Friday uncertain

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

• Friday uncertain.
  
• ES pivot 1614.50.  Holding above is bullish.
• Next week bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Wow - after an ugly start that was beginning to look like deja vu all over again, Mr. Market reversed course and finished Thursday up 80 Dow points with a roller coaster of a rally that began right after lunch and climbed straight into the close.  The ES pivot lay didn't quite work out but we'll take the gain anyway.  Now let's figure out where Friday is headed.

The technicals (daily)

The Dow: Thursday's gain kept alive the Dow's streak of no more than two down in a row so far this year.  We tested support at the lower BB for the second day and once again it held.  This also had the effect of moving the indicators back up off oversold and forming a bullish stochastic crossover.  So technically this chart is in lots better shape tonight than 24 hours ago.

The VIX:  At last!  I'd been waiting to the VIX to come down for two days now and it finally obliged on Thursday, dropping 4.97% on a big bearish engulfing candle closing under its upper BB.  The indicators remain overbought even after this move but they have begun coming down a bit so this chart looks ready for more downside on Friday.

Market index futures: Tonight all three futures are basically flat at 1:48 AM EDT with ES down by just 0.02% or one tick.  Like the Dow, ES tested its support at the lower BB on Thursday and it held, finishing with a bullish green hammer.  We're still in a descending RTC but we now have a bullish stochastic crossover.  The action of the past two weeks has taken some froth out of the market and I believe the stage is now set for at least a couple of days of advances.

ES daily pivot: Tonight the ticks down from 1615.25  to 1614.50.  We broke above the pivot at 3:25 PM Thursday and remain above the new number by a decent six points, so that remains a positive sign.

Dollar index: The dollar took a major hit on Thursday, diving a whopping 1.30% on the $USDUPX, its biggest daily loss since, well a long time.  I scrolled back a year on my chart and couldn't find anything near this big.  This dump was stopped only by the 200 day MA which was breached intraday but ultimately held.  With the dollar now this extended form its pivot I'd expect a reversal soon, though it might not be on Friday - there's still a bit of room to run lower..

Euro: And of course the euro posted outsized gains on Thursday to complement the dollar's drop, busting right through its upper BB and negating Wednesday's doji.  After a gain this size while the indicators are already overbought, I'd expect at least a bit of retracing on Friday.  This increases my confidence that the dollar will turn on Friday too.

Transportation:After underperforming the Dow yesterday, on Thursday the trans handily outperformed, gaining nearly a percent on increased volume to the Dow's half a percent.  The indicators have also bottomed at oversold and the stochastic looks to be finishing off a scalloped bottom if not a classic bullish crossover.  So although we remain in a descending RTC, the technicals favor more upside here on Friday.

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. Actually, due to my being away last week, we're missing a week so we'll have to make do without it until I can find the missing data.

Wk.# Week   % Bullish  % Bearish  NightOwl Poll SPX  Accuracy Poll

  1  12/31      40         48        -      -   1402   0/1

  2  1/7        47         30        +      +   1466   1/2

  3  1/14       52         15        +      +   1472   2/3

  4  1/22       50         21        +      +   1486   3/4

  5  1/28       44         26        +      +   1503   4/5

  6  2/5        40         36        +      +   1513   5/6

  7  2/11       43         25        +      +   1518   6/7

  8  2/19       21         43        -      -   1520   6/8

  9  2/25       30         52        -      -   1516   6/9

 10  3/4        29         39        -      -   1518   6/10

 11  3/11       41         26        +      +   1551   7/11

 12  3/18       41         37        +      +   1561   8/12

 13  3/25       31         38        +      -   1557   8/13

 14  4/1        38         38        +      x   1569   9/14

 15  4/8        32         50        -      -   1553   9/15

 16  4/15       33         50        +      -   1589   10/16   9/16

 17  4/22       19         63        -      -   1555   10/17   9/17

 18  4/29       33         58        -      -   1582   10/18   9/18

 19  5/6        50         31        +      +   1614   11/19  10/19

 20  5/13       37         37        +      x   1634

 21  5/20       50         25        +      +   1667 

 22  5/28       ??         ??        +      ?   1650

 23  6/3        29         38        -      -   1631

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.  The "Poll" column is how the majority of participants 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 both the majority and I voted bullish four weeks ago, so we were both right.   Therefore we  continue the year with an accuracy of 11  for 19, or 58%.   The poll as a whole meanwhile  rises to 10  for 19 or 53%.

This week I and the majority of participants switched our votes to bearish.  I can't speak for the others but I did so based on some bearish looking weekly and monthly SPX charts.

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      7      5      5           3        0.667    328
May        3      4      6           4        0.636     85
June       1      2      1           0        0.333     62

     And the winner is...

The technicals tonight look poised for further gains, but I'm afraid that some weaker than expected jobs numbers on Friday may put a damper on the party.  Without a way to know for sure how that's going to shake out, I have no choice but to call Friday uncertain, though again, I believe there's a modest positive bias at work now.

ES Fantasy Trader

Portfolio stats: the account remains at $110,375 after 12 trades (10 for 12 total, 5 for 5 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside on the "uncertain" call.