Friday uncertain

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

• Friday uncertain.
• ES pivot 1364.75.  Breaking above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

We got the downside continuation I was expecting today with the Dow shedding another 92 points.  Friday could be tricky, with more employments numbers coming out.  We can't know what they're going to be, but we can look at the charts and see if we can figure out how to serve an ace on Friday.

The technicals (daily)

The Dow: Today's candle looks almost, but not quite like a hammer.  While it is tempting to read positive signs into this, I'd be careful.  The stochastic, which has been turning in a gold medal performance since June 20th, continues its move from overbought to oversold, implying that the selling here isn't over yet.

The VIX:  Last night I wrote "I'd favor continued upside here on Thursday" and the VIX gave us just that, down 7.33% on a long red candle.  This short-circuited the stochastic bullish crossover and the stochastic in fact now looks poised to execute a bearish crossover from a low level.  This really bears watching because it often presages strong moves.  For example, on May 14th, we got a bullish crossover form a high level and the VIX went on to go from 21.87 to just over 25 in the next four days.  The idea here is that we could conceivably see more downside to the VIX over the next few days which would be positive for stocks.

Market index futures: Tonight we have another mixed market.  NQ and YM are actually up a bit but ES is down one tick at 1:08 AM EDT.  Today's candle was a broad spinning top that continued the now three day downtrend.  Interestingly, I was not able to fit a good RTC to this decline and ES actually staged a rally from 2 PM right into the close.  And it's only been wandering around the flat line since then, almost like the bears have suddenly gone into hibernation.  Ad as I write this, ES has now turned positive - by one tick.

And while RSI remains quite overbought and the stochastic continues lower, momentum, and OBV have actually turned higher.  With the overnight candle developing as a doji, there does seem to be some indecision in the air - more than one would expect from looking at the past three days alone.

ES daily pivot: Tonight the pivot drops from 1373.25 to 1364.75.  With ES having posted some afternoon gains, this drop now leaves us just a couple of points below the new number - definitely within striking distance.  Whenever we're this close to the pivot, it pays to pay attention.  Breaking above it before the open would be bullish.

Dollar index: Wow - we have another megaphone (diverging triangle) pattern developing in the dollar, which put in a 0.33% gain today on a tall green candle.  These triangles usually resolve in the same direction they were entered form, so in this case we should be due for further gains in the dollar, which would be bad for stocks.  The stochastic, which just finished a bullish crossover, supports this idea.

Euro: Meanwhile, the euro ended the day lower on a crazy red candle with a tall upper shadow.  It has now clearly broken down from its support at 1.2250and is continuing to drift lower in the overnight.  The indicators are all only about halfway down from overbought, so more downside could be possible here on Friday.

Transportation: An interesting development in the trans today - while the Dow dropped 0.71% the trans fell just 0.05% and formed a tall dragonfly doji that nearly touched the lower BB, co-located with support at 4935.  There's at least a hint of a turn-around on this chart.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  2      0      0           0       1.000     125

     And the winner is...

Dow hourly

While the overall chart patterns continue to look quite bearish, I'm concerned about the lack of follow-through to the downside in the overnight futures, as well as this afternoon's market rally.  In fact, if one draws the RTC on the Dow hourly chart, we get a nice bullish setup.- check it out.  The 3 PM bar is the setup and the 4 PM "tail" is the trigger.  (The same thing is visible on the hourly ES chart which of course continues past 4 PM).

So tonight we have some pretty strong technical reasons to go higher and some good reasons to go lower.  There seems to be considerable indecision in the air.  The TLT formed a doji and its stochastic is all knotted up.  I'm afraid this one is too hard for me.  Logic would dictate we're going lower again on Friday, but something doesn't feel right here.  I'm afraid I'm just going to have to call Friday uncertain.  The best I can say is to watch the ES pivot Friday morning.  If we can break above that, we might actually go higher.

ES Fantasy Trader

It was looking a bit iffy this morning for this trade, but patience paid off once again for a 15.5 point gain.  I pulled the trigger just before lunch when it looked like ES was breaking out of its descending RTC.  With so much uncertainty surrounding recent developments in Europe, I decided that there was no point in being an oinker about it  I left a little on the table, but not much.  Although I still think there's more downside ahead, it never hurts to lock in gains.  Tonight, with our earlier momentum seemingly gone and some real mixed signals, I'm just going to stand aside and watch the Olympics instead.

Portfolio stats: the account the account now rises to $180,375 after 55 trades (43 wins, 12 losses) starting from $100,000 on 1/1/12. 

BOT    10    ES    false    SEP12 Futures     1358.00    USD    GLOBEX    11:26:58   

SLD    10    ES    false    SEP12 Futures     1373.50    USD    GLOBEX    AUG 1 01:18:10   


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.  Act accordingly.
 

Thursday lower

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

• Thursday lower, low confidence.
• ES pivot 1373.25.  Holding above is bullish.
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader holding short at 1373.50.

Recap

I'll admit I was a bit surprised at the big pop out the gate this morning, though now I'm wondering if this had anything to do with the, ahem, "trading irregularities" I read about in an alert from my broker.  In any case, those issues were soon resolved and the Dow ended going lower as I had originally expected, closing down 38 points and establishing a new downtrend.  I guess Mr. Market didn't really like what the Fed had to say.  Question now is whether this will carry through to Thursday.  There has to be a clue in here somewhere.

The technicals (daily)

The Dow: The Dow's solid red candle was bearish on the face of it, particularly when coupled to the stochastic which has now completed its bearish crossover.  Nothing here to suggests anything but further downside.

The VIX:  Meanwhile, the VIX did go higher today, also as I expected, but put in a tall doji.  However, with a bullish stochastic crossover now complete, I'd favor continued upside here on Thursday.

Market index futures: Tonight all three futures are running higher with ES up 0.24% at 1:09 AM EDT.  Today's ES candle was also a doji and the overnight action seems to be suggesting a reversal.  However, the indicators are all quite overbought and that suggests more downside to come.

ES daily pivot: Tonight the pivot drops from 1377.33 to 1373.25.  We just broke above the new level at 12:30 AM.  If this holds into the morning, it would be bullish.

Dollar index: The dollar took off after the Fed announcement today to gain 0.57%, breaking out of its recent consolidation to the up side.  With its indicators all depressed, there's no reason it couldn't go higher again Thursday, and that's bad for stocks.

Euro: Meanwhile, the euro moved lower again today, though doing it on a green candle.

Transportation: After hitting their 200 day MA on Tuesday, the trans followed through on their recent pattern by moving lower again today.  And while the Dow dropped just 0.29%, the trans fell a solid 2% on a tall red candle that was also good for completing a bearish stochastic crossover.  With the lower BB down to 4933, there's still more downside possible here.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  1      0      0           0       1.000      33


Performance:

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

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

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

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

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

5/31/12      -1.92%       14.23%   26.63%     4.91%     1.45%

6/30/12       4.33%       19.17%   40.38%     2.80%     5.44%

7/31/12       2.96%       22.69%   76.00%    10.98%     6.49%

And for those who might be interested, here's a daily graph of my trading account balance so far this year (I tried, but failed to get Excel to draw vertical lines on month boundaries).  This corresponds to a Sharpe ratio of 0.32.


     And the winner is...

Tonight I'm seeing some confusion in the charts, probably reflecting uncertainty over whatever the heck the ECB is planning on saying Thursday.  But just as the chatter was right about the Fed today, the chatter I'm hearing now is that the ECB is going to disappoint the market.  And since there are also enough technical signs to warrant lower stocks, I'm going to call Thursday lower.

ES Fantasy Trader

Portfolio stats: with no trade last night the account the account remains at $172,625 after 54 trades (42 wins, 12 losses) starting from $100,000 on 1/1/12.  Tonight we remain short at 1373.50.  I'm still a bit nervous about doing this in the face of upcoming ECB news, but we'll see.  I contemplated getting out of this trade Wednesday afternoon, but I'm going to gamble that there's more downside in store on Thursday.  I'll admit that this strategy is riskier than I usually play.

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.  Act accordingly.
 

Wednesday lower

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

• Wednesday lower, low confidence.
• ES pivot 1373.42.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1373.50.

Recap

Today the Dow lost 64 points amid signs that we may have put in a short-term top.  With pronouncements due on Wednesday from the Fed, let's check the charts to see what may be in store for us.

The technicals (daily)

The Dow: Today's solid red candle confirmed yesterday's doji as a reversal making it look like the top is in on this chart.  And volume, while lower than average, was higher than Monday.  In addition, today's loss took us right out the rising RTC and that's a bearish setup.  And finally, the stochastic is just about to execute a bearish crossover.  This chart looks ready to go lower.

The VIX:  As I suspected, the VIX did indeed move higher today, gaining 5% on a gap up green candle.  With a stochastic just forming a bullish crossover now, there's a good chance to go higher Wednesday here again, a negative for stocks.

Market index futures: The futures are mixed tonight, with NQ and YM up a bit but ES down just a tick at 1:45 AM EDT, although it's been drifting higher since 10:30 PM, retracing about half its decline in the final hour of regular trading today.  The picture here is similar to the Dow: doji followed by a red candle lower, RTC exit, and overbought indicators.  And here the bearish stochastic crossover is now complete.  This chart really looks ready for more downside action on Wednesday.

ES daily pivot: Tonight the pivot drops from 1381.25 to 1377.33.  With ES just about unchanged as I write this, we're still below the new level, so that's bearish. 

Dollar index: Another doji today, this one from the dollar which has shown support right around 57  on the USDUPX.  Its stochastic is just about to form a bullish crossover suggesting a move higher on Wednesday.

Euro: The euro moved higher today, continuing what is now a three day consolidation in the range of 1.2273 to 1.2322.  While the euro has now entered overbought territory, there's no sign right now that this consolidation will break on Wednesday.

Transportation: The trans dropped 0.47% today on a red candle stopped only by the 200 day MA at 5088.  Three of the last four times this happened, the trans ended the next day below the MA.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points trade

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632   +$330
July   11      2      6           1        .857     917

     And the winner is...

With the rumor mill not expecting a dramatic announcement from the Fed on Wednesday and all the charts looking about ready to roll over, I'm going to have to give this one to the bears and call for a lower close Wednesday.  I note also that while the first trading day of the month is usually positive, that's not been the case for the 1st of August.

ES Fantasy Trader

Portfolio stats: with no trade last night the account the account remains at $172,625 after 54 trades (42 wins, 12 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1373.50.  I'm a bit nervous about doing this in the face of upcoming Fed news, but we'll see.  The technicals really look like we're ready to move lower.

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.  Act accordingly.
 

Tuesday could go higher

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

• Tuesday higher, low confidence.
• ES pivot 1381.25.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Last night I wrote "we're due for a doji day or even a small loss following such an impressive run."  This time I was right - we got a tiny 3 point loss on the Dow forming a small doji.  But these things generally require confirmation.  Is there any in the charts?  Let's scout out the opposition as we go for the gold.

The technicals (daily)

The Dow: Today's doji ended right on the upper BB.  However, the stochastic (which I ignored yesterday and lived to regret that) has yet to form a bearish crossover.  Therefore it is too early to call the Dow lower based solely on this chart.

The VIX:  While I thought the VIX might go lower on Monday, it instead gained almost 8%.  Now one has to think that the VIX might go higher on Tuesday.

Market index futures: Tonight all three futures are running in the green by non-trivial amounts with ES now up 0.40% at a:21 EDT, keeping us inside the latest rising RTC.  This is basically canceling today's doji and indicating the potential for more upside on Tuesday.  Apparently, traders are expecting some positive news from Uncle Ben and the Europeans (hey that would make a good band name).

ES daily pivot: Tonight the pivot bumps up from 1373.42  to 1381.25.  We were above before and thanks to the continuing overnight gains in ES, we're still above the new number, so that's a positive sign for Tuesday.

Dollar index: Last night this chart looked pretty indeterminate. Today confirmed (sort of) yesterday's spinning top as the dollar gained 0.12% but did it on a gap-up red candle.  Still, with indicators now having bottomed near oversold and the stochastic getting ready for a bullish crossover I'd say we're within a day or two of some more upward dollar action.  Ergo, bad for stocks.

Euro: Technically, the euro looks ready to move lower on Tuesday, having now exited its rising RTC and its stochastic just completing a bearish crossover.  However, I think the financial news this week is going to trump the technicals for this currency.

Transportation: While the Dow was nearly unchanged today, the trans dropped 0.28% on a red spinning top.  There's at least the hint of a downward move here but one that requires confirmation.  Also, we're now back above the 200 day MA which served as support today and likely will do so on Tuesday too.

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  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355

 29  7/16       44         32        -     1357

 30  7/23       33         42        -     1363

 31  7/30       43         22        +     1386

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 7/2 was wrong (again), the S&P now being higher than then. I'm using the column "Accuracy" to track my calls.  So now I'm 16 for 27 .  After an impressive start this year, my monthly calls have now been wrong for 8 weeks running.   For the record, I switched my vote to bullish this week, for the first time since April 30th, based on my reading of the SPX monthly and weekly charts.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points trade

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632   +$330
July   12      1      6           1        .929     984
“You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct.”  

               - Warren Buffett


     And the winner is...

Sunday night I tried to anticipate the top and paid the price for it.  With the charts not really looking any closer to topping tonight than a day ago, no really bearish signals in sight, and with the futures showing some strong gains, I'm going to have to call Tuesday higher.  But I have to add the caveat that I think the next few days are going to be more news-driven than technically directed.  That's just how it is sometimes.

My trades today: bought OXF at 8.90, sold DHY at 3.18 and bought RSO at 5.43.

ES Fantasy Trader

Tonight the more prudent course of action seems to be to simply give up on last night's short attempt, taking a 6.75 point loss rather than run the risk of some announcement from the Fed or the Europeans running the market any higher later this week.

Portfolio stats: the account falls to $172,625 after 54 trades (42 wins, 12 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside in the expectation of coming uncertainty Tuesday.

BOT    10    ES    false    SEP12 Futures     1384.25    USD    GLOBEX    00:52:43   

SLD    10    ES    false    SEP12 Futures     1377.50    USD    GLOBEX    JUL 30 01:48:23   


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.  Act accordingly.
 

Monday maybe lower

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

• Monday lower, low confidence.
• ES pivot 1373.42.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1377.50..

Quote of the Day

“You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct.”  

               - Warren Buffett

Recap

OK, I know I said I was going to take two weeks off to watch the Olympics, but who am I kidding - I need to watch the market too.  I admit it - I'm hooked.  I may omit some of the usual details, but for now at least it looks like I'll keep the usual schedule.

Anyway, I was surprised at the extent of Friday's gains which leave us at a number of extremes now but not necessarily reversal indications

The technicals (daily)

The Dow: Last Thursday I said a big up day in the Dow was often followed by a doji.  That obviously didn't happen.  But now we've got two big up days, the second of which blew right past the 12,950 resistance line, the 13K psychological line and the upper BB too.  At the risk of repeating myself, I'm going to say again that we're due for a doji day or even a small loss following such an impressive run.

The VIX:  The VIX dropped again Friday but has no support in sight.  More downside possible here Monday.

Market index futures: All three futures are in the red Sunday night with ES down 0.34%.  Like the Dow, ES put in two days of outsized gains that took it above its upper BB.  And unlike last Thursday night, tonight there is no continuing upside follow-through and that worries me.

ES daily pivot: Tonight the pivot jumps from 1347.08  to 1373.42.  While this still leaves us above the new number, we're now pretty close.  Once again we have to watch the pivot for a break under.

Dollar index: The dollar gave us a doji Thursday, and then a second, lower one Friday.  But with so much additional news coming out of Europe over the weekend, it's hard to draw any conclusions form this chart.

Euro: After three days of gains, the euro seems to be running out of gas and has been unable to recover from a Friday afternoon slide.  Of all the charts I look at, this one seems the closest to turning bearish on Monday.

Transportation: Unlike the Dow, the trans still seem to have lots of room to run up some more.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points trade

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632   +$330
July   11      1      6           1        .923     981

     And the winner is...

Once again, another tricky night full of mixed messages.  The Dow, VIX, and the trans are looking good, the euro is looking poised to move higher which would be bad for stocks, and the ES overnight is bearish.  All things considered though, I'm going to go with the futures which have reversed within a day the last five times they hit their upper BB.  Accordingly, I'm calling Monday lower, though I'm not feeling particularly confident about saying that.  I hope my facts, hypotheses, and reasoning are all correct.

ES Fantasy Trader

Portfolio stats: with no trade last Thursday night the account remains at $176,000 even after 53 trades (42 wins, 11 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1377.50.  If this trade isn't profitable Monday, I think it will be Tuesday.

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.  Act accordingly.