Friday higher only if ES pivot holds

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

• Friday higher if ES pivot holds, else lower.
  
• ES pivot 1539.42. .  Holding above is bullish..
• Next week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Last night I called for Thursday's outcome to depend on the ES pivot.  Well ES kind of threaded about its pivot in the wee hours until giving it up for good just before 9 AM.  And that was that.  The Dow lost another 81 points on the day.  So with two consecutive down days for only the third time this year, will we go for four on Friday?  Surely the charts have something to say about that, so let's get to it.

The technicals (daily)

The Dow: Thursday's candle was quite bearish, with the selling pretty much picking up where Wednesday left off.  And even this 0.56% loss wasn't enough to drive the indicators to oversold, although the stochastic is now getting into position to form a bullish crossover - possibly Friday or next Monday.

The VIX:  The VIX continued climbing its upper BB on Thursday, gaining 6.36% to close at 17.56, above the BB for the second day in a row.  Not to sound like a broken record, but in the absence of a bank crisis or some such, the VIX rarely spends this long above its upper BB before falling back.  It's now definitely due.  And that's supported by the stochastic which is now primed for a bearish crossover.

Market index futures:Tonight all three futures are higher at 1:10 AM EDT with ES up by 0.47%.  Thursday's ES candle took it very nearly to its lower BB before bouncing back a bit.  It also served to drive RSI close to oversold (32) and moved the stochastic to its lowest level since December 28th.  And the overnight is forming a bullish harami with some healthy gains for this time of night.  So while we remain in a somewhat fragmented descending RTC, this chart is now showing signs of life and could be ready to move higher on Friday.  I know I wasn't really bearish on this chart last night and we went down anyway, but I think the situation has improved since then.

ES daily pivot: Tonight the pivot falls from 1551.17  to 1539.42.  That big drop, plus ES's gains in the overnight combined to just squeak us back above the new pivot, a positive development.

Dollar index: I thought we might see some more upside to the dollar on Thursday but I was wrong.. What we got was a 0.13% decline on a tomahawk pattern.  But that's not the best reversal indicator and it traded entirely outside the descending RTC so that's a bullish trigger.  And with indicators continuing to rise, I have to vote again for the dollar to move higher on Friday.

Euro: On Thursday the euro put in a mirror image f the dollar's tomahawk for a small gain at the lower end of Wednesday's big dump.  However, the overnight is gapping up, currently +0.15% and the stochastic is quite overextended.  We're also still inside a rising RTC, even after Wednesday's slide, so I'm guessing the euro may move higher on Friday.  Of course, since the dollar chart looks ready to move higher too, one of those ideas is wrong.  I'm more confident in the euro right now.

Transportation: The trans have been giving good leading indications lately and on Thursday they declined just 0.09% to the Dow's 0.56%.  This doji, plus the fact that it broke away from the lower BB plus the stochastic now very close to forming a bullish crossover all make me think that we could see some upside here 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      5      7      5           2        0.500    121 
April      5      2      4           1        0.750    444

     And the winner is...

Interestingly, the SPX Hi-Lo indicator hit 68 yesterday.  It has only been lower than that three times since last November, and each time that was followed by a positive day.  And it rose to 75 on Thursday, suggesting a bottom may be in.  I'm also liking the VIX for looking toppy and the trans as due for a rebound.  The futures and the euro also seem to be guiding higher tonight.  I try hard to look at these signs logically every night and tonight logic seems to be pointing upwards.  But the Night Owl is a cautious type and cognizant of the fact that we're still in falling-knife territory.  So the most I'm willing to do, particularly given the precariously small gap in ES relative to its pivot is a conditional call: if ES can stay above its pivot by mid-morning Friday, then we close higher, else lower. My purely intuitive guess though is that we're going higher.

ES Fantasy Trader

Portfolio stats: the account remains at $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside again in the face of the conditional call.

Thursday higher if ES pivot passed

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

• Thursday higher if ES pivot passed, else lower.
  
• ES pivot 1551.17. .  Holding below is bearish..
• Rest of week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Oh so we're back to the yo-yo market, are we?  On Wednesday the Dow gave up all the gains it made on Tuesday when it retraced the losses it suffered on Monday.  I'm certainly glad I called Wednesday "uncertain" because I honestly did not see this one coming.  Now let's take a stroll through Chartville looking for directions to Thursday.
The technicals (daily)

The Dow: Two things immediately strike me about Wednesday's chart - first, that we seem to have some substantial support at 14,600.  Second, that although we dropped 138 points, the close at 14,619 was higher than the close on Monday following that big drop.  And third (OK, three things) the stochastic is now well-positioned to begin forming a bullish crossover, possibly by Friday.  Still, the ability of the bears to drag the market back down after Tuesday's rally concerns me.  And I note that volume on the two down days was notably higher than on Tuesday.  So overall, this isn't looking too promising.
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The VIX:  On Wednesday the VIX popped right back over its 200 day MA, its third crossing in as many days.  It also closed back above its upper BB again and in fact hit an intraday high even higher than on Monday.  But the same factors come back into play: the VIX rarely remains above its upper BB more than a day or two, so odds are that the VIX will back off again on Thursday.

Market index futures: Tonight all three futures are mildly higher at 1:05 EDT with ES up by just half a point, or 0.03%.  Still, this chart doesn't look as weak as Wednesday's big decline might suggest.  First, support held here too and appears to continue to hold in the new developing candle overnight.Second, the indicators have come a fair way off overbought already.  And third, the stochastic  is now in prime position to form a bullish crossover.

ES daily pivot: Tonight the pivot falls from 1560.58 to 1551.17.  ES's weak drift higher in the overnight so far is not enough to break above even this lowered pivot, so this remains bearish.

Dollar index: On Wednesday the dollar put in a most impressive gap-up green marubozu, good for a 1.18% pop that cleared its descending RTC for a bullish setup.  It also brought the indicators out of the oversold gutter so I'd say we could move higher again on Thursday.

Euro: Like the other charts, the euro reversed course on Wednesday, giving up all of Tuesday's gains and then some.  Although  it's up 0.23% in the overnight, there's nothing in the indicators to suggest a higher close on Thursday.  That would mesh with my guess of a higher dollar too.

Transportation: A similar pattern to the Dow here but with an even bigger loss on Wednesday, as the trans fell 1.52%.  However, support at 5913 held and the stochastic was driven down to the point from which bullish crossovers usually begin.  While we have no reversal candle here, the indicators suggest that further downside is limited.

Sentiment: Once again it's time (actually it was time two nights ago) 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   6/7

  8  2/19       21         43        -      -   1520   6/8

  9  2/25       30         52        -      -   1516   6/9

 10  3/4        29         39        -      -   1518   6/10

 11  3/11       41         26        +      +   1551   7/11

 12  3/18       41         37        +      +   1561   8/12

 13  3/25       31         38        +      -   1557 

 14  4/1        38         38        +      x   1569

 15  4/8        32         50        -      -   1553 

 16  4/15       33         50        +      -   1589

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 8  for 12, or 67%. 

The only surprise this week is that the poll is almost unchanged from last week.  And I did change my vote back to bullish, marking the second time this year I've disagreed with the majority.  I find the continuing bearish sentiment interesting.  We've only had two weeks this year where a majority voted bullish, and the highest was only 52% back in mid-January.  If you believe that extreme bullishness is required for a correction, we're not finding it 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      5      7      5           2        0.500    121 
April      5      2      4           0        0.714    444

     And the winner is... 

Just on the basis of Yo-yo  Theory (which worked so well most of last month), I'd call Thursday higher.  But the bear case is weaker than it was last night, unless our three-day support lines give way.  But with a bunch of economic news coming out Thursday morning, including Phillie Fed, it's too risky to make an unconditional call.  So I'll make a conditional call: if ES can break above its pivot of 1551.17 by mid-morning, we'll close higher Thursday  If on the other hand, it makes a run at it and bounces off (or just continues lower), we close lower.

ES Fantasy Trader

Portfolio stats: the account remains at $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside in the face of the conditional call.

Wednesday uncertain

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

• Wednesday uncertain.
  
• ES pivot 1560.58. .  Holding above is bullish
• Rest of week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Tuesday repeated the February 25/26 pattern just about exactly, with a big dump followed by a 50% retracement once Mr. Market figured out the world wasn't actually coming to an end.  So now will we continue the February pattern on Wednesday or turn lower again?  Let's get right to it and run the charts.

The technicals (daily)

The Dow: On Tuesday the Dow gave us the bounce I'd be expecting, for a 1.06% gain.  It also short-circuited the indicators which halted their trip from overbought to oversold and actually turned back up again.  In fact the stochastic seems to be preparing for a bullish crossover just three days after completing a bearish one.  All of which leaves this chart just too tough to call.

The VIX:  And just as I expected last night, the VIX was unable to sustain its launch into outer space and came crashing back to earth on Tuesday with a 19.17% drop that took it right back through its 200 day MA as quickly as it had gone the day before.  This is always a high-probability call.  And even with this drop, we're still overbought, so more downside isn't out of the question here.

Market index futures:Tonight all three futures are lower at 1:10 AM EDT with ES down by 0.19%.  With Tuesday's candle strongly retracing Monday's big dive, you have to wonder if Wednesday might not retrace Tuesday's big gains.  Thing is, is that while we were highly overbought on Friday and ready for a fall, that's no longer the case.  Monday's action let a lot of hot air out of this balloon.  The stochastic is now actually almost ready to form a bullish crossover.  Still, these charts where we stop halfway between BB's are always tough calls.  My best guess is that any further downside is limited at this point, if we get any at all.

ES daily pivot: Tonight the pivot rises from 1555.08  to 1560.58.  The strong performance of ES on Tuesday keeps us above the new pivot even despite a slow drift lower in the overnight so that's a positive sign.

Dollar index: Last night I wrote "given the recent pattern, I'd look for a move lower on Tuesday" and the dollar obliged, dumping 0.83% to close under its lower BB and remain solidly inside its descending RTC.  And with indicators still not quite yet oversold, more downside is possible here on Wednesday.

Euro: Last night I wrote "the lack of pin action and the pivot crossing both suggest a move higher on Tuesday" and that's what happened here too, with the euro closing on its upper BB at 1.3196 on a tall green marubozu.  It's just meandering around at the top of that candle in the overnight so far.  The euro remains in an admittedly broad rising RTC and is prone to creeping up its upper BB rather than bouncing off.  It's indicators, while oversold are only just barely so, making me think that at least some small further gains might happen on Wednesday.

Transportation: On Tuesday the trans handily outperformed the Dow, up 2.22% vs. 1.08%.  And  that was enough to arrest the decline of the indicators here too.  Having now bounced off their lower BB,we just might see more upside 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      4      5           6        0.692    131
March      5      7      5           2        0.500    121 
April      5      2      3           0        0.714    444

     And the winner is...

It doesn't really look like the market is particularly interested in starting a big correction, at least not yet.  I think we're due for some more upside later this week.  I'm just not sure if it will happen on Wednesday.  It looks like things are starting to set up for a move higher, but it might be premature to call it just yet.  And the picture is somewhat muddled tonight, with the futures and currencies looking bearish while the VIX and trans look bullish.  So I'm going to have to satisfy myself with simply calling Wednesday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside in the face of the "uncertain" call.

Tuesday higher

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

• Tuesday higher, low confidence.
  
• ES pivot 1555.08. .  Breaking above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader going short at 1576.00.

Recap

Ouch!  I was expecting a lower day on Monday, but I wasn't expecting to see my account lose an entire month's worth of profits in one day.  And that was even including an SPXS hedge.  Definitely my worst day in well over a year.  In any event, this changes the picture on the charts, so we now sift through the wreckage for clues to Tuesday's direction.

The technicals (daily)

The Dow: The Dow's 266 point red marubozu on Monday pulverized the rising RTC and confirmed Friday's dragonfly doji in a big way.  (Remember what I said last night about this particular doji?)  But for all the drama, we're still only back to where we were a week ago.  The problem now is that while steep declines are often followed by a DCB or a relief rally, this isn't always the case, particularly when we haven't hit the lower BB.  And right now we're still only halfway to that.  And with a fresh bearish stochastic crossover, this chart looks like it's still got some downside.

VIX daily

The VIX:  Now this is interesting.  As the Dow ranked, the VIX rocketed for a 43.20% gain on Monday, a move that powered it out of its trading range, through its upper BB and then right on through the 200 day MA all the way to 17.27 where it stopped mostly I think only because the bell rang at 4 PM.  It also gave us one of those rare instances where RSI goes from highly oversold (1.35) to overbought (73.8) in just one day.  And of course we got our bullish stochastic crossover.

But here's the thing - like I always say, the VIX rarely stays at it's upper BB more than a day or two before reversing.  And the higher above it goes, the more likely it is to retreat.  Look at the chart to see what happened the last time, on February 25th, a day that looked a lot like today - big spike up right through the 200 MA.  The next day was lower.  I think the same thing is likely on Tuesday..


Market index futures:Tonight all three futures are significantly at 1:23 AM EDT with ES up by 0.53%.  ES of course gave us a big red marubozu on Monday just like the rest of the market.    But the last two times this year we saw a big one day drop, the next day gave us first a big gain and the other, a small gain.  And with a steady uptrend all evening basically from the minute the bell rang Monday, one gets the impression that this pattern is likely to continue on Tuesday.

ES daily pivot: Tonight the pivot simply dives from 1582.25  to 1555.08.. This is a case of pivot magnetism.  Whenever ES gets too far from its pivot, it tends to be attracted back to it, and we got very far away indeed on Monday.  As I write, ES continues to grind higher ion the overnight and is now less than four points below the new pivot.  Breaking above that in the wee hours of Tuesday morning would be a bullish sign.

Dollar index: And here's an interesting chart - while the other bi charts had big moves on Monday, the dollar gained just 0.12% in an unremarkable move that keeps it well within its latest downtrend.  In fact it looked like a purely technical move, bouncing exactly off its lower BB as it did.  There's not a lot of guidance here, but given the recent pattern, I'd look for a move lower on Tuesday.

Euro: And like the dollar, the euro posted a rather unremarkable drop on Monday in a move that was larger than the preceding three days but not larger than the gain it made on April 9th.  And while it did break out of the rising RTC for a bearish setup, the overnight is actually retracing higher, already back to 1.3080.  That was enough to break above the new daily pivot.  I find the lack of pin action and the pivot crossing both suggest a move higher on Tuesday.

Transportation: The trans got hit even harder than the Dow on Monday, plummeting 3.81% with a tall red marubozu that broke the rising RTC for a bearish trigger, broke support at 6000, and broke through the lower BB at 5903, stopping, like the VIX only because the bell finally rang.  We now also have a completed bearish stochastic crossover.  But since, unlike the Dow, we did hit the lower BB on Monday,  I'd say the odds are better for a DCB or some sort of retracement on Tuesday, given what I believe to be an overdone sell-off.


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      5      7      5           2        0.500    121 
April      4      2      3           0        0.667    286

     And the winner is...

Ahem, evidently Monday's sell-off was triggered by the fact (or maybe I should say "fact") that China's GDP grew by 7.7% instead of the expected 8%.  Really?  This was all over a 0.3% miss?  Even assuming you can believe any numbers the Chicoms put up, a 1.79% pounding of the Dow (and the SPX was even worse) seems to be a bit of an over-reaction.  And the overnight futures seem to be agreeing.  My best guess is that the bargain hunters will show up on Tuesday and we'll close with some small gains, so we go out on a limb and call for Tuesday higher.

ES Fantasy Trader

Yes folks, we have a winner.  Last night's short trade worked out well enough, even if I exited a bit prematurely.  But it was a nice result anyway.
 
Portfolio stats: the account now rises to $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside, in fear of the falling knife.

Reminder - you can follow these trades live on Twitter @nightowltrader.

BOT    10    false    ES    JUN13 Futures     1567.50    USD    GLOBEX    12:09:07   
SLD    10    false    ES    JUN13 Futures     1576.00    USD    GLOBEX    01:13:26     

Monday lower

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

• Monday lower, medium confidence.
  
• ES pivot 1582.25. .  Holding below is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader going short at 1576.00.

Recap

Last Thursday night I wrote "Perhaps this will be the doji I thought we'd see (but didn't) on Thursday."  Well sure enough, Friday gave us a perfect dragonfly doji, with a Dow closing down just 0.08 points (not percent).  So on Sunday night, with the market at the same level it was on Thursday, what has changed?  The charts will tell us, as usual.

The technicals (daily)

The Dow: The dragonfly doji is not all that common, and coming as it does after four solid up days is at least a little cause for concern.  It did not take us out of the rising RTC but it did drive RSI even more overbought (now 90), sent money flow lower and put the stochastic into position to execute a bearish crossover.  So overall, this chart now has a bearish cast, for the first time in a week.

The VIX:  And I was right not to call the VIX higher last Thursday night, as it continued downward for the seventh day in a row losing another 1.47% on Friday to close at 12.06.  But RSI is now quite oversold (1.35), the stochastic is in position for a bullish crossover soon, and even the lower BB isn't too far away now at 11.57.   Although the candles aren't suggesting a reversal yet, the overall gestalt here suggests we might get a hammer on Monday.

Market index futures:Tonight all three futures are lower at 1:36 AM EDT with ES down by 0.28%.  Friday's ES candle was a distinctly negative bearish engulfing pattern.  And the overnight is seeming to confirm that as we continue lower.  Friday closed just outside of the latest rising RTC for a bearish setup and it looks like we're now getting the bearish trigger.  We also have a just completed bearish stochastic crossover, so all the signs are pointing lower tonight.

ES daily pivot: Tonight the pivot dips from 1587.17  to 1582.25.  After spending Friday below the old number, we remain below the new pivot thanks to a decline around 10 PM Sunday, so that's a bearish sign.

Dollar index: The dollar's got a funny declining stair-step thing going as its candles have been alternating between higher and lower for six days now, though the overall trend is down.  So despite oversold indicators, we don't really have any sign of a trend change here yet.

Euro: The euro continues to struggle with resistance at 1.3116.  After failing there on Friday and closing lower, the Sunday overnight was similarly rejected and is down again, now 1.3083.  And with the indicators looking to have peaked at oversold, more downside seems to be in the cards here.

Transportation: And the trans on Friday moved lower for the second day in a row, down 0.34% this time.  This left them right on the edge of their rising RTC.  Any close lower on Monday would be a bearish setup.  With the indicators now overbought and both momentum and money flow having peaked, more downside is at least a possibility - though I have more confidence in the euro moving lower Monday , which would imply a move higher for the dollar.


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      5      7      5           2        0.500    121 
April      3      2      3           0        0.600     20
     And the winner is...

Tonight things seem to be lining up on the bear side.  The trans appear to have ended their run and are down two in a row, the VIX may be getting ready to move higher, and the futures are looking decidedly negative.  So I just have to go with what I'm seeing and call Monday lower.

ES Fantasy Trader

Portfolio stats: the account remains at $94,000 after 9 trades (7 for 9 total, 3 for 3 longs, 4 for 6 short) starting from $100,000 on 1/1/13.  Tonight we go short at 1576.00.