Thursday lower

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

• Thursday lower, low confidence.
• ES pivot 1454.58.  Holding below is bearish.
• Friday bias lower technically. 
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going short at 1448.50.

Quote of the Day

"It's real easy to spend other peoples' money". 

              - Me


Recap

Last night I said "the sideways motion will continue" and that's just what happened, with all three major averages putting in tiny gains on small dojis and the Dow up just 13 points.  I also said a bunch of charts were at important junctures.  Let's take a quick peek at them to see what if anything got resolved today and what it means for Thursday.

The technicals (daily)

The Dow: We got another reversal candle today, this one in the form of a shooting star that traded above yesterday's spinning top.  But the whole mess remains stuck (four days now) in a tight trading range of 13,550 to 13,590.  All the factors in play last night are still there tonight and the conclusion is the same - still no direction here.  The only thing of note is that the Dow exited its rising RTC (finally) for a bearish setup.

The VIX:  We got a doji here too today as the VIX dropped 2.12% to close near its recent support of 13.50.  Next (and presumably last) stop would be the lower BB at 13.24.  So there's still a bit of room to move lower here.

Market index futures: Tonight all three futures are down at 1:11 AM EDT with ES lower by 0.29%.  Today's doji was largely inconsequential.  The thing to watch is the current action.  With ES now at 1449, it has already broken out of a steep rising RTC from 9/11 and is right on the edge of a longer one from 9/4.  Unless ES can climb back above 1453, it's looking lower for Thursday.

ES daily pivot: Tonight the pivot rises from 1452.75 to 1454.58.  We're now below that, so that's a negative sign.

Dollar index:After gapping up yesterday, the dollar reversed course today on a big bearish engulfing pattern that also drove it right back to the edge of the descending RTC, thus canceling yesterday' bullish setup.  This looks more likely to go lower than higher from here.

Euro: The euro now has a nice new descending RTC going and today's doji is already canceled by the overnight action which is all down since 9:30 this evening, I believe on Chinese PMI numbers.  Indicators are also dropping though still overbought, so I'd say the euro's going lower on Thursday.

Transportation: After two days of big losses that took them under the 200 day MA the trans reversed course today with a spinning top for a 0.40% gain, much better than the Dow's 0.10%.  Still no immediate reversal signs from the indicators though, so tomorrow's pretty much up in the air.

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 5      4      3           0        .556     -88 

     And the winner is...

It's not unanimous by any means, but I'm feeling more bearish than bullish tonight.  I'm looking mostly at a falling euro, falling ES, and a Dow RTC exit.  Copper also looks ready to move lower (though my call for that least week was definitely premature).  And the TLT has been rising for three days now and just exited its own descending RTC.  So in my mind that all adds up to a lower Thursday.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $180,750 after 64 trades (49 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we're going short at 1448.50.  Twitter seems to be down again and isn't letting me post.  The time of trade was 1:26:46 though.

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, consolidating.
• ES pivot 1452.75.  Holding above is bullish.
• Rest of week bias uncertain technically. 
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Things were looking good for a lower close until a late-afternoon rally (of sorts) closed out a blah day with all of 11.54 points higher for the Dow.  However, the Naz and SPX did close a bit lower.  There seems to be a lot of indecision in the market now that we've heard what the Fed had to say.  So let's go to the charts for some guidance.

The technicals (daily)

The Dow: Yesterday's bearish harami was followed today by a small spinning top that traded at the lower end of yesterday's candle, despite a positive close.  It's not exactly a roaring bullish sign and with the indicators still quite overbought, lower again looks like the more logical choice.  We're also ever so close to a bearish RTC setup.

The VIX:  I didn't want to commit to a direction on this one last night and after a spinning top today giving a 2.81% loss, I'm not willing to call it again.  The only ST pattern I see here is a developing symmetrical triangle of sorts.  If true, then we'd have a lower VIX later this week.

Market index futures: Tonight all three futures are up at 1:03 AM EDT with ES higher by 0.40%.  This surprises me a bit considering the bearish signs on the other charts.  After today's doji, it looks like ES want to move higher.  However, it's already back to 1459 where it found resistance for the past three days.  Unless ES can break above this number, I think it's going lower.

ES daily pivot: Tonight the pivot drops from 1454.50 to 1452.75.  We broke above the old number before midnight and are now even higher, so that's a positive sign.

Dollar index: Today the dollar moved higher as I expected, gaining 0.29% on a small gap-up hanging man.  But with the indicators now having bottomed and just coming off oversold, the dollar looks set to move higher still.  Also, today's close was right on the edge of the descending RTC - a bullish setup.

Euro: Yesterday I said this chart looked to be topping and today the euro did indeed move lower, right to the edge of its rising RTC for a bearish setup.  Although it took a small pop right at midnight,the euro will have to trade above 1.3092 to avoid a bearish trigger on Wednesday (it's 1.3078 right now).

Transportation: More divergence on the trans today as the Dow gained 0.09% but the trans fell a significant 1.12%.  As I mentioned yesterday, the trans do not respect the 200 day MA very well and today they indeed fell right through and never looked back.  We're now halfway between BB's and halfway to oversold with no sign of a reversal, so more downside is possible.

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 4      4      3           0        .500     -88

     And the winner is...

You know, instead of a top, the recent chart action is looking more like consolidation to me now.  And the last two times we had this kind of sideways movement, it resolved higher.  So that's a distinct possibility.  And yet we have a number of charts that are right on the edge of their RTC's suggesting a breakdown is possible.  This conflict should be resolved on Wednesday.

But in the meantime, the only reasonable course is to assume that the sideways motion will continue and therefore I have no choice but to call Wednesday uncertain.  Remember, as those great epistemologists Rush once said, "If you choose not to decide you still have made a choice".

ES Fantasy Trader

I was watching ES fall down its descending RTC this morning as last night's short trade gained profitability.  When ES exited the RTC around lunch time, I pulled the trigger.  Good thing too, because it rallied from there.  Anyway, we took a reasonable four point profit.

Portfolio stats: the account now rises to $180,750 after 64 trades (49 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight without a clear edge, we stand aside.

BOT    10    false    ES    DEC12 Futures     1450.75    USD    GLOBEX    12:36:32   

SLD    10    false    ES    DEC12 Futures     1454.75    USD    GLOBEX    01:26:42   


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 lower

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

• Tuesday lower, low confidence.
• ES pivot 1454.50.  Holding below is bearish.  Now using  "Z" contract.
• Rest of week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going short at 1454.75.

Recap

We basically got the drop I was expecting today as the Dow proved unable to breach last Friday's close in a kind of lackluster session due in part no doubt to a religious holiday.  Is a short-term top in or was this another fake-out breakdown?   This is going to be another interesting week, as triple-witchings always are.  Let's check the charts.

The technicals (daily)

The Dow: Today the Dow dropped 40 points on a bearish harami candle.  However, this is a pattern that really requires confirmation, especially since today's session wasn't quite normal.  I do note though that RSI, momentum, and money flow have all peaked at overbought and are now headed lower, a bearish sign.

The VIX:  Today the VIX gained just 0.55% following yesterday's rise with a small doji.  We're still just coming off oversold here and have yet to retrace 50% of last week's big drop.  However, the futures were actually lower today, and lower on a dark cloud cover.  So the picture for the VIX is muddled.  This one is too tough to call.

Market index futures: Tonight all three futures are actually up just a bit at 1:16 AM EDT with ES higher by 0.07%.  Like the Dow, ES today failed to advance beyond Friday's highs and the developing candle is sitting right on the edge of the rising RTC for a bearish setup.  1455 is the key level here for ES (Remember, I have now switched over to the "Z", or December contract).  Higher, bullish; lower, bearish.

ES daily pivot: Tonight the pivot drops from 14458.83 to 1454.50.  With ES wobbling higher over the evening, we're actually above the new number now, though by less than a point.  This puts the pivot in play.  If we break back under it before the open on Tuesday, that's decidedly negative.

Dollar index: Yesterday's doji was confirmed today as the dollar finally moved higher, up 0.16% for its first gain in nine sessions.  But all it really did was give us another doji and the small move still keeps us inside the descending RTC.  Still, being as oversold as we are, I'd bet on the dollar moving higher before it goes lower from here.

Euro: Meanwhile, the euro moved in mirror image to the dollar.  Today's red spinning top is being followed by lower action in the overnight.  While we're still inside the rising RTC, a move below 1.3057 would be a bearish setup.  Even before that, the chart seems to be topping here.

Transportation: This is probably the weakest chart of the bunch tonight.  While the Dow lost 0.30%, the trans dumped 1.45% today on a long red marubozu that was stopped only by the 200 day MA at 5134.  Five of the last six times  the trans stopped in that position, they were lower the next day.  And like the Dow, the indicators seem to have all topped at overbought and are headed lower, a bearish sign.

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  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411 

 36  9/4        31         38        +     1407

 37  9/10       54         29        +     1438

 38  9/17       63         22        +     1466

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 8/27 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 20 for 34, or 59%.  For the record, I voted bullish again this week based on my reading of the SPX monthly and weekly charts.
This week we find a most interesting development. Bullish sentiment jumped to its highest level of the year.  In fact the last time it was higher was at the start of November 2011, and recall that last November was an awful month.  And bearish sentiment dropped 7 points to just one point above its lowest level for the year.  With a 41 point spread, this is starting to make me a bit uneasy.  We may in fact be reaching contrarian bearish levels 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    8      6      8           1        .600     -78
September 4      3      3           0        .571     -76

Politics: Here's a news item from the CBC News that's now over a week old, and while it got virtually no media play, at least here in the US, I find to be fairly disturbing: Canada closes embassy in Iran, expels Iranian diplomats.  Now why would Canada suddenly and without warning sever diplomatic relations with Iran?  While there's been some grumbling in Canada about human rights issues, that's nothing new and no one has been storming Canadian embassies or burning Canadian flags lately.

What has been happening is increasingly strident noises from Israel about taking out Iran's nuke facilities, and by "taking out" I don't mean dinner and a movie.  If this happens, the market's gonna tank.  But I don't think Israel will act before our elections.  With Romney acting decidedly more friendly towards Israel than Emperor Nerobama (who has been downright hostile), the Israelis probably will want to wait and see if Romney can get elected before launching any attack.  So we're probably safe until then.  Either way though, this situation bears watching.  And I'll bet our friends in the Great White North know something they're not saying.
 
     And the winner is...

I'm a bit concerned that the futures are not running any lower at this time of night, but the overall tenor of the charts remains bearish and on that basis I will call Tuesday lower.

ES Fantasy Trader

I think I had the right idea about going short last night, but by this afternoon something didn't feel quite right.  Maybe it was just the lack of market participation, but I decided to just pull the plug on this trade for a small 1.25 point profit.  I can always get back in again later if it seems warranted.

Portfolio stats: the account now rises to $178,750 after 63 trades (48 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go short once again at 1454.75.

BOT    10    false    ES    SEP12 Futures     1460.75    USD    GLOBEX    14:31:03    

SLD    10    false    ES    SEP12 Futures     1462.00    USD    GLOBEX    01:08:24   


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 lower

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

• Monday lower, low confidence.
• ES pivot 1465.67.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going short at 1462.00.  Switching to the "Z" contract tomorrow.

Recap

The Dow continued to push higher on Friday closing at 13,593, a level not seen since May 2007 on the upside and leaving us just 605 points shy of the all-time high back in October 2007.  There also seems to be a lot of gathering bullish sentiment after last week's Fed announcement and ECB news the week before - recall that last week's Ticker Sense poll hit its second highest bullish reading of the year last week.  Now we need to decide if the market has enough steam to keep on chugging or if they're going to start running for the exits on Monday.   Let's peruse the charts.

The technicals (daily)

The Dow:  I was expecting a doji on Friday but instead got a stubby hooting star - still a bearish pattern.  And the indicators continue to rise, now being extremely overbought.  This chart now looks ready to roll over.

The VIX:  On Friday the VIX rose 3.27% even as the market rose too, an unusual event.  And it gained 3.27% on a bullish piercing pattern, one of the most reliable candlestick reversal patterns.  It also respected its support at 13.50.  With the same pattern in the futures, I'm thinking the VIX is going higher on Monday.

Market index futures: Tonight all three futures are down at 1:24 AM EDT with ES lower by 0.24%.  On Friday ES gave us an inverted hammer the likes of which we haven't seen in this latest rally. Combined with a volume spike, this sort of looks like a blow-off top.  We remain above the upper resistance line of the rising wedge that ends on Friday but so far at least, ES seems to be unable to cross the 1465 line.  Note: I'll be switching to the "Z" contract tomorrow.

ES daily pivot: Tonight the pivot jumps again from 1452.17 to 1465.67.  After drifting lower all evening, we crossed under the pivot right at midnight, so this particular indicator is now bearish.  Unless ES can break above the new pivot by morning, it's not looking good.

Dollar index: On Friday the dollar broke right through its support and gapped down to form a long spindly doji to close at its lowest level of the year and breaking right through its lower BB on both the daily and weekly charts.  The indicators are now extremely oversold on both daily and weekly charts.  All together, this looks like the dollar will be wanting to go higher Monday, or Tuesday at the latest.

Euro: After a small decline last Monday, the euro made progressively larger gains every day for the rest of the week giving the chart and exponential run-up look to it.  These things can't go on forever and right now the euro is forming a doji, something we haven't seen at this hour since the big push began last week.  This is at least a warning that the euro may be ready to move lower on Monday.  The indicators are now entering their eighth day at overbought.  The last time this happened was in February 2011, and the next day was lower.

Transportation: On Friday the trans rolled on, continuing their march higher with a 0.26% gain that kept them solidly inside a rising RTC from 9/6.  However, the RSI hit 100 on Friday - it doesn't get any more overbought than that.  And that's the first time this year we've hit this level.  Every other top this year came right after RSI's moved above 94.  I'd say the trans are about to hit a detour on Monday.


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 3      3      3           0        .500    -116

     And the winner is...

Historically, this particular Monday (the Monday before September options expiration)  is weak.  We are also now leaving the strongest part of September, which is generally a bad month (though that hasn't been the case this year, thanks largely to the ECB and the Fed).  Add in the charts that tonight are showing some significant bearish reversal signs and I'm going to have to call Monday lower.

I'll also add a purely personal indicator: so far this year my longest daily winning streak has been five days, and that's happened a bunch of times.  Last Friday marked the fifth day in a row I made money.  For whatever reason, that favors a losing day on Monday.

ES Fantasy Trader

Portfolio stats: the account remains at $178,125 after 62 trades (47 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1462.00.. 

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.  Act accordingly.