Friday, October 11, 2013

Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1673.58.  Holding above is bullish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader remains long at 1695.00.

Yowza!  I was figuring we were going higher on Thursday but I sure wasn't counting on a 323 point rocket ship from the Dow, especially since the proximate cause was only that the head clowns down at Reedling Bros. Obamnum & Boehnly apparently have agreed to put down their squirting flowers and start talking.  But hey, my account doesn't care why it went up today, only that it did. As an interesting aside, according to The Stock Trader's Almanac, this week back in 2008 the Dow lost 1874 points, its biggest drop in history.

Now let's see if we can keep climbing or will we give it all back on Friday.  The charts aren't the best predictor, but they're all we've got.

The technicals (daily)

The Dow: Holy moly - in one swell foop, on Thursday the Dow put in the mother of all green marubozus and popped out of its descending RTC for a bullish setup while confirming Wednesday's spinning top and the support we found at the 200 day MA, now a distant memory.  And even after this big gain, we're only still just off oversold on the indicators.  There's now no resistance until 15,315, we have a fresh bullish stochastic crossover, and unless there's some profit-taking Friday after such quick, easy gains, there's suddenly nothing bearish on this chart.

The VIXLast night I wrote "there's more downside risk than upside potential from here".   And so there was with the VIX gapping down nearly 16% in one day.  The VIX can only spend just so much time hanging around its upper BB before running out of O2 and heading back to earth.  And even this big dump only took the indicators just barely off oversold, leaving plenty of room to run lower on Friday.  VVIX shows the same thing, but even more dramatically.

Market index futures: Tonight all three futures are higher once again at 12:47 AM EDT with ES up by a modest 0.09%.  The talking heads on CNBC were moaning Thursday about "light volume" but when ES can manage to move higher at all even after such a big move as we had Thursday, there's definitely some hi-test in the tank there.  With a completed bullish stochastic crossover, a bounce off the lower BB confirming Wednesday's doji and a bullish RTC trigger, this chart now looks bullish.

ES daily pivot: Tonight the pivot rockets from 1649.00  to 1673.58.  And even with that big jump, we're still above the new pivot, quite a bullish sign indeed.

Dollar index: I'm glad I waited for confirmation on the dollar because on Thursday it did not even try to fill Wednesday's big gap up and in fact moved 0.06% higher.. But it did it on a big inverted hammer which strengthens the case for a move lower, though once again, a candle like this requires confirmation so we still can't call the dollar lower yet.

Euro: The euro did not fall on Thursday as I had expected, but it didn't make much headway either, closing at 1.3538 at the lower end of Wednesday's big drop.  The indicators continue falling towards oversold and the overnight is now up just a tad as the euro finds a measure of support in the 1.3525 neighborhood.  So now it's looking possibly higher on Friday.

Transportation: Technically, the trans on Thursday were identical to the Dow, so all the comments there hold here too.  This chart now looks bullish.

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    11      3      6           2        0.813    687
September  8      3      3           3        0.800    485
October    2      1      3           1        0.750    459

     And the winner is...

Ordinarily, I'd be wary of the day following an outsized gain like we got Thursday as there's a natural tendency for the market to at least take a breather.  But it's still possible for those gains to be extended, especially in the case where we're far from natural reversal points such as upper BB's, overbought indicators, or resistance lines.  And that's the situation right now.  It's a bit dangerous because all the headline risk is still out there but I'm going to go out on the limb and call Friday higher anyway.  I'm not expecting a big move though.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats: the account remains at $110,000 after 16 trades (12 for 16  total, 6 for 6 longs, 6 for 10 short) starting from $100,000 on 1/1/13.  Tonight we remain long at 1695.00.


  1. Quick question,

    You call the ES a "Fantasy Trade" Does that mean that you don't actually have money invested?



    1. Exactly. My account will not support trading 10 ES contracts at a time. Also, I'm using a very very risky strategy that involves placing overnight trades with no stops. I don't think I'd be able to sleep at night putting on real trades like that. And I have suffered a few really nasty (paper) losses doing this.

      But overall, the fantasy account has been profitable, and generally at least twice as profitable as my real acocunt, thus demonstrating the correlation between risk and reward. It's primarily just an interesting exercise conducted for my own amusement.


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