Friday lower

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

• Friday lower, low confidence...
  
• ES pivot 1508.33.  Holding below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Darn - if Thursday's session had ended just two minutes earlier, my call for a higher close would have been correct but unfortunately, something spooked Mr. Market in the closing minutes and we ended down 21 points.  What does this mean for Friday?  Let's take a quick look at the charts.

The technicals (daily)

The Dow: The net effect of this sell-off was to give us a big inverted hammer of a candle, one whose tail pierced the upper BB.  Sitting at the top of Wednesday's big run-up, this is looking a bit bearish to me

The VIX:  I missed the VIX on Thursday too - it rose 5.3% on a green hammer.   However, the indicators continue to move lower, so this chart is mixed - no good call here.

Market index futures:Tonight the futures are mixed at 1:32 AM EST with ES down by 0.12%, YM down 0.02% but NQ up 0.05%,  The indicators are still rising off oversold but with Thursday's red spinning top and the new candle forming below that, this chart is now looking somewhat bearish.

ES daily pivot: Tonight the pivot inches up from 1508.33  to 1515.50.  With ES kind of drifting about in the overnight, this gain now puts us below the new pivot, a bearish sign.

Dollar index:The dollar just popped right back up to its resistance at 56.40 on Thursday to remain in a month-long uptrend.  This canceled what looked like a developing downtrend the last two days and could set the stage for even higher on Friday.

Euro: I missed this one too - the euro did not move higher on Thursday, it completely retraced all of Wednesday's gains and formed a mean-looking bearish engulfing pattern in the process.  The overnight is actually up 0.15% but sitting below the pivot as we are, I'm not too sure how much follow-through there will be into Friday,  So despite oversold indicators, I'm feeling cautious about a rising euro for Friday.

Transportation:And finally, another doji in the trans, which did manage a 0.07% gain on Thursday, hitting their upper BB like the Dow.   After Wednesday's monster move, this seems to suggest that we may be getting ready to retrace on Friday.


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

     And the winner is...

Hmm - a tough one.  With the sequester now officially about to start, it's not clear how the market will react.  So far, it hasn't had much of an effect at all, but that was the rumor.  Now it's news.  And the charts have taken a turn for the bearish this evening.  Add to that the fact that the first day of March, unlike most months, is historically weak and I'm afraid I'm going to have to call for Friday lower.

ES Fantasy Trader


I think we had the right idea going long last night but I lost my nerve and bailed out too early around lunch time on Thursday.  The result was still a win, but only half a point.  Oh well.  At least I got out before the afternoon sell-off.

Portfolio stats: the account now rises to $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight with the headline risk around the sequester, we're just going to watch from the sidelines.

SLD    10    false    ES    MAR13 Futures     1518.00    USD    GLOBEX    12:24:59
BOT    10    false    ES    MAR13 Futures     1517.50     USD    GLOBEX    01:22:14
 

Thursday higher

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

• Thursday higher, low confidence...
  
• ES pivot 1508.33.  Holding above is bullish.
• Friday bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going long at 1517.50..

Recap

Well so much for the sequester and the Italian elections, I guess eh?  It took all of two days to erase Monday's big dump and then some.  In fact, after appearing to break down out of February's trading range, we've now suddenly broken out to the upside.  My conditional call played out nicely as ES  never seriously threatened its pivot Wednesday morning and once the market opened it was just up up and away.  Will the raging bull keep charging on Thursday?  Let's wave a red flag in front of the charts to find out.

The technicals (daily)

The Dow: After Monday's extraordinary move down on Monday, we have now made an extraordinary move up, going from the lower BB to the upper in just two days.  And today's close at 14,075 also cleared 14K again as well as the resistance at 14,012.  It also broke out of the descending RTC for a bullish trigger and completed the bullish stochastic crossover.  But even after two big up days, the indicators are still nowhere near overbought, so it looks like the Dow sitll has room to run higher from here.

The VIX:  And the VIX, which on Monday crashed through its 200 day MA going up, crashed right back down through it on Wednesday, ending up very nearly where it began the week.  And with a bearish stochastic crossover, the 200 MA behind us, overbought indicators, and three consecutive lower closes, the momentum seems to be to the downside for the VIX.  And that is of course good for stocks.

Market index futures:Tonight all three futures are higher at 1:11 AM EST with ES up by 0.12%.  ES put in a big green marubozu on Wednesday to totally retrace all of Monday's losses and bring us convincingly out of the descending RTC for a bullish setup.  The overnight seems to be continuing that with no sign of wanting to retrace the gain.  That notion is supported by the indicators which are close to oversold and by the stochastic which just completed a bullish crossover.  With no resistance now until 1527, this chart is looking good.

ES daily pivot: Tonight the pivot jumps from 1491.00  to 1508.33.  We were way above the pivot all day Wednesday and remain comfortably above the new number, so this is definitely bullish.

Dollar index: On Wednesday the dollar completed a bearish evening star by dropping 0.33%. .That was enough to finally bring the indicators down from extreme overbought so it looks like there's still lower to come here.

Euro: Meanwhile, the euro confirmed Tuesday's doji with a nice green marubozu.  And the developing overnight candle is continuing that with a 0.11% gap up so far.  With the euro still oversold and just coming off its lower BB, there definitely seems to be a lot of room to run higher here.

Transportation:And finally, while the Dow gained 1.26% Wednesday, the trans put in a turbo-supercharged nitro-fueled 2.91% explosion for their biggest gain since March 2012.  And with a now-complete bullish stochastic crossover, declining RTC exit and indicators having bottomed, it looks like the trans still have the gas to move higher again.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      5           6        0.750    152

     And the winner is...

Overall tonight the charts are looking rather bullish.  My only concern is the tendency of the market often to take a break following big one day moves up.  And also both the last day of February and the first day of March are historically weak.  But there seems to be a lot of positive pressure driving things right now so the logical call is for Thursday higher.  I've not expecting another triple digit day, but I'd be surprised to see a big loss on Thursday.

ES Fantasy Trader


Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're going long at 1517.50.

Wednesday higher if ES pivot holds

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

• Wednesday higher if ES pivot holds, else lower....
  
• ES pivot 1491.00.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Hah - last night I was wanting to call Tuesday higher but got scared away out of fear of more news/rumors out of Italy.  Well on Tuesday Italy just fell off the world map and the Dow climbed 116 points.  Oh well - nothing ventured, nothing lost.  Now let's see if we can make some money on Wednesday by staring intently at the charts.


The technicals (daily)

The Dow: Last night I was thinking that Monday's sell-off was overblown and I guess when Mr. Market woke up this morning he agreed, sending the Dow up 116 to retrace half of Monday's losses.,  That was enough to eke out a bullish stochastic crossover and just send us out of the latest descending RTC for a bullish setup.  So the confused and confusing action continues as we bob along between bullish and bearish.  The last four days have been down, up, down, up.  In fact we haven't had a run of more than two days in the same direction in over a month now, since January 25th.  However, having now gotten a bullish stochastic crossover, the first since December 28th, this chart looks like it might be ready to move higher.

The VIX:  The VIX came back to earth today, falling 11.16% after Monday's monster pop and proving once again what I always say - that the VIX rarely spends more than a day or two above its upper BB.  I kind of outsmarted myself by pointing to the summer of 2011 when the VIX just kept going up, but this is not the summer of 2011.  Tuesday's fall was stopped only by the 200 day MA, on the dot at 16.87.  But with the VIX once again overbought and a fresh bearish stochastic crossover in place, I'm wagering on more downside here on Wednesday.

Market index futures:Tonight all three futures are barely lower at 1:35 AM EST with ES down by 0.08%. Tuesday's ES candle had the flavor of a DCB with somewhat muted gains in comparison to the Dow.  But it was enough to throw the new developing candle out of the descending RTC we're in for a bullish setup.  If ES closes above 1487 on Wednesday, that will confirm the setup.  Any lower returns us to the RTC.

ES, 5 minutes

ES daily pivot: Tonight the pivot inches up from 1497.83  to 1491.00 even.  With ES essentially flat in the overnight so far, this now puts us just above the new pivot.  As I write, ES has made three attempts to break under, all of which have been rejected.  Just look at this chart and see how the pivot acts as support.  The pivot is the black line.  Note how since midnight, ES has touched this line  no fewer than ten times in 5 minute bars, just in 90 minutes, but has not gone one single tick below.  Pretty strange stuff, eh kids?  Remaining above would be bullish.

Dollar index:The dollar continued its climb on Tuesday putting in a spindly gap-up doji .that at least warns of the possibility of a move lower on Wednesday.  That idea is supported by highly overbought indicators, with RSI now over 98 for the past three days in a row.

Euro: And like the dollar, the euro put in a doji of its own on Tuesday, this one gapping down to keep it in a descending RTC.  And the euro is correspondingly oversold.  So far the overnight action seems to be confirming the doji, with the euro now up a healthy 0.15% and breaking above its daily pivot as I write.  This says higher euro to me.

Transportation:The trans put in a small morning star on Tuesday just above support at 5787 and their stochastic is about to execute a bullish crossover, so I'd not be surprised to see a move higher here on Wednesday.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      5           5        0.727    152

     And the winner is...

So tonight we have pretty much an absence of any bearish pin action on Tuesday following Monday's rout.  Then we've got ES bumping along its pivot.  As I write, each successive 5 minute bar keeps trying to break under but keeps getting rejected.  Call it the bots, the PPT, the banksters or the phase of the moon, but someone or something is propping up ES at 1491.00 tonight.  So I'm going to make a conditional call: if ES stays above its pivot by mid-morning Wednesday, we close higher.  If we break under convincingly, then we close lower.

ES Fantasy Trader


Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again.  With no real trend in sight, I'm just not willing to pull the trigger.

Tuesday uncertain

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

• Tuesday uncertain...
  
• ES pivot 1497.83.  Holding below is bearish..
• Rest week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Mama mia!  Who would have thought Mr. Market cared so much about the elections in Italia?  After all, Italian governments seem to have all the fleeting longevity of a Higgs boson.  (For the record, it's 61 new governments since WWII, but who's counting).  So for this the Dow craters 216 points?  Oh yes well there's also the "sequester", another pseudo-crisis coming soon as a complete surprise to absolutely no one.  I don't get it.  Wait, let me check my calendar - gee, no, i'ts not April 1st yet.  Just more crazy stock market antics I guess.  No wonder I had to call Monday uncertain.  Ah well, let's see what the charts foretell for Tuesday - if the new Italian government lasts that long, that is.

The technicals (daily)

The Dow: What a strange day.  It started off OK - until 10 o'clock, then it was all downhill from there with a nasty waterfall into the close.  So this giant red candle not only retraced all of Friday's gains (and more), and brought us right back into the descending RTC but it also gave up 14K and  punched straight through the lower BB at 13,823.  It also broke out of the month-long trading range we'd been stuck in.  And even all this didn't bring us to oversold levels.  Not a very pretty picture going into Tuesday.

The VIX:  But if the Dow was bad, the VIX was just plain ugly, with a spectacular 34% skyrocket.  This was the Godzilla of marubozus.  We opened at 13.69, then broke the pivot at 14.45, then whizzed past the upper BB at 16.66 and finally smashed through the 200 day MA at 16.90 without batting an eye, stopping only because the bell rang at 4 PM.  Holy moly, it's like it's the summer of 2011 all over again.  Now I like to say that the VIX rarely spends more than a day or two above its upper BB, but there is an exception to this rule, and that's when the VIX has one of these explosive spikes.  In these cases, it's entirely possible that it can go even higher.  But gosh, this one day move is so astounding, I just have to wonder.  It also brought the stochastic to the edge of a bearish crossover.  But the 200 MA cross is the bad part here.  When the VIX does that, it tends not to fall back below for a while.  So I'm guessing we could spend some time at these levels before falling back.

Market index futures:Tonight all three futures are actually slightly higher at 1:03 AM EST with ES up by 0.03%.  Like the other charts, ES had a big move lower Monday, but found support at its lower BB at 1486.90.  This keeps us in a descending RTC but doesn't yet bring us to oversold levels.  The overnight action has the feel of a DCB.  If that continues, we could see some small gains on Tuesday.

ES daily pivot: Tonight the pivot plunges from 1510.50  to 1497.83.  With ES little changed in the overnight, we remain well below the new pivot, so that's bearish.

Dollar index:The dollar looked like it wanted to go lower, gapping down at the open on Monday but when it was all said and done, it posted a 0.24% gain to remain above its 200 day MA and defy its now highly overbought indicators.  And there's nothing here to suggest a reversal coming.

Euro: Unlike the other charts, on Monday the euro didn't move in a straight line, instead putting in a wide-ranging red spinning top that nonetheless kept it inside its latest descending RTC.  And it's not gapping even lower in the overnight, down to 1.3062 as it continues dribbling down its lower BB.  So there's nothing here to suggest a  move higher.

Transportation:On Monday the trans fell even harder than the Dow, tanking 2.16% in a wide-ranging move that nearly touched both BB's, closing just above the lower one.  This loss also left us close to oversold and put the stochastic into position to begin forming a bullish crossover, though further downside isnt' out of the question here.  Support and the lower BB are just below us at 5778.

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   4/5

  6  2/5        40         36        +      +   1513

  7  2/11       43         25        +      +   1518

  8  2/19       21         43        -      -   1520

  9  2/25       30         52        -      -   1516 

  

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 again correct.   We therefore continue the year with an accuracy of 4 for 5, or 80%. 

This week saw a bunch of people come off the sidelines as both bearish and bullish sentiment increased by exactly the same amount.  That still leaves me in with the majority looking for a lower SPX in 30 days.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      4           5        0.727    152

     And the winner is...

It's very hard to make a technical forecast in a market where the charts have gotten all distorted over some news item.  My feeling is that the Italian job is somewhat overblown, since we don't even know the real results yet.  But I guess that's what "sell the rumor" is all about.  The other thing is that often after big one day dumps a DCB is to be expected.  I think this is looking more likely based on the overnight ES action so far.  We're also at the lower BB and very near oversold.

So technically I think we're due for a move higher on Tuesday.  However, with the big pop the VIX took on Monday and with this Italian business still unsettled and the looming sequester pseudo-crisis, the best I can do is call Tuesday uncertain.  I may just do some day trading of ES on Tuesday.  It seems like a better bet than trying to swing trade these crazy moves.

ES Fantasy Trader

Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again amid the uncertainty of Monday's move.

Monday uncertain

• Monday uncertain, small positive bias..
  
• ES pivot 1510.50.  Holding above is bullish..
• Rest week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

On Friday in the absence of any major market moving news, the technicals reasserted themselves and we got the results I'd been expecting Thursday night with the Dow gaining 120 points.  We now get set for a full week of trading and crunch the numbers to see which way Monday might go.

The technicals (daily)

The Dow: Friday's big move was significant because it not only reclaimed the 14K level (just barely) but also just edged out of a new developing descending RTC.  And it puts us right back to where we've been all month long, either opening or closing very close to 14K.  So just when it looked like a pullback might be getting underway, we're back to where we started.  Those two down days last week did take us almost to oversold levels though, providing more space for another run to the upside.  But with the weekly chart now showing three dojis in a row, it looks like the most likely scenario is more sideways action for a while.

The VIX:  Notice how well the VIX worked out on Friday.  Thursday night I pointed out how the VIX had spent two days touching its upper BB and how it rarely did that more than two days.  Well on Friday it obliged us by dropping 6.90% to confirm Thursday's inverted hammer.  With a red candle in and indicators having peaked at overbought, I'd say more downside is likely from here.

Market index futures:Tonight all three futures are just barely higher at 1:06 AM EST with ES up by 0.05%.  The ES daily chart continues to resemble the Dow, so those comments again apply here - an incipient breakdown seems to be stalled but with such a big move up on Friday, we might be in for some consolidation on Monday.  I will note the increased volume on Friday indicating conviction buying and a newly completed bullish stochastic crossover - always a positive sign.

ES daily pivot: Tonight the pivot rises from 1501.92  to 1510.50.  We were so far above on Friday that even with relatively flat trading in the overnight, we remain above the new pivot, a bullish sign.

Dollar index:The dollar put in a small 0.04% gain on Friday on an inverted hammer.  With indicators now quite overbought (RSI = 97.9), I wouldn't be surprised to see a move lower here on Monday.  The dollar also has a large unfilled gap from last week waiting to be retraced. .

Euro: While the euro didn't move higher on Friday as I had expected, instead putting in a spinning top, it is moving higher in the Sunday overnight where it is already up 0.17%.  While we remain in a descending RTC, it's a fairly wide one (so not very good) and the euro has just broken above its daily pivot so I'd say it might just continue higher on Monday.

Transportation:The trans did quite well on Friday with a 1.16% gain giving us a bullish engulfing pattern and causing the indicators to hook up from nearly oversold levels. The pattern all year though has been for big one-day gains  to be followed by some retrenchment, so a small loss isn't out of the question here on Monday.


Accuracy (daily calls): 

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      3           5        0.727    152

     And the winner is...

All in all, the charts aren't looking too bearish tonight but with the big move we had on Friday, we might need a day or so to digest those gains.  So my expectation is for an uncertain Monday but with a small positive bias. his isn't a bull market or a bear market - it's a crab market as we continue to crawl sideways.

ES Fantasy Trader

Well we had the right idea going long last Thursday night but got in just a bit too late and out a bit too early.  The net result was a meager 0.75 point gain.  Still, that beats a loss of any size so I'll take it.

Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again.

    SLD    10    false    ES    MAR13 Futures     1506.00    USD    GLOBEX    FEB 22 11:05:05    0001f4e5.5126f867.01.01        20.10    null
    BOT    10    false    ES    MAR13 Futures     1505.25    USD    GLOBEX    FEB 22 01:11:27    0001f4e5.5126ae88.01.01        20.10    null