Friday uncertain, topping possible

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

• Friday uncertain, topping day possible.
• ES pivot 1464.00.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

 Signature of the week

Does the J stand for "joke"?

Will someone please tell me Emperor Nerobama's not hiring a guy who signs his name as a doodle to be the Secretary of Treasury.  Actually, that can't really be his signature.  Even doctors write better than that.  My German Shepherd writes better than that.  I think he was simply trying to get his pen to start putting down ink and by the time he finally realized it was in fact going, it was too late and then he couldn't find the WhiteOut.  Yeah, that must be it.  What the heck.

Recap

With an 81 point gain on Thursday, the Dow finally broke out of a five day trading range.  But very little has changed in that time, indicator-wise.  Which kind of leaves us in a pickle because the longer this goes on, the harder it becomes to tell if this move is for real or just another fakeout.  Maybe a review of the charts will help shine some light on this conundrum.  Or maybe we're just drawing curli-ques.

The technicals (daily)

The Dow: After starting the week off with a fakeout breakdown, the Dow has rebounded and now broken above the upper end of its recent range with a close at 13,471.  In addition, both money flow and OBV have put in a bottom and turned upward.  However, the upper BB lies just overhead at 13,532 and we remain quite overbought.  So given that we've finally broken out of the range, I'm thinking there's fairly clear sailing now at least until the upper BB but we may get a pullback after hitting that.

The VIX:  The VIX has fallen and it can't get up.  It's trying awfully hard, but keeps moving lower, this time by 2.32% even though it put in two consecutive green candles. The indicators are all lower than I've seen them since October 2011 and the VIX has been cut nearly in half in just eight sessions.  With today's inverted hammer, you've just got to think a reversal is coming, but then again so's Christmas.  I'll believe it when I see it.

Market index futures:Tonight all three futures are basically flat at 1:04 AM EST with ES dead even and both NQ and YM down all of 0.01%.  After posting an impressive 0.89% gain on Wednesday, ES has actually been drifting lower since around 6 PM giving the new candle a developing dark cloud cover appearance.  RSI has also peaked at overbought and is now headed lower.  I don't know if this is the start of a larger reversal, but we may be in for a pause or a move lower here on Friday.

ES daily pivot: Tonight the pivot bounces from 1455.50 to 1464.00. We were above before and remain so now but the distance has narrowed to just three points.  While this is de facto bullish, the pivot is now in play and we'll want to watch for attempts to break below it.

Dollar index:After a bunch of directionless trading, the dollar absolutely cratered today, with the $USDUPX dropping a whopping 1.07%, it's biggest one-day decline since August 3, 2012, probably after traders got a look at Jacob Lew's signature.  This move is driving the indicators off overbought and it looks like further downside is possible Friday.

Euro: And similarly, the euro put in a huge green candle today to bring it to 1.3259, right at the resistance that stopped it last month.  Despite this, the indicators are not yet overbought and we're inching higher still in the overnight.  But we'll have to wait and see if the euro can break above this strong resistance line or if it's going to try to retrace Thursday's big jump.  It's too risky to predict from here.

Transportation:I commented last night that this chart no longer looked very bearish and today we got another advance, this time for 0.51%.  We're now at levels not seen since July 2011 and are now quite overbought.  And like the Dow, the upper BB is nearby at 5608.  So with two green candles no signaling any reversal, I'd say we're going to have a look at the upper BB and then maybe reverse.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    2      2      2           1       0.600     0

     And the winner is...

With charts still looking fairly bullish but also near various resistance lines, I think Friday may be a topping day, possibly a doji.  I'm definitely not expecting another big move higher.  And it's too soon to tell if today's move was a breakout or a fakeout.  Accordingly, I'm going to just call Friday uncertain.  The ES pivot should be illuminating.  IF we break below it by mid-morning, that increases the odds for a lower close.

ES Fantasy Trader

Portfolio stats:  tonight the account remains at $103,750 after one trade (1 for 1 total, zero for zero longs, 1 for 1 short).  Tonight we stand aside again in the face of a lack of good guidance.

Thursday uncertain

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

• Thursday uncertain.
• ES pivot 1455.50.  HOlding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Oops.  I was really thinking we'd go lower today.  Instead the Dow surprised me by gaining 62 points.  So we are right back to the 13,390 level that's been either the open or the close for the last six straight sessions.  There's probably some day trading money to be made here, but for a swing trader we're just spinning our wheels.  Let's call AAA and see if we can get towed out of these doldrums on Thursday.

The technicals (daily)

The Dow: After a short descending RTC, today the DOw closed outside it for a bullish setup and an approximation of a bullish engulfing pattern.  With the indicators now completely broken at overbought, this chart's not looking anywhere near as bad as it did last night.

The VIX:  After setting a multi-year low on Tuesday, the VIX moved even lower today, hitting 13.22 intraday before recovering to close at 13.81 for a 1.40% gain, so at least I guessed this one right.  With RSI in the basement at 2.04 and the stochastic joining it, I'd have to  think we're more likely to move higher from here than lower.

Market index futures:Tonight all three futures are higher at 1:00 AM EST with ES up by 0.22%.  ES is now, like the Dow, in a channel between 1451 and 1460.  After opening at the bottom of that range on Wednesday, the overnight has brought us to the top.  We'll break out eventually, but right now I'm not even going to venture a guess which way that will be.  The recent past suggests a move lower though.

ES daily pivot: Tonight the pivot inches up from 1451.08  to 1455.50.  With a mini-rally around 9 PM we remain above the new pivot so that's bullish.

Dollar index:The dollar has been bouncing around lately with no particular pattern.  I'm happy to admit I have absolutely no clue where it may be headed next. .Maybe the euro has a clue.

Euro: Nope.  After expecting once again to see the euro move higher, it moved lower on Wednesday.  But it continues to find support right around 1.3050.  The candles look bearish, the indicators look bullish, and I'm stumped.

Transportation:After looking like they'd put in a top, today the trans handily erased two days of losses and closed above 5530 resistance.  Broken indicators here too and yesterday's hanging man is now looking more like a hammer, so this chart's no longer particularly bearish.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    2      2      1           1       0.600     0

     And the winner is...

Tonight the charts are being particularly coy.  I'm afraid I don't have a particularly good feel for the whole environment here so I think the most prudent course of action is to simply sit back and wait for the break.  Until then, I think we'll see some more of this nervous channeling action and because of that, all I can say is that Thursday is uncertain.  Sorry folks, wish I had something more profound to say, but sometimes that's just how it is.

ES Fantasy Trader

Portfolio stats:  tonight the account remains at $103,750 after one trade (1 for 1 total, zero for zero longs, 1 for 1 short).  Tonight we stand aside again in the face of a lack of good guidance.

Wednesday lower again

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

• Wednesday lower, low confidence.
• ES pivot 1451.75.  Breaking below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

I called the Dow lower today and was rewarded with a morning-long decline into negative territory.  But the bears must have had one martini too many at lunch because we recovered a bit in later trading to end down just 55 points.  Still, last week's uptrend is now clearly over, so what's next?  You may not need a weatherman to tell which way the wind is blowing, but do you need a Night Owl to tell which way the market's heading.  Read on!

The technicals (daily)

The Dow: We can dispatch this one quickly.  With two nearly identical red candles in a row, the Dow is now totally out of its rising RTC for a bearish trigger and has just completed a bearish stochastic crossover.   And while the indicators are not entirely overbought, they do look to have peaked.  So in general, there's no signs of a move higher here.

The VIX:  In an interesting bit of divergence, the VIX moved lower on Tuesday as well as the major averages, dropping another 1.23%.  At 13.62, it's now at the bottom of its support range and quite oversold.  I actually had to go to the monthly chart to find the last time the VIX was this low.  Know when it was?  Try June of 2007!  Ad although we traded outside the last descending RTC today for a bullish trigger, it sure doesn't feel like it.  I'd say there's some evidence for a move higher from here but it's not particularly compelling, not when the lower BB has fallen to 12.30.

Market index futures:Tonight all three futures are just a tad higher at 1:04 AM EST with ES up by 0.05%.  Call it basically flat. Today's candle traded entirely outside the rising RTC for a bearish setup and gives us now four bearish warnings in a row: two spinning tops followed by two hanging men.  With an inverted hammer in the overnight so far  and the indicators remaining very overbought, I'm not feeling the love.

ES daily pivot: Tonight the pivot inches down from 1455.75  to 1451.75. This drop combined with tonight's slight gains were just enough to send us above the new pivot for a bullish indication.  It's just a bit more than one point mind you, so we'll need to watch for any attempts to break under before morning.

Dollar index:The dollar put in a little red harami today (sounds like sushi, doesn't it?) but that was good for a 0.09% rise.  Still, we remain overbought and with a just-completed bearish stochastic crossover, there could be further downside here.

Euro: The euro's two day rally was abruptly cut off on Tuesday with a close at 1.3091 basically wiping out yesterday's gains.  But we're basically flat in the overnight suggesting that there may be some support around this level.  While it did not go higher today as I had expected, I still think the upside is looking more promising that any move lower.

Transportation:On Tuesday the trans dropped 0.38% putting in a second hanging man suggesting that the bulls have not quite given up this fight yet.  However the indicators remain quite overbought and the stochastic is dead-even on forming a bearish crossover (the %K and %D lines are virtually equal).  And we traded entirely outside the rising RTC so that's a bearish trigger.  I don't see any suggestion here of a gain on Wednesday.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    2      1      1           1       0.750     62

     And the winner is...

I know some people are calling for a rally from here and bandying about number like SPX 1475.  That may yet happen in a month or two, but it's not happening tomorrow.  One might think that the failure of the bears to drag the market down in one quick swoop is a sign of weakness on their part, but one would be wrong. There is the death by a thousand cuts too.  I'm really only seeing one bullish sign tonight, the ES pivot.  But that's pretty weak, just one point over.  So I'm going to officially call Wednesday lower, though I'll admit I'm keeping an eye on the pivot.  I'd really want to see more bullish signs though to turn my call to bullish.

ES Fantasy Trader

Well we made our goal of having the first trade of the year be a profitable one as last night's short yielded a respectable 7.5 points.  Not bad for eleven hours worth of work (most of which I spent sleeping). 
Portfolio stats:  tonight the account rises to $103,750 after one trade (1 for 1 total, zero for zero longs, 1 for 1 short).  Tonight we stand aside.  Although I believe the market has lower to go, I'm not seeing any good momentum in that direction in the overnight so far so I'd rather just watch and wait.  Getting on a bus that's standing still with its motor off and the driver on coffee break usually isn't the best tactic for going somewhere fast.

BOT    10    false    ES    MAR13 Futures     1447.25    USD    GLOBEX    11:29:38   
SLD    10    false    ES    MAR13 Futures     1454.75    USD    GLOBEX    00:36:14     

Tuesday lower

• Tuesday lower, medium confidence.
• ES pivot 1455.75.  Holding below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader going short at 1454.75.

Recap

Last night I said that ES needed to break above its pivot in order to close higher.  Well the ES commandos made a valiant effort to take Hill 1457.33 at 2 AM and again at 3:30 AM but were repulsed both times by the Bear defenders.  It was all over after that and while the Dow did recover somewhat from its intraday lows, we still finished down 0.38% on the day.  As we're finally getting a full week of trading going with full participation, the charts should settle down and give us some more reliable clues.  So let's bring out the magnifying glass, Holmes, and start the search.

The technicals (daily)

The Dow: We got some clarity from today's 51 point decline which solidified a congestion range of 13,390 - 13,435.  The indicators are also just about at overbought and the stochastic is now very close to forming a bearish crossover.  My best guess is that the break out of this range is going to be to the downside.

The VIX:  Last night I talked about some support around here for the VIX and it basically held on Monday as the VIX lost just 0.29% to close at 13.79, just under Friday's close.  This leaves us just outside the descending RTC for a bullish setup.  The stochastic is lying on the floor with nowhere to go but up and the other indicators are now oversold.  I take the failure of the VIX to push substantially lower today as a sign it may be getting ready to move higher.

Market index futures:Tonight all three futures are lower at 12:45 AM EST with ES down by 0.09%.  Like the Dow, ES gave us a hanging man today.  Following two days of spinning tops, it looks like we may finally be getting ready to roll over.  The drift lower in the overnight seems to support this.  It's also dragging us out of the rising RTC for a bearish setup and the stochastic has just eked out a bearish crossover.  This chart definitely looks ready to go lower on Tuesday. 

ES daily pivot: Tonight the pivot drops from 1457.33 to 1455.75.  With ES mounting yet another unsuccessful assault on the pivot around 3 PM Monday, we remain below the new number tonight, so that's bearish.

Dollar index:I was right about the dollar moving lower on Monday as we lost 0.30% on the $USDUPX.  This also formed a bearish evening star pattern and peaked the indicators at overbought.  This chart looks likely to continue lower on Tuesday.

Euro: I also called the euro correctly today as it closed up to 1.3120 on a nice green candle.  In the overnight tonight it's sort of bouncing around but seems inclined to continue higher.  With a complete bullish stochastic crossover and indicators now bottomed at oversold, that seems likely.

Transportation:Last night I was talking about what a great run the trans were having.  Tonight it looks like that may be over as we got our first loss in five days, dropping 0.37%.  More telling was the candle, a hanging man.  The indicators are also starting to turn lower from overbought and today's close was just outside the rising RTC for a bearish setup.  That all spells lower for Tuesday.
 

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.  Here's the final cumulative list for 2012.
 

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

 16  4/16       26         48        -     1370  13/16
 17  4/23       30         48        -     1379  14/17

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466  23/38

 39  9/24       52         30        +     1460  23/39

 40  10/1       39         39        -     1441  24/40

 41  10/8       52         34        +     1461  24/41

 42  10/15      41         32        -     1429  25/42

 43  10/22      38         41        -     1433  26/43

 44  10/29      36         43        -     1412  27/44

 45  11/5       44         33        -     1414  27/45

 46  11/12      38         46        -     1380  27/46

 47  11/19      52         34        +     1360  28/47

 48  11/26      48         26        +     1409  29/48

 49  12/3       57         21        N     1416  29/49

 50  12/10      46         29        N     1418  29/50

 51  12/17      52         28        -     1414

 52  12/26      52         26        +     1430

 

  1  12/31      40         48        - -   1402 

  2  1/7        47         30        + +   1466

  

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.  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 I voted "Neutral" four weeks ago (because I felt I had no way to predict the outcome of the Fiscal Cliff), so that counts as neither right nor wrong.  Therefore, as we fill in the last few calls for 2012, I remain 29 for 50 or 60%.  I will remove all the 2012 entries in two weeks when we have a complete chart for the year.

In the meantime, I note that I changed my vote from bearish to bullish along with the majority of voters.  I'm not sure why they did, but I'm seeing a bullish trigger on both the weekly and monthly SPX RTC.  We're also in a period of strong seasonality anyway.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    1      1      1           1       0.667     7

     And the winner is...

After two days of vaguely bearish charts, tonight the bear case seems to be strengthening as I'm seeing more signs of tops.  I'll add that the TLT looks ready to move higher too - always a bad sign for stocks.  And the SPX Hi-Lo index hit 100 again on Monday, also a good sign a top is coming.  So all in all, I'm going to just say that things are looking good for a move lower Tuesday.

ES Fantasy Trader


Portfolio stats:  tonight the account remains at $100,000 as we enter our first trade of the year by going short at 1454.75.

Monday higher if pivot passed, else lower

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

• Monday higher if pivot passed, else lower, medium confidence.
• ES pivot 1457.33.  Holding below is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Well I called Friday lower and that didn't happen.  But in retrospect, I still think it wasn't an unreasonable guess.  It was a 44 point gain for the Dow, but it felt half-hearted as we discuss below.  And speaking of fun, let's get right to our circus we call the market.  No elephants, but lots of bulls and bears.  We crack the whip and see who stands up on Monday.

The technicals (daily)

The Dow: Friday's 0.33% gain came on volume that declined for the third consecutive day.  And it was also the third day the Dow clung to its upper BB.  Like the skinny kid trying to cross the monkey bars, he can't hold on forever.  While the pattern is close to bullish engulfing, the overall gestalt suggests fatigue.  With the indicators now very nearly in overbought territory, I have to wonder how much more immediate upside is available.
 
The VIX:  The VIX meanwhile continued its plunge, hitting 13.83 on Friday.  It seems hard to believe that only a week ago it hit 23.  Anyway, while we're now in a region of support, the lower BB is pretty nearby, at 13.01.  With no immediate reversal in sight, more downside is still possible on Monday but I feel it will be limited.

Market index futures:Tonight all three futures are lower at 1:50 AM EST with ES down by 0.09%.  That's actually a two point gain since I started writing tonight, following a steady decline earlier Sunday evening.  But we got two dojis last Thursday and Friday and the current candle looks like a dark cloud cover that is also breaking away from the upper BB.  This is also causing the stochastic to be just about to execute a bearish crossover.  While we've been slowly drifting higher the past few days, this move may be about tapped out.

ES daily pivot: Tonight the pivot inches up from 1454.67 to 1457.33.. This means we crossed under the new pivot at midnight.  This will remain a bearish sign unless ES can recapture this level, and as I write, it does seem to be sending out a patrol to scout it out, now only 1.33 points below.  This skirmish will be worth watching.

Dollar index:On Friday the dollar put in an unusual candlestick pattern called upside gap two crows.  It is supposed to be high reliability bearish, but I have little experience with it.  We'll see.  In any case, the indicators certainly support a top being as RSI is almost pegging the meter at 99.58 and the stochastic appears to be forming a narrow bearish crossover.  I'm going to stick to my guns and claim the dollar is going lower Monday.

Euro: And then the euro is putting in a bunch of bullish signs.  After a green hammer on Friday, the overnight is trading entirely outside the descending RTC for a bullish setup, even though we're currently down 0.28%.  The indicators have all gone oversold now and the stochastic is just about to form a bullish crossover.  I think the euro has some decent short-term upside potential here. 

Transportation:And the trans are simply on fire, tacking on another 1.17% to extend their impressive winning streak to four.  With a solid rising RTC, indicators that have only just barely gone overbought, and a solid green candle, I see no reversal signs here at all.  This is by far the strongest chart of the night.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    1      1      1           0       1.000       -44

     And the winner is...

A tough one.  We're in a period of some tough slogging - not exactly consolidation, but the big rally is clearly behind us.  But we are in a period of strong seasonality and that's nothing to discount.  The charts tonight look a lot like they did last Thursday night, only more so.  I called the market lower back then but it failed to cooperate.  So tonight, with the futures evidently seeing something they liked around 12:30 AM, I'm going to make a conditional call: if ES can break over its pivot (1457.33) and stay there by mid-morning, we'll close higher Monday, else lower.

ES Fantasy Trader

Portfolio stats:  the account remains at $100,000 as we continue to wait for the right moment to enter our first trade of the year.