Friday higher

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

• Friday higher, low confidence.
  
• ES pivot 1541.92.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader remains short at 1538.25.

Recap

Much to my surprise, the Dow's rise continued unabated on Thursday, gaining another 33 points.  With the Dow now up five in a row and three consecutive record closes, how long can this go on?  I'm beginning to wonder myself.  We now interview the charts for their opinions.

The technicals (daily)

The Dow: Thursday's 0.23% advance keeps the Dow squarely inside its rising RTC and all the indicators pegged at overbought.  It's looking a lot like January all over again.  And the last three days weren't even reversal candles.  I must say I see nothing bearish on this chart at all.

The VIX:  And as the Dow rose, the VIX fell, this time down 3.47%, giving up support at 13.50.  The VIX has no support now until 12.45.  And the lower BB is all the way down to 10.44.  I see nothing on this chart to prevent it from moving lower on Friday.

Market index futures:Tonight all three futures are slightly higher at 12:50 AM EST with ES up by 0.05%. On Thursday ES completely canceled Wednesday's spindly doji and instead continued its relentless climb up the upper BB, now at 1547.35.  The developing candle for Friday is looking like a hanging man, but the night is young and reversal signs from ES have been worth bupkiss lately, so we'll take that one with a grain of salt.  I do note that RSI has begun moving lower, now down to 92.42.  So there's at least a hint of interest in moving lower here, but not much more than that.

ES daily pivot: Tonight the pivot inches up from 1540.258  to 1541.92. Despite some wandering in the evening hours, ES remains above the new pivot, so that's a bullish sign.  But it's only by a point and a half, so we'll need to watch for signs of a breakdown here.

Dollar index:I blew this one too last night.  The dollar ignored the morning star and dropped 0.47% on Thursday to close almost on the edge of the rising RTC.  With the last five days now looking like congestion more than anything else, we'll want to see if we move lower on Friday, which would signal a bearish RTC setup

Euro: Meanwhile, the euro took a big bounce on Thursday, leaping right out of its descending RTC for a bullish setup with a bullish engulfing pattern.  The euro now looks poised to move higher on Friday.

Transportation:At least I got this one right when I wrote last night "there's a good chance of this chart going lower on Thursday."  And so it did, down 0.48%.  Not much perhaps, but still a divergence on a day when the Dow was up.  It also closed outside the rising RTC for a bearish setup and gave us a completed bearish stochastic crossover.  So I'd say odds are good for lower here again 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
March      2      2      1           0        0.500     97

     And the winner is...

I almost hate to say it, being as I'm short the ESFT and holding some SPXS for real, but the charts really don't look as bad tonight as they did last night.  The ability of the market to rise on Thursday in the face of mild negative signs makes me think that there's still more upside available, given the improved technicals.  Therefore, I'm calling Friday higher.

ES Fantasy Trader

Portfolio stats: the account remains $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 we remain short at 1538.25 and take the heat.

Thursday lower

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

• Thursday lower, low confidence.
  
• ES pivot 1540.25.  Holding below is bearish.
• Friday bias lower technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going short at 1538.25.

Recap

My play last night was to not get too excited over the record high Dow close and just to treat it as another technical day - and that worked out quite nicely as the Dow finished up another 42 points.  But with four up in a row into uncharted (literally) territory, can we make it five of a kind?  Faites vos jeux, rien ne vas plus!  At the risk of mixing our gambling metaphors, let's see if the little ball stops on red or black on Thursday.

The technicals (daily)

The Dow: The Dow continued it ascent into the stratosphere on Wednesday with another green candle and now gives us a bullish three white soldiers pattern that continues to crawl along the upper BB.  And volume has been increasing for the past three days.  However, we're now quite overbought and the stochastic may be getting ready to set up a bearish crossover.  On the other hand, we had a similar situation for most of January and that did nothing but go straight up.  But we remain inside the rising RTC and I have to say I still don't see any sign of a pullback on this chart.

The VIX:  Here's an unusual divergence, as the VIX actually rose 0.37% while the Dow and SPX gained too.  That's unusual.  Although the gain was small, it formed a bullish engulfing pattern against Tuesday's morning star and closed back above support of 13.50.  With indicators now as oversold as the last few times the VIX has bottomed and the futures posting similar gains, we could definitely see more upside from the VIX on Thursday.

Market index futures: Tonight all three futures are mixed at 1:05 AM EST with ES down by 0.05%, NQ up 0.04% and YM dead flat.. Unlike the past two nights, this is looking like a bit of uncertainty.  And that's reflected in Wednesday's candle, which was a short evening star that traded outside the rising RTC for a bearish setup.  The new candle is forming as a bearish engulfing pattern consuming the star and confirming the signal.  We also now have a bearish crossover from the stochastic, just barely.   So all in all, this chart is looking much weaker than last night.

ES daily pivot: Tonight the pivot rises again from 1534.75  to 1540.25.  This bump combined with ES drifting lower in the overnight now leaves us below the new pivot, so that becomes a bearish sign.

Dollar index:The dollar remains firmly inside it rising RTC as Wednesday's 0.44% gain broke a three day slide and completed a bullish three candle morning star pattern.  So despite overbought indicators, we could see the dollar continue to move higher.

Euro: And as the dollar rose the euro fell on Wednesday, keeping it inside its descending RTC.  While it is rising in the overnight that's off a gap down earlier this evening, so it's not clear that the euro is really interested in moving higher just yet.  The day-to-day moves of the euro have been sort of herky-jerky lately anyway.

Transportation:Here's another divergence, with the trans dropping 0.42% even as the Dow advanced 0.30% on Wednesday.  And they gave us a red inverted hammer.  And the indicators are getting more overbought, and the stochastic is about to make a bearish crossover.  I'm now thinking that there's a good chance of this chart going lower on Thursday.


Accuracy (daily calls): 

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      4      5           6        0.692    131
March      2      1      1           0        0.667    130

     And the winner is...

Tonight it's sort of looking like Mr. Market is running out of steam.  There are some bearish signs starting to pop up, especially in the futures and the VIX, enough in fact to make me call Thursday lower.  I also took out a position in SPXS as a hedge on Wednesday afternoon.

ES Fantasy Trader

Portfolio stats: the account remains $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 we're going short at 1538.25.  I think if this trade isn't successful on Thursday, it stands a chance of coming through on Friday.

Wednesday higher

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

• Wednesday higher, low confidence.
  
• ES pivot 1534.75.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Ding!  Finally, we've taken out the previous record high of the Dow when it hit 14,198.10 back in 2007.  And we didn't just nibble at it.  Tuesday's close of 14,254 was  impressive.  Now of course, the question everyone is asking is, does this move signal a breakout or a pullback. Rather than getting into emotional arguments about this or treating Tuesday as some exception to usual market dynamics, let's run the charts and look for the usual technical signs.

The technicals (daily)

The Dow: OK, so Tuesday's big green marubozu not only shattered the all-time high for the Dow, but also busted above the upper BB.  It also canceled out three day's worth of dojis.  And even this big move did not bring us into overbought territory (though we're close).  In fact, there are no bearish signs on this chart tonight.  The only note of caution I'd bring up is that as the Dow has been steadily rising for the past four days, volume has been declining.  Tuesday's volume was just slightly higher than Monday's, but the highest volume of the past eight days has been on the only two days that were down.  Hmmm...

The VIX:  Last night I wrote that I was "now calling for a lower VIX again on Tuesday."  So bingo - got that one right as the VIX  gapped down 3.78% for a classic morning star.  The VIX also closed right on a support line at 13.48.  But with the indicators still not yet oversold and the stochastic still not forming a bullish crossover, it is premature to call the VIX higher just yet.

Market index futures:Tonight all three futures are once again higher at 1:23 AM EST with ES up by 0;13%.  Like the Dow, ES just busted through its upper BB on Tuesday.  And lookee here - remember what I wrote last night?  "I note that we'd have to close above 1537 on Tuesday to avoid a bearish setup."  Well guess what - ES closed at 1537.00 on the dot.  I was somewhat skeptical that ES could do it, but it did.  And with an intraday high of 1542.75, I'd say the bearish setup is, somewhat surprisingly, averted.

Tonight we;re in a similar position.  ES continues to move higher, now at 1539.25, climbing its upper BB.  And now I'll note that it will have to close above 1549 on Wednesday to avert a bearish setup.  Doable?  Who knows.  I'm not going to gainsay this market right now.  But with the indicators now becoming quite overbought (RSI now 95.59) I'd be cautious about piling on any longs at this level.  Still, I don't see the pullback happening on Wednesday.

ES daily pivot: Tonight the pivot jumps from 1520.00  to 1534.75.  But we were so far above the old number that we remain four points above the new pivot, so that remains a bullish sign.

Dollar index:The dollar gapped down on Tuesday for a 0.13% loss on a small spinning top.  While it remains in a rising RTC, the indicators have been coming down off extreme overbought levels for a few days now, so more downside is possible here on Wednesday.

Euro: Then the euro moved higher as expected on Tuesday, but with a green spinning top.  However this is not being confirmed in the overnight so far as the new candle is moving higher, now up 0.18% to 1.3066.  It also brings the euro out of its descending RTC back to 2/13 for a bullish setup.  And the indicators continue moving up off oversold, and we remain above the pivot.  So it's looking good for continued higher here on Wednesday.

Transportation: And finally, the trans outperformed the Dow, piling on another 1.52% to simply blast right through their upper BB at 6086.  But volume was lower than Monday, we're now into overbought territory, and the stochastic is starting to flatten out for a bearish crossover.  But I don't think any of that will matter until the end of this week.  For the time being, the trans may actually have some more room to run here.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      4      5           6        0.692    131
March      1      1      1           0        0.500     88

     And the winner is...

My call last night was based on the performance of the futures and the currencies.  Everything that was true then remains in effect tonight.  You'd think that if taking out the 2007 highs was going to trigger profit-taking or short-selling, we'd already be seeing indications of that in the futures, but we're not.  So with the trans outperforming, copper catching a bounce, the TLT moving lower, the Italian elections having faded back into obscurity, the non-sequesitur leaving Comrade Stalibama with egg on his face, Hugo Chavez having gone to that great Comintern in the sky (and good riddence) and the VIX back in the toilet, the logical call is for Wednesday higher.

ES Fantasy Trader


Portfolio stats: the account remains $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 we're standing aside again in the absence of a clear reversal sign.

Tuesday higher

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

• Tuesday higher, low confidence.
  
• ES pivot 1520.08.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Things were looking good for my call for a lower close on Monday - until lunch time.  Then Mr. Market decided he wanted to take a look at those 2007 highs after all and the Dow clambered to a 38 point gain on the day.  So we inch ever closer to that magic 14,198 level.  Will Tuesday be the day?  The day I get one right, that is?  We bring out the fine-toothed comb to give the charts a restyle and find out.

The technicals (daily)

The Dow: Once again we're in a sort of trader's Twilight Zone wher we get day after day of dojis, all warning of potential reversals while we continue to drift higher.  Today was no exception, as yet another hanging man drove us to within 70 points of the all-time highs.  What was different on Monday was that we closed just barely under the upper BB and traded entirely outside th rising RTC for a bearish trigger.  The stochastic is also getting ready to form  a bearish crossover.  So I'm going to say a reversal is coming sometime this week.  If not Tuesday, then more likely on Wednesday.

The VIX:  So much for the symmetrical triangle.  It broke as expected on Monday but down instead of up as the VIX took an 8.79% dump right back to the lower end of its recent range.  With two red candles in a row and indicators continuing to decline, I'm switching my stance and now calling for a lower VIX again on Tuesday.

Market index futures:Tonight all three futures are just barely higher at 1:29 AM EST with ES up just 0.03%.  On Monday ES rose by a substantial 0.68% to close just short of last month's highs at 1529.  That was enough to keep us inside a steeply rising RTC.  At this point the indicators are still not overbought but I note that we'd have to close above 1537 on Tuesday to avoid a bearish setup.  I suppose that's doable, but after today's relatively large gain, I'm not sure where the additional push is going to come from.  One theory that comes to mind is that Tuesday could be a topping day.  The overnight action so far at least is demonstrating little interest in moving lower.

ES daily pivot: Tonight the pivot inches up from 1511.67  to 1520.08.  We were above before and even with a fairly flat evening, remain above the new pivot by a good six points.  And ES seems to be uninterested in challenging the pivot as I write, so that's all a positive sign for Tuesday.

Dollar index:At least I got this one right.  The dollar indeed moved lower on Monday, losing 0.13% in the $USDUPX.  But I think that's only the beginning of the gap-filling.  Today's move completes the classic three bar bearish evening star and with indicators still overbought but already starting to decline, I'd say the dollar has more room to run lower Tuesday

Euro: I also called for a lower euro on Monday, which would be quite unusual.  But that ended up being pretty close.  The euro did rise, but only  bit moving from 1.3028 to 1.3040 on the day.  But the resulting candle was a definite hammer and the overnight action is confirming that, with a 0.10% gain so far.  With indicators still oversold, I'd say a higher euro is likely Tuesday.  And that would at least sync with my call for a lower dollar.

Transportation:After two wishy-washy days when the trans couldn't decide if they wanted to shift into forward or reverse, they finally stepped on the gas on Monday to gain a full percent, stopping just under their upper BB and handily clearing last month's 6019 resistance line.  But even this still wasn't enough to send them to overbought levels, though we're getting close.  With Monday's bullish move, no resistance left, and no other reversal signs in sight, you'd have to expect at least a bit more upside here on 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.
 

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   5/6

  7  2/11       43         25        +      +   1518

  8  2/19       21         43        -      -   1520

  9  2/25       30         52        -      -   1516

 10  3/4        29         39        -      -   1518 

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 5 for 6, or 83%. 

The big news this week is that while bullish sentiment was virtually unchanged, bearish sentiment dropped substantially.,  We now have a rare situation where "neutral" is the second most popular vote, at 32%.  I'm not quite sure why bearish sentiment would drop without a corresponding increase in bullish.  Perhaps people are waiting to see what happens when we hit the 2007 highs - either a breakout or a pullback.  I'm voting for the latter, having voted negative three weeks in a row now.  Stay tuned.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      4      5           6        0.692    131
March      0      1      1           0        0.000    -38

     And the winner is...

Tonight there are mildly bullish signs from the futures and the currencies.  But we're also quite close to the all-time record highs of 2007 and I think that will provide some resistance.  So Tuesday could be a topping day but I still expect the market to close up, so I'm calling Tuesday higher.

ES Fantasy Trader


Portfolio stats: the account remains $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 we're standing aside again in the absence of a clear reversal sign.

Monday lower

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

• Monday lower, low confidence.
  
• ES pivot 1511.67.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Well an early morning plunge and a late morning dip made it look like my call for a lower close Friday would be vindicated but it was not to be as the Dow finished up, admittedly only by 35 points but up nonetheless.  Now let's figure out where we're headed on Monday.

The technicals (daily)

The Dow: While Friday's 0.25% gain doesn't seem like much, it gave us a classic hanging man.  This follows an inverted hammer for two dojis in a row.    It also just wasn't quite enough to keep us in the rising RTC, so that's a bearish setup.  We're still not quite overbought though, so this is only a vague warning of a move lower, particularly since the upper BB has now risen to 14,115.  I still think the Dow is going to want to have a look at its record 2007 highs, but I'm not convinced that will be on Monday.

The VIX:  After a hammer last Thurday the VIX put in an inverted hammer on Friday to finish little-changed down just 0.97%.  The striking feature here is a developing symmetrical triangle.  Since the long-term trend is higher, the expectation is for the break to be higher too.  If this holds true (and it's not a sure thing) then I'd be looking for a higher VIX within a day or two since this triangle is nearly complete.

Market index futures:Tonight all three futures are lower at 1: 03AM EST with ES down by a not insubstantial 0.43%.  Friday's candle was a tall hanging man that followed Thursday's spinning top - two reversal warnings in a row.  And the new candle forming now is trading outside the rising RTC for a bearish setup.  And the stochastic is getting close to executing a bearish crossover.  Overall, this chart is looking bearish for Monday.

ES daily pivot: Tonight the pivot dips from 1515.50  to 1511.67.  With a gradual drift lower all evening long, we broke under the old pivot around 6 PM and remain below the new pivot - a bearish sign.

Dollar index:On Friday the dollar gave us the mother of all evening stars with a giant 0.43% gap up that just about touched the upper BB intraday.  Although we remain inside a rising RTC, with indicators now slowly coming off overbought, it looks like the dollar may very well try to fill in this gap on Monday.  I'm watching for a move lower here. .

Euro: Meanwhile the euro remains in its own two week long descending RTC after a far red spinning top on Friday.  This move also broke support at 1.3054.  Next support isn't til 1.2978 and with the euro just now bouncing off its daily pivot in a failed attempt to mover higher, I wouldn't be surprised to see it moving lower on Monday.  And note that it would be unusual for both the dollar and the euro to move lower on the same day.  So one of these guesses is probably wrong.  All I can go by is how the charts look to me.  This will be interesting to see.

Transportation:And to top off the charts, here's a bit of divergence.  ON Friday the Dow rose 0.25% but the trans dropped 0.14%.  Same pattern though - inverted hammer, then a hanging man.  This does make me think that a retracement of last Wednesday's big gains is in the cards.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      4      5           6        0.692    131
March      0      1      0           0        0.000    -35

     And the winner is...

With no major economic news slated for Monday and the whole sequester thing looking more like a non-sequesitur (and yes, I just invented that) and some bearish signs popping up in the charts tonight, I'm simply going to call Monday lower.

ES Fantasy Trader

Portfolio stats: the account remains $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 we're standing aside and I'll tell you why.  ES is already down a substantial 0.43% in the overnight.  As a result of this, it's actually looking bullish on the hourly chart and in fact has begun rising since right around midnight.  I think this bus has already left the station.  I'd hate to go short, have the market close lower, and end up losing money anyway.