Friday uncertain - watch jobs numbers

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

• Friday uncertain.
• ES pivot 1391.08.  Holding below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last night I was pessimistic about Thursday unless the ES pivot held.  It didn't and so down we went, with the Dow shedding 62 points in the process.  Whither Friday?  Read on...

The technicals

The Dow: Yesterday's dragonfly doji was confirmed today with a long red candle that finally moved the indicators off their extreme overbought levels.  Offhand, this chart looks ready for more downside.  The only caveat is that the Dow has been finding some good support at 13,200 lately.  If this line isn't respected Friday, look for lower still.

The VIX:  The VIX gained 4% today on a decent green candle as I expected it might.  With indicators still just coming off oversold, there's nothing here to suggest the VIX won't go higher Friday, which would be bad for stocks.

Market index futures: At 1:26 AM EDT we've got all three futures just turning positive with ES up 0.05%.  The pattern lately has been for small move following big declines, and we've now had two down days in a row.  The indicators are still transiting from overbought to oversold, so I wouldn't expect any big gains Friday, but the downside looks limited too..

ES daily pivot: Tonight the pivot drops from 1397.17 to 1391.08.  With ES basically flat in the overnight so far, that puts us about twice as close to the new pivot as before.  Still not a particularly bullish sign though.

Dollar index: I did get this one right as the dollar gained 0.12% today.  The dollar has now managed only one green candle in the last 14, giving the impression of not really wanting to move higher.  Meanwhile the euro is giving some good signals of moving higher Friday, which would move the dollar lower and be good for stocks.

Transportation: The trans did not go higher today as I thought they might, instead completely giving back yesterday's gains.  The overbought indicators suggest more downside to come, but with the $TRAN unable to put together more than one down day in a row since April 9th, I'm cautious about this.


History: According to The Stock Traders Almanac, Friday is historically quite bearish - almost as bad as today was.

Accuracy: 

Month right  wrong  no call

April   7      9      2 May     2      1
     And the winner is...

With both the Dow and ES sitting right on support levels, we need to see if they're going to respect them on Friday morning.  A break below and we'll be looking at a lower close.  Respecting Dow 13,200 and ES 1385 though could mean a higher close.  I suspect the catalyst will be the jobs numbers.  Since I have no way of telling what they may show, I'm going to have to take a pass tonight so no call for Friday.  Maybe I'll give myself a day off.  It's good to be retired :-)  Happy trading!

ES Fantasy Trader

Today our long running short trade finally became profitable and I decided to cash out just before 9 PM.  It took a while, but patience paid off in the end.  It was admittedly only a 1.75 point gain, but considering how much heat we took on it, it was nice to get anything out of it at all.

Portfolio stats:  the account now rises to $142,625 after 34 trades (27 wins, 7 losses) starting from $100,000 on 1/1  Tonight without a discernible edge, we're just going to stand aside.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

BOT    10    ES    false    JUN12 Futures     1385.00    USD    GLOBEX    MAY 3 20:52:26   

Thursday lower unless pivot holds

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

• Thursday lower - low confidence.
• ES pivot 1397.17.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short at 1386.75.

Recap

Last night's call was "Wednesday higher unless pivot broken" with the hedge "If ES should drop below 1401.17 on Wednesday morning, then look for a lower close.".  ES did indeed drop below the pivot at 3:30 AM, after the Night Owl had gone to bed (hey, even I have to sleep sometime).  And that was that.  The Dow closed down 10.75 points after a late day rally.  Moving right along, let's see what Thursday might have in store for us...

The technicals

The Dow: The Dow put in a tall skinny hanging man, almost a dragonfly doji with its small decline today.  With indicators that have been overbought for three days now and just keep getting more so, the Dow is due for a break any day now.

The VIX:  The VIX managed a 1.69% gain today but remained stymied by resistance at 17.25.  To me, this is starting to look like an ascending triangle so one might expect the VIX to pop up over this resistance fairly shortly.  The fact that today put in a higher low puts the kabosh on my theory last night that the VIX might be going lower.  Now I'm thinking higher is more likely.

Market index futures: Today's ES candle pretty much copied the Dow, with a tall hanging man that topped out at yesterday's close.  And the indicators are all quite overbought now.  At 1:28 AM EDT all three futures are just barely lower, with ES down only one tick.

ES daily pivot: Tonight the pivot drops from 1401.17 to 1397.17.  With ES virtually unchanged in the overnight so far this now leaves us just barely below the pivot, but it's already acting as resistance.  If ES is unable to break above this level by morning, that will be a bearish confirmation.  As I write, ES is tracking exactly along this line.

Dollar index: Last night this chart was too tough to read.  Well the confusion melted away today and the 200 day MA proved no obstacle as the dollar just blasted through it to gap up for a 0.34% gain.  The bullish stochastic crossover is complete, the indicators are now rising from oversold and the euro dropped out of a two week rising RTC.  To me, thsi all spells higher dollar on Thursday and that's bad for stocks.

And while we're on the subject, an alert reader asked today where to find the dollar index, $USDUPX, that I use here.  This is the symbol in eSignal for the Deutsche Bank US Dollar Index.  If you don't have eSignal, you can view it here from Bloomberg.  Or you can simply watch UUP, the PowerShares ETF that tracks this index.

Transportation: People often look to the trans as market predictors.  Well look at this - on a day when the Dow was down 0.08% and the S&P lost 0.25%, the trans were up 0.92%.  And that was on top of a similar size gain yesterday.  The indicators are just now becoming overbought and the upper BB is still 23 points away.  Two strong green candles is never a reversal warning, so one more day higher is not out of the question, and that would be good for the broader market.

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

Accuracy: 

Month right  wrong  no call

April   7      9      2
May     1      1 

Performance - another view:

My broker has come out with an interesting tool called "Portfolio Analyst" that lets you benchmark your results versus other metrics with a single click.  Here's my graph for April.  The purple line is my account.  The black box is where I redacted my account number. The Sharpe ratio here is 4.15.

     And the winner is...

Tonight, the majority of the charts seem to be getting tired, if not outright pessimistic.  Still, just before 2 AM, ES has broken above the pivot.  Therefore I'm going to make another conditional call.  If we're still above the pivot by morning, a higher close Thursday is likely.  But if ES sinks back under the pivot, watch for a lower close.  The majority of the evidence suggests lower, but you really can't ignore these futures moves about the pivot, especially around 2 AM.

ES Fantasy Trader

Portfolio stats:  the account still remains at $141,750, after 33 trades (26 wins, 7 losses) starting from $100,000 on 1/1  Tonight we are still not giving up on this trade and remaining short at 1386.75.  I know it's frustrating just holding on and doing nothing, but that's one thing about trading - doing nothing can also be doing something.  I have a feeling this trade will end up being profitable before too long.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

Wednesday higher unless pivot broken

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

• Wednesday higher - low confidence.
• ES pivot 1401.17.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short at 1386.75.

Recap

They say "Sell in May" but they never say when in May.  Clearly, today was not the day.  After being up triple digits for a while, the Dow pulled back in to close up a still respectable 65.7 points on the strength of some unexpected (by me at least) ISM numbers.  And in so doing, it also finally cleared the 13,250 resistance level that has plagued us all year so far.  In fact, I had to go all the way out to the monthly chart to find the next resistance level, and that looks like 13,925 way back in November 2007, just short of the all-time high of 14,198 in October 2007.  Yowsa!  So are we headed back up to those rarified altitudes, or are the emergency oxygen masks about to drop?  The Night Owl (who admittedly got it wrong again today) continues to press on in search of market truth.

In Passing...

The Night Owl sees all, and tonight what caught my eye was a most kind mention of my blog in the blog dancingnakedonwallstreet.com.  This is one I was not familiar with, so I took some time to check it out.  I like the author's concise, practical approach to the markets in a weekly format.  I recommend my readers take a look.  And I should mention that there was no quid-pro-quo whatsoever involved here.  I just saw my name, visited the site, and liked what I saw.  So a tip of the Hatlo hat to RJ for some good work.  And I might mention that the Night Owl is a girl owl, not a boy :-)

The technicals

The Dow: Well we did close above 13,250 today but not by enough to put it convincingly behind us.  Right now I'm looking at the indicators.  RSI - overbought.  Momentum - declining for the third day.  Money flow - overbought.  OBV - overbought and at the same height from which previous market declines have occurred.  And the stochastic is also overbought and trying to form a bearish crossover but it's getting "threaded out" with the %K and %D lines pretty much just overlapping instead of crossing.  Still, today's big gain pretty much canceled last night's bearish RTC warning.  All of which sadly  leaves us without a clear technical picture of where the Dow may go next.  That's why we look at more than one chart every night.

The VIX:  The VIX continued its wayward ways today, dropping 3.21% on a fat hanging man that pretty much completes the bearish evening star pattern I mentioned last night.  And that is as good an indicator as any that the VIX could continue lower on Wednesday.  The VIX futures put in an even bigger drop relatively speaking today, supporting this view.

Market index futures: If there's any guidance to the future, tonight it comes from, well, the futures.  Today ES pierced its upper BB and then retreated, leaving us with a solid body conforming to a three day trading range.  While yesterday's losses were completely retraced, we didn't make any real headway.  And the indicators, which were already overbought, are now really overbought.  This chart just doesn't look quite as optimistic to me as the daily Dow.

On the other hand, it is impossible to ignore the fact that at 1:29 AM EDT all three futures are up by non-trivial amounts, with ES gaining 0.21%.  And since the upper BB is at 1408.38, we still have a few more easy points possible here before encountering more serious resistance at 1412.

ES daily pivot: Tonight the pivot jumps from 1395.25 to 1401.17.  Because ES has been wobbling upward in the overnight, we're still above this new number, so ES remains bullish.

Dollar index: The dollar, which respected support at 54.60 today (recall that I'm using $USDUPX rather than $DXY), managed to bounce right back up to its 200 day MA at 54.73 which is where is closed, on the dot.  This is most interesting.  You don't often see the Dow up and the dollar up on the same day.  And you can't blame the euro today either, since it just put in a spinning top.  Technically, the dollar's in limbo here.  It's stochastic suggests a move higher, but it's hemmed in by the 200 day MA.  The irresistible force versus the immovable object.  Which one will give in first?  No idea - we'll have to see how this resolves on Wednesday.

Transportation: The trans had a great day along with everything else today.  But they were nonetheless unable to break out of a five day range featuring support at 5220 and resistance at 5300.  The indicators are all confused right now and this average has alternated between gains and losses every day for a week now.  So the only conclusion we can draw is that since we're now at the top of the range, Wednesday's likely to be lower.  But if we can break above 5300, that would be bullish indeed.


History: According to The Stock Traders Almanac, Wednesday is historically almost as bullish as Tuesday, which was truly outstanding.

Accuracy: 

Month right  wrong  no call

April   7      9      2
May     0      1

     And the winner is...

While the charts aren't looking all that great tonight, the charts also haven't been too kind to my predictions lately.  So I think tonight I'm going to go with the futures which have put in only one red candle in the last seven, and call for a higher close Wednesday.  Still, this market can't remain overbought forever without going lower.  But it's just not right to keep calling for a lower close until it finally happens.  We are clearly due for lower sometime soon.  I'm just going to guess it won't be Wednesday.

But I will hedge that by noting that we are still pretty close to the ES pivot.  If ES should drop below 1401.17 on Wednesday morning, then look for a lower close.

ES Fantasy Trader

Portfolio stats:  the account still remains at $141,750, after 33 trades (26 wins, 7 losses) starting from $100,000 on 1/1  Tonight we are still not giving up on this trade and remaining short at 1386.75.  This truly defines the meaning of "taking the heat".  But if this one doesn't go our way soon, I'm just going to have to pack it in.  You know the old saying, "If at first you don't succeed, try try again.  Then give up.  No point being a damn fool about it."

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

Tuesday maybe lower

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

• Tuesday lower - low confidence.
• ES pivot 1395.25.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short at 1386.75.

Recap

I'm starting to think that whatever direction I think the market is going the next day, I should just announce the opposite and I'd get better results.  Heck, at this point, flipping a coin would give better results.  At least the Dow tried to end on a positive note today and a 14.7 point loss isn't that bad.  Still a miss is a miss.  Maybe the market will settle down in May.

The technicals

The Dow: Today the Dow confirmed yesterday's bearish shooting star with a hanging man.  Its indicators are also all now topping out at overbought levels.  And finally, we traded entirely outside the rising RTC - a definite bearish sign.  All indications of a chart that's going lower.

The VIX:  The VIX continues to pop corn its way along, today gapping up for a 5% gain on the makings of a bearish evening star.  A move lower tomorrow would confirm this.  However, its stochastic just formed a bullish crossover today, suggesting more upside Tuesday.  The futures seem to support this idea.  And a higher VIX would be bad for stocks.

Market index futures: Tonight we're seeing a mixed picture with ES and YM up a bit and NQ down a hair.  ES is up 0.11% at 1:43 AM EDT.  The picture is muddied a bit by the news tonight that Australia is lowering interest rates.  That caused a brief spike in ES but that was quickly retraced.  Today's candle was a bearish engulfing pattern that confirmed yesterday's spinning top.  And like the Dow, ES is now outside its rising RTC and has indicators that have topped at overbought.  This all suggests a move lower.

ES daily pivot: Tonight the pivot dips from 1396.00 to 1395.25.  We were below the pivot most of the day and we're still below the new level, except for a brief blip when the Australian interest rate news hit the wires.  In any case, holding below the pivot is never a good sign.

Dollar index: Today the dollar gained 0.12% but did it on a red candle that kept it below the 200 day MA which is now resistance.  With the recent advance in the euro stalling out, this could encourage the dollar to move higher - if it can get past the 200 MA.  Tuesday will tell the tale.

Transportation: Here we got a bearish engulfing pattern today and a stochastic that's about to form a bearish crossover.  Looks like more downside to come for $TRAN.


History: According to The Stock Traders Almanac, Tuesday is historically very bullish.

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  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398

 16  4/16       26         48        -     1370
 17  4/23       30         48        -     1379   

 18  4/30       44         32        +     1403

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 4/2 was wrong once again, though just barely, the S&P now being a bit lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 11 for 14.  And of course that means that since I voted with the majority back then, the poll as a whole was also incorrect that week.  Despite being wrong three times in  a row now, 11 for 14 still isn't that bad.

This week we see a dramatic change of fortunes, with the bull and bear numbers just about trading places.  And I was one of those who switched their vote back to bullish this week.  What was looking like a fairly ominous monthly candle for the SPX ended up being  more of a hanging man rather than a dark cloud cover.  Although that still indicates a possible reversal, the stochastic ended the month by unwinding what looked like a near certain bearish crossover.  And while anything's possible, right now it looks like the earlier threat has receded, at least for the time being.

Performance:

Here are my performance stats so far for 2012.  The first two columns are for my trading account.  The next, "ESFT", is the ES Fantasy Trader.  Following that I've now added the results for my IRA.  The last is the Dow, my reference benchmark that I try to match or beat.

 Date    Trading, Month  Tr. YTD  ESFT YTD   IRA YTD   Dow YTD

1/31/12       7.41%        7.41%   -0.50%     6.18%     3.41%

2/29/12       3.67%       11.35%    7.88%     9.02%     6.02%

3/31/12       1.76%       13.31%   29.88%    10.05%     8.16%
4/30/12       2.35%       15.97%   41.75%    10.90%     8.17%

It's interesting to see the risk/reward in action.  My IRA, which I treat most conservatively, has the lowest return, whereas the ESFT, which I trade with reckless abandon (since it isn't real money), has the highest.

Accuracy:

Month right  wrong  no call

April   7      9      2

It was clearly a difficult month for forecasting with more consolidating than trending going on, making daily calls treacherous.  At least we're still making money, and that after all is the name of this game.

     And the winner is...

I'm almost afraid to write anything at all here after being so consistently wrong lately, but given the look of the charts tonight, I'm going to have to call for a lower close Tuesday, interest rate cuts or not.  The damage may be limited though, in view of the fact that tomorrow is the first of the month, historically a bullish day.

ES Fantasy Trader

Portfolio stats:  the account remains at $141,750, after 33 trades (26 wins, 7 losses) starting from $100,000 on 1/1  Tonight we are still not giving up on this trade and remaining short at 1386.75.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

Monday maybe higher

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

• Monday higher - low confidence.
• ES pivot 1396.00.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short at 1386.75.

Recap

One thing about the market - there is no better place in the world to learn humility.  Being wrong again on Friday reminds me of that lesson.  I'm not really sure what's driving this market higher, but I'm not about to fight the tape.  Still it's important to keep an open mind about what's coming next.  We'll see tonight if the charts can shed any light on the subject.

The technicals

The Dow: Friday's 24 point advance was marked by a bearish shooting star.  This sort of pattern does require confirmation though so it would be premature to call this chart lower on that basis.  We're also still just barely hanging on to the rising RTC and the indicators, though high, have yet to suggest a top.

The VIX:  On Friday the VIX put in a green candle for the first time in nine straight sessions, gaining half a percent.  On the other hand the weekly chart generated a big bearish engulfing pattern that also took it outside the rising RTC - a bearish setup.  Along with a weekly stochastic forming a bearish crossover, this would seem to suggest a lower VIX this week which would definitely be good for stocks.

Market index futures: OK, so Friday gave us a spinning top warning of a reversal.  But so far, we're not seeing that with all three futures up at 1:58 AM EDT and ES up by 0.14%.  Still, the indicators are getting fairly overbought by now and although we haven't seen an RTC break yet, the channel is quite narrow so it wouldn't take much to generate a bearish setup here.

ES daily pivot: Tonight the pivot rises from 1392.00 to 1396.00.  With ES pretty much just wandering around in the overnight so far, this now cuts the distance to the pivot in half.  While not cause for concern yet, we want to watch for any attempts to dive bomb that level.

Dollar index: The big development here is that on Friday the dollar broke under its 200 day MA following five straight days of declines and ten straight red candles in a row.  The dollar has some support coming up around 54.50 but we're not quite there yet.  A lower dollar would help stocks.

Transportation: This daily chart is now too choppy to figure out.  Even the weekly chart has been channeling in the 5200-5300 area for five weeks now.  Again, I think this reflects the recent political events in Europe more than anything.


History: According to The Stock Traders Almanac, Monday is historically slightly bearish.

Accuracy: 

Month right  wrong  no call

April   7      8      2
     And the winner is...

Well as I said at the start, you can't fight the tape and right now the tape is running higher.  While a lot of charts look like they're getting kind of extended, there are really not yet any really clear reversal signs.  So instead of trying to outsmart the market and second guess the top, I'm now just going to go with the flow and that means a higher close Monday.  (Watch - now the market will tank - no, just kidding).

ES Fantasy Trader

Portfolio stats:  the account remains at $141,750, after 33 trades (26 wins, 7 losses) starting from $100,000 on 1/1  Tonight we are gritting our teeth and remaining short at 1386.75.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.