Friday uncertain

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

• Friday uncertain.
• ES pivot 1319.75.  Holding above is bullish..
• Next week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Because of a lack of clarity last night, I appealed to the ES pivot, figuring that we'd go higher if we could stay above it in the morning.  Well we did and the Dow delivered a handy 156 point gain.  Now we have to face Friday with the prospect of upcoming elections in Greece over the weekend.  Will today's rally inspire follow-through or profit-taking?  Let's figure it out.

The technicals

The Dow: Today the Dow continued its alternating up/down pattern for the fifth straight day.  However, its 1.24% gain did finally break the consolidation to the upside.  In fact the Dow nearly hit its upper BB before retreating a bit to close at 12,652.  So resistance is now at 12,727 which leaves a bit more room to run higher, but the up/down pattern would suggest that tomorrow goes lower.  There's been some talk of today's action as a breakout, but the Dow has had so much trouble getting a multi-day rally going lately, it's just going to have to show me before I believe that.

The VIX:  The VIX bounced off its 200 day MA resistance and took a big 10.67% drop today.  This was enough to turn the indicators back down again.  But I'd be cautious about that because they were just coming off oversold and large one day moves tend to induce distortions in the patterns.  Although technically, this is basically a bearish engulfing candle, I'm a bit cautious about it.  However, the futures do support a move lower on Friday, and that would be good for stocks.

Market index futures: All three futures are just barely hanging on to gains at 1:33 AM EDT with ES up a scant 0.04%.  Apparently, the enthusiasm of recent nights has slowed somewhat.  ES has this same yo-yo pattern going as the Dow, but if we back off to the weekly chart, we see that candle (which is almost completely baked now) is forming a distinct hanging man, a bearish sign for next week.

ES daily pivot: Tonight the pivot rises from 1311.17 to 1319.75.  This still leaves ES above the new number but the spread has been cut in half.  Even so, a seven point gap is pretty positive - if it can be maintained.  Wit no real trend since 11 PM, it's hard to say where it may go next or what those pesky Europeans will do to it when they start trading around 2 AM our time.

Dollar index: The dollar continued lower today, losing another 0.12% and restoring its inverse relationship to stocks.  This moved it into oversold territory but without a reversal candle or support line nearby, it could go lower again on Friday.

Transportation: Last night the trans were really not looking so hot, but they delivered an upside surprise (to me anyway) in the form of a 1% gain on the day.  Unfortunately, they remain range-bound, with support at the 200 day MA and resistance at 5060.  But now they're at the upper end and with indicators that are even more overbought than yesterday it is put up or shut up time for the trans.  If they can't break the 5060 resistance line (and they're 0 for 6 here), they're going lower on Friday.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      3           1            .667        +77   +$66
   And the winner is...  
 
A very tricky situation tonight.  Friday is a triple-witching with all the volatility that implies.  But also it's the last trading day before the weekend Greek elections.  A leftist win there would hurt the markets.  However, the banks have signaled an intention to put out any resulting Greece fire with big gobs of cash.  So what to do?  Personally, I believe the Greeks will not choose to exit the euro.  But I'm not sure enough about that to be putting on any big bets right now and I'm definitely not going to be wanting to hold any futures positions going into the weekend.  In addition, the TLT appears to have put in a short-term bottom suggesting more money flowing into bonds.

Tonight I'm feeling cautious.  I see more downside risk than upside potential from here.  And hey, every move up for the last six days has been followed by another one down, so on that basis alone, we're going lower on Friday.  But with so much riding on news from Europe, I am once again just going to declare that Friday is uncertain and take the day off.  Not that I'm not trading - today I sold some OMEX and ZTR, and bought NCZ and NCV.  But ES trades - no thanks.

One other note of caution - today my account hit a new high for the year - always an ominous sign :-)  And a final note that supports the indecision in the market I'm seeing - J-Trader is reporting that one of his systems is going long and the other is short.  Go figure.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  With no obvious edge once again, there's still no trade tonight.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.

Thursday higher unless pivot broken

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

• Thursday higher unless ES breaks under pivot, low confidence.
• ES pivot 1311.17.  Holding above is bullish.
• Friday bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Last night's call was "uncertain with a bias lower" and I think that's a pretty good description of what happened today, as the Dow crossed the unchanged line eight times before finally moving decisively lower just before 2 PM - and then making a valiant rally attempt in the closing minutes that took us off the lows of the day but still left a 77 point loss.  So we remain in consolidation mode.  What will it take to get a break?  Let's peruse the charts for an answer.

The technicals

The Dow: The Dow meandered about today until some ratings agency decided that Spanish bonds weren't just plain junk, they were really junk.  That should have come as a total surprise to absolutely no one, but it nonetheless tanked the index and that was that.  So we continue stuck in a trading range with now four alternating up/down days and no real way to gain any meaningful insights from each succeeding candle.  However, we did trade outside the rising RTC today and that's a bearish trigger.  These are usually pretty reliable.  Add to that the indicators which are all overbought, and a stochastic that seems to be trying to form a bearish crossover but is for the moment basically just tangled up in itself.  Overall though, this chart seems to have more downside risk than upside potential.

The VIX:  Meanwhile the VIX does seem to have established an uptrend, gaining nearly 10% today to close just above 24, an advance that was basically stymied by the 200 day MA at 24.55.  Last night I mentioned the bullish RTC trigger here, and whadaya know, today we got the pay-off.  But with indicators still just coming off oversold, I would not be surprised to see the VIX move higher again on Thursday, bad for stocks.

Market index futures: All three futures are up at 1:12 AM EDT, with ES gaining 0.42%.  There's still no clear trend in sight on this chart and the indicators are just as confused.  Money flow is way down and just took an upward hook but RSI is just coming off overbought - I never saw that combination before.  Then we have the stochastic which is just executing a bullish crossover but doing it form a level where normally a bearish crossover would occur.

Backing out to the weekly chart again, the current candle, though only half-cooked, is starting to look like a dark cloud cover, which is a strong bearish sign for next week.  However, I think what's really going to drive the market early next week is the Greek elections this weekend.

ES daily pivot: Tonight the pivot ticks down from 1312.50 to 1311.17.  With the overnight gains in ES, we actually broke above the old number at 11:05 PM and are now a bit higher above the new pivot, a positive development.

Dollar index: The dollar today continued its wayward ways, falling 0.47% (contrary to my expectations) even as the Dow lost 0.62%.  The long-standing inverse dollar/stock correlation seems to be breaking down here reducing the utility of this chart as a predictor.  I think it's basically all about the euro here.

Transportation:The trans continued to be supported by their 200 day MA at 4976 but nonetheless posted a 0.57% loss today on a spinning top.  This candle also adds to a developing symmetrical triangle.  Since these usually exit in the direction from which they were entered, in this case from below, this portends poorly for this chart.  Supporting this idea are the indicators, now quite oversold, along with a stochastic that just completed a bearish crossover.  I'm not liking this one.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      3           0            .667        +77   +$66




     And the winner is...

This market just keeps getting more and more opaque.  I'm seeing a whole bunch of bearish signs in the charts, including the TLT which is starting to come off oversold, and yet the futures are all rising in the overnight.  This makes no sense to me.  So I'm going to make a conditional call for Thursday.  If ES stays above its daily pivot, 1311.17, then we're going to close higher on Thursday.  But if ES breaks below the pivot convincingly in the morning, then we're going lower.  That's about the only way I can reconcile the divergence between the futures and the charts.  We've already seen one night this week where the futures were up big time in the overnight but the following day closed lower.  I'm open to alternative interpretations.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  With no obvious edge once again, there's still no trade tonight.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.

Wednesday uncertain but bias lower

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

• Wednesday uncertain, bias lower.
• ES pivot 1312.50.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Quote of the Day

 "Once you sell an asset (or 4% of an asset), what you sold is gone."

                  - David van Knapp, on dividend growth investing at Seeking Alpha

Recap

Last night I didn't really know what to make of the market today so we just reviewed the weekly charts.  With a strong triple digit gain today that erased yesterday's triple digit loss, it's still not clear which way this market wants to go.  But we're back to the daily charts hunting for clues.

The technicals

The Dow: The Dow's 163 point gain today established a trading range bounded by 12,550 on top and 12,410 below.  After three days of alternating big gains and losses, you'd expect Wednesday to go lower on that basis alone.  The indicators support this, to the extent they can be trusted, being as they're all at overbought levels now.  Other than that, there's no real pattern here.

The VIX:  Hmm - here's a clue.  While the Dow regained all of yesterday's losses today, the VIX dropped by less than half of its gains on Monday.  It is also now officially oversold.  And yesterday's pop took it outside its descending RTC for a bullish setup.  Today's action was entirely outside the RTC, so there's the bullish trigger.  This pattern is usually very good so that would imply a higher VIX for Wednesday which would be bad for stocks.

Market index futures: At 1:35 AM EDT all three futures are in the red with ES leading the way lower, down 0.19%.  Of more concern is that we seem to have some strong resistance at 1323, just above the current price of 1317.75.  And the indicators are all overbought, with the stochastic finishing a bearish crossover.

ES daily pivot: Tonight the pivot drops from 1314.00 to 1312.50.  With ES drifting aimlessly in the overnight so far, we were above the old number and are still above the new pivot, and by a bit more now so that's a positive sign.

Dollar index: The dollar traded outside its descending RTC today for a 0.12% loss and a bullish setup.  Its stochastic also finished a bullish crossover and the other indicators are very nearly oversold.  I'd say a move higher is not out of the question here on Wednesday.  If the inverse correlation holds, that would be bad for stocks.

Transportation: The trans almost hit their 200 day MA today before recovering nicely for a 0.86% gain.  But that's still just half of Monday's loss.  With the alternating up/down pattern in force here too, there's no clear trend - just more consolidation.

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  13/16
 17  4/23       30         48        -     1379  14/17

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/19

 21  5/21       30         52        -     1295

 22  5/29       35         42        -     1318

 23  6/4        32         48        -     1278

 24  6/11       28         40        -     1326

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 5/14 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 16 for 19.  And of course that means that since I voted with the majority back then, the poll as a whole was also wrong that week.  So closing in on half the year gone the poll's accuracy edges up to 84 % YTD.  Not bad.

This week we note that both bullish and bearish sentiment declined from last week.  I believe this reflects the overall uncertainty and instability in the market that I've mentioned a few times recently.  But these are still not contrarian extreme readings.  And for the record, this week I voted bearish again which keeps me in step with the majority of the poll.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      2           0            .667        +77   +$66
     And the winner is...

Technically, I'd call this market lower Wednesday.  But with the current instability in the system, every little jitter gets magnified and can send stocks on a tear one way or the other on a whim.  And on top of that it's a triple witching week which is often jittery by itself.  So let's just say I see a bias lower Wednesday, but there's no official call once again tonight.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  With no obvious edge, there's no trade again tonight.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.

Tuesday uncertain

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

• Tuesday uncertain.
• ES pivot (switching to the "U" contract)  1314.00.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Well that had to be the World's Shortest Rally.  If you blinked, you missed it.  After some overnight gains last night in the futures suggesting a big move up today we got just that - once again for all of 90 seconds.  This open was pretty much a carbon copy of last Thursday.  Only this time all the gains evaporated and then turned very ugly to end with a 143 point loss.  All because, um, well, who really knows why.  Just as last night's big jump up was overdone, I think so was today's dive.

What's strange is that the VIX is still in the low 20's, but the market is behaving more like it's in the low 40's.  With all this herky-jerky action motivated mainly by random news items and rumors from Europe, technical analysis pretty much falls by the wayside.  So as alert reader Daniel suggested in a comment this evening, tonight we're going to move out to the weekly charts to see if we can filter out some of this random noise and nonsense.  Even that may not be much help, but since I don't happen to have Angela Merkel's unlisted cell phone number it's going to have to do.

The technicals

The Dow: It really is pointless to look at the daily charts tonight.  Today's oddball move completely confused the indicators and they're temporarily unreliable.  So instead we look at the weekly chart, including only up to last week (the last fully formed candle).  And here we see, somewhat surprisingly, a nice bullish engulfing pattern.  In addition, last week's close was just outside the descending weekly RTC for a bullish setup.  If this week can close above 12,358, we'll have a bullish trigger.

The VIX:  Part of the market confusion is evident in the weekly VIX.  After a doji the week of 5/7, we got four consecutive weeks of big up-down-up-down moves that left us exactly where we started on 5/14.  Of particular interest though is that all four weeks played through the upper BB.  Just as it is unusual for the VIX to spend more than a day or two at its upper daily BB, it's very unusual to find it spending more than two weeks at the upper weekly BB.  The last time we saw this was last summer during the same old European soap opera.  Then we spent five weeks at the upper BB from July through August before moving lower.

And today's VIX action seems to play into this because even with today's 11% pop, we're now well below the weekly BB and only to the middle of the range of the past month.

ES weekly

Market index futures: Before looking at the weekly chart here, I'll just note that right now at 1:25 AM EDT, all three futures are higher by identical 0.35% margins.  OK, now look at the weekly chart.  I see, holy moly, another megaphone!  Such an unusual pattern and this is now the second one in two weeks?  I mentioned the first one in this post on May 31st.  It was in the Dow and if you look at that chart it looks an awful lot like this one.  And we all know how that one ended - badly, with the Dow tanking on June 1st.

Anyway, this pattern is so rare, I don't have a lot of experience with it.  It is possible that this is a bullish megaphone.  There was a situation like this with the weekly VIX in the second half of 2009 and it resolved lower.  Or this one could be bearish like the Dow at the end of May.  One thing's for sure - there is a lot of instability in the market and it's increasing.  This pattern suggests a big break is coming soon.  Best I can tell, if ES ends the week around 1258, look for a big break lower next week.  If we can move above today's open at 1337, look for a move higher.  I guess it all depends on what kind of news comes out of Europe this week.  Perhaps the Greek elections will provide the catalyst?

And now that I look at it, there's another megaphone developing in the daily VIX too!

ES daily pivot: Tonight the pivot ticks down from 1314.58 to 1314.00 (reminder - tonight we're switching to the "U" contract).  Despite ES's overnight gains so far, we're still below this, a negative sign.

Dollar index: The dollar finally traded out of its rising weekly RTC from 4./30 last week for a bearish setup.  The action so far today suggests the bearish trigger is coming.  However, with the dollar decoupling its relationship to stocks lately, I'm not sure one can read too much into a lower dollar.  The dollar/euro relationship is probably the most politically influenced of all the charts anyway.

Transportation: The last four weeks of trans looks just like the VIX in reverse - down-up-down-up.  The interesting thing here is that the trans have been putting in higher lows.  With a resistance line around 5080, this give us an ascending triangle which would be a bullish reversal to the downturn that began the week of 4/30.  Today's action fits into this pattern.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      1           0            .667        +77   +$66
     And the winner is...

Well that's the weekly chart analysis.  And what did we learn, class?  Um, not a whole heck of a lot, I'm afraid.  A hint of positive signs and a big warning sign.  These periods of increasing instability tend not to end well and my personal feeling right now is that we may be in for a lot lower in a week or so, but officially, the current environment is far too difficult to make a daily call on a technical basis, so we'll just leave it at that - Tuesday uncertain.  But I'd be paying close attention and be ready for a big move coming sometime this week.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  No trade again tonight.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.

Monday higher

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

• Monday higher, high confidence.
• ES pivot 1321.25.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Last Friday was quite interesting for me because some fool with a backhoe dug up the local fiber cable and knocked out Internet service in our entire neighborhood.  Service wasn't restored until about 5 PM, so I basically had the day off.  I used the time to rethink the idea of installing a dual WAN router and subscribing to a wireless ISP like Clearwire.  That would prevent these sorts of problems.

Anyway, by watching CNBC I was able to see my call for a lower close go down the drain as the market relentlessly trended up the entire day for an impressive 93 point gain to close out its best week  this year so far (and my best week also).  But with some new wrinkles over the weekend from Spain and China, where are we likely to go this coming week?  We turn to the charts for the answer.

The technicals

The Dow: Thursday's shooting star reversal warning was shot down by Friday's strong green candle.  With indicators still not yet at overbought levels, the only thing in our way now is a small resistance shelf at 12,580, give or take.  After that, there's another line at 12,700 and then the psychological 13K again.  Right now, there's nothing on this chart to suggest anything but continued higher on Monday - and that was before the weekend news.

The VIX:  And on Friday the VIX formed a classic dark cloud cover, one of the most powerful bearish reversal patterns around.  With its indicators still not oversold yet, there's no reason to believe the VIX can't go lower still on Monday.

Nobody expects the Spanish Inquisition!

Market index futures: Tonight all three futures are up sharply, of course on the news from Spain.  I sure wasn't expecting that.  ES is up a monster 1.22% at 1:10 AM EDT - the biggest gain at this time of night I've ever seen.  This big gap up handily cleared resistance at 1332 and brought us right to the upper BB at 1350 which coincidentally is another resistance line.  So I'd say futures-wise, we've probably already seen most of the gains, but the markets as a whole should follow suit on the open Monday morning.

ES daily pivot: Tonight the pivot ticks up from 1319.42 to 1321.25.  We moved above the old number on Friday and of course now we're way above the pivot, always a good sign (initially at least - getting too extended from the pivot eventually starts to bring a reversionary pull into play).

Dollar index: The dollar on Friday completed sort of a morning doji star, except for the fact that Friday's candle was red instead of green.  But its stochastic just barely squeaked out a bullish stochastic crossover and the candle itself landed right on the edge of the descending RTC for a bullish setup.  This seems to suggest a move higher by the dollar on Monday.  But - and this a a big but, the euro gapped up big time in Sunday night trading on the news from Spain, so I wouldn't be surprised to see the dollar move lower on Monday.  Canonically, that should be good for stocks.

Transportation: Dow theorists take note - the trans gave us a 1.06% gain on Friday, better once again than any of the major averages.  And this move negated Thursday's gravestone doji so here too we have a chart that looks like it still has more upside potential.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      1      1           0            .800        +220  +$211
     And the winner is...

Well tonight is pretty clear I'd say.  While the charts already looked mildly bullish at the end of last week, right now the futures are pointing to a higher close Monday.  I'll be a buyer of DIA at the open.

ES Fantasy Trader

Earlier this evening we covered last Thursday night's trade at 1343.50 for an ugly 29.75 point loss, a victim of the (unexpected) news from Spain and last Friday's network outage that kept me from closing the position when I wanted to in the face of steadily rising prices. Tonight we are regrettably standing aside.  I'm pretty sure most of tomorrow's gains have already occurred.  This one was simply not tradeable.

Portfolio stats:  the account falls back to $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1

BOT    10    ES    false    JUN12 Futures     1343.50    USD    GLOBEX    19:53:26   

SLD    10    ES    false    JUN12 Futures     1313.75    USD    GLOBEX    JUN 7 20:21:18 

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.