Friday higher only if pivot passed

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

• Friday higher if ES pivot passed.
• ES pivot 1329.67.  Holding under is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

I love it when a plan comes together.  Every chart I looked at last night behaved exactly as I expected today.  And we finally got the decline that seemed to be brewing for a while with the Dow shedding 251 points in its second worst day of the year.

The technicals

The Dow: Last night I said about the Dow, "something's going to break here soon.".  And today it sure did, with a relentless day-long decline down nearly 2% to close at 12,574 at session lows.  The bearish RTC trigger went off today, though a new downtrend is not yet in effect.  Even with today's big drop, the indicators are still all just starting to come off overbought.  Further downside would not be out of the question.  The only problem is that today's close stopped right on a big support line, so continued losses on Friday is not a given.

The VIX:  Just as the Dow tanked today, the VIX jumped, up almost 16.5% to close just over 20 again.  This move took it just past the right edge of its descending RTC for a bullish setup.  One more day higher would be the bullish trigger.  And note that the stochastic made a bullish crossover today.  And we still have a long way to go before reaching the upper BB.

Market index futures: While the Dow and VIX may be suggesting more downside on Friday, the futures, perhaps surprisingly (in view of this afternoon's bank downgrades) are actually all in the green at 1:29 AM EDT with ES up 0.23%.  Today's long red candle was a bearish setup and trigger all rolled into one as ES crashed out of its rising RTC.  But even that wasn't enough to send the indicators to oversold, implying that there's still some downside potential here.

ES daily pivot: Tonight the pivot takes a dive from 1348.33 to 1329.67.  So that still leaves us under the pivot but a lot closer than before midnight.  An eight point spread is within striking distance, though ES is showing no inclination to strike just yet.

Dollar index: Last night I wrote "I'd say the dollar's going higher Thursday".  Right again, as the dollar jumped almost a full percent trading outside its descending RTC for a bullish trigger, implying more upside to come.  Its indicators are also all just coming off oversold, leaving plenty of room to run higher.

Transportation: And finally, recall that last night I wrote "This chart too is looking ready to roll over.".  And so it did, dropping almost 2% today.  And that took us right out the rising RTC for a convincing bearish setup.  One more down day here and we have a bearish trigger.  Supporting this are indicators that have all peaked at overbought now.

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    5      4      5           1            .600        207   +$167

Reminder: "points" is the number of Dow points gained on days I was right, less points lost on days I was wrong about the direction of the close.  "Trade" is the results from trading 100 shares of DIA from the open to the close on days I call the close higher, or DOG on days I call the close lower.

    And the winner is...

The net bias tonight seems to favor the bears once again.  All except the futures which are up a bit.  But the typical market reaction following a big down day like today is either a small DCB or some form of small doji.  So because I don't think we'll see a significant move either way on Friday, I'm pretty much sitting on the fence.  But this may be a key pivot day.  So let's do a conditional and say that if ES manages to break above 1329.67 Friday morning, we'll close higher, else lower.

ES Fantasy Trader

Well last night's trade was profitable for 5.25 points, even though I got out way too early and left a pile of cash on the table.  But I'd always rather have that than watch a profit turn into a loss.

Portfolio stats: the account rises to $126,750 after 45 trades (34 wins, 11 losses) starting from $100,000 on 1/1  Tonight we stand aside absent any good bias one way or the other.

BOT    10    ES    false    SEP12 Futures     1338.75    USD    GLOBEX    11:24:10    

SLD    10    ES    false    SEP12 Futures     1344.00    USD    GLOBEX    01:02:53   

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 lower

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

• Thursday lower, low confidence.
• ES pivot 1348.33.  Holding under is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1344.00.

Recap

Yup, yesterday they bought the Fed rumor.  Then today they sold the news.  Then they bought the news.  And then they sold it some more.  And finally bought it again.  And when this tale told by an idiot was finally over at 4 PM, nothing was signified as the Dow had moved all of 13 points to the downside.  Can you blame me for not trying to call today's action?  It was one of those days where the scalpers had a field day, the day traders got whipsawed good and the swing traders were left going, huh?  Never a dull moment on Wall St.

The technicals

The Dow: While the Dow remains in its rising RTC, today's roller coaster took it just over the right edge for a bearish setup.  And the candle was a tall tomahawk (a hanging man with a little upper shadow).  We saw another similar setup two days ago, but this time the overall gestalt is weaker and the indicators are even more overbought.  Like storm clouds gathering on a hot and hazy summer afternoon, I'm thinking something's going to break here soon.

The VIX:  This VIX put in its third day bumping down the lower BB today on a tall inverted hammer.  That's not a great reversal candle but three days is a long time for the VIX to go down the lower BB without reversing.  Thing is though, the futures are quite oversold now but I see no reversal signs there at all yet, so a big VIX pop isn't necessarily imminent.

Market index futures: No mixed markets tonight - all three futures are running in the red at 1:39 AM EDT with ES down by 0.48%.  Today's tall doji bearish warning seems to be getting confirmed in the overnight, so far at least.  And the indicators have now all peaked at overbought levels, a good sign of a top.  I also note that this is now the third day that ES has faced resistnace at 1350 and been unable (so far anyway) to break above.

ES daily pivot: Tonight the pivot ticks up from 1348.00 to 1348.33.  But with ES in a downtrend since 6 PM, we actually broke under at 9:55 PM and haven't been able to come back since then - not a good sign.

Dollar index: The dollar today closed outside its long descending RTC for a bullish setup with a 0.18% gain.  And its indicators have all hooked up off oversold levels.  And with a euro chart at its upper BB for four days now, I'd say the dollar's going higher Thursday

Transportation: Like the Dow, the trans today gave us a hanging man right off their upper BB.  And the stochastic just formed a bearish crossover.  And RSI at 85 is even higher than it was just before the nasty May downturn.  This chart too is looking ready to roll over.

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      4      5           1            .500        -44   +$89
     And the winner is...

I'm feeling kind of shell-shocked right now.  Sunday night I said the market would go higher, so it went lower.  Monday I said it would go lower Tuesday, so it went (a lot) higher.  Arrrgh!  So tonight I'm going to call Thursday lower and head for my foxhole.  I know this feels like, what's the opposite of catching the falling knife - grabbing the helium balloon?

But with Chinese PMI numbers down (and if the Chicoms say something is bad, it must really be bad), a bunch of overbought and oversold extremes on the charts, Dr. Copper putting in a dark cloud cover today, and Uncle Ben offering nothing more encouraging than Let's Twist Again (like we did last year), "down" simply seems the more logical direction right now.  And I'm nervous about saying it, but sometimes that's a good thing.  It seems like my worst calls come when I'm the most confident.  We'll see how this one plays out.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $124,125 after 44 trades (33 wins, 11 losses) starting from $100,000 on 1/1  Tonight we go short at 1344.00.

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

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

• Wednesday uncertain.
• ES pivot 1348.00.  Breaking under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Well I'm sure glad I only said that Tuesday was a "maybe lower" last night because it ended up being clearly higher to the tune of 96 Dow points.  I'm now putting in the "trend up" arrow although technically we're still not quite there yet because the Dow has not put in three consecutive up days yet.  But the overall trend of the past six sessions is clearly up.  Now we're at an important junction.  We'll run down the charts because that's what I do, but I'm already thinking that tomorrow's close will be determined more by what Uncle Ben has to say than what the technicals look like.

The technicals

The Dow: Yesterday the Dow gave us a hanging man.  Today proved why this candle always requires confirmation to be a reversal sign.  We didn't get it of course and in fact got a bullish engulfing pattern instead and that keeps us solidly inside the rising RTC and points the way higher, overbought indicators notwithstanding.  And as an alert reader commented yesterday, just hitting the upper BB is no guarantee of a reversal either.  And in fact there were two instances last year where the Dow went six and then seven sessions in a row crawling up the upper BB before finally peeling away.  We might be starting one of these "wall of worry" rallies here.

The VIX:  And on the other end of the BB's, the VIX bumped down its lower BB for the second day in a row, ending the session up 0.33% but still comfortably below 20 at 18.38.  However, the VIX is pretty good about bouncing off its lower BB.  That would indicate a higher VIX, I'd like to say tomorrow, but let's be cautious and just say later this week.

Market index futures: Like the Dow, yesterday's ES hanging man was invalidated by today's big gain, and the bullish engulfing pattern predicts more upside possible Wednesday.  The indicators are not reliable at the moment.  And at 1:27 AM EDT, we have another mixed session, with NQ up a bit but both ES and YM lower.  ES is down 0.07% - nothing of great significance here.

ES daily pivot: tonight the ES pivot vaults from 1338.58 to 1348.00.  With ES wandering lower from its earlier highs this evening, this now puts it right on the pivot.  We could go either way from here.

Dollar index: The inverse dollar/stock correlation is back on with the dollar taking a big 0.77% dump today to remain solidly inside a descending RTC.  No sign of a reversal here either so we have to assume continued lower on Wednesday.

Transportation: The big gain in the trans yesterday was the real clue to today's action - too bad I saw it but didn't grasp it.  Anyway, with another green candle and another 1.13% up today, the trans have just been on a tear the past four days, closing at 5251.  There's no resistance until 5340 and we didn't bounce off this upper BB either, so there might just be more upside left here.

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      4      4           1            .500        -44   +$89
     And the winner is...

Well the charts have mostly taken a turn for the positive today, with the exception of the VIX which looks ready to move higher, which would mean lower stocks.  But it's really all moot because I think tomorrow's outcome will be determined by whatever the Fed has to say.  And that could go either way.  With the recent run-up apparently pricing in good news, we might very well get a classic "buy the rumor, sell the news" day.  But if Uncle Ben makes an unexpected move the market likes, we could get further gains.  The charts are not quite at any important resistance levels yet.  So against that background, I hope you'll forgive me if I take a pass on this one and simply call Wednesday uncertain.

If I had to take a wild guess, I'd vote for a higher close simply on the basis of the TLT, which today  turned decidedly lower, breaking a four day winning streak.

ES Fantasy Trader

Ugh - I'm throwing in the towel and covering this short at 1349 for a disappointing 10.25 loss.  There's just too much risk of an upside surprise on Wednesday to hold onto this one any longer.  If we do close lower, I'll just go out in the back yard and bang my head against a tree.

Portfolio stats: the account drops to $124,125 after 44 trades (33 wins, 11 losses) starting from $100,000 on 1/1  Tonight we stand aside ahead of Fed news.

BOT    10    ES    false    SEP12 Futures     1349.00    USD    GLOBEX    01:06:13    

SLD    10    ES    false    SEP12 Futures     1338.75    USD    GLOBEX    JUN 19 01:12:30   


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 maybe lower

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

• Tuesday lower, low confidence.
• ES pivot 1338.50.  Breaking under is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1338.75..

Recap

The market was mixed today with the Nasdaq up nicely, the SPX up a bit and the Dow down a bit.  But since my call was for the Dow, that's a miss.  Oddly enough, my DIA trade for the day (buy the open, sell the close) was a winner anyway.  Go figure.  Anyway, it was all pretty much a re-run of exactly a week ago when the Dow ended lower after a news-inspired rally in ES the night before.  I guess it was a case of "buy the news, sell the news".  We now resume the search for clues as to whether they'll be buying or selling on Tuesday.

The technicals

The Dow: Today's 0.2% drop formed a little hanging man at the top of Friday's big green candle and peeled away from the upper BB.  Also, RSI and momentum have peaked at overbought levels.  Last night I expected some Greece-fueled limited upside today adding "At some point, the recently overbought nature of the market will reassert itself and we'll go lower.".  That moment may now be at hand.

The VIX:  The VIX took a huge 13.22% plunge today which I found somewhat surprising given the limited moves in the market as a whole.  Normally, I'd have expected more market upside to accompany this sort of VIX action.  In any event, we now have a classic bearish three black crows pattern here.  Unfortunately, that last crow today flew right through the lower BB.  And the VIX usually spends no more than one or two days around its lower BB before heading higher again and that would be bad for stocks.  Now that I think of it, this drop in the VIX may simply reflect a lot of people sitting on their hands in advance of the Fed this week.

Market index futures: Today ES put in a pretty clear hanging man that just touched the upper BB.  And the indicators are all overbought.  In fact RSI and momentum have already started coming back down, portending lower on Tuesday.  At 1:20 AM EDT, we still have a mixed market with NQ up a bit and both ES and YM down.  ES is lower by 0.15% and has been trending down since 10:40 PM.  today's ES candle formed a gap-up hanging man right on the upper BB suggesting at least the chance of a continued move lower Tuesday.

ES daily pivot: Tonight the pivot moves up from 1333.50 to 1338.50.  This gain leaves ES precariously close to the pivot., just a point and a half above.  While remaining above is bullish, we need to watch this level for signs of breaking under in the morning.

Dollar index: Today the dollar exited a descending RTC from the first of this month for a bullish setup.  Its indicators are also all quite oversold and its stochastic just formed a bullish crossover.  Everything seems to be lining up here for a move higher on Tuesday, potentially bad for stocks.

Transportation:Here's another interesting divergence.  While the Dow actually lost 0.2% today, the trans jumped nearly 2%, advancing clear to their upper BB.  While this tall green candle is not a reversal indicator, the upper BB can be nominal resistance.  With overbought indicators now, I have to wonder how much short term upside is left here.

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  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318

 23  6/4        32         48        -     1278

 24  6/11       28         40        -     1326

 25  6/18       39         26        -     1343 

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 5/21 was wrong, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 16 for21 .  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 with almost half the year gone the poll's accuracy drops back to 76% YTD, still pretty good.

This week we finally got a reversal in sentiment with the bulls outnumbering the bears for the first time since April 30, and by a non-trivial 13 points.  This also marked the first time all year that I voted against the majority with a continued bearish call.  I'm afraid I just don't see the enthusiams for the 30 day market at this point.  The monthyl SPX has just exited a rising RTC, its indicators are all still jsut coming off overbought, and the stochastic just finis  I guess we'll see who was right in a month.hed a bearish crossover in April.

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      3      4           1            .625        +52   +$98



     And the winner is...

It may be a bit early, but I'm seeing some signs that we've run into some resistance here in the form of several different BB's all at the same time as well as reversal candlestick patterns.  The Dow in particular acted especially weak today making me think that we could be in for at least one day of lower prices, so I'll go out on a limb and call for a lower close Tuesday.  I'll be buying DOG on the open.

ES Fantasy Trader

Portfolio stats: the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  Tonight we finally enter a new trade, going short at 1338.75.

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, low confidence.
• ES pivot 1333.50.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

I'm not too proud to admit that I really could not figure out which way the market was going to go last Friday.  Turns out it was up, in decisive fashion with the Dow adding on another 115 points.  One more day like this and we'll be able to put in the "up-arrow" for the swing trend.  So apparently those who bet on a positive (for the market) outcome to the Greek elections were proven correct.  But will this carry over into Monday?  After all, it was just a week ago that we had the World's Shortest Rally on Spanish bank bailout news.  Let's run the charts.

The technicals

The Dow: On Friday the Dow put in the second of two consecutive strong candles.  It's always better to see a 150 and 100 point up day in a row than a 200 followed by a 50.  But particularly interesting is that the volume on Friday was huge - the greatest since March 16th.  Of course back then, the Dow had just hit its upper BB, just like this past session.  Hmmm...  Unfortunately, the indicators are all pegged at overbought now and so have lost their predictive power.  OTOH, the weekly chart actually looks quite positive, showing two consecutive solid green candles on increasing volume with a stochastic that just formed a bullish crossover last week.

The VIX:  On Friday the VIX dropped another 2.63% to complete a three candlestick pattern known as the three outside down, generally a good bearish reversal indicator.  And of course more VIX downside is good for stocks.

Market index futures: Wait - we've seen this movie before.  Wasn't it exactly one week ago that the futures spiked on Sunday evening on news of a Spanish bank bailout?  Well only this time it's not quite the same.  While all three futures are indeed up at 1:20 AM EDT, this time ES is up only 0.36%, not the giant 1%+ pop we saw this time last week.  ES was higher earlier this evening though, up to 1347.50 initially, which was right up to its upper BB.  I actually prefer to see this than the sort of irrational exuberance we got last time around.  There may be less buyer's remorse come Monday.

ES daily pivot: Tonight the pivot jumps from 1319.75 to 1333.50.  But after the big pop on the open Sunday evening, we're still comfortably above the pivot, but not too far above (which would be a negative sign).

Dollar index: My dollar chart ($USDUPX) is only available during regular trading hours, so instead I'll comment on the euro, (6E#F in eSignal) which is trading Sunday night.  Here obviously we've got the Greek pop that took the euro clear to its upper BB at 1.2765 for a huge 0.6% gain.  This will surely drive the dollar lower on Monday and that's generally good for stocks.

Transportation: This chart is similar to the Dow although Friday's gain was noticeably weaker than Thursday's, striking a note of caution.  Add to this the fact that RSI peaked on Thursday and the rest of the indicators are overbought, and I would not be surprised to see the trans move lower on Monday, which could bode ill for stocks later this week.

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      4           1            .667        +77   +$66
     And the winner is...

Another tough call with the charts once again being distorted by an exceptional news event.  True, the futures are all up right now, but they were up a week ago too and last Monday turned out badly.  Fool me once, etc.  With the Dow already at its upper BB, I think there might still be some Greek-driven upside on Monday but will be limited.  At some point, the recently overbought nature of the market will reassert itself and we'll go lower.  The only question is if it will be Tuesday or mid-day Monday.  But the market does seem to have some momentum behind it at the moment, so I'll go for a higher close Monday.  I'll be buying DIA at the open.

ES Fantasy Trader

Portfolio stats: the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  Once again there's no trade tonight, this time because, as like a week ago, I feel that the train left the station before we got there.  And one of my rules is to never chase.  I look at this instead as an opportunity to exercise my patience.

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.