Friday, January 25, 2013

Friday higher only if pivot passed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher only if ES pivot passed, else lower
  • ES pivot 1490.75.  Holding below is bearish...
  • Next week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

I think I was right to call Thursday uncertain.  The Dow advanced once again but with a changed pattern, and the SPX was flat, giving us a perfect doji.  And the Nasdaq of course was dragged into negative territory by the 800 lb. gorilla known as Apple.  So once again like the kids in the back seat we have to ask, in regard to a top, are we there yet?  Don't make me stop these charts!

The technicals (daily)

The Dow: Yes the Dow gained another 46 points on Thursday but it did it on an inverted hammer, the first reversal sign we've seen in six sessions.  We are indeed up five in a row and 10 for 11, which is getting to be quite a long rally without a pullback.  While the indicators are still pegged on overbought and we're still in a rising RTC, I'm getting the feeling that people are looking for an excuse, any excuse to move things lower.  This inverted hammer may be it.  I'd not be going long right now.  I'll also note that the Dow came to within 2 points of its upper BB today.

The VIXThe VIX posted its second day of admittedly small gains, gaining just 1.85% on a long-legged doji.  We remain inside the descending RTC but the stochastic seems to be trying to set up a bullish crossover.  So support around 12.50 continues to hold and with today's close just above that I wouldn't be surprised to see a further move higher on Friday.

Market index futures:Tonight all three futures are lower at 1:10 AM EST with ES down by 0.17%.  On Thursday ES gave us a candle that resembled the Dow's inverted hammer more than the SPX's doji so that alone is not a reversal warning.  What is one though is the new candle which right now is trading outside the rising RTC for a bearish setup.  ES is going to have to close above 1492 on Friday to cancel that one.  So far, one part of my prediction last week has come true - the SPX hit 1500 and retreated.  That alone makes me cautious for Friday.

ES daily pivot: Tonight the pivot rises from 1488.67  to 1490.75. Like last night, we threaded about the old number earlier this evening but remain below the new pivot thanks to this gain.  But ES does seem to be showing some interest in taking a look at ti and now we're only a point and a half below.  That puts the pivot in play for Friday.

Dollar index:The dollar index continues its random bouncing around and gained just 0.02% on Thursday.  We're now overbought and nearly out of the rising RTC, but the action here is so chaotic I'm not getting much utility from this chart right now. .

Euro: Same story with the euro.  It continues to trade in a range of 1.3300 to 1.3400, moving from the lower end to the upper end on Thursday.  But as has been the case lately, in the overnight, we're heading back down again.  Last night I wrote this, and I'll say it again, "expect more sideways motion until this chart makes up its mind which way it wants to go."  Doesn't look like that's happened yet.

Transportation:While the Dow was giving a possible reversal sign on Thursday, the trans were having none of it, posting a big 1.66% gain on a green marubozu.  This actually broke us out of the left edge of the rising RTC, something that can be a bearish sign as that is the behavior you get when a stock goes exponential on you.  And RSI is now at 100 for the second day in a row.  They say what goes up must come down, but you'd never know it from this chart.  I'm wanting to call it lower on general principles, but honestly, there's still no reversal sign here, and that is good for the market.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      5      6           1       0.500     -93

     And the winner is...

Tonight we're seeing a bunch of dojis all over the place warning of possible reversals.  Frustratingly, they all require confirmation.  We now have a long-running rally that's overdue for a pullback but we still have a fair amount of momentum, both qualitatively and quantitatively (the latter stands at 22.25).  So I'm becoming increasingly nervous about continuing to call this market higher but also unwilling to fight the tape by going short in the absence of a definitive top.  Therefore, I'm going to make a conditional call: if ES breaks above its pivot of 1490.75 and stays there by mid-morning Friday, then we close higher.  If ES tries to break above and fails or just drifts lower then we close lower.

ES Fantasy Trader

Portfolio stats: the account inches up to $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Tonight I'm not seeing enough of an edge either way to commit, so we're standing aside.

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