Friday higher unless bad jobs numbers

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

• Friday higher unless bad jobs numbers, low confidence.
• ES pivot 1415.58.  Holding above is bullish.
• Next week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

I was right last night in saying  "I'm still expecting the next move to be higher" but it wasn't clear that it would happen today after four consecutive days of fake-outs.  But we finally got a nice pop in the Dow that got us out of that doji swamp.  Now we need to figure out if we can build on this move or not.  Bring on the charts!

The technicals (daily)

The Dow: The RTC worked perfectly here - bullish setup on Friday, bullish trigger yesterday, and payoff today.  Today's 136 point gain nicely completed the bottoming process of the indicators and started them back up toward overbought.  That alone suggests more upside for Friday.

The VIX:  I called the VIX correctly too last night, writing "it's not clear the VIX has enough gas in the tank to capitalize on the RTC breakout and logic would suggest that the next move will be lower."  There wasn't and it did, dropping an impressive 10.27% today to fall solidly back into the descending RTC.  This move also gave direction to the indicators which are now clearly heading off overbought.  I'd expect more downside from the VIX on Friday.

Market index futures: Tonight all three futures are down at 1: 15 AM EDT with ES lower by 0.09%.  Today's big gain caused a rare phenomenon - RSI jumped from very oversold (10.25) yesterday to very overbought (87.64) in just one day.  And the stochastic has now moved into a position from which a bearish crossover could happen within a day or two.  ES is also now right at a resistance line of 1424 making me think that while a further advance is not out of the question, it will probably be much smaller than today, or we could even just go right back down on Friday.  Too much too fast, basically.

ES daily pivot: Tonight the pivot rises from 1408.50 to 1415.58.  With ES nearly flat we're still holding above, though only by half as much as earlier this evening.  Still, it remains a bullish sign.

Dollar index: The dollar continued its chaotic motion of late, rising 0.19% today even as the major averages were also up.  I missed this one today but I still think we're more likely to see a lower dollar on Friday based on the overbought indicators.

Euro: I missed this one too last night as the euro declined today rather than rising.  And it continues lower in the overnight now just forming a bearish stochastic crossover.  With no near-term support in sight, I now think the euro could move lower again on Friday.

$TRAN daily

Transportation: Perhaps the most interesting chart of the day, the trans gained an impressive 1.62% with a big green marubozu that provided a bullish trigger and punctured the 200 day MA in one fell swoop, stopping only at their upper BB at 5171.  Check it out.  This level also tops last month's resistance and the indicators are now clearly rising off of oversold.

Two things concern me though: first the fact that we did hit the upper BB, and also that the trans has been acting like the VIX, reversing soon after reaching that level.  Second, the gains of the last three days have been ever increasing in exponential fashion and that never ends well.  So I'm going to guess we could see the trans move lower on Friday.


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    8      5      8           0        .615     208       
November   0      0      1           0        .000       0

     And the winner is...

Even after today's big jump, the technicals remain mostly bullish.  Note too that Dr. Copper has recovered from his recent malaise and is now looking fit as a fiddle.  And the TLT seems to be tilting lower again.  And the NH/NL index has not quite reached bearish levels.  So I'm going to go out on a limb and call Friday higher (probably not by a lot though) but with an important caveat.  If the jobs number coming out tomorrow are stinko, we're going down.

And BTW, the Dash of Insight blog today has a nice summary of the jobs data collection process in this article here.

ES Fantasy Trader

Portfolio stats:  the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we continue to stand aside, this time because of the uncertainty associated with the jobs numbers.

Thursday

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

• Thursday uncertain.
• ES pivot 1408.50.  Holding above is bullish.
• Friday bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

After all the assorted and contradictory predictions of either tax selling or window dressing today, it turned out that the markets delivered neither trick nor treat with the Dow down  just 11 points and the SPX up a mere 0.22.  About as exciting as last year's leftover Halloween candy.  All of which pretty much leaves us in the same place we've been for four sessions now - desperately seeking direction.  This seems like the fourth time in three months that Mr. Market just hasn't been able to make up his mind which way he wants to go.  Maybe the charts can give him a hand here, so let's get to it as we munch on the leftover Snickers bars.

The technicals (daily)

The Dow: The Dow has now given us four dojis in a row in continuing sideways trading.  After last weeks' long slide left us so oversold, the logical next move is up.  The only question is when.  Tomorrow, being the first of the month might provide the excuse, though November 1st hasn't been too kind to the Dow in recent years, being down four of the last six.

The VIX:  Hmm, the VIX, which I figured good to move lower today, tricked me and instead gained 4.44% on a big green marubozu that broke back above the 200 day MA and popped out of the latest descending RTC for a bullish setup.  But meanwhile the VIX is right up against its recent resistance at 18.70 and the indicators remain pretty overbought.  So it's not clear the VIX has enough gas in the tank to capitalize on the RTC breakout and logic would suggest that the next move will be lower.

Market index futures: Tonight all three futures are down at 1:11 AM EDT with ES lower by 0.36%.  ES finished the day essentially flat but did it with a bearish dark cloud cover.  The overnight candle is forming as a gap-down doji but support continues to kick in right at 1400 as it's been doing for a week now.  Es continues to trade in a chaotic congestion range of 1400-1413.  Being as we're now at the bottom of that range and still oversold, I'd expect the next move to be higher.

ES daily pivot: Tonight the pivot rises from 1404.25 to 1408.50.  But with ES trending lower since 11 PM (I'm not sure what happened then - there was some Chinese PMI news, but it was good - you'd think that would drive ES higher)  so anyway, that now puts us below the new pivot, a bearish sign.

Dollar index: Last night I wrote "All these signs point to a lower dollar Wednesday."  And that's just what we got with the $USDUPX ceding 0.21%.  The net effect was to give us a bearish RTC trigger, a bearish stochastic crossover confirmation, and a peak in RSI.  These all point once again, to further dollar declines on Thursday.

Euro: Today the euro formed a tall spindly doji but it traded outside the descending RTC for a bullish trigger.  And while the overnight is basically flat so far, the indicators are all now in sync moving up out of oversold, suggesting more euro gains on the way.

Transportation: At least I got this one right.  The trans today gained another 0.65%  This broke us out of the descending RTC for a bullish setup and confirmed the bullish stochastic crossover.  We have a continuing divergence now of the trans posting three days of solid gains while the Dow goes nowhere.  Further advances for the trans look possible 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    8      5      8           0        .615     208      

     And the winner is...

All the bullish signs that were in place last night remain in place.  But for some reason this market just isn't gaining any traction and in fact both the futures and currencies are showing some definite weakness in the overnight..  I'm still expecting the next move to be higher, but I just don't know when we're going to get off top dead center so I'm afraid I'm going to have to start off November with a call of Thursday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we continue to stand aside, waiting for the market to pick a direction to move in..

Wednesday higher

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

• Wednesday higher, low confidence.
• ES pivot 1404.25.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

The recap?  Heck, I can't even remember that far back.  With a highly unusual two day closing followed by reopening on the last day of a month, everything is sort of up in the air right now.  We'll do what we can tonight, but I've already got a feeling that it's going to be sort of a shot in the dark.

The technicals (daily)

The Dow: Anyway, way back last Friday the Dow gave us a perfect doji, the third reversal candle in a row.  It also traded outside the descending RTC for a bullish setup.  We'd need to close below 12,946 on Wednesday to not get a bullish trigger.  And the indicators are all extremely oversold now with the stochastic having just barely completed a bullish crossover.  I'd say this chart looks due for a bounce.

The VIX:  Also on Friday, the VIX dropped 1.71% stopping exactly on its 200 day MA of 17.81.  Will the MA provide support on Wednesday?  I don't know, but it didn't the last seven times in a row that we were in a similar situation.  We also remain in a descending RTC, the indicators have now all topped at overbought and the stochastic just completed a bearish crossover.  Those signs all point to a lower VIX which would be good for the market.

Market index futures: Tonight the futures are mixed at 1:42 AM EDT with ES higher by 0.07%, YM down 0.12% and NQ down 0.28%.  ES has been giving us reversal candles for the past five sessions, though I'm taking the last two days of trading with more than a grain of salt given the sporadic nature of trading.  In any event though, we're now clearly out of that nasty descending RTC for a bullish trigger and we have a nicely completed bullish stochastic crossover to boot.  With support at 1400 seeming to hold and the futures quite oversold, I'd say we're now ready for a bounce.

ES daily pivot: Tonight the pivot ticks up from 1404.00 to 1404.25  Because of the technical disruptions induced by two days of market closures, I'm not reading too much into this tonight, although ordinarily, this is bullish.

Dollar index: On Friday the dollar index gained just 0.05% but did it on a red spinning top that bounced off its upper BB and drove its RSI to its most overbought level since May at 94.12.  This chart also gave us a bearish stochastic crossover.  All these signs point to a lower dollar Wednesday.

Euro: The euro is one chart that continued to trade when everything else was closed so it gives us a bit more perspective.  And I'm liking it.  On Tuesday, the euro put in a tall green candle to close at 1.2969, right at the edge of its descending RTC.  The overnight is now trading just outside it for a bullish setup.  And the stochastic just gave us a bullish crossover.  Complementing the dollar chart, this one looks ready to move higher.

Transportation: Contrary to last week's sagging broader market, the trans finished off the week with two consecutive strong up days taking us close though not yet out of the descending RTC.  The indicators are now almost oversold and the stochastic just completed a bullish crossover.  I'd say more upside is not out of the question 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  8      6      5           0        .571     -19
October    8      4      8           0        .667     219       
 And the winner is...

It's pretty clear - technically the market looks ready to deliver a treat tomorrow and not a trick.  But given all of the hurricane-induced dyspepsia Mr. Market is suffering, honestly, anything could happen on Wednesday.  Nevertheless, I'm going to go with what the charts dictate and call Wednesday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  With the unusual events of recent days combined with tomorrow being the last day of the month, we're going to take the conservative route and simply watch the action from the sidelines.  If I like what I see, I'll consider getting in tomorrow.

Monthly forecasts

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

• Tuesday canceled - again!
• ES pivot N/A
• Rest of week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Quote of the Day

"Menschen und Wind, ändern geschwind."

                - Carl Orff, Musikalisches Hausbuch

Recap

Well with nothing else to do tonight and with the markets facing the longest weather closing since 1888 tomorrow, I thought I'd take the opportunity of this rare gift of time to back out a bit and take a look at some monthly charts.  Since the month is nearly over anyway and I don't often get to discuss this (though I do watch these charts regularly) it's as good a time as any.

The technicals (monthly)

The Dow: OK, let's start off with the monthly Dow going back to 2007 just before the all-time high that triggered the Great Recession.

Dow monthly

What stands out right away is how we've been making a series of higher highs and higher lows ince the bottom in 2009.  So far, that trend is unbroken.  We're also about to enter a period of favorable seasonality and the indicators are not at all overbought right now.  If anything, they're headed down toward oversold. That's the good news.

However, note how each leg of the advance has been smaller than the one before.  And I know it's hard to see with all the lines, but we have now fallen completely out of the rising RTC marked "2009-11".  That's a big one and we now have a bearish setup.  And the candlestick for October is now almost complete, and it's very very close to being a bearish engulfing pattern.

Overall, this chart's not looking particularly healthy, but it's also not signaling imminent disaster either.

Euro monthly

Euro: Now here's an interesting monthly chart.  Just going by the past month, the euro seems to be in quite the funk.  But looking at the monthly chart, we see that the big E has been trading in a range from around 1.2250 to 1.5000 for about four years now.  I've drawn three regression trend channels on this chart for each downtrend in that time.

Notice how we just exited the last one in September - that's the bullish setup.  And while October looks like an inverted hammer, it's entirely outside (and higher than) the RTC.  That's the bullish trigger.  Ergo, there is a 95% chance that the current downtrend that began in May 2011 is now over.  Don't believe it?  Look at the other two RTC's.  You exit the RTC, the trend is over.

The indicators are also all rising off oversold but nowhere near overbought yet.  Of course this doesn't mean we're going straight up, but it sure seems to suggest that the euro could head back to the 1.50 neighborhood over the next few years, assuming it's not derailed by politics.  And that would be good for the market.

$TRAN monthly

Transportation: And here's another interesting chart.  There's been a lot of hand-wringing lately about the relative underperformance of the trans.  But when we back out to the monthly chart, it actually doesn't look that bad.  True, we've been in a slow drift lower all year long, but that still leaves us well above the midpoint of this chart, going back five years.

Even if you chop off the whole 2009 bottom as an outlier, we're still pretty well off.  And look at the stochastic (bottom chart).  It has now reached oversold levels and is flattening out in preparation for a bullish crossover.  And the October candle is actually green and a bullish engulfing pattern.

So while it's too soon to call an end to the trans' decline just yet, it looks like it may be due for a turnaround in a few months.

Sentiment: Hurricane or no hurricane, 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  23/39

 40  10/1       39         39        -     1441  24/40

 41  10/8       52         34        +     1461

 42  10/15      41         32        -     1429

 43  10/22      38         41        -     1433

 44  10/29      36         43        -     1412

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 10/1 was correct, the S&P now being lower than then. I'm using the column "Accuracy" to track my calls.  So now with 9 weeks to go in 2012, I'm 24 for 40 or 60%.

This week I voted bearish again for the third week in a row mainly because we now have a bearish trigger on the weekly SPX RTC.  While the monthly charts seem to suggest that the world may in fact not be coming to an end, it looks like the shorter term outlook's not so hot.


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    8      4      8           0        .667     219  

     And the winner is...

blowing in the wind...  Menschen und Wind...

ES Fantasy Trader

Portfolio stats: with the markets closed the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  No trade tonight.