Friday maybe slightly lower

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

• Friday lower, low confidence.
• ES pivot 1378.50.  Holding above is bullish..
• Next week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside..

Recap

Last night the market looked ready to move higher today and so it did, with the Dow tacking on181 points to close just below 13K.  Things were looking up earlier this evening for Friday until the China GDP numbers came out.  They missed, though not by much, but that was enough to throw a money wrench into the outlook for Friday.  We'll quickly run down the technicals anyway, bearing in mind that they may get skewed (or maybe skewered) on Friday.

The technicals

The Dow: Today's tall solid green candle just about exactly retraced 50% of the decline from the April 2nd top and left us just short of 13K which is once again resistance.  That said, the indicators are all in a wonderfully bullish position, with the stochastic having completed a bullish crossover from a very oversold position.  There's nothing to suggest a move lower on this chart.

The VIX:  This VIX took a big tumble today dropping 14.1%.  I told you it doesn't like hanging around the upper BB for long.  Even after that, it's still overbought and looks likely to go lower still on Friday, which would be good for stocks.

Market index futures: Today's tall solid green candle was big - almost too big.  It's pretty common for the market to take a pause after big up days like this and that's sort of what we're seeing now at 1:52 AM with all three futures in the red and ES down 0.2%.  This was admittedly helped along by the poor China numbers, but I think it was already in the cards.  The developing overnight candle is a red star, no doubt paying homage to the Chicoms and reflecting a market teetering on the edge.

ES daily pivot: Tonight, the pivot jumps from 1364.00 to 1378.50.  ES was comfortably above the old number, but this rise along with the hit ES took on the China data now leaves us less than five points above the pivot.  That's still OK, but bears watching.

Dollar index: Last night I wrote "more downside to come Thursday" and the dollar obliged, gapping down for a 0.68% loss.  Even at that, it remains overbought so I think there's still room to run lower on Friday.

Transportation: The trannies also had a big day today, like just about everyone.  Like the Dow, we now have a completed bullish stochastic crossover and other rising indicators.  No sign of a reversal here either.


History: According to The Stock Traders Almanac, Thursday is historically fairly bullish for the Dow, only so-so for the SPX.

Accuracy:

Month right  wrong

April   4      3

And speaking of accuracy, I came across this interesting post, Guru Grades over on cxoadvisory.com.  They give a long list of more than 60 well-known market forecasters along with their accuracy.  It's too long to reprint entirely here but I will note that they claim that

 "The overall accuracy of the group based on both raw forecast count and on the average of forecaster accuracies (weighting each individual equally) is 47% (48%)."

Now the Night Owl has never claimed to be a guru and has somehow inexplicably been left off this list, but I will simply note that since I started tracking my daily calls this month, my current average is 57%, which puts me tied for third place.  And this is just a short sample.  I humbly believe I'm better than this.  (Now watch, I'll be wrong for the next two weeks).

     And the winner is...

Wow - a very tough one tonight.  I'm almost feeling like taking a pass on this call but ultimately I think I'm going to go for a lower close Friday.  I'm thinking that the China numbers will weigh on the market and people are going to want to take some profits ahead of the weekend after two nice up days.  Nevertheless, I'm bothered by the VIX and the dollar which both really look like ready to head lower.  So I'm not looking for a big dump on Friday, but I'd be really surprised to see another day of gains like the last two.

ES Fantasy Trader

Tonight I threw in the towel on my long trade from last week for a disappointing 15.5 point loss.  Still, we were down more than double that at one point, so this feels like a victory.  Still I think I'd be pushing my luck to hold onto this much longer, so I'm just going to give up on it.  They can't all be winners.  Portfolio stats: The account takes a hit down to  $130,000, after 29 trades (22 wins, 7 losses) starting from $100,000 on 1/1  

Tonight we're simply standing aside amid the uncertainty over the China numbers.

SLD    10    ES    false    JUN12 Futures     1381.50    USD    GLOBEX    00:47:21    0001f4e5.4f875c76.01.01        20.10    null

Went long at 1397.00 on April 5th - since this is over a week ago, I don't have the line item for it anymore and I'm not digging up the daily report from IB to find it.  I just need the number, which I gave on the post for that day.

Thursday higher

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

• Thursday higher, low confidence.
• ES pivot 1364.00.  Holding above is bullish..
• Friday bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains trapped long.

Recap

As sometimes happens, I was right, but just one day early.  We got the bounce I was looking for today to the tune of 89 Dow points.  As I was looking for, we saw ES break above its pivot in the wee hours of Wednesday morning, when even the Night Owl is sleeping, and it was all uphill from there.  So was today a one-off sucker trap for the bulls, or are we resuming an up-trend?  Few are foolish enough to even attempt to answer that question, but I figure what the hey, I'll give it a shot.

The technicals

The Dow: Today the Dow retraced close to but not quite half of yesterday's losses.  It is now >< that close to executing a bullish stochastic crossover.  And both momentum and money flow have now hooked up from depressed levels  RSI remains oversold at 20.55.  On that alone, I'd have to say there's more chance of the Dow moving higher than lower on Thursday.  If we do a Fibonacci retracement of the recent selloff, we see that we're still not even up to the 0.25% retracement at 12,855.

The VIX:  Ah, all hail King VIX!   The VIX today did go lower as I expected, but only by 1.81%.  And it did it on a green candle.  But - that was a pretty good bearish harami, a pattern you don't see too often.  In addition, it remains above its upper BB and its indicators are now highly overbought.    I'd say the VIX is more likely to go lower Thursday than higher, and that's good for stocks.

Market index futures: At x AM EDT all three futures are up, though not as much as last night at this time.  ES, NQ, and YM are all up exactly 0.2% at 1:04 AM EDT.  I'm actually liking the looks of the ES daily chart more than last night.  The developing candle is just touching the right edge of the descending RTC, ready for a bullish setup.  And all of my Fave Five indicators have bottomed at very oversold levels and are now rising, also a good sign.  Whereas two days ago there was no sign of an end to the pullback, now there are several.

ES daily pivot: Tonight the pivot nudges up from 1363.42 to 1364.00.  The old number served as support all day and we're still three points above the new value in a roller coaster overnight session.  As long as we can stay above this level, that's a good sign.

Dollar index: Today the dollar gave us some more clarity compared to last night by way of dropping 0.13% and forming a descending triangle which, coupled with overbought indicators implies more downside to come Thursday.  And that would be good for stocks.

Transportation: Today, after a big two day sell-off, the trannies pretty much emulated the Dow, gaining 0.91%.  They are now quite oversold and  three of my Fave Five indicators have now bottomed.  From here, I'd say its more likely they go higher than lower.


History: According to The Stock Traders Almanac, Thursday is historically fairly bullish.

Accuracy:

Month right  wrong

April   3      3

     And the winner is...

After a run of several bad days, especially when they involve big drops there's always a tendency to be gloomy about the future.  I'm reading a lot of that kind of talk in the blogosphere right now.  But for the short term anyway, which for me means tomorrow, I have to say I'm not really seeing any technical reasons to be pessimistic.  In fact, all the charts I watch seem to be in agreement, so I'm going to claim there's more room to run and we're in for a higher close Thursday.

ES Fantasy Trader

Portfolio stats:  The account remains, for the time being, $137,750, after 28 trades (22 wins, 6 losses) starting from $100,000 on 1/1  Tonight we continue to remain long from last Wednesday's trade.  Patience may pay off in the end.  In this case, not caving yesterday proved to be the right decision as we made back some of our (unrealized) losses.

Bounce Wednesday if pivot passed

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

• Wednesday higher, low confidence.
• ES pivot 1363.42.  Breaking above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains trapped long.

Recap

Sigh - wrong again.  I did mention yesterday that we had "a market that wants to reverse but isn't totally committed to the idea."  Turns out it actually hated the idea, with the Dow plunging another 214 points to close on session lows.  Looks like we're right back to last year's Euro-mania, with Spain now apparently taking on the Greece role in the 2012 edition.  We'll give the charts another shot tonihgt in the hopes that we can be a bit more accurate on Wednesday.

The technicals

The Dow: There is absolutely no candlestick reversal pattern at all on the Dow daily chart.  On the other hand, the indicators, which were all oversold yesterday only got even more oversold today.  The thing is, is that once the market gets into these selling snits, it can go on for quite a while with oversold indicators as we saw last July when it took 10 straight sessions to get a reversal after the stochastic made a bullish crossover.

So having broken support at 13K and support at the lower BB (12,881) and monthly support at 12,756, we're kind of in free-fall at the moment.  From here there is no further support until 12,625, then 12,470, then 12,250.

There are just two positive signs here.  First, the Dow has now fallen off the left edge of the steep descending RTC.  Second, this sell-off is going exponential to the downside.  Parabolic moves are always a great top indicator and they work the other direction too.  Still, at this point we need confirmation before calling a bottom and I don't see any right now.

The VIX: Hah - after putting in a clear reversal indicator yesterday, today the VIX didn't.  Indeed, closing at 20.39, up another 8.4% today, it just left its upper BB in the dust at 18.6.  Although I did expect a turnaround today, the fact that we moved even further above the upper BB only strengthens the case for a move lower on Wednesday.  It would be highly unusual indeed for the VIX to spend three days above the upper BB.  And I note that the VIX has gone just completely exponential - always a sign on any chart that a blow-off top is near.

Market index futures: Tonight we're finally seeing some concrete signs of an end to the slump with all three futures in the green by meaningful amounts.  ES is up 0.44% at 1:31 AM EDT.  Also OBV today hooked up for the first time since this slide began seven sessions ago.  Momentum also seems to have bottomed.  However, what looked like a bullish stochastic crossover unwound itself today, so there is not total agreement here.

ES daily pivot: Tonight the pivot takes a big drop from 1376.50 to 1363.42.  This is good news indeed because with ES trending higher since around 3 PM today, we're now only about a point under this.  Breaking through this level will be bullish.  If we bounce off and head south again, that's bad news.

Dollar index: Well the evening star failed to come out today.  Instead of going lower, the dollar gained 0.22%.  But it left us with a quandary.  The candle is a bullish piercing pattern, suggesting more upside.  But the stochastic just completed a bearish crossover suggesting some downside.  My best guess is that the dollar has no idea which way to go and we're back to simply reacting to news from Europe, just like last year.  Ugh.

Transportation: The story of the trannies is a bit better than the Dow.  While they took a dive today along with the rest of the market, they stopped just short of some support at 5044.  Still there's nothing on this chart to suggest a reversal yet.


History: According to The Stock Traders Almanac, Thursday is historically slightly on the bearish side.

Accuracy:

Month right  wrong

April   2      3

     And the winner is...

Yesterday we were oversold.  Today we're even more oversold and the reversal signs are a bit more convincing tonight than last night.  So I'm going out on a limb and once again call for a higher close Wednesday.  If we do move higher, I'm going to use the opportunity to raise cash and do some hedging.  The monthly SPX chart is beginning to look pretty ominous.  And I do want to point out that this call is predicated on ES moving above its daily pivot.  If that doesn't happen by mid-morning, then all bets are off.

ES Fantasy Trader

Portfolio stats:  The account remains, for the time being, $137,750, after 28 trades (22 wins, 6 losses) starting from $100,000 on 1/1  Tonight we continue to remain long from last Wednesday's trade.  Patience may pay off in the end.

Tuesday slightly higher

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

• Tuesday higher, low confidence.
• ES pivot 1376.50.  Holding under is bearish..
• Rest of week bias mixed technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains trapped long.

Recap

Well you sure didn't need a crystal ball today to see a dive in the Dow coming today.  The only thing that surprised me was that it wasn't worse than the 1% we lost.  In fact, for a while there it looked like we might retrace a lot of the opening losses until the bears came back out around 2:30 and knocked 'em lower into the close.  Will this continue on Tuesday or are we in store for a rally as some are suggesting?  The charts will speak to us now.

The technicals

The Dow: Today the Dow did pretty much the obvious, shedding 130 points and forming another solid red candle that keeps it solidly in a descending RTC channel that now includes four straight down days.  However, we hit the lower BB at 12,960 and then kept on going to 12,930.  And the indicators have all gone from overbought to oversold in just five days.  The stochastic in particular, while not yet forming a bullish crossover, is now lower than any time since the end of last November's ugly two week slide.  While there's nothing on this chart to suggest an immediate reversal, it's quite possible it might happen on Wednesday.

VIX daily

The VIX:  OK, this really merits a chart.  Check out the VIX today right here.  Here we have a chart that jumped 12.63%.  The VIX finished at 18.18, gapping up way above the upper BB at 17.42.  And it formed the mother of all hanging men in the process.  Oh yes, and its RSI hit 100 today.  It doesn't get any more overbought than that.

I had to go back to November 12, 2007 to find anything similar, a hanging man that gapped up way above the upper BB.  And the next day was down.  Down big.  And the Dow?  The next day it soared 332 points.  Not that that's a guarantee that this will happen again tomorrow.  But right now it looks like the VIX is much more likely to go lower on Tueday than it is to go higher and that would be very good for stocks.

Market index futures: Tonight, all three futures are up, with ES gaining 0.18% at 1:27 AM EDT.  That in itself is a good thing.  Today's ES candle was a long-legged doji, which is a decent reversal indicator.  And the indicators are all oversold now, with the stochastic just starting a bullish crossover.  However, we do remain inside the falling RTC, just like the Dow.

ES daily pivot: Tonight the pivot drops from 1385.67 to 1376.50.  And with ES wandering around vaguely higher from today's close, that now puts us above the pivot, finally.  Since this number now serves as support, that's a good sign for stocks.

Dollar index: Today the dollar completed its evening doji star (and not the bearish tri-star I was sort of expecting last night) but still moved lower as I was expecting by about half a percent.  With a bearish stochastic crossover now complete and RSI having peaked at overbought levels, the dollar looks ready to continue lower Tuesday which would be good for stocks.

Transportation: The $TRAN got badly beaten by an ugly stick today.  Not only did it drop 1.65%, but it has now traded for a second day outside its rising RTC and that's a bearish trigger.  And to top it all off, the indicators confirm that, moving clearly lower from a peak at overbought levels.  The only positive note here is that they have a modicum of support around 5175.  If that doesn't hold, we're going to the lower BB at 5157.


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

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  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404

 13  3/26       39         29        +     1397

 14  4/2        42         21        +     1408

 15  4/9        25         46        -     1398

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 3/12 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 11 for 11.  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.

Notably though, for the first time this year, I voted bearish this week.  As we begin the second quarter, I'm finally beginning to see some technical reversal indicators on the monthly SPX chart.  See my weekend post  Is the Top In?   And it looks like the majority of the TS bloggers are with me.  This week also marks the first time this year that bearish sentiment has exceeded bullish.  And the change was as dramatic as it was sudden.  Bullish sentiment was cut nearly in half while bearish sentiment more than doubled.  The bulls and bears have essentially flipped from where they were on January 1st.

Recall that one week ago I wrote "I am seeing signs that a turnaround is coming, possibly next month.  This may be a good time to sell in May, as they say."  For the time being anyway, we seem to be on track for that.

Accuracy:

Month right  wrong

April   3      2

     And the winner is...

Tonight I'm seeing signs of a market that wants to reverse but isn't totally committed to the idea.  That said, I keep coming back to that crazy VIX chart.  As I've often said here, the VIX rarely spends more than one day without reversing after hitting its upper BB.  And today we totally punctured that level.  This kind of move is almost always followed by a decline.  Now the conservative in me wants to wait for confirmation in the form of an RTC exit from the Dow or SPX, but I think the evidence from both the VIX and the dollar is compelling enough  tonight to call Tuesday at least marginally higher.

ES Fantasy Trader

Portfolio stats:  The account remains, for the time being, $137,750, after 28 trades (22 wins, 6 losses) starting from $100,000 on 1/1  Tonight we continue to remain long from last Wednesday's trade.  Patience may pay off in the end.

Monday lower

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

• Monday lower, medium confidence.
• ES pivot 1385.67.  Holding under is bearish..
• Rest of week bias mixed technically.
• Monthly outlook: bias down.
• ES Fantasy Trader now trapped long.

Recap

These holiday weeks always disrupt things.  I have to go back to last Wednesday night when I was thinking that Thursday might go higher.  While the Nasdaq did, the Dow fell 14.6 points and since that's what I base my calls on, I was wrong.  But the big bombshell fell on Friday when the markets were closed, with some worse-than-expected employment numbers.  That tanked the futures and dimmed our prospects going forward.  See my previous post, Is the Top In?   Anyway, let's try to make some sense of this mess.

The technicals

The Dow: There's little point in trying to analyze last Thursday's session in view of what happened on Friday.  The fact that we did not get a dead cat bounce or any bounce for that matter only makes it worse.  The best that can be said for this doji is that it once again respected the 13K support line.  I'm pretty sure it isn't going to hold on Monday.

The VIX:  This is really the only bright spot in the charts, though I'm not sure it's going to hold for Monday.  On Thursday, the VIX bounced off its upper BB as expected and closed on a red hanging man, though that was still higher on the day by 1.58%.  Ordinarily I'd say this means the VIX goes lower Monday and that's good for stocks.  But this doesn't factor in the mess we saw in the futures on Friday, so again, I can't draw any technical conclusions here.

Market index futures: Tonight the futures are all down massively from Thursday, with ES leading the way lower at minus 1.08% at 1:07 AM EDT.    After such a huge dump like we got Friday, it is natural to expect some sort of retracement. However, we've seen very little in the way of that so far at least.  ES is admittedly not losing any more right now, but it's still just 3 points off its low set earlier this evening.  Still it is creeping higher ever so slowly, so one cannot yet rule out a retracement to some level.  The first three Fibonacci retracements would be 1377.50 (we're already just two points below that), then 1380.14 and 1382.50 (that's 50%).


There are however a couple of good points here.  First, this big dump took us all the way to the lower BB at 1379.55.  We're actually below that now at 1375.75.  Also, the losses of the last four days have brought all the indicators well into oversold territory.  OBV in particular is lying on the floor, running negative 2M.  That's the sort of extreme reading one would expect before a reversal.

ES daily pivot: The pivot now drops from 1390.67 to 1385.67.  Of course, we're well below even this number.  Not at all encouraging.

Dollar index: On Thursday, the dollar put in a gap-up spinning top/almost doji for 2/3 of a bearish tri-star pattern.  The oversold indicators suggest the dollar is due to move lower, which would be good for stocks.  Trading continued in the euro though and Friday's action there plus today's overnight suggest that the euro has found support around 1.3060.  It is also just now exiting its falling RTC and that's a bullish setup.  And its stochastic is about to make a bullish crossover.  This all suggests a higher euro Monday which would imply a lower dollar which would be good for stocks.

Transportation: The $TRAN on Thursday put in a spinning top after falling for two days indicating at least some indecision.  However, the stochastic just made a bearish crossover suggesting the trans are headed lower, even before factoring in Friday and that's bad for stocks.


History: According to The Stock Traders Almanac, Monday is historically quite bearish in the long term, though the SPX is up 6 of the last 8.  Somehow, I'm not thinking tomorrow is going to make it 7 of 9.

Accuracy:

Month right  wrong

April   2      2

     And the winner is...

Going on the futures alone, I'd have to say Monday will close lower.  That said, there at at least a few positive signs, notably in the movement of the dollar and (possibly) the VIX (which we'll know more about on Monday).  This makes me cautious now about going all out short at this point.  I'd like to wait a bit and at least see how Monday plays out before making that decision.  That said, the monthly charts have weakened considerably due to Friday's move (see my previous post below) and I'm changing my 30 day outlook to negative.  It will be interesting to see the new Ticker Sense Sentiment Survey on Monday.

ES Fantasy Trader

Portfolio stats:  The account remains, for the time being, $137,750, after 28 trades (22 wins, 6 losses) starting from $100,000 on 1/1  Tonight we (unfortunately) remain long at 1397.00.  One nice thing about this being a fantasy trade is that I can take unlimited heat.  I'm afraid that's what we're in for here.  But patience may prevail in the end.  Let's see what Monday brings.


New: Twitter


By popular request, I am going to try an experiment in real-time calls for my ESFT trades in my brand new Twitter feed.  Feel free to follow @NightOwlTrader on Twitter.  For now, you can expect at the most two tweets per day - one entry and one exit.  If this goes well, I may post some of my other trades there too.  Reader feedback is always appreciated.