Friday weakly higher

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

• Friday higher - very low confidence..
• ES pivot 1355.67.  Holding below is bearish.
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

It was touch and go for a while there coming into the close, but ultimately the Dow managed to finish up a modest 20 points and save me from having to eat my hat.  Whew!  So does this mean we're out of the woods?  Not so fast - read on...

The technicals

The Dow: You don't see the combination of a hammer followed by an inverted hammer very often, but we got one today.  You'd think that if a hammer is a bullish reversal candle, then the inverted hammer should be bearish, but it isn't.  They're both bullish reversal signs.  Taken together, they're even more bullish.  I found two instances of a hammer/inverted hammer after a decline in the last five years.  In both cases, the next day was higher.

The indicators, which by now are about as oversold as they get, support this.  However, for the time being, we're still stuck in a seven day declining RTC.  But it would take just one day of sideways action to get a bullish RTC setup, so this bears watching.  It's worth noting in passing that the descending RTC on the hourly chart was exited at 11 AM today.

The VIX:  Last night I was so convinced the VIX would go lower today I offered to eat my hat if it didn't.  Fortunately the VIX obliged me with a nice 6.23% decline that started the indicators on a trip down from overbought, taking the VIX back below 20 in the process.  This leaves us just teetering on the edge of the latest rising RTC.  It all looks ready for more downside, though I'm not quite as certain about it tonight, particularly in view of the JPM news that came out late today.

Market index futures: The strangeness just continues here.  At 1:34 AM EDT all three futures are running lower with ES down a disturbing 0.68%.  But if you look at the daily chart, we're not seeing a continuation of last week's declines.  Instead we're getting some sideways consolidation.  And that took us entirely outside the descending RTC today.  And the overnight action, despite being down pretty substantially, is actually a bullish trigger.  Go figure.

ES daily pivot: Tonight the pivot actually rises from 1350.33 to 1355.67.  Where we were just about even with the pivot this evening, we're now well below it and showing no signs of mounting an attack on this level - not a good sign.

Dollar index: The dollar did not go lower today as I expected it might, gaining instead 0.03%.  However, the body of the candle was entirely below yesterday's star and off the upper BB suggesting lower to come which would be good for stocks.  The indicators are also massively overbought here.  RSI remained at 100 for the third day running.  The dollar tends to respect its upper BB about the same as the VIX, so I'd say a lower dollar is more likely from here.

Transportation: Last night I called this chart weak and kicked some sand in its face.  Well today the trans dropped another 0.49%.  But they did it on an inverted hammer here too that dribbled down the lower BB and left the indicators finally entering oversold territory.  It's a reversal warning, but one that requires confirmation.


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

Accuracy: 

Month right  wrong  no call

April   7      9      2
May     5      2      1
 
     And the winner is...

This one's a real puzzler.  The charts all look fairly bullish to me tonight - even ES.  But the actual direction of ES in the overnight is down, and down significantly, and going lower as I write.  On the other hand, we bounced off a strong 1344 support level earlier this evening.  It bothers me greatly that the futures are running so poorly right now, but we've seen reversals happen in the wee hours before.  In the final analysis, I'm going to go waaaay out on the limb and vote with the charts, and with some misgivings call for a higher close Friday.  Maybe.  We'll see.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're still holding on to this long at 1365.00, as I hum along to "Some Day My Prince Will Come".

Thursday may reverse higher

[For some reason, this post, which was completed at 2 AM Thursday morning, never appeared.  My apologies to my readers.]

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

• Thursday higher, low confidence.
• ES pivot 1350.33.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Well last night I said we'd go higher today if ES could manage to break above its pivot this morning.  It couldn't and so we didn't, with the Dow dropping an additional 97 points to extend the losing streak to six now  There's been some rather strange market action this week so far.  Let's see if we can make some sense of it.

The technicals

The Dow:Another day, another hanging man.  We now have a  whole army of three hanging men marching steadily downward.  I've never seen anything like this.  I just scanned back 10 years of Dow daily candles and there's nothing similar.  All I can say is that everything in place yesterday in still in place today only more so.  The only difference is that we've now finally reached the lower BB.  A reversal has to be coming Real Soon Now.

The VIX:  Closed just over 20 today on a gap-up spinning top right to the upper BB.  As I often mention, the VIX tends to bounce off the upper BB fairly quickly, rarely spending more than a day there.  And we have a complete bearish stochastic crossover now.  And highly overbought indicators.  If this one doesn't go lower Thursday, I'll eat my Hatlo hat.

Market index futures: At 1:52 AM EDT we've got NQ just about flat, YM up a hair, and ES up a respectable 0.24%.  This is looking to me like we're nearing the end of the downtrend.

ES daily pivot: Tonight the pivot drops from 1356.75 to 1350.33.  With this drop and ES rising since the close, we're now above the pivot for the first time in a while.  This is a positive sign.

Dollar index: Big gap-up here today, for a spinning top right at the upper BB.  If this one doesn't go lower on Thursday, I'll buy another hat and eat that too.  Of course, there was news today that the Chicoms are manipulating xxxxxxxx supporting the euro, so I suppose anything's possible now in currency-land.

Transportation: Big dump here today, right to the lower BB.  But that's not a reversal guarantee.  Overall, this chart's looking weak.


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

Accuracy:

Month right  wrong  no call

April   7      9      2
May     4      2      1
     And the winner is...

It's tempting to throw in the towel after so many days of negativity, but this downtrend is getting long in the tooth.  You really don't want to sell at these levels.  From here I believe there is clearly more short term upside potential than downside risk.  With the futures (finally) up in the overnight, and the VIX looking ready to go lower, I'm going to go way out on the limb and cautiously call Thursday higher.  We'll see.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're still holding on to this long at 1365.00.  I briefly considered dumping this one but looking at the chart, if I was out of the market right now, I'd be buying this level, not selling it.  It's buy low, sell high, not the other way around.

Wednesday higher if pivot passed

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

• Wednesday higher, low confidence.
• ES pivot 1356.75.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Huh - well I sure didn't see that one coming.  I thought the latest Greek drama, version 258,243, was already priced in.  I guess I was wrong as the Dow dumped another 76 points on Tuesday.  Those freakin' Greeks!  Tonight we review the smoking wreckage to see if I was a day early or just plain off my rocker.

The technicals

The Dow: Yesterday's little hammer that fooled me into thinking we'd go higher today was replaced instead with a much bigger hammer, one that very nearly hit the lower BB.  And even though things are looking pretty miserable right now, two hammers in a row like this are quite often a good reversal indicator.  Aside from that, the indicators all got only more oversold today than Monday.

The VIX:  Despite spiking to an intraday high just over 20 this morning, the VIX regained some sanity to actually close higher by just 0.58% on a giant red spinning top.  The failure of the VIX to either open or close above yesterday's open confirms, for me anyway, yesterday's dark cloud cover.   And the bearish stochastic crossover is >< that close to completing.  I still have to believe the VIX goes lower Wednesday, which would be bullish for stocks.

Market index futures: Tonight, all three futures are running in the red with ES down a third of a percent at 1:52 AM EDT.  The chart is somewhat unclear, with a big hammer today following yesterday's fat spinning top.  The overnight follow through so far is negative enough to keep us inside what is anow a six day descending RTC.

On the other hand, the indicators are all quite oversold now and we have touched the lower BB three days running.  And support seems to continue coming in at the 1340-1350 area.  This is now reminding me a lot of the early April nastiness we saw.  If that history repeats itself, this downtrend should be just about exhausted.

ES daily pivot: Tonight the pivot drops from 1359.50 to 1356.75.  Even at that, we're still beneath, which is bearish.

Dollar index: After gapping up yesterday, not only did the dollar not move lower to form an evening star as I expected - it moved higher, and in confusing fashion with a second red candle in a row.  And it is even more overbought now than last night.  Today its RSI hit 100.  It doesn't go any higher than that.  Technically, it's really looking ready to go lower.  Realistically, it's now being controlled by the antics in Europe.

Transportation: A big hammer in the $TRAN today, raising at least the possibility of a reversal in a day or two.


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

Accuracy:

 

Month right  wrong  no call

April   7      9      2
May     3      2      1
     And the winner is...

Sigh - it's starting to look a lot like 2011 all over again, right down to the April peak.  Maybe the sell-in-May'ers were right after all.  That said, everything I sadi last night about overbought and oversold is still true tonight, only now even more so.  The question now, is who will be in the driver's seat on Wednesday?  The technicals, or the news stories from Europe that jerked us around so badly last summer?

I'm giving my bounce thesis one more shot at redemption on Wednesday, with the understanding that it could easily be sidetracked by some news item in the FT about how the Greek leftists can't agree on how many olives should go in a martini.  News or no news, the markets do not stay this oversold forever.  I will take advantage of the reversal higher, when and if it comes, to do my sell-in-May-ing.

As is often the case, I think the ES pivot will be key tonight.  Watch to see when you get up Wednesday morning if ES has managed to go above 1356.75.  That will greatly strengthen the case for a higher close.  If we hit that level and just bounce off, it's a lower close.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're holding on to this long at 1365.00.  I think I was a day early with this trade, so we're going to exercise some patience with 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 possibly higher

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

• Tuesday higher, medium confidence.
• ES pivot 1359.50.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1365.00.

 Quote of the Day

"The first quality that is needed is audacity."

                    - Winston Churchill

Recap

It was a funny day on Monday.  All the overnight brou-ha over the French and Greek elections ended up amounting to less than a hill of brie - rien du tout.  The SPX and Naz were both up just a tad and the Dow did close down 30 points, confirming my call.  Tonight we stir the tea leaves for our nightly look at the charts to figure out where Tuesday might go.

The technicals

The Dow: The best that can be said for today's action is that the 13K support level held despite the bears' early effort to drive the Dow lower.  The net result was a slightly misshapen red hammer.  Not quite classic, but close enough for me.  Especially given how the past four days of losses have driven the indicators all the way from overbought to oversold.  Still this is not yet a rousing reversal warning.  We'd want to see one day higher before declaring this downtrend over.

The VIX:  Ah, more funny candles.  The VIX actually lost 1.15% on a red candle lying largely above Friday's.  But that's  the classic dark cloud cover position, a powerful reversal indicator.  The futures have an even more dramatic version of this.  Add in overbought VIX indicators and you've got the stage set for a lower VIX Tuesday, implying higher stocks.

Market index futures: The market continues its mixed ways in the overnight, with NQ up a bit while ES and YM are down a bit at 1:27 AM EDT, ES being just a point lower.  ES today put in a hammerish green candle, not quite meeting the classical definition, but the family resemblance is there.  The tail pierced the lower BB before pulling back up.  The last few days have driven all the indicators down to oversold levels and the stochastic is gearing up for a bullish crossover in the next day or two.  All of these are positive signs.

ES daily pivot: Tonight the pivot actually drops from 1371.00 to 1359.50.  Even without ES drifting ever so slightly higher in the wee hours, this puts us once again above the pivot, a bullish sign.  Pivot power - a tip of the Hatlo hat the the legendary Dr. Brett Steenbarger for opening my eyes to this invaluable market tell.

Dollar index: Last night I wrote "A long bet on the dollar Monday would seem like a reasonable idea".  And so it was, with the buck gaining 0.16% today and forming 2/3 of a bearish evening star in the process on a gap up doji.  This, combined with indicators all well into overbought territory would seem to signal a lower dollar on Tuesday, good for stocks.  The euro chart supports this, with the euro having put in a big hammer today.

Transportation: Last night this chart looked ready to provide further downside.  Instead, the trans actually gained 0.34% on a spinning top that held the 5225 support line I mentioned.  I view this as a positive sign.  Also, three of my Fave Five indicators have now turned upward, another good sign.  And the stochastic is gearing up to start a bullish crossover in a day or two.


History: According to The Stock Traders Almanac, Tuesday is historically as bullish as Monday was bearish\, so that's nice.

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  12/15

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

 18  4/30       44         32        +     1403

 19  5/7        23         50        -     1350

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 bearish call on 4/9 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 12 for 15.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So the poll's accuracy rises to 80% YTD.

This week I'm switching my vote back to bearish on the 30 day outlook.  And I apparently have plenty of company as half of the other poll particpants seem to agree with me now.  It's the sharpest reversal in sentiment of the year so far, with bullish sentiment being chopped in half in just one week.

And why?  I can't speak for everyone else but here's what I'm looking at.  April put in a classic hanging man that failed to exceed the highs of March.  And May so far is trading largely below the body of the hanging man, providing bearish confirmation.  Add to that a stochastic just forming a bearish crossover.  The stochastic is very good on the monthly charts and not to be ignored.  these are all bad signs.

Accuracy:

Month right  wrong  no call

April   7      9      2
May     3      1      1
     And the winner is...

Whereas last night was looking lower, tonight I feel better about calling for a higher close Tuesday.  The charts and indicators are showing some classic direction changing patterns that suggest at least a day or two of higher prices.  In any event, I don't think Tuesday is the day to sell in May.

ES Fantasy Trader

Last night's long trade was admittedly some pretty risky business but sometimes audacity is its own reward.  And so we were rewarded this morning with a nice 15 point profit on a day when the market ended down.  I ended up leaving a bit on the table, but hey, it never pays to be an oinker.

Portfolio stats:  the account rises to $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're going long again at 1365.00.  If this trade isn't profitable Tuesday, I believe it will be by Wednesday.

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.

SLD    10    ES    false    JUN12 Futures     1364.50    USD    GLOBEX    11:15:19
BOT    10    ES    false    JUN12 Futures     1349.50    USD    GLOBEX    00:47:52

Monday looking lower

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

• Monday lower, medium confidence.
• ES pivot 1371.00.  Overextension under is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1349.50..

Recap

Last Thursday night, the market direction was too tough for me to call technically so I said to just watch the jobs numbers instead.  Well the numbers came out and they were stinky indeed, so down we went again to the tune of a hefty 168 point plunge for the Dow.  And if that wasn't bad enough, tonight comes word that the French have given le Sarkozy le boot.  Zut alors!  Should be another interesting week coming up...

The technicals

The Dow: Candlestick-wise, Friday's daily Dow chart looks awful.  A hanging man on Wednesday confirmed by a loss on Thursday followed by an even bigger solid red candle Friday.  And all that has only brought the indicators maybe halfway down from overbought.  The only good thing here is that the 13K support line was respected Friday.  But I said the same thing about 13,200 the day before, and that fell like it wasn't there.  After that, there's nothing til minor support at 12,930, then major support at 12,650.  And there's no sign of a reversal on this chart.  Just plain ugly.

The VIX:  The VIX's big move up on Friday just put it into overbought territory, but at 19.16 it is still well short of the upper BB at 20.57.  It's not a given that we'll reach that level but the futures support more upside with two solid green candles and indicators rising off of oversold levels.  All of which bodes ill for stocks.

ES daily

Market index futures: All three futures took a big gap-down dump right out the gate Sunday night on the French news.  At 1:14 AM EDT, they're all still way down, with ES lower by 0.95%.  This merits a chart.  It looks bad, but there may actually be some good in here.  Notice how ES is forming a hammer and how the last four days of negative action have brought all the indicators deep into oversold territory.

And note how we punctured the lower BB tonight and then recovered back to it.  And finally note how the recent decline has that exponential waterfall look to it.  Those are encouraging signs.  The horizontal blue line is where I went long a few minutes ago.  Tonight's gap down feels like a selling climax to me. 

ES daily pivot: Tonight the pivot, unsurprisingly, drops from 1391.08 to 1371.00.  With the gap down on the Sunday evening open, we're now way below the pivot.  Being under the pivot is normally bearish.  But being way under the pivot can be bullish, as no chart likes to get too far extended from this magic number for very long.  This, perversely enough, is a bullish sign.

Dollar index: On Friday the dollar continued a four day march higher with a strong 0.37% move.  But even that was not enough to reach overbought levels.  And tonight the euro is taking a powder on the French election news.  A long bet on the dollar Monday would seem like a reasonable idea - but bad for stocks in general.

Transportation: Two big down days here too brought us right into the Twilight Zone, halfway between the BB's.  Although there is a support level at 5225, both the candles and the indicators support further downside here.


History: As if it wasn't bad enough, according to The Stock Traders Almanac, Monday is historically extremely bearish.

Accuracy: 

Month right  wrong  no call

April   7      9      2 
May     2      1      1

     And the winner is...

It's a funny night.  I think the futures are going to drag the market down on Monday so I will call for a lower close on that basis.  Well, that plus some ugly looking charts as detailed above.  However, I also think that ES has gotten overextended to the downside here and a bounce is not out of the question which is why I'm going long tonight.  We'll see how that works out.  That's all she wrote!

ES Fantasy Trader

Portfolio stats:  the account remains at $142,625 after 34 trades (27 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're going long at 1349.50.

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.