Friday lower

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

• Friday uncertain, top possible
• ES pivot 1453.00.  Holding below is bearish.
• Next week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going short at 1451.25.

Recap

I think my call for Thursday worked out pretty well, considering it was for "uncertain".  The Dow lost all of eight points and did nothing to change my opinion that we might be seeing a short-term top.  Let's see now if there's any confirmation in the charts for tomorrow.  Friday being op-ex, things should be interesting.

The technicals (daily)

The Dow: Today the Dow gave us a classic star doji.  That makes two dojis in a row, counting yesterday's hanging man.  It sure seems like the Dow is trying to tell us something here.  But consider that the indicators have still not reached overbought levels and that the Dow remains well within its latest rising RTC.  So for the second night in a row, I have to say that we need to see confirmation of these reversal warnings before calling the Dow lower.  That's the conservative play.  The aggressive play is: two reversal signs, go for it.

The VIX:  Today was one of those unusual times when the market went down and the VIX did too, dropping 0.27% and bearing out what I wrote last night, namely "there's a possibility of a lower VIX on Thursday".  But this drop also drove the indicators into oversold territory and the candle was a spinning top.  The futures are quite oversold and hit their lower BB for the third day running.  So I'd say the VIX is due for a bounce if not Friday then early next week.

Market index futures: Tonight all three futures are down, just barely, at 1:49 AM EDT with ES lower by one tick.  The important point is that today's red candle was something of a dark cloud cover and the overnight is trading at the bottom end of that.  Also RSI is now overbought, money flow and OBV have topped and the stochastic is about to form a bearish crossover.  This chart is now looking fairly toppy to me.

ES daily pivot: Tonight the pivot ticks down from 1453.67 to 1453.00 even.After breaking below at 1 PM today we remain under the new number, so that's bearish.

Dollar index: Here's an interesting divergence.  While the Dow and SPX moved very little today, the dollar took a big jump, up 0.46% on a green marubozu that neatly filled yesterday's gap down and left the $USDUPX oversold with a stochastic moving into position for a bullish crossover. It also traded outside the latest descending RTC for a bullish trigger.  I'd say the $ is ready to continue higher on Friday, and that's bad for stocks.

Euro: And we got confirmation here from the euro which moved lower today, bouncing right off its upper BB to close at 1.3070.  The overnight is drifting lower still and the stochastic is right on the cusp of a bearish crossover.  So I'd give the euro more chance of moving lower than higher on Friday.

Transportation:While the Dow was basically flat today, the trans managed a fifth straight advance, this time to the tune of 0.15%, handily keeping above the 200 day MA.  But the candle was a tall spinning top, RSI hit a very overbought 96.65, and the stochastic flattened out for a bearish crossover.  Can the trans go for six up on Friday?  To quote noted Scottish stock sage Angus MacTavish, "Ee ha' me doots".


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  8      6      5           0        .571     -19
October    6      4      4           0        .600      12

     And the winner is...

The failure of the Dow to make any headway above 13,555 for three days running concerns me.  The SPX is similarly stuck at 1463.  And with everything now officially short-term overbought, I'm not sure where the gas is coming from to power us higher tomorrow.  Also worth noting is that the Dow is down six straight and seven of the last eight on October op-ex Friday according to The Stock Trader's Almanac.  And my good pal J-Trader is now all-in short, and he's been doing pretty well for some time now.  The charts in general now look toppy to me so all things considered, I'm going to call Friday lower.  I also took out some SPXU this afternoon at 36.85 as a hedge.

ES Fantasy Trader

Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1451.25.  I think the risk/reward finally favors the short side, so we might as well give it a shot.  Reminder - you can follow these trades live on Twitter @nightowltrader.

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, top possible

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

• Thursday uncertain, top possible
• ES pivot 1453.67.  Breaking below is bearish.
• Friday bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Yesterday I raised the possibility of a doji day today.  I'd say today's five point gain in the Dow certainly qualifies.  Of course that was helped out by some dismal numbers from IBM and Intel, and the SPX performed much better.  So what to make of this divergence?   The charts will tell us if there's more upside left for Thursday or not.

The technicals (daily)

The Dow: After two nice days of gains, the Dow gave us a classic hanging man, so that's at least a warning of a coming reversal, but one that requires confirmation.   And for the time being, there's no confirmation from the indicators which simply continue their climb from oversold to overbought.  So this is a yellow caution light, but not a clear reversal yet.

The VIX:  Today the VIX continued a haphazard decline, this time down nearly a full percent on a dark cloud cover.  This particular pattern is usually pretty good, so I'd say there's a possibility of a lower VIX on Thursday, particularly since the indicators are nowhere near oversold yet and we're a long way from the lower BB.

Market index futures: Tonight all three futures are mixed once again at 1:37 AM EDT with ES lower by just 0.03%, YM flat, and NQ down 0.08%.  ES has now handed us a classic three white soldiers pattern and that's quite bullish.  However, today' soldier stopped right at 1456, a strong resistance line that has defied all attempts to cross it for over a month now.  The difference this time is that we're not quite as overbought yet so there's more gas in the tank for launching an assault and the upper BB is at 1463.68.  With no reversal sign from the stochastic or the RTC right now, that means ES still has a bit more room to run.but Thursday could be the turn-around day.

ES daily pivot: Tonight the pivot rises again from 1445.08 to 1453.67. The situation is quite similar to last night - the rise in the pivot leaves us once again still above, but by much less.  So the same principle applies - stay above the pivot - good, fall below - bad.

Dollar index: Yesterday the dollar gapped down big with a spinning top and today it did it again.  Today's 0.51% plunge took us just below the lower BB and drove the indicators closer to, but not quite into oversold.  I was premature to think the dollar might rise today, and with an identical candle tonight, I'm going to wait for the confirmation of a move higher on Thursday.

Euro: As the dollar cracked its lower BB today, the euro blasted through its upper BB, closing at 1.3132, exactly at resistance from last month's highs.  And it's now drifting lower in the overnight.  With indicators becoming highly overbought, this suggests the possibility of a move lower on Thursday.

Transportation: The trans continue to do very well, putting in a fourth day of solid gains made all the more impressive by the ease with which they motored through the two resistance levels I mentioned last night - the 200 day MA and the upper BB.  With that now in the rear view mirror and no further resistance until 5200, I think we could make it five in a row on Thursday.


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  8      6      5           0        .571     -19
October    6      4      3           0        .600      12

     And the winner is...

I know some people are going short right now.  At this point I don't think that's an unreasonable stance, but I'm a bit more conservative than that.  I'd like to see some confirmation of a top first and I'm not seeing it just yet.  In fact the charts seem to suggest that there's still a little room left to run higher before hitting some strong resistance points.  My general feeling is that Thursday may be a turn-around day.  The market doesn't look really toppy quite yet, but it's starting to show some signs of it.  So given all that, once again I'm going to have to punt and call Thursday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight with another uncertain forecast, we stand aside once again.  But I'm anticipating going short tomorrow.

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 1445.08.  Breaking below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

We got a second very nice run up for the Dow today with all of the technicals working out nicely.  Let's see if the charts will continue to deliver the goods for Wednesday.

The technicals (daily)

The Dow: Today's big 128 point run was very helpful in moving us back into the long term rising RTC that we very nearly hit last Friday.  The indicators are all rising smoothly now off oversold.  And today's big green marubozu gives us a bullish RTC trigger.  So everything's looking up on this chart for Wednesday.

The VIX:  Moved lower today as expected, but just barely on a green hammer.  This is a potential reversal sign, but the stochastic is sitll in descending mode and the VIX is in no-man's land halfway between the BB's, so this chart's too tough to call right now.

Market index futures: Tonight all three futures are down at 1:40 AM EDT with ES lower by 0.14% on what I assume is a Presidential debate induced drop off.  The insta-pundits are claiming Obama won this one, which would be about right since ES jumped after the first debate which Romney won.  I'll take their word for it.  The Night Owl has better things to do than watch two politicians lie to each other for 90 minutes.  In any event, this move is sort of putting the kabosh on what was a nicely developing rally since the indicators are still only about halfway to overbought and the upper BB is at 1462.  After two big days of gains, it's possible ES may take a break on Wednesday.

ES daily pivot: Tonight the pivot jumps from 1429.50 to 1445.08.  This gain combined with the overnight drop in ES now leaves us just two points above the new pivot.  That's barely bullish and we need to watch for any attempts to break under - that would be basically bearish.

Dollar index: The dollar took a big gap down today right back to its recent support around 54.75 on the $USDUPX.  This alone suggests a chance at a move higher on Wednesday.  The stochastic has declined enough that this would not be out of the question.

Euro: After a big gain today that took the euro right up to its upper BB, it blew right through with a gap up in the after hours but the developing candle is looking like a gravestone doji.  The stochastic is not yet in bearish reversal mode but with a candle pattern like this, I'd be looking for a lower euro, possibly as soon as Wednesday.

Transportation: The trans soared 1.05% today all the way to their upper BB and and stopped just short of the 200 day MA at 5139.  With the indicators about to enter overbought territory and two resistance lines now dead ahead, the trans may have some trouble advancing further on Wednesday.


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  8      6      5           0        .571     -19
October    5      4      3           0        .556      12

     And the winner is...

We had some nice momentum going, but it's looking like Emperor Nerobama may have poured cold water on it with whatever he said in his debate tonight - I can basically summarize it as "blah blah blah".  Unfortunately, this injects just enough caution into the mix that the market may use it as an excuse to take a break after rallying hard for two days.  Since this suggests the possibility of a doji day tomorrow, the only choice I have is to call Wednesday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  We left a lot on the table today by not going long last night, but oh well - no one ever went broke by not trading.  Tonight with an uncertain forecast, we stand aside.

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, low confidence.
• ES pivot 1429.50.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Last night I played it conservatively.  The most I was willing to commit to was "uncertain" but with a positive bias.  Turns out we were positive alright - a positive 95 points to snap the Dow's five day losing streak.  So was this a one-off or is there more upside to come?  Let us now round up the charts to give them the full treatment and get the answers we're looking for, whether they like it or not.

The technicals (daily)

The Dow: Today's 0.72% advance decisively broke us out of the descending RTC for a bullish setup and a 95% chance that the downtrend is over.  The bullish stochastic crossover is also now complete.  Money flow and OBV have also now hooked upwards.  All of this suggests continued upside on Tuesday.

The VIX:  Yesterday the VIX has posted two consecutive gains, but I pointed out that the bearish stochastic crossover was usually a pretty good indicator.  And if paid off today as the VIX dropped 5.39%.  We also have a bearish RTC trigger now and declining futures, so more downside is possible for the VIX on Tuesday.

Market index futures: Tonight all three futures are up at 1: 40 AM EDT with ES higher by 0.17%.  Today's big gains in ES gave us a decisive bullish RTC trigger marking the end of the recent downtrend.  In addition, the bullish stochastic crossover is now nicely complete and we're seeing encouraging follow-through in the overnight.  I see more upside left in this chart for Tuesday.

ES daily pivot: Tonight the pivot rises from 1425.33 to 1429.50.  We were above before and remain above the new number, so this continues to be bullish.

Dollar index: I'm going to punt on this chart tonight.  The dollar just looks like it's being jerked around by politics of some sort.  Regrettably, I see no technicals clues here as to where we may be going next.

Euro: Like the dollar, the euro is sort of rattling around right now looking for a direction.  It moved lower today in regular trading but is now back above the day's highs in the overnight at 1.2980.  The best clue here comes from the indicators which are now rising off oversold and seem to suggest continued higher on Tuesday.

Transportation:Last night I wrote of the bullish stochastic crossover from a high level that "these are good indicators of higher to come".  And so we were in fact transported higher today, by 0.41%.  Our close at 5065 also broke through resistance at 5055.  I think there's still at least a little gas left in this particular tank to continue higher on Tuesday.

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  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466  23/38

 39  9/24       52         30        +     1460 

 40  10/1       39         39        -     1441 

 41  10/8       52         34        +     1461

 42  10/15      41         32        -     1429

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 9/17 was wrong after a string of rights, the S&P now being lower than then. I'm using the column "Accuracy" to track my calls.  So now with 10 weeks to go in 2012, I'm 23 for 38  or 61%.

This week I switched my vote back to bearish.  This is mainly because the monthly SPX candle for October has now turned into a perfect star doji.  I have the feeling that these candlestick reversal patterns work better on longer time frames, like the monthlies, so I'm willing to give more credence to a half-baked candle like this one.  And even more telling, at 1440 the SPX has now fallen out of a rising monthly RTC going back to June and that is a bearish setup.  If the SPX can manage to end October above 1470, then this setup is canceled.  If not, then I do think we're going lower.

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  8      6      5           0        .571     -19
October    4      4      3           0        .500    -116

     And the winner is...

After two days of indecision, Monday delivered the bullish confirmation I've been waiting for.  So with no real negative signs in the charts tonight the logical course is to declare Tuesday higher.

ES Fantasy Trader

 Last night I wrote that "I still have confidence that [this trade] will turn profitable tomorrow."  And so it did.  Patience paid off and we turned a loser into a five point winner.  Although I still think ES has more room to run higher, I decided to book this profit now rather than let it ride simply due to the strange way the market's been behaving lately and the general riskiness associated with October.  We can always get in again later.  Oh, and Tuesday is historically weak

Portfolio stats: the account rises to $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside.  While I do believe that we're going higher on Tuesday, I think the move will be smaller than we saw today and there's always the possibility that by the time I'm up, ES will have reversed course.  Ordinarily I'd take this trade, but not in October.  .

SLD    10    false    ES    DEC12 Futures     1436.25    USD    GLOBEX    15:57:57   
BOT    10    false    ES    DEC12 Futures     1431.25    USD    GLOBEX    OCT 12 01:24:05


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 uncertain, bias higher

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

• Monday uncertain, bias higher.
• ES pivot 1425.33.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader remains long at 1431.25..

Recap

Last Friday the Dow provided us with a classic doji that finally stopped four ugly days of decline.  Does this mean that a turn-round is at hand?  Time for the daily chart run-down as we seek out answers.

The technicals (daily)

The Dow: Friday's monster two point gain pretty much summed up the indecision in the market at the moment.  On the plus side, RSI has now gone oversold and the stochastic is flattening out for a bullish crossover from a very oversold level.    On the minus side, we remain inside a declining RTC.  So while this chart is now looking more bullish than bearish, we need confirmation on Monday before calling the current downtrend over.

The VIX:  Last Thursday night I really wasn't sure about this chart.  Turns out the VIX gained 3.53% on Friday, but this bounce was enough to cause a bearish stochastic crossover and those are usually pretty good reversal indicators.  On that basis alone, I'd be looking for a lower VIX early this week.

Market index futures: As has happened a few times in the last week, tonight all three futures are mixed at 12:47 AM EDT with ES flat, NQ up by 0.1% and YM down by 0.02%, reflecting the continued uncertainty and dare I say it general confusion about direction among market participants.  Friday's red candle kept ES inside its now six day declining RTC, but the action so far this evening has moved us out the right hand edge.  If ES can stay above 1416 on Monday, that will cause a bullish setup.  The indicators are now supporting this idea, with RSI extremely oversold at 5.73 and the stochastic just about to execute a bullish crossover - I had to look at the actual numbers to see that it hasn't quite happened yet.

ES daily pivot: Tonight the pivot drops from 1429.67 to 1425.33.  This still leaves us below the new number but only by half as much.  Nevertheless, until and unless we see ES break above this level, it's a negative sign.

Dollar index:Last Thursday's dollar doji was confirmed on Friday with the dollar shedding another 0.15%, enough to form a bearish crossover on this chart.  With no support until 54.69 on the $USDUPX, I'd say the dollar still has lower to go on Monday.

Euro: After posting some small gains on Friday that resulted in a bullish RTC trigger, the euro turned back downward again this evening.  Although the euro seems poised to move higher this week, it's not clear right now that this will happen on Monday.

Transportation: Here's a positive sign: after two days of dojis, the trans on Friday gave us a disproportionate 0.88% jump that was enough to cause a bullish stochastic crossover from a high level.  Typically these are good indicators of higher to come.  If higher trans bode higher markets, then this is a positive development.


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  8      6      5           0        .571     -19
October    4      4      2           0        .500    -116
     And the winner is...

The factors that began coming together on Friday for a bullish turnaround remain in play and are even more pronounced now.  This market is looking technically ready for at least a short-term bounce.  Unfortunately, we don't have enough confirming signs, as opposed to reversal suggestions, for me to make the call for a higher close Monday, so I'll just have to settle for calling Monday uncertain but with a bullish bias.  I definitely would not be going short at these levels.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. In a classic case of "you snooze you lose", this trade was actually profitable early Friday morning but I was sleeping.  Hey, ya gotta sleep sometime.  In any case, like I said last week, I still have confidence that it will turn profitable tomorrow.

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.