Friday, April 19, 2013

Friday higher only if ES pivot holds

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher if ES pivot holds, else lower.
  • ES pivot 1539.42. .  Holding above is bullish..
  • Next week bias higher technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Last night I called for Thursday's outcome to depend on the ES pivot.  Well ES kind of threaded about its pivot in the wee hours until giving it up for good just before 9 AM.  And that was that.  The Dow lost another 81 points on the day.  So with two consecutive down days for only the third time this year, will we go for four on Friday?  Surely the charts have something to say about that, so let's get to it.

The technicals (daily)

The Dow: Thursday's candle was quite bearish, with the selling pretty much picking up where Wednesday left off.  And even this 0.56% loss wasn't enough to drive the indicators to oversold, although the stochastic is now getting into position to form a bullish crossover - possibly Friday or next Monday.

The VIXThe VIX continued climbing its upper BB on Thursday, gaining 6.36% to close at 17.56, above the BB for the second day in a row.  Not to sound like a broken record, but in the absence of a bank crisis or some such, the VIX rarely spends this long above its upper BB before falling back.  It's now definitely due.  And that's supported by the stochastic which is now primed for a bearish crossover.

Market index futures:Tonight all three futures are higher at 1:10 AM EDT with ES up by 0.47%.  Thursday's ES candle took it very nearly to its lower BB before bouncing back a bit.  It also served to drive RSI close to oversold (32) and moved the stochastic to its lowest level since December 28th.  And the overnight is forming a bullish harami with some healthy gains for this time of night.  So while we remain in a somewhat fragmented descending RTC, this chart is now showing signs of life and could be ready to move higher on Friday.  I know I wasn't really bearish on this chart last night and we went down anyway, but I think the situation has improved since then.

ES daily pivot: Tonight the pivot falls from 1551.17  to 1539.42.  That big drop, plus ES's gains in the overnight combined to just squeak us back above the new pivot, a positive development.

Dollar index: I thought we might see some more upside to the dollar on Thursday but I was wrong.. What we got was a 0.13% decline on a tomahawk pattern.  But that's not the best reversal indicator and it traded entirely outside the descending RTC so that's a bullish trigger.  And with indicators continuing to rise, I have to vote again for the dollar to move higher on Friday.

Euro: On Thursday the euro put in a mirror image f the dollar's tomahawk for a small gain at the lower end of Wednesday's big dump.  However, the overnight is gapping up, currently +0.15% and the stochastic is quite overextended.  We're also still inside a rising RTC, even after Wednesday's slide, so I'm guessing the euro may move higher on Friday.  Of course, since the dollar chart looks ready to move higher too, one of those ideas is wrong.  I'm more confident in the euro right now.

Transportation: The trans have been giving good leading indications lately and on Thursday they declined just 0.09% to the Dow's 0.56%.  This doji, plus the fact that it broke away from the lower BB plus the stochastic now very close to forming a bullish crossover all make me think that we could see some upside here on Friday.

Accuracy (daily calls): 

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      4      5           6        0.692    131
March      5      7      5           2        0.500    121 

April      5      2      4           1        0.750    444

     And the winner is...

Interestingly, the SPX Hi-Lo indicator hit 68 yesterday.  It has only been lower than that three times since last November, and each time that was followed by a positive day.  And it rose to 75 on Thursday, suggesting a bottom may be in.  I'm also liking the VIX for looking toppy and the trans as due for a rebound.  The futures and the euro also seem to be guiding higher tonight.  I try hard to look at these signs logically every night and tonight logic seems to be pointing upwards.  But the Night Owl is a cautious type and cognizant of the fact that we're still in falling-knife territory.  So the most I'm willing to do, particularly given the precariously small gap in ES relative to its pivot is a conditional call: if ES can stay above its pivot by mid-morning Friday, then we close higher, else lower. My purely intuitive guess though is that we're going higher.

ES Fantasy Trader

Portfolio stats: the account remains at $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside again in the face of the conditional call.

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