Friday higher

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

• Friday higher, low confidence.
  
• ES pivot 1594.67.  Holding below is bearish. Now watching the "U" contract.
• Next week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Can you swim?

Holy moly!  When I woke up Thursday morning at the crack of 11, I thought my computer had locked up, because it was showing the Dow down 217 points, same as Wednesday's close.  But no - we really were down 217 points, and it wasn't even noon yet.  By the time the carnage was over, the Dow had puked up 354 points in its worst day since the Emperor was re-elected last November.  There's been no shortage of analysis all day long over on TV and the web about why this happened, at least half of it wrong, so we'll just skip past all that and move straight on to Friday.  Surely, it can't be any worse than Thursday was.  Or can it ... ominous Spooky Music of Doom>.


The technicals (daily)

The Dow: Yowsa - the bottom just absolutely fell out of the Dow on Thursday as we crashed through 15K, then support at 14,956, then the lower BB at 14,869, and finally support at 14,858, all on increased volume.  And like yesterday, the only thing that stopped the carnage was the bell at 4 PM.  And even after two big down days, the indicators are still not oversold yet.  And of course we now have a bearish RTC trigger - in fact this rising RTC is now only a distant memory.

And yet -we are now quite extended from the pivot, back at 15,182 and as I mentioned last night, the further you get from the pivot, the more likely a retracement becomes.  It's also pretty unusual to close more than 100 points below the lower BB.  I scrolled the daily chart all the way back to the crazy times of 2008 and found that over 80% of the time, when the Dow closes under its BB by a non-trivial amount, the next day is either flat or higher.

The VIX:  Another positive note comes from the VIX which on Thursday soared 23.14%.  It actually opened above its upper BB and then went higher from there, closing waay above its upper BB.  The last time we had such craziness was on August 8, 2011, and the next day was a lot lower.  And on that next day, the Dow gained 429 points.  Of course, the VIX stood at an impressive 48 back then, so I wouldn't look for this kind of movement on Friday, but still, there it is.  And of course, as I always say, the VIX rarely spends more than a day or two at its upper BB.  And the higher above it gets, the more likely it is to fall hard.  I note that VVIX also hit its upper BB on Thursday.

Market index futures: Tonight all three futures are significantly higher at 1:18 AM EDT with ES up by 0.49%.  Thursday's ES chart was just beat up with an ugly stick.  We gave up support at 1604 like it wasn't even then, then continued on down through 1600 and then even the lower BB at 1595 before finally stopping at 1584.  A close 10 points under the lower BB is pretty unusual and warrants attention.  We are now also very extended from the pivot, by a whopping 47 points.  And while the indicators still aren't even oversold yet, that may be due more to some hysteresis in the system.  I'd tend to think we're due for a relief rally or at least a DCB here real soon.

ES daily pivot: Tonight we switch from the "M" to the "U" contract just in advance of expiration.   And tonight the pivot plummets from 1631.00 to 1594.67.  While that still leaves ES below, it has actually been clawing its way higher since even before the close and appears intent on staging an attack on the new number.  If this succeeds, that would be bullish indeed, while a bounce off would mean continued bearish.

$USDUPX, daily

Dollar index: Last night I wrote "you could see further dollar strength into Thursday." and boy did we ever.  The dollar popped 0.61% on Thursday in a beautiful textbook gap-up evening star - check it out (click on the chart to magnify).  This star just about touched its upper BB.  Of course, the pattern isn't complete until day 3, but there is now at least a fair chance of seeing a move lower on Friday here.  Also note the descending RTC (the parallel red, black and blue lines).  Technically, today's star was a bullish trigger, but I think that the candlestick pattern trumps the channel exit here due to its magnitude.

Euro: And of course the euro took a dump on Thursday, ending at 1.3201.  With two consecutive tall red candles, a bearish RTC trigger, indicators still not yet oversold, a stochastic nowhere near forming a bullish crossover, no nearby support and a lower BB down at 1.2828, you'd think that we're due for more downside on Friday.  And yet the euro is actually up 0.29% in the overnight which really makes me wonder.  And yes there are two paths you can go on.  We'll just have to see if this stairway leads to heaven or hell.

Transportation: The trans of course got clobbered on Thursday, along with everything else, closing right on their lower BB at 6142.  This is also a fair support level so I'd say there's a chance of a bounce 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      7      5      5           3        0.667    328
May        3      4      6           4        0.636     85  
June       2      5      4           0        0.286     98

     And the winner is...

I'll admit, I'm as spooked as anyone by the last two days.  But where I thought Wednesday's action was overdone, I think Thursday's was really overdone.  We've now hit a bunch of technical reversal points that make me think we're due for a relief rally as buyers come in to take advantage of the sale Wall St. is now putting on.  Of course, Friday's quadruple witching throws a big monkey wrench in the works but I'm going to go waaay out on a limb and call Friday higher anyway.  Gulp.

ES Fantasy Trader

Portfolio stats: the account drops to $108,250 after 13 trades (10 for 13 total, 5 for 5 longs, 5 for 8 short) starting from $100,000 on 1/1/13.

In a strange twist, this trade turned briefly profitable just before I woke up Thursday morning and then started moving against me again.  At that point I decided to just throw in the towel and take a small 4.25 point loss.  Considering that I was a whopping 56 points underwater at one point, this felt like quite the comeback and almost as good as a win.  Ironically, had I waited til the end of the day to cover, it would have ended up being fairly profitable.  Oh well.  Tonight we stand aside in part because Friday is op-ex day and also because I'm concerned that we missed a good entry point earlier in the evening.

BOT    10    false    ES    JUN13 Futures     1604.50    USD    GLOBEX    11:51:05  

Thursday lower

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

• Thursday lower, low confidence.
  
• ES pivot 1636.92.  Holding below is bearish.
• Friday bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1600.25.

Recap

Well I am certainly glad I called Wednesday as "uncertain" because I sure wasn't expecting a 200+ point dive in the Dow following Uncle Ben's announcement of basically nothing new.  Personally, I think this was a bit overdone but it did throw a few interesting wrinkles into the charts, which we will now attempt to press out.

The technicals (daily)

The Dow: The Dow wasn't doing too badly on Wednesday, holding nicely just above its pivot - until Bomber Ben dropped his payload at 2 PM.  Then it went down.  Then it went down some more, stopping only because the bell rang at 4 PM.  The net result was an ugly red marubozu that crashed right out of the rising RTC for a bearish setup and caused a bearish stochastic crossover.  This chart has gone from fairly positive to pretty bad in just one day.

The VIX:  What with all the ugly charts out there on Wednesday, here's something really interesting - the VIX rose as you might expect - but only 0.03 points or 0.18%.  That's pretty unusual for a 208 point move down in the Dow.  And the resulting candle was red, not green.  This was enough to turn all the indicators downward.  And VVIX, the VIX of the VIX, actually dropped 1.56%.  None of this is what you'd expect from a market ready to move lower.  In fact, I'd be surprised to see a big jump in the VIX on Thursday after this pattern.

Market index futures: Tonight all three futures are significantly lower at 1:43 AM EDT with ES down by 0.46%.  Pretty much the same story on this chart on Wednesday - a big red marubozu causing an exit from a rising RTC for a bearish setup.  Add in a bearish stochastic crossover and no support til 1609, and things are looking grim for the bulls.

ES daily pivot: Tonight the pivot drops from 1647.83  to 1636.92.  With ES continuing its fall in the overnight, we remain well below the new pivot, a bearish sign indeed.

Dollar index: Last night I wrote "we could conceivably see a bullish exit to this long-running descending RTC in as little as a day or two".  It turned out to be one day and in dramatic fashion as the dollar jumped 1.05% on Wednesday.  This blasted it right out of the descending RTC for a bullish setup and continued right on through the 200 day MA at 55.77 ($USDUPX).  Add in a bullish stochastic crossover and indicators that are now rising but just barely off oversold and you could see further dollar strength into Thursday.

Euro: And the euro took the mirror image move, falling out of its rising RTC with a big red marubozu for a bearish setup.  With indicators continuing to fall, a break below the pivot, and the overnight trade off another 0.14% so far, it looks like more downside is possible here on Thursday.  That squares with my call for a higher dollar.

Transportation: A similar story to the Dow herewith a big red candle that caused a bearish stochastic crossover on Wednesday.  The resistance I mentioned last night was never even tested - it was just down and out.  After this turn of events, I'm not sure more downside isn't possible on Thursday.

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.  This week I've managed to locate the data that was missing from the week of May 28th, so the chart is once again complete.
 

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

  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   8/13

 14  4/1        38         38        +      x   1569   9/14

 15  4/8        32         50        -      -   1553   9/15

 16  4/15       33         50        +      -   1589   10/16   9/16

 17  4/22       19         63        -      -   1555   10/17   9/17

 18  4/29       33         58        -      -   1582   10/18   9/18

 19  5/6        50         31        +      +   1614   11/19  10/19

 20  5/13       37         37        +      x   1634   12/20  10/19

 21  5/20       50         25        +      +   1667   12/21  10/20

 22  5/28       37         33        +      +   1650

 23  6/3        29         38        -      -   1631

 24  6/10       38         38        +      x   1643

 25  6/17       32         40        +      -   1627 

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 both I and the poll I voted bullish four weeks ago, so we were wrong.   Therefore we  continue the year with an accuracy of 12  for 21, or 57%.   The poll as a whole drops to 10  for 20 or 50%.

This week we hve a split once again, with me voting positive but the majority voting negative.  After Wednesday's action, I may be switching my vote next week!

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      7      5      5           3        0.667    328
May        3      4      6           4        0.636     85 June       1      5      4           0        0.167   -256

     And the winner is...

Somewhat surprisingly, tonight's verdict isn't quite as cut & dried as you might think.  While we have a number of good bearish indicators involving the stochastic and RTC exits, there are two significant counter-indicators as work.  The first is the VIX which really does not look to me like it's gearing up for a big jump on Thursday.  The second is that we're now quite overextended from the daily pivot.  Dr. Bretty Steenbarger used to talk about this in his Traderfeed blog, and it often works quite well.  Whenever you get too far from the pivot, watch out for a retracement.

OTOH, mitigating this is the fact that we're in June triple-witching week which is historically pretty dismal.  So while I'd like to think that the recent yo-yo market would dictate a move higher on Thursday, or at least a DCB, I'm going to have to go with the preponderance of evidence and call Thursday lower, admittedly with some trepidation.

ES Fantasy Trader

Portfolio stats: the account remains at $110,375 after 12 trades (10 for 12 total, 5 for 5 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we remain short at 1600.25.  After failing to get out when the getting was good, I at least held on Wednesday and in so doing managed to chop my unrealized loss exactly in half, thereby turning an unmitigated disaster into simply a disaster.  It's still not a good situation, but at least I feel a bit better about it than I did last night.  Possibly we can achieve some further improvement on Thursday though it might be a stretch to ever hit break-even.

Wednesday uncertain - Fed

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

• Wednesday uncertain, pending Fed comments.
  
• ES pivot 1647.83.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1600.25.

Recap

My apologies for the recent disruption in publication.  After another plane ride yesterday that was in some ways worse than the previous trip on that miserable airline, Southwest, the Night Owl is home again and we can get back to our usual schedule.  Tuesday's action was interestng and we review it below.

The technicals (daily)

The Dow: Tuesday's big run in the Dow broke right through resistance at 15,255 to keep us in a sharply rising RTC.  It also confirmed a bullish stochastic crossover from a high level last Friday.  Those are usually good for a few more days of upside before overboughtedness kicks in.  And not to be overlooked is a pretty clear bullish inverse head and shoulders pattern.  So this chart continues to look strong.

The VIX:  After some big swings last week, the VIX is settling down, posting just a 1.13% loss on a small range spinning top.  The problem with this chart now is its lack of direction.  There's not RTC, no BB extremes, no nearby S/R lines, and the indicators are wandering aimlessly.  This may reflect a certain existential malaise ahead of the Fed.  In any case, I'm drawing a blank tonight which is a shame because I think the VIX is so important.  >shrug<

Market index futures: Tonight the futures are mixed at 1:08 AM EDT with ES down by 0.12%, YM down 0.08% but NQ flat.  The double bottom from the Dow is quite in evidence here.  However, we'll need to break the resistance at 1653 and the candle developing in the overnight is a dark cloud cover.  But, from half-baked candles come half-baked results, so I'm not reading too much into the slight decline at this hour.

ES daily pivot: Tonight the pivot rises from 1636.83 to 1647.83.  Although a slight decline set in this evening and ES made one attempt to break through the new pivot, that was rejected so this indicator remains bullish for now.

Dollar index: The dollar's decline continued on Tuesday, down another 0.27%.  The only thing that's changed here is that the rate of fall has slowed over the past week.  If this continues, we could conceivably see a bullish exit to this long-running descending RTC in as little as a day or two.  But for now, there's still no sign of a reversal.

Euro: And of course as the dollar falls, the euro's climb continues unabated in a rising RTC that's been overbought since June 5th.  But here too, the rate of increase has begun slowing down so I'm starting to think there's a chance we could see an end to this trend by the end of the week.  But for now at least, it's still intact.

Transportation: After two days in the dumps the trans rebounded nicely on Tuesday breaking through resistance at 6345.  The indicators are not yet overbought and the upper BB isn't til 6492 so with no reversal signs there appears to be some room to run yet.


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      7      5      5           3        0.667    328
May        3      4      6           4        0.636     85
June       1      5      3           0        0.167   -256

     And the winner is...

All the charts appear to be set up for at least some additional gains on Wednesday.  However, this is of course a triple-witching week and more importantly, we're going to be hearing some new pronouncements (or maybe not new) from Uncle Ben.  So I am not going to try to fight the Fed or even second-guess them and will therefore be pulling up a chair to see which way the action falls before making my move.  Judging by the shape of the VIX, I think I'm not alone.  So the official call is simply Wednesday uncertain.  My personal bias is for a move higher though.

2 AM Update - ES took off just before the Asian close, so it's looking more optimistic for Wednesday.

ES Fantasy Trader

Portfolio stats: the account remains at $110,375 after 12 trades (10 for 12 total, 5 for 5 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we remain short at 1600.25.  It's a shame I was traveling and unable to manage this dog.