Friday uncertain

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

• Friday uncertain.
• ES pivot 1310.83.  Holding below is bearish..
• Next week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Ugh.  Not only did we not go higher today as I thought the charts might be suggesting, we had one of the biggest losses in the current downtrend.  The Dow is now down five straight and 11 of the last 12.  Its indicators have been oversold for nine days straight now.  And still no end in sight...

The technicals

The Dow: Last night I suggested that it would take a 90+ point loss to keep us inside the descending RTC.  Well we got that and more, blowing off another 156 points today.  And with today's close at 12,442, the 200 day MA now comes into view on my chart, at 12,196.  That's now just 240 points away.  With what's been going on lately, we could easily be there in a day or two.  And there is only one minor line of support above that, at 12,200.  So tonight we remain solidly inside the descending RTC on a solid red candle.  And despite impossibly oversold indicators, there is still no turnaround in sight.

The VIX:  After three days of small gains where it looked like the VIX was getting ready to move lower, today it instead shot up10%, way above its upper BB.  This is now looking just like last August when the VIX broke through its upper BB and refused to come down. The only hope here is the looming 200 day MA at 25.86 which will serve as resistance.  But even that has only worked 50% of the time in the past few years.  Still, the RTC is finally looking like it's making a bearish crossover.  And the VIX has now been overbought for 10 straight sessions.  I went all the way back to 2007 and was unable to find any other time that was even close to this, even through the Great Recession.  I want to say the VIX has to come down soon, but everything seems to be going crazy here and not working the way one would expect.

Market index futures: Tonight the futures are gloomier than they've been this entire downturn.  At 1:346 AM, all three are significantly in the red with ES down another 0.58% and moving lower as I write.  And the 200 day MA is coming into play on this chart too, at 1268.09.  That's just 26 points away now.  And like the Dow, we can be there in a day or two if the current sell-off continues.  Today's loss and the continuing overnight decline have actually taken us way off the left edge of the declining RTC - very unusual.  Supposedly, this can signal the end of a decline but that remains to be seen.

ES daily pivot: Tonight the pivot drops again from 1327.67 to 1310.83.  But with ES in freefall, we're just as far below it now as earlier today.  Very negative.

Dollar index: The dollar rose again today.  Technically, it's nearing a big resistance level and it is now unbelievably overbought - RSI has been stuck on 100 for 8 straight days now.  Now what goes up really must come down.  It's just that in the current environment, there's no way to tell when that will be.  The dollar remains firmly stuck in its rising RTC and that's about the only remaining working indicator we have.

$TRAN daily

Transportation: And as if the Dow's 1.24% loss today wasn't bad enough, check out this chart of the trans.  This widely watched predictor crashed a whopping 3.18% today.  And notice how it stopped exactly on its 200 day MA of 4938.18.  Tomorrow becomes crucial.  The last time we ran into the 200 MA from above, we bounced off and went higher.  This time we are vastly more oversold.  The canonical expectation is that we'll reverse here and the market will rally.  But things have been so unusual lately, who knows.  And if we don't bounce off, then it's look out below. 


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

Accuracy:

Month right  wrong  no call  conditional

April   7      9      2
May     6      5      1           1
     And the winner is...

Impossible to tell.  There is absolutely nothing in the charts tonight to suggest that this downtrend is even close to coming to an end.  But Friday is a triple witching day and on top of that we've got Facebook going IPO.  And we are now so overextended to the downside, the market just has to have an up day soon.  If you go back to my last post on market streaks here, you will see that until now the longest losing streak in the Dow was of length 10.  On the other hand, we are now completing only our third straight losing week, and we've seen much longer weekly losing streaks than this.  The record there is seven.

But in any case, given that the charts are not working the way I expect and the fact that we are at so many extremes in so many places, there's no way I can make a meaningful prediction here.  So I'm now officially taking a break and moving to the sidelines until some sanity returns to the markets.  No call tonight.

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 once again still holding on to this long at 1365.00.  At this point we're in too deep to get out now.  But perhaps that's the problem.  Maybe I should just throw this trade into the volcano to appease the angry market gods.

Thursday higher

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

• Thursday slightly higher, medium confidence.
• ES pivot 1327.67.  Holding above is bullish..
• Friday bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Quote of the Day

“You have to fight self-deception. Human beings are experts at it. I do it, too.”                                        - Jamie Dimon, June 2009

Recap

For a while early on today it was looking like my call for a lower close was going to be wrong, but the Dow obliged by giving up all its early gains and then 33 points more for its 10th loss in 11 days.  To quote noted stock gurus Devo, "Lord how long can this go on?"  We go to work in our coal mine tonight to find out.

The technicals

The Dow:Although the losing streak continues seemingly without end, I'm starting to notice a few signs of change.  Today's tall gravestone doji had a feel of something of a bottom being put in.  The indicators remain uselessly oversold but we are at least edging very close to the boundary of the RTC.  In fact it will take a loss of more than another 90 points on Thursday to keep us inside this channel.  Absent that we'll be getting a bullish setup.  Now of course we could easily see that kind of loss - we've seen that and more recently, but I'm getting a feeling we're nearing a turning point here.

The VIX:  The VIX closed right on its upper BB today at 22.27 for the third day in a row.  That's about as long as the VIX ever spends at those levels.  Today's 1.37% gain only increased my expectations of a lower VIX on Thursday and that would be bullish for stocks.  We do remain firmly inside the rising RTC and there's on indication of a bearish stochastic crossover yet though, so it's not out of the question to see the VIX move higher one more day, but I think this move is near the end now.

Market index futures: Tonight all three futures are up by non-trivial amounts at 1:02 AM with ES leading the way, up 0.55%.  This puts us exactly on the edge of the latest descending RTC.  If we can just hold onto the current levels around 1330, we'll have a bullish setup by Thursday's close.  The fact that we are already above today's regular open, after another bad day in ES creates a bullish engulfing pattern.  The candle is admittedly not cooked yet, but this  is a more encouraging sign than I've seen here in weeks.  Rob Hanna's Quantifiable Edges blog today has a quantitative assessment of this phenomenon.  And also note that RSI, momentum, and OBV have now all hooked up from very oversold levels.  This reawakening of the indicators, or the Lazarus Effect, is always a strong sign of a reversal at hand.

ES daily pivot: Tonight the pivot falls yet again from 1333.58 to 1327.67.  Combined with ES now being up smartly in the overnight, we've just crossed the pivot, always a positive sign.

Dollar index: Today the dollar gapped up to form a spinning top that is 2/3 of a bearish evening star.  Momentum actually decreased a bit for the first time in 8 days.  A lower dollar tomorrow would confirm the pattern and suggest even more downside here, which would be good for stocks.

Transportation: Today the trans gave back all of yesterday's gains plus a bit more but did it on a really tall inverted hammer that extended a support line at 5100.  Two more days of this sort of action would provide a bullish RTC exit.  As it is, this chart is at least showing some signs of a bottom being near.  Interestingly, the copper chart put in the same pattern today.


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

Accuracy:

Month right  wrong  no call  conditional

April   7      9      2
May     6      4      1           1
 
     And the winner is...

Tonight, I'm going out on a limb and calling Thursday higher.  I'm finally seeing a bunch of reversal signs in the charts I follow and this losing streak is getting pretty old.  This doesn't mean I'm expecting a big rally, but it does look to me that we'll at least see some green on Thursday.

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 once again still holding on to this long at 1365.00.  We're just so oversold now I really hate to throw in the towel at this late stage in the game. There's nothing worse than throwing in the towel and taking a big loss at what turns out to be the bottom.

Wednesday lower still

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

• Wednesday lower - medium confidence..
• ES pivot 1333.58.  Breaking above is bullish.
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

I thought I was finally going to be vindicated when I woke up this morning to find the markets actually up for a change.  No such luck as all the gains went pfft after lunch and left us with a sour 63 point loss in the Dow.  Is this ever going to end?  I'll check the charts as I do every night, though I'm starting to wonder why I bother.

The technicals

The Dow: Today the Dow extended its losing streak to 9 out of the last 10.  This is really starting to get up there in terms of streak length, implying some sort of rally must be coming soon.  On the negative side, we broke through another support level today at 12,710 and are still firmly inside the descending RTC.  Until I see this change, there's no reason to call a reversal.  The indicators are now all useless, stuck on broken oversold.

The VIX:  The one bright spot I can find in an otherwise bleak landscape is the VIX, which today managed only a small 0.46% gain in the form of a spinning top centered about yesterday's action and closing just above the upper BB.    It is notable that despite all the jitters over Greek elections, or whatever their latest problems are, the VIX did not rocket up into the mid 20's as we were seeing last spring.  This one is looking to me to be ready to come back down and that would be good for stocks.

Market index futures: Yesterday's loss in ES was followed by more losses today and the overnight is moving lower still.  At 1:42 AM EDT all three futures are once again in the red, with ES now down a disturbing half a percent.  Of greater concern is that we exited a descending RTC four days ago but the bullish setup totally failed.  That is quite rare.  We're now in another descending RTC with seemingly no turnaround in sight.

ES daily pivot: Tonight the pivot drops yet again from 1339.42 to 1333.58.  And with ES doing nothing but drifting lower, we're just as far below the pivot now as we were in the evening hours.  Another negative sign.

Dollar index: After putting in what technically looked like a good bet for a peak yesterday, the dollar instead rocketed even higher, up a whopping 0.78% on the day.  Technicals no longer matter here - the dollar is now being driven by the euro which sank to a level not seen since mid-January today, in a 12 day run to the basement.  And neither the dollar nor the euro are near any S/R lines right now.  This one looks bad, folks.

Transportation: The trans today actually gained 0.13% while the rest of the market marched lower.  Leading indicator?  Perhaps, but here too we remain stuck in a descending RTC here too.  I'm tired of trying to catch one falling knife after another here, so now I'm going to wait for an RTC exit before sounding the all-clear.


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

Accuracy:

 

Month right  wrong  no call  conditional

April   7      9      2
May     5      4      1           1
     And the winner is...

I really hate to be the bearer of bad news, but it's not looking good at all tonight.  The only positive I see is the VIX, but even that could spend another day around its current levels before heading lower.  I see nothing on the other charts indicating an end to the carnage so I just have to call Wednesday lower.  I'm just not feeling the love.  Not one bit.

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 once again still holding on to this long at 1365.00.  We're just so oversold now I really hate to throw in the towel at this late stage in the game.

Tuesday higher only if pivot passed

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

• Tuesday higher - low confidence..
• ES pivot 1339.42.  Breaking above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

My thesis last night was that we'd go higher just because the charts were looking so beaten down.  But today's ugly 125 point loss in the Dow reminds us of why the old saying "Never buy a stock just because it's down" got to be an old saying.  In my defense, I will point out that I made my call conditional on ES crossing up above its pivot in the morning.  Well ES never got close to the pivot and so down we went.  I have a feeling that tonight the pivot may be, uh, pivotal.  Let's take a closer look at the charts and see what we can see.

The technicals

The Dow: Just as we were on the edge of the descending RTC, we got another nosedive today, with the Dow tanking another 125 point thanks to those freakin' Greeks again.  I'm getting tired of this.  Maybe it's time to break up Greece.  Give it to the Albanians.  You never hear of any fiscal crises i Albania, do you?  Uh well anyway, today's plunge brought us right back into the center of the RTC and broke April's support of 12,725.  We're now down 8 of 9 and the indicators are all broken on the floor after a six day oversold run.  You have to go back to last August to find a longer run when it took 10 days of oversold levels before we caught a rally.  But there's still no sign of a reversal yet on this chart.

The VIX:  On the other hand, there are several reversal signs on today's VIX chart.  One, we gapped up for a 10% pop that took us right through the upper BB.  As I always note, the VIX rarely spends more than one day at such levels before coming down.  Two, it formed a hanging man in the process.  Three, it also popped out the left side of the rising RTC.  And finally, closing at 21.87, it is very far from its pivot of 19.48.  The futures are showing a similar setup.

That said, we had a similar pattern last month and after a big gap up on April 9th, the VIX rose even more on the 10th (but it did come back down two days later).

Market index futures: At 1:35 AM EDT, the futures are actually finally all in the green for a change, and by non-trivial amounts.  ES is up 0.39%.  Today's big dump took us cleanly out of the recent consolidation and may have set the stage for the bounce we've all been waiting for.  RSI actually just turned higher for the first time in 9 days.

ES daily pivot: Tonight the pivot take another big step down from 1352.42 to 1339.42.  With ES actually drifting higher in the overnight so far, this puts us just knocking on the door.  You can see how the last five five-minute candles have peaked just below the pivot, looking for a chink in the armor.  If we can break through, that will be a big plus for Tuesday.

Dollar index: Today the dollar gapped up big time for a 0.43% gain that took us way above the upper BB and still inside the rising RTC.  The indicators are all now solidly broken overbought.  These sorts of situations don't last forever though and what goes up must come down, to coin a phrase.  And I'd say we're getting ready to come down real soon now.

Transportation: The trans hit a support line at 5090 today and bounced off.  However, they remain stuck in a declining RTC and have been tracking the lower BB for four days now.  Meanwhile the indicators are as oversold as they were after the big slide last November.  Although there's no evidence of it right now, we remain overdue for a bounce.


History: According to The Stock Traders Almanac, Tuesday is historically fairly 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  12/15

 16  4/16       26         48        -     1370  13/15
 17  4/23       30         48        -     1379   

 18  4/30       44         32        +     1403

 19  5/7        23         50        -     1350

 20  5/14       32         44        -     1353

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 4/16 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 13 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 after 16 weeks the poll's accuracy rises to 87% YTD.

Interestingly, the spread between bullish and bearish narrowed considerably this week.  I'm not sure why, since I still voted bearish and remain with the majority here.  My look at the monthly SPX chart shows considerable downside remains and it could easily be a month or two before we reach the end of this decline - maybe even until September.  And as alert reader Daniel commented today, the world economic situation is looking pretty discouraging at the moment.

Accuracy:

Month right  wrong  no call  conditional

April   7      9      2
May     5      3      1           1
I'm adding a new column called "Conditional" to my "Accuracy" section.  This will be used to count the days when I give a conditional call like "we'll go higher if ES crosses the pivot, else lower".  That gets a point when the condition is met, either way.  If say ES does not cross the pivot but we close lower anyway, then that would go into the "Wrong" column.


     And the winner is...

I really hate to sound like some sort of inverse Chicken Little here, but once again I'm going to say that I see more upside potential than downside risk just because we're so oversold on every chart.  And that view is at least finally being supported by the futures.  But I will once again have to go to the ES pivot as the final arbiter here.  If we can break above 1339.42 on Tuesday morning, then it's likely we'll see a higher close.  If we bounce off and fail to go above that level, we're in for another down day.

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 once again still holding on to this long at 1365.00.

Monday maybe higher

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

• Monday higher - low confidence..
• ES pivot 1352.42.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

That's what I get for committing hubris.  I was feeling pretty smug around noon last Friday for calling the market higher in the face of a big whoopise from JPM.  After a big dump right out the gate, the Dow had recovered all of its losses and I was looking good.  But how quickly one can go from hero to zero in this game.  It was all downhill from there and the Dow ended the day down 34 points.  So that one goes in the loss column.  But we do not dwell on the past here, we only look to the future.  So that's what the rest of this post is about.

The technicals

The Dow: Ah, the Dow.  As Mick Jagger once sang, "Heartbreaker, with your thirty four", the Dow broke my heart on Friday, giving up all its early gains and putting my account negative for the day.  (OK, and I know it's 44, not 34, but the Dow lost 34).  Uh, so anyway, we got this spinning top following a long decline and highly oversold indicators.  RSI hit 4 on Friday and the stochastic has been lying on the floor for three days now.  But we are still stubbornly stuck in a descending RTC so until I see that breakout, I can only assume we're in for more of the same.

The VIX:  On Friday the VIX rose 5.63% on a tall dragonfly doji.  But since we're not really in a trend either way, I'm not sure this signals a reversal.  The VIX of the VIX seems to be climbing.  Lately we've had three days of gap up and down days.  The futures gave us a hanging man though and are sufficiently overbought as to suggest a move lower Monday, and therefore a lower VIX too.

Market index futures: At 1:26 AM EDT Sunday night (actually early Monday morning), all three futures are in the red.  ES is down 0.22% putting us at the lower end of what is now becoming a fourth day of consolidation.  Given how oversold we are here, the conventional wisdom is that the next move will be up.  I just don't see a sign right now that that will happen on Monday.

ES daily pivot: Tonight the pivot steps down from 1355.67 to 1352.42.  With some aimless trading in the overnight, we remain below this level and that's bad on the face of it.  I need to see ES break above this on Monday morning to have a meaningful shot at a higher close.

Dollar index:The dollar continued its ascent on Friday, hitting its upper BB.  And its indicators are as overbought as they get.  RSI has been pegged on 100 for four days straight now.  Technically, this chart favors a move lower, but what with the Chicoms meddling with the euro and who knows what other monkey business going on behind the scenes, anything's possible.  In any case, a move lower looks likely in the next few days and that would be good for stocks.

Transportation: On Friday, the trans gave us a tall spinning top that along with highly oversold indicators suggest the next move is higher.  So that would be good for stocks in general.


History: According to The Stock Traders Almanac, Monday is historically slightly bullish, but it is up 14 of the last 17.

Accuracy: 

Month right  wrong  no call

April   7      9      2
May     5      3      1

     And the winner is...

Very strange.  Tonight I'm not really seeing any signs that we're going higher on Monday.  And yet, if I had just returned from an extended journey to Mars and looked at these charts, would I be shorting anything here?  No I would not.  Buy low, sell high, right?  Well, things are looking lower than higher right now so I'm going to call for a higher close Monday simply because I see more upside potential than downside risk at these levels.  But I don't feel really good about saying that.  Watch the ES pivot closely Monday morning.  If we can break above 1352.42, we have a good shot at a higher close.  If not, then we're going lower.  So says I.

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 once again still holding on to this long at 1365.00.