Friday higher

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Friday  higher, medium confidence.
• ES pivot 1494.83.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader going long at 1497.75.

[ES pivot values corrected, Friday, 2/1/13, 12:24 PM]

Recap

I know I was taking a chance calling Thursday lower in view of the fact that it was the last day of January, but sometimes the logical point of view pays off as the Dow lost 50 points, defying the historical odds.  Despite this, January was a stellar month and the needle on the famous "January Barometer" spun all the way around twice and flew off.  Now let's lay some odds on Friday.  Will we roll seven or snake eyes?  Let's shake the charts for luck and find out.

The technicals (daily)

The Dow: With two consecutive equal length red candles, things aren't looking so hot for the Dow at first glance.  Interestingly though, even with that we're still inside the rising RTC, just barely.  That means we cannot yet declare the uptrend over even though the indicators have now started to come down off their pegged-oversold levels of recent days.  So this chart looks possibly, but not definitely bearish.

The VIX:  Meanwhile, the VIX actually posted a drop today, down 0.28% after forming a hanging man at the top of Wednesday's green candle.  We remain in the rising RTC here too but the indicators on this chart have been moving higher for days and are now well into overbought territory.  I'd say there's a fair chance of the VIX moving lower in a day or two.

Market index futures:Tonight all three futures are higher at 1:21 AM EST with ES up by 0.32%.  On Thursday ES traded outside its rising RTC for a bearish trigger.  However it did it on a small morning star type doji.  The new overnight candle is gapping up giving support to the doji so I'm hesitant to be too bearish here right now.  See my comments on the trans below which are painting a similar picture.

ES daily pivot: Tonight the pivot drops  from 1498.25  to 1494.83.  A rising ES in the overnight combined with this move now leaves us above the new pivot, so this becomes bullish.

Dollar index: This one surprised me.  Rather than move higher, the dollar lost again today, down another 0.13% as it following a lower BB that's now falling away.  Once that starts happening, it can go on a while so in the absence of a good reversal candle, I'm not going to call the dollar higher from here just yet.  There's no support til 54.40 on the $USDUPX anyway.

Euro: And as the dollar drops, so rose the euro.  After putting in a small green doji on Thursday, it looks like that's being rejecting with the overnight candle gapping sharply higher to remain well inside the now eight day rising RTC.  Currently at 1.3626, with no reversal candle and the upper BB now at 1.3365, this one looks to still have room to run higher on Friday.

Transportation: On Wednesday the trans crashed out of their rising RTC for a bearish setup.  Thursday traded entirely outside for a bearish trigger.  However, it did so on a green spinning top which makes me cautious about being too dogmatically bearish here.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow

                                             average  points

January    5      7      6           3       0.533    -101

     And the winner is...

What we have here is a market that looks like it's having second thoughts about moving lower.  What was looking bearish last night now isn't looking quite so bad.  And given the fact that the first day of February is historically very strong with both the Dow and SPX up 9 of the last 10 according to The Stock Traders Almanac, I'm not wanting to buck those kinds of odds.  So in the absence of any real bearish pin action, I'm just going to call Friday higher.

ES Fantasy Trader

I said last night that I wasn't going to take any chances with this trade and I didn't.  As soon s I saw it moving against me, I got out, and just in time to eke out a half a point profit.  And for the benefit of anyone following the live trades on Twitter - here is what greeted me when I tried to post the exit:

I'm like, huh?  Did some Middle Eastern despot get overthrown again?  Anyway, I was able to get through an hour later, but an hour is an eternity in trading ES.  So just a word to the wise - don't trust Twitter.  I'll continue to post the trades live just to prove I'm really doing it, but there's no guarantee they'll get through.

Portfolio stats: the account inches up to  $93,875 after 4 trades (3 for 4 total, zero for zero longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're entering our first long trade of the year at 1497.75..

BOT 10 false ES MAR13 Futures 1494.00 USD GLOBEX 11:12:43

SLD 10 false ES MAR13 Futures 1494.50 USD GLOBEX 01:00:00

Thursday lower

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Thursday  lower, low confidence.
• ES pivot 1498.25.  Holding below is bearish....
• Friday bias uncertain  technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader going short at 1494.50..

Recap

It wasn't looking too bad early on but I guess Mr. Market eventually didn't like what Uncle Ben had to say on Wednesday afternoon despite the fact that it was the same old thing he's said countless times before.  Go figure.  In any event it was good (or bad) for a 44 point drop in the Dow and another miss for me.  Tonight we release the chart-hounds and let them follow the scent of Thursday's market direction.  Arrooooh!

The technicals (daily)

The Dow: 0.32% is hardly a major decline, but it's the biggest the Dow has seen since January 8th.  Unfortunately, the resulting candle isn't quite either dark cloud cover or bearish harami and we remain inside the rising RTC.  It was enough to bring the indicators down off oversold-broken, but I need confirmation on Thursday to call a pullback.

The VIX:  Still, the on again-off again VIX does now seem to be in a new uptrend, gaining 7.59% on Wednesday, the most in over a month.  The frustrating part is that we've gone from oversold to overbought in just four days and we're now already quite near the upper BB at 14.72.  And as I've often pointed out, the VIX generally respects its upper BB very well.  So while there might be more upside left here, it's looking like it's limited.

Market index futures:Tonight all three futures are barely lower at 1:00 AM EST with ES down by just one tick, or 0.02%.  However, today's regular session drop moved ES exactly to the edge of its rising RTC for a bearish setup.  The new candle is currently outside the RTC, so unless ES can close back above 1500 on Thursday, that will be a bearish trigger.

ES daily pivot: Tonight the pivot dips  from 1500.58  to 1498.25.   For the first time in a while, this leaves us below the new pivot, a bearish sign.  However, ES seems to be interested in revisiting the new level, so it will bear watching before morning.

Dollar index: The dollar broke support at 54.71 on Wednesday and gapped down to touch its lower BB before.bouncing a bit and closing at 54.56.  This caused a bullish hammer and left the indicators highly oversold.  I'd say the dollar is likely to move higher from here.

Euro: And the euro seems to support that idea.  After putting in another tall green candle today to close at 1.3570, it's moving higher again in the overnight, up another 0.13% and remaining firmly in its rising RTC.  With the upper BB now at 1.3634, there's still some room to run here.

Transportation: Well it looks like the trans recent run is finally over with a 1.54% drop on Wednesday.  This took them way out of their long rising RTC for a bearish setup and finally brought the indicators down from their maxed out overbought levels where they'd been for two weeks now.  I'll say that now more downside is likely.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow

                                             average  points

January    4      7      6           3       0.500    -151

     And the winner is...

I know the last two days of January are historically strong, but the charts tonight seem to be suggesting that the momentum is turning, and after the monster run-up of the past few weeks, it's hardly unexpected.  This market has been more overbought than I've ever seen and yet has stubbornly refused to pull back.  Now that we're finally seeing some charts falling out of their regression channels, I'm feeling a bit more confident in calling the trend over.  Thursday will tell for sure.  In the meantime I may be jumping the gun a bit but I'm going to go out on a limb and call Thursday lower anyway.  I'll be happy to be proven wrong as I'm still long and I've not taken out any SPXS hedges yet.

ES Fantasy Trader

Portfolio stats: the account remains at $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Tonight we're going to try hitting the short side once again now that it finally looks like the uptrend is over.  It may be a bit premature, but I think that we may see a day or two of selling coming up.  I know it's risky given the seasonality, so if this one doesn't turn profitable quickly, we're just going to give it up.

Wednesday higher

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Wednesday  higher, low confidence.
• ES pivot 1500.58.  Holding above is bullish...
• Rest of week bias uncertain  technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Last night I issued one of my Famous Conditional Calls - " If we manage to stay above 1496.08 by mid-morning (say the 10-11ish area), then we'll close higher Tuesday".  Well ES did dip below the pivot in the wee hours but then rallied above it just before 10, and then after a vain attempt by the bears to knock 'em lower, the bulls recaptured the initiative at 10:20 and by 11 AM it was all over.  The rest of the day proceeded higher and the Dow finished up 72 points, just short of the 14K level.  So once again, the pivot prevails.  Now let's move on to Wednesday and see if we can figure out what the fickle finger of the Fed will write.

The technicals (daily)

The Dow: The Dow gave us a reversal warning Monday but it was soundly canceled with today's 0.52% advance.  So once again, the broken record plays the same old tune: rising RTC, broken indicators maxed out at overbought, solid green candles.  If we're going to get a pullback, I'll need to see it before believing it. And right now I still don't see it.

The VIX:  Just when it looked like the VIX was pulling itself off the floor, it got KO'ed again on Tuesday for a 1.92% loss.  And it came in the form of a bearish engulfing pattern.  So right now I['d question if the VIX can manage to move higher again on Wednesday.  It's not looking good.

Market index futures:Tonight the index futures are mixes at 1:19 AM EST with ES down by 0.08%, YM down 0.06% but NQ up 0.02%.  Call it basically flat. I believe we were correct to be cautious about yesterday's doji in ES as that was rejected in a big way as ES closed above 1500 for the first time and the run that began on the 17th remains intact.  Tonight we're seeing something similar to two nights ago with a pause after a big up move.

I'll admit I was surprised we didn't see a pullback when the SPX hit 1500.  I think that that, plus ES closing above 1500 are both rather bullish signs.  Meanwhile, the upper BB has come down a bit but is still at 1509 and we're still inside the rising RTC, so once again I still can't call this chart lower yet.  This is like trying to catch the falling knife but in reverse.  What would that be - catching the rising balloon?  We're going lower eventually, but if it's happening Wednesday, ES isn't tipping its hand right now.

ES daily pivot: Tonight the pivot inches up from 1496.08  to 1500.58.  The story of the pivot remains the same - above the old number all day and still above the new level, so it remains bullish.

Dollar index: On Tuesday the dollar broke under its recent six day range but has not broken under its support at 54.68 on the $USDUPX.  With the indicators continuing to drop and a lower BB not til 54.58, there's still some more downside available, but this chart has been so squirrelly lately I'm not putting any money on that theory.

Euro: I missed this one for Wednesday.  Instead of dropping, the euro closed up to 1.3469, a level not seen since November 2011!  In fact, the euro is now closing in on its 200 week MA at 1.3521.  Breaking above that would be bullish indeed.  However, in the short term the stochastic is very close to executing a bearish crossover and the developing overnight candle is flirting with the edge of the rising RTC as the euro is unchanged since the close so far.  I'd say a move lower Wednesday is still not out of the question.

Transportation: Well it's sure looking like the trans are stalling out, with the 5880 level proving to be a hard nut to crack.  On Wednesday we got the third doji in a row, indicating that the bears are starting to exert some downward pressure we haven't seen for a while.  That said, we're still in a rising RTC and the indicators are still broken-overbought.  After this phenomenal run, we're going to need more evidence than that to call a top.  The best I can say at this point is that we're consolidating.  I'll need to see the pullback before acknowledging it.

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.  We've now completed the stats for all of 2012 so we start over with 2013.
 

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

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

  2  1/7        47         30        +      +   1466

  3  1/14       52         15        +      +   1472

  4  1/22       50         21        +      +   1486

  5  1/28       44         26        +      +   1503

  

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 I voted bearish four weeks ago, so both I and the majority were wrong.   We therefore start the year off with an accuracy of 0 for 1, or 0%.  I expect that number to rise :-)

This week we see the majority remains bullish although the spread has narrowed since last week.  I'm agreeing with the majority that we still have some room to run on a monthly basis.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      6      6           3       0.538    -107

     And the winner is...

With nothing much having changed technically for days now, and the trend remaining up, and some room left to run before hitting resistance levels, the only logical call is Wednesday higher, even though I feel a bit uneasy saying that.  One of these days, that will be the wrong call.  But I have to calls 'em like I sees 'em.

Oh, and with the Fed expected not to make any earth-shattering announcements, I'm not looking for any big moves either way on Wednesday.

ES Fantasy Trader

Portfolio stats: the account remains at $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Now I'm glad I did not go long last night, but with the doji, it didn't really make much difference anyway.  Once again, I'm just going to sit on my hands waiting for the long overdue pullback.

Tuesday higher if ES pivot holds

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Tuesday higher if ES pivot holds, else lower..
• ES pivot 1496.08.  Holding above is bullish...
• Rest of week bias uncertain  technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Well the Dow's winning streak is snapped at six and it took my call for a higher close with it after a late afternoon slip sent us negative on the day.  But a meager 14 point loss is hardly worth writing about..  Or is it?   Let's stir up the chart anthill and see what climbs out.

The technicals (daily)

The Dow: So we got a small spinning top on Monday.  Sure it's a reversal sign, but we've seen five of these over the course of the last thirteen sessions and not a single one of them panned out.  So I'm a little skeptical of getting bearish just because of this, in particular because we remain in the rising RTC and still haven't touched the upper BB yet.  So this chart is going to have to show me a solid red candle before I believe it's a pullback.  And that means closing under 13,767 on Tuesday (the RTC edge).  Think we're in for a 114 point tumble Tuesday?  Me either.

The VIX:  Then again, the VIX finally posted a real gain on Monday, gapping up 5.28% to send the indicators off oversold and confirming the bullish stochastic crossover.  So why isn't the market going lower? I wish I knew.  This is highly unusual.  Rob Hanna commented on this himself today in his Quantifiable Edges post here.   Perhaps people are simply anticipating the top and getting their puts in early.  

Market index futures:Tonight all three futures are just barely higher at 1:06 AM EST with ES up by 0.07%.  ES gave us a small spinning top today but the overnight doesn't seem to be confirming it.  Still, unless we can pack on a few more points, this is moving us closer to the right edge of the RTC.  If we close below 1492.50 on Tuesday, that will be a bearish setup.  Or, ES may just be gearing up for an attack on 1500.  Either way, I'm still not seeing a pullback yet on this chart.

ES daily pivot: Tonight the pivot inches up from 1493.92  to 1496.08.  The situation is almost identical to last night at this time.  We were above the old pivot all day (aside from a brief test around 10 AM) and we remain above the new number, but a bit less so.  Still, that remains bullish unless we break under.  With just a two point spread now, the pivot is definitely in play and bears watching.

Dollar index: The dollar continued its random walk today, gaining all of 0.06% and remaining range-bound.  Stuck halfway between the BB's, with indicators halfway between overbought and oversold, and without an RTC there continues to be zero guidance from this chart..Maybe there's a clue in the euro.

Euro: Hmm, there might be.  The euro put in a tall spinning top today near the top of Friday's tall green candle.  And the overnight action is headed lower, confirming (so far anyway),  the reversal candle.  The indicators here are now on the move lower off overbought, so I'd say a lower euro on Tuesday is definitely possible.

Transportation: It looks like the phenomenal rally in the trans may finally be sputtering to a halt as they managed to gain just 0.09% on Monday.  And did it on a hanging man, making it two in a row.  Volume has also been declining for three days suggesting buyers may be getting wary at these heady levels.  So I'd say we may be near a pullback, but without seeing a red candle and an RTC exit, I still can't pull that particular trigger.  We might just get some consolidation for a few days.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      6      6           2       0.500    -107

     And the winner is...

On the one hand we have the proximity of ES to its pivot tonight, a rising VIX, the fact that the Dow failed to advance on Monday, and the trans may be signaling an end to their rally.  On the other hand, we've seen this movie before and the market just picked right back up the next day.  Therefore, I'm making another conditional call tonight.  Watch the ES pivot.  If we manage to stay above 1496.08 by mid-morning (say the 10-11ish area), then we'll close higher Tuesday.  Else lower.  So sez I.

ES Fantasy Trader

Portfolio stats: the account remains at $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Now I'm glad I did not go long last night, but with the doji, it didn't really make much difference anyway.  Once again, I'm just going to sit on my hands waiting for the long overdue pullback.

Monday higher

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

• Monday higher, low confidence.
• ES pivot 1493.92.  Holding above is bullish...
• Rest of week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Last Thursday I made the call that we'd go higher on Friday only if ES could break above its pivot point of 1490.75.  That happened at 2:40 AM and we did indeed close higher, with the Dow gaining another 71 points and the SPX closing above 1502 for the first time since November 2007, right when we stood on the brink of the cliff that led us into the Great Recession.

Never discount the power of the pivot.  Take a look at last Friday's SPX chart in 5 minute bars and you'll see how they made two stabs at knocking it lower, at 10:35 AM and again at 10:45 AM.  Both times the index dropped to exactly 1490.75 on the dot and bounced right off.  And right after the second failure, the bears simply packed up and went back into hibernation.

Now let's figure out how the last week of the month might play out.

The technicals (daily)

The Dow: The Dow continues its quite extraordinary rally with six solid green candles in a row and 11 of the last 12.  We've now hit my target of 1500 for the SPX and now Dow 14K is only 105 points away.  Everything I've been saying about this chart remains true and despite the length of this rally, I see nothing technically bearish here yet.  Obviously, we have to come down sometime, but so far there's no sign of it.

The VIX:  Well, there might be a sign here.  On Friday the VIX posted a 1.58% gain, unusual in view of the fact that the market was up too.  This had the effect of canceling Thursday's doji and also created a bullish stochastic crossover.  With RSI continuing to rise off oversold I'd say we have a good chance of moving higher again on Monday, and that can't be good for stocks.

Market index futures:Tonight all three futures are mildly higher at 1:11 AM EST with ES up by 0.12%.  Like the Dow, ES is on a roll and after putting in two strong green candles to end last week remains firmly in its rising RTC.  The indicators also remain broken at overbought levels and with ES continuing higher once again in the overnight, there really isn't any sign of a pullback here either.

ES daily pivot: Tonight the pivot rises from 1490.75  to 1493.92.  We were above before and remain above, though  only by half as much, but that's still undeniably bullish.

Dollar index:The dollar dropped 0.23% on Friday as it continues to bounce around between 55.10 and 54.85 on the $USDUPX.  We got a morning star but also a bearish stochastic crossover.  But with this chart literally all over the place and no visible trend, I'm still not going to hazard a guess as to where this is headed Monday.

Euro: The euro had a good day Friday, hitting its upper BB and closing at 1.3469.  In the overnight we're just sort of meandering near the top of Friday's candle so there's really little to be gleaned from this chart.  The weekly chart though continues to look bullish for a while, though I note the nearby presence of the 200 week MA at 1.3521 that might provide some resistance before long.

Transportation:The trans seem just unstoppable, packing on another 0.26% on Friday to continue a streak that began way back on January 9th.  We did get a hanging man - but we also got one last Tuesday and that came to naught.  RSI remained pegged at 100 for the third straight day but still no sign of this rally ending.  The most we can do is see if this hanging man is confirmed on Monday.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      5      6           2       0.545     -93

     And the winner is...

As much as I want to be bearish simply because it feels like this rally has now gone on far too long without any pullback, I'm still not seeing it in the charts.  I do think that since we managed to close above SPX 1500 that the next stop is Dow 14,000.  And if that holds, then we're going to revisit the all time highs of 2007.  I figured we'd pull back at SPX 1500 and that didn't happen.  The VIX is inching higher but the market's not going down.  I'm not sure what's going on here, short-squeeze, dumb money, PPT, name your usual suspects, but we all know that fighting the trend is a bad idea.  Therefore, while SPXS looks attractive at these levels, I'm going to hold off on my desire to hedge until the market shows me the top.

Um, oh yeah, so where are we going Monday?  Well in the absence of anything bearish-looking, I've got to say that it looks like Monday higher.

ES Fantasy Trader


Portfolio stats: the account remains at $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Tonight we're standing aside simply because I don't want to get on the bus just before it reverses direction , and I just can't shake the feeling that this is going to be happening Any Day Now.