Friday, August 9, 2013

Friday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday uncertain.
  • ES pivot 1691.75..  Breaking below is bearish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader remains short at 1643.00.

There were bullish indications in the charts last night and despite an early swoon Thursday morning, the market clawed its way back into positive territory with the Dow ending the day up 28 points and vindicating my call for a higher close.  With three of these U-shaped days on the books, let's see if the charts will reveal the direction for Friday.

The technicals (daily)

The Dow: On Thursday the Dow gave us a nice spinning top.  Unfortunately, this neither confirms nor invalidates Wednesday's hammer.  What it did do was push us closer to the right-hand edge of the descending RTC we're in, and drive the indicators closer to oversold.  As such this is more bullish than bearish, though the jury is still out.

The VIXLast night I wrote "I'm giving better than even odds of a lower VIX on Thursday.".  There were no takers since that was about right as the VIX dropped 1.93% albeit on a green gap-down inverted hammer.  VVIX is in a similar state, stuck mid-way between BB's and between overbought and oversold.  This is a very dangerous place to make calls so I won't even try.  It's a shame too, because the VIX is one of my favorite leading indicators.

Market index futures: Tonight all three futures are lower at 1:00 AM EDT with ES down by 0.07%.  Thursday ES managed to reclaim all of Wednesday's losses and a bit more with a bullish one white soldier pattern.  However, recall that last night I mentioned the 1694 level as required to exit the descending RTC for a bullish setup.  Thursday's close:1693.75.  As Maxwell Smart used to say, "Missed it by that much!"    And to complicate matters, while the stochastic appears to be getting ready to form a bullish crossover, the new overnight candle is making a dark cloud cover.  So this is now one of the more ambiguous charts I've seen in a while.

ES daily pivot: Tonight the pivot steps up from 1687.42  to 1691.75.   We were not particularly higher earlier in the day but this bump in the pivot has left ES less than a point above the new number.  While it remains bullish, a break below is entirely possible from this level and that would be a negative sign for the market.

Dollar index: Last night I thought the dollar might reverse on Thursday but alas it was not to be as the buck dropped another 0.36% to continue a now five-day slide.  This has now brought us all the way to the lower BB at 55.43 although the indicators are still not oversold.  And with the next support level not until .55.24, and remaining in a descending RTC. I'm afraid I don't see any reversal signs now.

Euro: On Thursday the euro hit it upper BB with a solid green candle to close at 1.3391 leaving it just shy of resistance at 1.3411.  Nevertheless, we now have three white soldiers marching up a rising RTC and indicators that have yet to hit overbought, suggesting an ample supply of gas in the tank for further gains.

Transportation: In a bit of positive divergence, the trans on Thursday gained a big 0.81% to the Dow's anemic (and palindromic) 0.18%.  This confirmed Wednesday's hammer and left the trans just shy of exiting the descending RTC for a bullish setup.  Indicators remain mixed though, so this chart is a bit murky.

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       6      5      6           0        0.545    543
July      10      2      4           4        0.875    486
August     6      0      0           0        1.000    373

     And the winner is...

After taking a turn for the better last night, tonight the charts are being coy.  There are at least some indications that Thursday's rally may not have much follow-through coming.  On the other hand, there aren't a lot of overtly bearish signs as there were two nights ago.  It's a puzzler.  Historically, Friday is pretty weak, but we're about to exit the worst part of August.  Which all pretty much leaves us on square one.  I'm just going to have to get up from the table and walk away from this one, folks.  You can't play Blackjack when the dealer keeps all his own cards face down.  So the call is Friday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $115,000 even after 14 trades (11 for 14 total, 6 for 6 longs, 5 for 8 short) starting from $100,000 on 1/1/13.  Tonight we remain short at 1643.00.


  1. Why do you show the trend down?


    1. Good question. This is how I do it: it takes three consecutive days in the same direction to establish a trend. We got that this week on Monday, Tuesday, and Wednesday with three down days for the Dow. I then drew a descending regression trend channel between Tuesday's high and Wednesday's close.

      Now while Thursday was indeed up, that candle remained inside the new descending RTC. Therefore, although we got an up day on Thursday
      , there is a 95% chance that the newly established down trend is not over. And we see that today (Friday) is indeed continuing lower. So the arrow remains pointing down. Gotta love the RTC :-)

      Oh, and I should probably add that the "trend" is the short-term swing trend, suing RTC's on daily charts. You can draw RTC's on charts of any time period and they may point in different directions, so it's important to be aware that I'm using the daily chart here.

    2. Thanks for clarifying!!

      Have a great week-end...


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