today.  I expect that tomorrow's number will show at least a one tick gain.

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

Sentiment: Once again it's time for the latest weekly 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   9/9
 10  3/5        43         26        +     1370
 11  3/12       46         32        +     1371
 12  3/19       46         29        +     1404
 13  3/26       39         29        +     1397

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 2/27 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 9 for 9.  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.  With the year just about one quarter gone, I'm still not seeing any technical reversal indicators on the monthly SPX chart

I find it interesting that while bearish sentiment remained unchanged this week at 29%, bullish sentiment declined to its lowest level of the year, leaving us also with the narrowest point spread of the year - just 10 points.  If you believe that the TS bloggers know what they're talking about (and history this year seems to support that), then it appears that some of them are thinking the rally may be near its end.  On the other hand, market tops are generally accompanied by a major increase in bullish sentiment.  To see bullish sentiment actually decrease like this could be considered contrarian bullish.

     And the winner is...

Often after a big run-up like we saw today, the market will pause and have a small range day the next day.  That's pretty much what I'm expecting tomorrow.  So with no real negative signs on the charts, I'm going to call for a small up day Tuesday.

ES Fantasy Trader

Last night's long turned out well, with a tidy 9.5 point profit. Portfolio stats::the account now goes to $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  Because I'm not seeing a big edge right now either way for Tuesday, tonight we're going to stand aside.  At this stage, I'd rather leave some money on the table than risk a loss of similar size.

SLD    10    ES    false    JUN12 Futures     1404.75    USD    GLOBEX    11:13:30   
BOT    10    ES    false    JUN12 Futures     1395.25    USD    GLOBEX    01:03:00   


Monday, March 26, 2012

Monday maybe higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1389.92Holding above is bullish.
  • Rest of week bias uncertain, technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1395.25 at 1:03 AM..

Thursday night I was expecting a doji on Friday - little change, with direction hard to determine.  It was more of a star than a doji but we did get a small move, with the Dow gaining just 35 points to close at 13,081.  What does that mean for the coming week?  Read on...

The technicals

The Dow: One thing I mentioned last wee was that Friday might be a bottoming day and that's just what the chart ended up looking like.  We got a nice green hammer on the day that held support at 13K.  The Dow is now firmly oversold and its stochastic is right at the level from which a bullish crossover appears ready to form.  I'm now liking the look of this chart.

The VIX:  On Friday, the VIX took its biggest tumble in 13 sessions, dropping 4.82% back below the 15 level.  And in so doing it just formed a bearish stochastic crossover.  This implies a lower VIX Monday which would suggest higher stocks.  The futures seem to support this idea, being stuck in a now seven day descending RTC that is showing no sign of reversing.

Market index futures: At 1:15 AM EDT we've got all three futures in the green.  NQ is up a nice 0.22% while ES and YM are lagging a bit, up just 0.05% each.  After three days of losses last week, ES on Friday put in a green hammer, just like the Dow.  The fact that we're now trading around the upper end of that hammer is early confirmation that the downtrend may be over.  This is supported by rising OBV and money flow, and a stochastic that looks to be readying a bullish crossover in the next few days.

ES daily pivot: Tonight the pivot ticks down from 1390.75 to 1389.92.  With ES pretty flat in the overnight after a pop on the open this evening, we're still about five points over the pivot - not a huge number but still encouraging for Monday morning.

Dollar index: On Friday the dollar put in a stubby gap-down star - not really a reversal indicator.  Supposedly the $DXY is continuing lower tonight.  I no longer have access to $DXY since my data provider whom I will not name but their initials are eSignal decided to start charging for it.  So I have to use the Deutsche Bank dollar index $USDUPX.  It's still free but it only updates during regular hours.  So be it - hey eSignal, you already get enough money from me every year.  Well anyway, even though the dollar gapped down and its indicators are all oversold now, there's still more downside room to go, which would be good for stocks.

Morningstar Market Fair Value Index: On Friday, the index remained at 0.96, but it continues to step down from the high of 0.98 reached early last week. This remains at least something of a concern and will bear watching

History: According to The Stock Traders Almanac, Monday is historically slightly bullish, the only really at all bullish day of the week.  The whole last week of March is generally a downer.

     And the winner is...

I'm seeing enough positive signs in the charts tonight to be cautiously optimistic about tomorrow, so I'm going to call for a higher close Monday.  The rest of the week though remains to be seen.  However, I do note that J-Trader is long right now and the great Rob Hanna is seeing a pretty convincing historical bullish edge to the current setup.  That's all she wrote.

ES Fantasy Trader

Since we did not trade Thursday night, the account remains $124,625, after 24 trades (18 wins, 6 losses) starting from $100,000 on 1/1.  Tonight we're going to try a long from 1395.25.