Friday uncertain, doji possible

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

• Friday uncertain but bias higher.
• ES pivot 1422.17.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Traderstanding aside.

Recap

You Bet Your Life

Yowza!  That's what I'm talking about.  Last night I really had to call Thursday as uncertain, just because I had no way of knowing what the ECB was going to do today, but I did write that "we will see this market close higher if the ECB has anything good at all to say".  Turns out Super Mario said the secret word, and the word was "unlimited".

That was all Mr. Market needed to hear to go on a 245 point tear in a session that actually strengthened into the close. The only thing that surprised me was the size of the advance.  I was thinking more along the lines of 100 points or maybe 125, but 245?  Holy moly.  This is especially amazing since almost the entire preceding month was composed of nothing but dojis and small range days.  Tonight we explore the usual question following big up days - can it hold or are we in for a retracement?  L:et's check the charts.

The technicals (daily)

The Dow: Today's jolly green giant marubozu brought us right up to double resistance: the upper BB at 13,315 and the highs for the year at about the same level.  The market has tested the13,290 level four times already this year and each time it has been rejected.  Is the fifth time the charm?  Well consider that the other four times we were already in a quite overbought state, much more so than now, where the indicators are still less than halfway between oversold and overbought, even after today's big gains.  I'd say this increases the odds that the market might be able to push higher from here.

The VIX:  Last night after getting a bearish RTC trigger I wrote "I think the VIX still has lower to go.".  And so down we went today, with the VIX shedding 12.06% on a tall red marubozu.  And even this drop only just took us off overbought on the indicators, leaving us halfway between the BB's.  The futures meanwhile gapped down almost as much, closing under 10 for the first time ever.

VIX Oct. 16 calls

And here's an interesting chart.  I made this while doing some investeigation of the VIX of the VIX.  (Click on the chart to enlarge).  These are VIX calls for October at a 16 strike (which was even money until today).  Notice how the price rose slowly until the end of August and then suddenly took a dive, losing almost half their value in just a week.  That doesn't seem to be the behavior of a market that's going to be headed lower.  I'd say this is all pointing to more downside for the VIX over the next few days.

ES daily

Market index futures: Tonight all three futures are up a bit at 1:20 AM EDT with ES higher by just 0.07%.  I brought this chart up last week and wanted to update it tonight.  Remember the rising wedge in ES? A week ago we fell out of it and then traded sideways for three days.  I was beginning to wonder if the break lower that you'd expect was going to happen or not.  Then look what happened today.

We popped right back up into the wedge, and indeed almost right up to the upper resistance line.  This now puts us back on track for my theory of compression into the expiry of the "U" contract in two weeks, after which we're due for a correction.  Originally, I didn't think that ES 1465 was looking possible by that time - now I'm not so sure.  At least one blogger I read (elliotwavetrader) has a target of 1459 for SPX, which is pretty close.

So we continue to squeeze the wedge while we watch and wait.  In the meantime, I note that even after today's big jump, we're still only just entering overbought territory.

ES daily pivot: Tonight the pivot leaps from 1403.00 to 1422.17.  But with the big gains we saw today we remain comfortably above the new number by a good 10 points, so that's positive for stocks.

Dollar index: Today the dollar let go of the 200 day MA, both opening and closing under it for a 0.25% loss.  The dollar on $USDUPX now has no support until 55.73, which is also its lower BB.  So there's at least a bit more downside to go here.

Euro: As one would expect, the euro rose again todaywith a gain that puts it in overbought territory, at least on the RSI.  However, the stochastic has not yet begun forming a bearish crossover, so there's still some upside available here on Friday.

Transportation: Today the trans shot out of their descending RTC for a clear bullish setup.  This is confirmed by the indicators all rising off oversold and the nicely completed bullish stochastic crossover.  While we might see a pause on Friday, it looks like the recent slide is over.


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    8      6      8           1        .600     -78
September 0      1      2           0        .000     -55

     And the winner is...

While the charts are still looking fairly bullish even after today's big gains, we have to be cognizant of the normal pattern in which we see s small range consolidation after a big up day where the market takes a breather to recharge.  It's also Friday and traders may be wanting to lock in their gains from today.  So I hate to do it, but I must once again throw the Uncertain card, because I'm expecting a doji day or spinning top on Friday.  I certainly don't see another triple digit day - in either direction, not after the big drop in the VIX today.  If anything, I'm going to maintain a slight bias to the up side again.

ES Fantasy Trader

Last night I made this prediction: "I'm going to bet that the ECB will provide a pop on Thursday that will save this trade,"  Ka-ching!  The bet paid off handsomely.  It was more like a rocket ship than a pop, but I never object to taking more money than I was expecting,  In this case, we salvaged what looked like another loser for a nice 20.5 point profit.  Once again, patience paid off in the end.

Now I know that there are some who will claim that I had no way of knowing what the ECB was going to say, that it could have easily gone the other way, or that I just got lucky.  To these, I answer that yes, it was a guess, but it was an educated guess supported by what the charts were saying last night.  And anyway, as we know it's better to be lucky than good.

Portfolio stats: the account now rises to $176,500 after 61 trades (46 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside in the expectation that there's not going to be much action in the remainer of the night, and it's not certain which way it will move anyway.

SLD    10    ES    false    SEP12 Futures     1428.25    USD    GLOBEX    10:59:28
BOT    10    ES    false    SEP12 Futures     1407.75    USD    GLOBEX    SEP 4 02:04:01


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 uncertain, bias higher

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

• Thursday uncertain but bias higher.
• ES pivot 1403.00.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader holding long at 1407.75.

Recap

Last night I called today as "uncertain" out of inability to pick a clear winner.  I'd say a paltry 11.5 point gain in the Dow qualifies, as the market continues to equivocate ahead of the ECB on Thursday.  Looks like the Dog Days of summer just keep on barking.  Let's see if we can teach this market to sit, stay.

The technicals (daily)

The Dow: Arroooh!  Woof woof.  After a less than impressive 50 point loss yesterday, today the Dow managed all of 0.09% up today.  Uncertain indeed.  What we have here, is not a failure to communicate, but rather a developing symmetrical triangle as the daily range just keeps getting squeezed tighter and tighter on a daily basis.  Look for the spring to pop when we get the word from the ECB on Thursday.  And since this triangle was entered from above, look for the break to be higher.  Interestingly, we're also now right at the lower support line of a wide rising RTC from June 5th.  This line was tested once, back on July 24th, and it held - so we do have some support right here.

The VIX:  As expected, the VIX fell again today on a small gap-down green candle for a 1.33% loss.  It drove RSI higher into overbought territory and continued the bearish stochastic crossover.  It also traded entirely outside the latest rising RTC for a bearish trigger.  Despite the green candle, I think the VIX still has lower to go.

Market index futures: Tonight all three futures are up at 12:47 AM EDT with ES higher by 0.2%.  ES gave us a small hanging man today to follow yesterday's doji - the uncertainty continues.  There does, however, seem to be some upside momentum developing in the overnight as the indicators are now clearly rising off oversold levels.  We've also got a symmetrical triangle in progress as the ES range has been narrowing for three days now.  Being as it was entered from below, the odds favor a break to the upside when the pattern completes.  Technically, this should be on Thursday, which oddly enough, is the day we hear from the ECB.

ES daily pivot: Tonight the pivot ticks down from 1403.33 to 1403.00.  After a nice run-up earlier this evening, we're now a good three points above the new level.  That's certainly not out of the woods, but is bullish on the face of it.

Dollar index: The dollar continued flirting with the 200 day MA today, this time closing just under it at 56.06 on the $USDUPX.  The long doji star is almost a carbon copy of yesterday's candle, reflecting the ongoing uncertainty about Europe.  Of note is that the stochastic executed a bearish crossover today, suggesting the next move for the dollar is lower.

Euro: I was wrong about the euro moving lower today.  Instead it moved higher, breaking the 1.2600 level this evening.  The overnight canlde is forming as a star, but there's really no telling where this one is going on Thursday.  It's going to be news-driven.

Transportation: In a striking bit of divergence, the trans had a bad day, dropping 1.14% on a red closing marubozu candle.  Not only did this not exit the descending RTC, it took us clear over to the left edge, as well as the lower BB.  However, the stochastic has completed its bullish crossover from a very oversold level and we're very close to support at 4935.  So although the candles don't show it, I'd be wary of going short here just yet.


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    8      6      8           1        .600     -78
September 0      1      1           0        .000     -55
     And the winner is...

The charts tonight generally seem to be pointing towards higher stocks, with the one worrisome exception of the trans.  That said, I believe that tomorrow's close will turn on whatever the ECB has to say rather than tonight's technicals.  Of course it could very well be that the bullish signs we're seeing are simply anticipating some good news from Europe.  So bottom line,  because of the event risk involved I'm not willing to commit either way and I'm going to simply call Thursday uncertain.  However, my wild guess is that we will see this market close higher if the ECB has anything good at all to say about the train wreck that is Europe.  Personally, I've yet to put on a single trade this week.

ES Fantasy Trader

Portfolio stats: the account remains, for the time being at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we remain long at 1407.75.  My bet last night for more sideways action on Wednesday paid off.  Now I'm going to bet that the ECB will provide a pop on Thursday that will save this trade, which is already looking a lot healthier than at this time last night and is almost back to break-even.

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 uncertain

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

• Wednesday uncertain..
• ES pivot 1403.33.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader holding long at 1407.75..

Recap

Today was one of those days when the news, specifically some really poor ISM numbers, trumped the technicals.  Not much you can do about that.  There are limits to what you can accomplish with TA.  Nevertheless, the damage was limited as the Dow leveled out just before lunch time and then staged a mid-afternoon rally to finish down just 55 points.  We'll run down the charts to see what they have to say about Wednesday.

The technicals (daily)

The Dow: The last three down-up-down candles in the Dow remind me of the indeterminate sort of action we were seeing last year around this time.  I can't even fit a decent regression trend channel to this stuff.  The only thing I can make of it is that the Dow seems to have some resistance at 13095.  Oh, and that we both opened and closed above the lower BB today for the first time in three days.  Moving out to the weekly chart provides a bit more clarity -this one looks bearish and is in fact about to fall out of a rising weekly RTC from June 4th.

The VIX:  Here's a good example of how the news derailed my call.  I was pretty sure the VIX was going lower today.  Instead it gained 2.92% and climbed right back up to its upper BB.  Nevertheless, the close was outside the latest rising RTC, so despite today's gain, that's the bearish trigger.  The other factors I mentioned last night are still in play, so I'll call again for a lower VIX on Wednesday.  The futures support this, having now put in two consecutive red candles with declining indicators.

Market index futures: Tonight all three futures are down at 1:31 AM EDT with ES lower by a non-trivial 0.35%.  Today's ES action gave us a tall doji reflecting continuing market uncertainty.  The overnight so far looks bearish while the stochastic looks bullish.  Go figure.

ES daily pivot: Tonight the pivot drops a bit from 1404.25  to 1403.33.  After flirting with the old level all evening, ES dipped right at midnight keeping us a couple of points below the new number.  This is de facto bearish, but close enough that we'll want to watch for signs of ES breaking back above the pivot in the early morning.

Dollar index: Today the dollar recovered the 200 day MA, closing just a bit above it on a small doji that also filled part of the gap left by Monday's plunge.  This also led the stochastic to get into position for a bearish crossover on Wednesday.  But that all requires confirmation, so once again, this chart is too hard to call.

Euro: Today's doji in the euro was followed by a drop in the overnight that has brought us right back into the middle of the recent 1.2585-1.2505 trading range.The declining indicators and recent price oscillation suggest continued downside for the euro on Wednesday.

Transportation: Last night I wrote "sideways or even a small gain is more likely." for the trans and that's what they delivered on Monday, up just 0.02% on a tall doji star that tested the lower BB intraday.  While this indicates indecision, it also nudges us closer to the right edge of the descending RTC,  In fact, just one more sideways day would be enough to give us a bullish setup 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  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  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406 

 34  8/20       46         31        +     1418

 35  8/27       39         29        +     1411 

 36  9/4        31         38        +     1407

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 bullish call on 8/6 was right again, the S&P now being higher than then. I'm using the column "Accuracy" to track my calls.  So now I'm 18 for 32.  For the record, I voted bullish again this week based on my reading of the SPX monthly and weekly charts.

Notable this week is that the bulls and bears have essentially flipped positions, marking the first time that the Poll's majority has shifted back to bearish since Jul 23rd.  Going by the monthly SPX chart, I'm not seeing it, though the weekly chart is clearly looking weaker.

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    8      6      8           1        .600     -78
September 0      1      0           0        .000     -55 

Performance:

Here are my performance stats for the first eight 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 beat or at least match.

 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%

8/31/12       2.75%       25.64%   66.25%    13.16%     7.17%

     And the winner is...

More mixed messages tonight.  The VIX looks ready to move lower, which would be good for stocks, and the trans are looking ready to move higher but the futures are looking bearish right now.  The fact that this is a holiday-shortened week doesn't help things either.  It's looking like we're back in another holding pattern, only this time waiting for the ECB on Thursday.  Because I simply can't pick a clear winner tonight, I'm going to call Wednesday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains, for the time being at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we remain long at 1407.75.  I'm going to bet that we're going to see more sideways action on Wednesday and that the ECB will provide a pop on Thursday that will save this trade, though it's not looking all that great at the moment.

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 higher

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

• Tuesday higher, medium confidence.
• ES pivot 1404.25.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going long at 1407.75..

Recap

You snooze, you lose.  Uncle Ben delivered his speech before I even woke up Friday morning and so the time to unwind my hedges had passed by the time I got up.  I must admit, I don't understand why the Dow gained 90 points on news that wasn't really much of anything particularly new.  But this move did have the positive effect of arresting a four day slump to end the week and the month on a positive note.  Will this carry over into the new holiday-shortened week?  Let's take a look at the charts.

The technicals (daily)

The Dow: On Friday the Dow bounced right off its lower BB and its 0.69% gain caused the indicators to hook up from oversold.  It also bounced off a lower trend line going back to June 4th.  Those are all positive developments. separate

VIX daily

The VIX:  I think this is the most interesting chart of the lot tonight.  Take a look.  First off, we got a big doji star on Friday that traded below the real body of Thursday's candle for a 2% drop.  But more importantly, note how we closed just outside of the rising RTC that began on August 20th.  The VIX has been rising pretty steadily until then.  Now it's giving us a bearish setup.  Exiting the RTC means there is a 95% chance that the recent uptrend in the VIX is over.

Also, note how the stochastic (bottom row) just executed a bearish crossover and how RTC (top row) actually peaked three days ago at overbought and has been slowly declining.  And also note how on Friday the VIX broke through the upper BB intraday but closed well under it.  Once again we see this phenomenon where the VIX does not like to hang around its upper BB very long before retreating.  All of this suggests a lower VIX for Tuesday.

And speaking of the VIX, be sure to check out this post in J-Trader's blog, on the topic of the VIX, XIV, and VXX.  The Night Owl gives it four hoots up.

Market index futures: Tonight all three futures are up at 2:06 AM EDT with ES in the green by 0.18%.  Friday's ES candle looked mostly like a bullish piercing pattern to me, and on increased volume to boot.  The stochastic also completed its bullish crossover and the other indicators are now rising out of oversold.  Overall, this chart is not looking bad at all for Tuesday.

ES daily pivot: Tonight the pivot rises from 1400.00  to 1404.25.  We remain above the new level, which is bullish.

Dollar index: The dollar on Friday gapped down under its 200 day MA for a 0.61% loss.  However, the last time this happened (April 27th), that was pretty much the end of it and two days later it was back above the MA.   What's different here is that we're not quite as oversold yet, so there's at least the possibility of more downside to come.  But overall, this chart is too hard to call.

Euro: The euro, on the other hand, closed at the top of a seven day trading range on Friday on its highest volume since August 3rd.  But in a full day of trading on Monday while out markets were closed, it continued higher, breaking out of the range to hit 1.2613, a level not seen since July 5th.  A higher euro would imply a lower dollar which would imply higher stocks.

Transportation: On Friday the trans finally broke an eight day downtrend with a modest 0.29% gain that bounced off it slower BB.  The indicators are all quite oversold here and while we remain inside the descending RTC, I'd be surprised to see more downside here on Tuesday.  I think sideways or even a small gain is more likely.

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  8      6      8           1        .600     -78

     And the winner is...

Tonight I'm seeing mostly bullish technical signs in the charts.  I'll add that while September as a whole is typically dreadful, the first trading day of the month is historically quite bullish.  Add in positive moves in $TRAN and a bullish stochastic crossover in copper, and I'm going to call Tuesday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go long at 1407.75.

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.  Act accordingly.