Friday higher

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

• Friday higher, low confidence.
  
• ES pivot 1501.92.  Holding above is bullish..
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going long at 1505.25.

Recap

The market continued lower on Thursday but the damage was relatively muted compared to Wednesday.  Is this a sign of a bounce on Friday?  Let's check the charts.

The technicals (daily)

The Dow: The Dow lost 47 points on Thursday while putting in a hammer whose tail just about touched the lower BB.  I have found that to be a good sign that a reversal is coming in a day or two, cf. 12/31/12, 11/15/12, and 7/24/12 to name three.

The VIX:  And while the Dow put in a hammer, the VIX put in an inverted hammer whose peak was way above its upper BB as it drove further into overbought territory.  I find this to be a good indicator of a move lower within a day or two.  Like I always say, the VIX rarely stays at its upper BB longer than a day or two.  Thursday marked day two.

Market index futures:Tonight all three futures are higher at 1:05 AM EST with ES up by 0.28%.  Like the Dow, ES gave us a hammer today and the stochastic moved into position to generate a bullish crossover.  The hourly chart is also looking more favorable right now.

ES daily pivot: Tonight the pivot drops from 1514.50  to 1501.92. This drop combined with ES trending higher switched us back above the pivot right at midnight, so that now becomes bullish.

Dollar index:And like the other charts, the dollar also gave us a clear doji, this one a classic hanging man that gapped way up over its upper BB and above its 200 day MA.  It's also now quite extended from its pivot so there are definite signs here pointing to a lower dollar for Friday. .

Euro: I'm sure glad I decided to wait for confirmation before calling this chart higher last night as the euro had a second big down day n Thursday with a tall red marubozu that took it down below its lower BB at 1.3219.  But now the overnight is giving me the signal I was looking for, with a nice 0.31% gap-up bounce off the lows.  This bodes well for a higher euro on Friday.

Transportation:The trans chart pretty much mimicked the Dow on Thursday so the same comments apply.  Additionally, the trans finished at a support level of 5675.  There's some chance here of a move higher of Friday.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   2      3      3           5        0.667     32

     And the winner is...

Tonight, for the first time in a while I'm seeing numerous technical signs of a reversal - hammers and hanging men galore at or beyond various BB's.  Also, this Friday is historically bullish and with no major economic news coming out to torpedo my call, I'm going out on a limb and saying that Friday's closing higher.

ES Fantasy Trader

Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're going to take a flyer and go long at 1505.25.

Thursday uncertain

• Thursday uncertain.
  
• ES pivot 1514.50.  Holding below is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

It sure seemed to me like the technicals were pointing higher for Wednesday, but the Fed minutes torpedoed that idea right quick and the Dow sank a nasty 108 points, the instant the news came out.  Oh well - such are the perils of technical analysis.  I did mention that as a possibility last night.  So let's just get back up, dust ourselves off and see what Thursday might have in store - technically that is.

The technicals (daily)

The Dow: On Wednesday the Dow of course tanked 0.77% after the Fed minutes came out and announced that, gosh I really don't know, Madonna had a love child with Tiger Woods or something.  For whatever reason, Mr. Market sold 'em hard and that was that.  We ended at session lows but oddly enough that still keeps us inside a congestion channel that now runs back 10 days.  It also drove the indicators from overbought very nearly to oversold in one day.  So despite this triple digit dump, there's still no trend in sight.

The VIX:  Well if I didn't see the Dow losing 100+ points on Wednesday I sure didn't see a 19.25% skyrocket in the VIX!  We went from nearly the lower BB all the way clear to the upper BB in one day.  And from oversold straight to overbought.  I don't think I've ever seen anything like this before.  One thing though - whenever the VIX has really big up moves that hit the upper BB, usually the next day is lower, and that's what I'm now expecting.

Market index futures: Tonight all three futures are lower at 1: 07 AM EST with ES down by 0.08%.  Wednesday's move in ES dumped us right back out of both rising RTC channels I'm following, so we're right back to a bearish setup.  But the overnight pin action seems to be suggesting more of a DCB in the works than continued lower.  Still, that's not a given and there's no way (at least none I can see) of calling this chart higher just from what we have now.

ES daily pivot: Tonight the pivot dives from 1524.08  to 1514.50..We broke below the old number at 11 AM Wednesday and remain underwater by a fair amount - a pretty bearish sign.

Dollar index:Like all the other charts tonight, the dollar put in a big move, this one to the upside by a giant 0.76% on a tall marubozu that just blasted through its upper BB and continued on clear to its 200 day MA at 55.85, where it was finally stopped. .It also leaves us quite overbought.  The last time we were in this situation (11/09/12), the 200 day MA proved to be formidable resistance.  The dollar spent a week fighting it before finally giving up.  I don't see why this time should be any different so I'm skeptical there's much further upside left for the dollar.

Euro: And as the dollar rose, the euro fell, though not by nearly as much.  But Wednesday's losses are continuing in the overnight with the euro just now hitting its lower BB at 1.3238.  While the lower BB could provide some support, it doesn't always, and since the developing candle pattern is quite negative we need to see confirmation on this chart too before calling a move higher for the euro.

Transportation:What a difference a day makes.  We went from the trans looking quite bullish last night to quite bearish on Wednesday night.  We retraced all of Tuesday's big gains and then some with a bearish engulfing pattern than punched right out the bottom of the rising RTC for a bearish setup.  And although the indicators all finally came off extreme overbought levels,they're still less than halfway to oversold.  But we had a similar situation on January 30th and the next day the trans bounced right back.  It's frustrating, but even after a big move like this, we still have to wait for further confirmation of a trend change.


Accuracy (daily calls):


Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   2      3      3           4        0.667     32

     And the winner is...

This market continues to confound with one curveball after another.  It seems to me that today's move was out of proportion to the trigger (speculation about what the Fed may or may not do in March).  Then a bunch of people who've been just waiting to sell for a long time now just used that as an excuse to unload their positions.  To me, that doesn't sound like the start of a protracted leg down - but I could be wrong.  I will note though that the Dow hasn't had more than two losing days in a row all year long so far and we just had a big one.  My guess is that we'll either see a DCB or a doji on Thursday and because I can't be sure, I just have to call Thursday uncertain.  Either way, I think the shorting opportunity here has come and gone.

ES Fantasy Trader

Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we just continue to stand aside. 

Wednesday higher

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

• Wednesday uncertain.
  
• ES pivot 1524.08.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

I'll be honest (heck, I'm always honest) - I sure didn't see today's 54 point gain coming in the Dow.  In fact I couldn't figure out just where we were going.  But at least it wasn't (for once) yet another doji and that just might have some implications for Wednesday.  Let's get out our magnifying glasses and see what those might be, eh Watson?

The technicals (daily)

The Dow: Today's gain may have been "only" 54 points, but I think it was 54 important points.  First off, it was a marubozu, the first time in three days we haven't seen a doji.  Second, we recaptured 14K.  And third, today's close of 14,036 also finally broke through the resistance at 14,012 that's been bedeviling us all month long.  Now it did just barely push us into overbought territory with an RSI at 70.29, but it also formed a bullish stochastic crossover from a high level and those are often good for a day or two of further gains.  It's still too early to declare this a breakout, but this chart is now looking more bullish than it was last night.

The VIX:  Last night I wrote "I see no reason we can't revisit [support at 12.41]".  Well not only did we revisit that today but we kept right on going, ending at 12.31.  So support at 12.41 is now history and the next stop is the lower BB at 11.83.  Often, the VIX likes to touch its lower BB before heading higher and I think that's what's going to happen here.  It's worth adding that the VIX is now back to levels not seen since April 2007 and is in the middle of the range it stayed in between 2004 and 2007.  And note what happened to the market during that time - not a whole lot, and certainly not a crash.

Market index futures:Tonight all three futures are just barely higher at 1:09 AM EST with ES up by 0.03%.  Today's tall green marubozu, the biggest since February 5th, kept us from falling out of both rising RTC's I discussed yesterday.  It also broke through the upper BB, and that's a bit concerning, because ES has been respecting the upper BB quite well all year.  But one more day higher here is not at all out of the question as this chart isn't looking bearish, candlestick-wise.

ES daily pivot: Tonight the pivot rises from 1516.67  to 1524.08.. We were above before and remain above the new number despite this jump, so that's a positive sign for Wednesday.

Dollar index:The dollar meanwhile has established a new trading range around the 55.44 level on the $USDUPX.It's been putting higher highs in for three days now but always gets dragged back down to close near that number.  With no real trend in sight, I can only guess we're in for more of the same.

Euro: On Tuesday the euro gave us a bullish engulfing candle and the overnight trading is confirming that, up 0.18% so far.  It's looking like the euro's downtrend that began this month, is over.

Transportation:Last Friday's doji was pulverized by the trans on Tuesday as they posted a 1.25% gain, the biggest of the current rally, to remain in their rising RTC and outperforming the Dow.  I see nothing bearish on this chart.

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.
 

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

  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

  6  2/5        40         36        +      +   1513

  7  2/11       43         25        +      +   1518

  8  2/19       21         43        -      -   1520

  

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 bullish four weeks ago, so both I and the majority were correct.   We therefore continue the year with an accuracy of 3 for 4, or 75%. 

And also this week I switched my vote from positive to negative after six consecutive bullish  weeks.  And apparently I was on the same wavelength as a bunch of other people, as we saw the biggest shift from bullish to bearish I've seen since I started tracking these numbers over a year ago.  It was literally a mirror image as we went from 43 to 25 bullish to 43 to 21 bearish.  I'm not sure why everyone else switched, but I based my call on my reading of regression trend channels in the 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   2      2      3           4        0.714    140

     And the winner is...

I still think the Dow is getting ready to take a look at its all-time high of 14,198 - that's just 162 points away now.  And I don't think we're going to see a pullback until that happens.  With the trans flying high, the euro's downtrend arrested, and the VIX having fallen and can't get up, the only logical call here is for Wednesday higher.  Of course with housing starts, PPI, and Fed minutes all coming out on Wednesday, that could all change, but technically I'm not seeing a pullback quite yet.  On the other hand, I'm not seeing a lot of gas in the tank for a real big move higher right away either.


ES Fantasy Trader

Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we just continue to stand aside. 

Tuesday uncertain

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

• Tuesday uncertain.
  
• ES pivot 1517.58.  Breaking below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

[My apologies - this article didn't publish at 2 AM - here it is now.]

Recap

Ah, this market simply continues to confound.  Just when I thought my ascending triangle in the Dow had broken down, we get an 8 point up day on Friday.  The "channeling" icon over there on the right has been up so long I think it's stuck.  Now we have another holiday-shortened week to contemplate.

Oh, and lest I forget, let me point out that the Night Owl turned three yesterday.  I can't believe it's been that long already.  Many thanks to all my readers for continuing to tune in to the late-nite rantings emanating from my fevered brain.  So let's see what we can do now with Tuesday.

The technicals (daily)

The Dow: Foo - we continue to be stymied by 14,013 on the top and supported around 13,970 from below.  We now have two hanging-man type candles in a row, but in the absence of a preceding trend, they don't mean much.  In fact, I'm not getting any sort of read off this chart, so I moved out to the weekly chart.  There, we find that we have two dojis in a row, we're quite overbought and have exited a weekly rising RTC, so that's all looking rather bearish.

The VIX:  The VIX continues to be stuck in the toilet, closing just under its support line of 12.5 on Friday with a star.  But the lower BB continues to fall away, now down to 11.85 and we remain in a descending RTC, though it is admittedly fairly wide with a Pearson's of just 0.793.  Still, I see nothing here to suggest a big pop in the VIX on Tuesday.

Market index futures:Tonight all three futures are higher at 1:33 AM EST with ES up by 0.07%.  There continues to be really nothing going on here.  We've got five straight sideways candles now.  The only real effect is to inch use closer to the edge of the rising RTC.  I 'm running two of these channels right now, one from 2.4 and the other, longer trend from 1/8.  We've actually now exited the shorter one for a bearish setup there but remain inside the longer one.  Overall though, I'm not seeing much on this chart.

ES daily pivot: Tonight the pivot inches up from 1516.42  to 1517.58.  But the overnight action so far is enough to keep us just barely above the new number, so we'll have to watch for a break under on Tuesday - that would be bearish.

Dollar index:I called for a lower dollar on Friday.  What we got was a fat little spinning top almost identical to Thursday's but sitting in a dark cloud configuration near the upper BB.  So there's a suggestion of a move lower on Tuesday, but nothing really definitive.

Euro: The euro continues to find buyers at 1.3326 and has now given us three dojis in a row as it trades mostly just sideways.  Even in the Monday overnight, it's up all of 0.01%.  Absolutely no guidance here either.

Transportation:On Friday the trans gave us a tall spindly doji but it remained it the rising RTC.  But with RSI now up to 93, there's at least a hint of a reversal here.  On the other hand, momentum has been quite strong all year so far, so I'm not giving much credence to these sorts of indications at the moment.  I've said it before and I say it again - show me the top.


Accuracy (daily calls): 

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   2      2      3           3        0.714    140

     And the winner is...

Zzzz, zzz, zzzz.  Huh?  Oh, sorry, I guess I must have dozed off there.   These charts are literally putting me to sleep.  It just looks like we continue to remain stuck in this holding pattern with very little indication of wanting to move either way.  About all I can make of this is that this sideways motion will continue until it ends and therefore all I can do is call Tuesday uncertain.  If we break convincingly below the ES pivot by morning, that increases the odds of a lower close.

ES Fantasy Trader


Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we just continue to stand aside.