Friday uncertain

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

• Friday uncertain..
  
• ES pivot 1605.17.  Holding above is bullish.
• Next week bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Once again the technicals prevailed and the Dow gained another 114 points so I'm pleased.  Now as the week, the month, the quarter and the half all wind down, let's see if we can figure out Friday.

The technicals (daily)

The Dow: Thursday's nice green candle completed a textbook-perfect bullish three white soldiers pattern.  Ooh rah!  The indicators are still just coming off oversold, the bullish stochastic crossover is clearly established, we reclaimed 15K support, and we have a new rising RTC going. And with only mild resistance at 15,180, this chart appears to still have room to run.

The VIX:  Last night I wrote "nothing here to suggest a move higher on Thursday", and the VIX indeed continued lower, down another 2.03% on a gap-down spinning top.  We remain solidly in a descending RTC and the indicators are still not down to oversold.  However, there are a couple of things now that were not here last night - the VIX encountered support around 16.50 intraday and respected it, and Thursday's candle was green for the first time in five days.  Also, VVIX is now sitting just above its 2200 day MA so that should provide some support too.  VXX though continues in down mode.  So I'm thinking there's a decent chance the VIX could go still lower on Friday, but this run may be reaching an end and we could see a reversal in a few days.

Market index futures: Tonight all three futures are higher at 1:06 AM EDT with ES up by 0.28%.  Like the Dow, ES now has a three white soldiers pattern going and the overnight action seems to be confirming it.  With a new rising RTC going and indicators rising smartly off oversold, this chart continues to look bullish.

ES daily pivot: Tonight the pivot rises once again from 1589.92  to 1605.17.  Even after this healthy gain, ES continues to remain above the new pivot as it drifts higher in the overnight, a bullish sign.

Dollar index: After two strong days, the dollar posted a slight loss of 0.09% .with a doji star on Thursday.  RSI is now highly overbought (97).  So while we remain in a rising RTC, there is now at least a suggestion of a move lower on Friday.

Euro: The euro once again defied my expectations by retracing half of Wednesday's losses on Thursday and the buying is continuing in the overnight, now up 0.14% and testing the 200 day MA at 1.3076 as I write.  The euro has been good about breaking through the 200 MA to the upside lately and the overnight is leaving the descending RTC (finally) for a bullish setup.  RSI also seems to have finally bottomed while remaining very oversold so I'm thinking there's a chance the euro could move higher on Friday.

Transportation: Bullish three white soldiers for the trans too as they outperformed the Dow on Thursday 0.83% to 0.77%.  A new rising RTC is established, there's no resistance until 6354, the indicators remain low, just off oversold, so this chart continues to look good for 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       6      5      5           0        0.545    543

     And the winner is...

Ah, a tough one tonight.  Most of the chart action looks bullish but I'm a bit concerned about the state of the VIX.  I'm even more concerned about the fact that Friday is historically an awful day according to the Stock Trader's Almanac - Dow down 6 of the last 7 and 15 of the last 21.  Complicating matters is the fact that Friday marks the end of Q2 and raises expectations of window dressing.  But window dressing doesn't always kick in so go figure.  It's also a Friday ahead of a holiday week, so perhaps some traders will want to get out ahead of that.  Then we've got Chicago PMI coming in Friday morning and the expectations are for WTE.  But we're still in this schizoid "bad news is good news" mode, right?

So bottom line - although logic dictates a call for a higher close, I'm not liking the quarter (and half) all ending on a Friday and the possible volatility that can induce.  So I'm going to have to content myself with a call of Friday uncertain as we say goodbye to the first half and await the start of July (which should be a good one).

ES Fantasy Trader

 Last night's long trade worked out nicely for a 13.5 point gain.  The entry was a bit late but the exit was perfect.  These reversal plays with stochastic crossovers are always high probability and this one was a good example.

Portfolio stats: the account rises to $115,000 even after 14 trades (11 for 14 total, 6 for 6 longs, 5 for 8 short) starting from $100,000 on 1/1/13.  Tonight we stand aside and live to trade another day.

SLD    10   false    ES    SEP13 Futures     1611.25    USD    GLOBEX    10:48:01
BOT    10   false    ES    SEP13 Futures     1597.75    USD    GLOBEX    00:26:56

Thursday higher

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

• Thursday higher, low confidence..
  
• ES pivot 1589.92.  Holding above is bullish.
• Friday bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going long at 1597.75.

Recap

I love it when the technicals work, and they sure did, nicely nicely, on Wednesday as the stochastic and RTC alerts paid off with a 150 point bump in the Dow..  The underlying reasons are almost immaterial - the point is they worked.  So as the week, the month, the quarter and the half wind down, we move on to see what Thursday might have in store.

The technicals (daily)

The Dow: On Wednesday, the Dow increased its gains by another 1.02% with a bullish RTC trigger.  The stochastic bullish crossover was consolidated and despite the jump we're still oversold so this chart continues to look bullish for Thursday.

The VIX:  Last night I wrote "the VIX is headed lower again on Wednesday." and so it did, dropping another 6.82% on a gap-down almost-gravestone doji.  But with a new downward RTC established, indicators still just coming off overbought and no support until 16.61, I'm seeing nothing here to suggest a move higher on Thursday.  I'll note that VVIX is now sitting on its lower trend line from which bounces have occurred before - but the indicators were much lower in those cases, so that supports the idea of a lower VIX.

Market index futures: Tonight all three futures are higher at 1:09 AM EDT with ES up by 0.19%.  ES posted another strong green candle on Wednesday for a bullish RTC trigger.  Indicators remain just oversold so they have plenty of room to run.  With a clear bullish stochastic crossover now complete and no resistance until 1604, I think this chart looks bullish for Thursday.

ES daily pivot: Tonight the pivot rises from 1575.83   to 1589.92.    With ES continuing to drift higher in the overnight, we remain comfortably above the new number even after that gain, so this one remains bullish.

Dollar index: OK, so I missed the dollar again. Despite highly overbought.indicators (RSI = 92) and a nominally bearish RTC trigger, this chart just keeps going up.  I'm starting to think that the dollar is headed back to its upper BB (57.39), which it could reach by Friday.

Euro:  I was also wrong about the euro last night.  Instead of bouncing off its 200 day MA, it sank through it like a stone.  That keeps it firmly in its descending RTC, and despite the oversold indicators and a 0.21% gain in the overnight, now I'm thinking we're going to visit the lower BB at 1.2943 in short order.

Transportation: On Wednesday the trans gave us a gap-up inverted hammer for a 0.78% gain.  While this was less than the Dow's 1.02%, it is still a clear RTC bullish trigger to go along with a solid bullish stochastic crossover and indicators only now starting to rise off oversold so I'm inclined to believe that there's still some upside left here for 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      5      7      5           2        0.500    121
April      7      5      5           3        0.667    328
May        3      4      6           4        0.636     85
June       5      5      5           0        0.500    429

     And the winner is...

Once again, I'm not seeing any bearish signs in the charts tonight and Thursday is historically the best day of a bad week so I'm going to go with the logical call, and that is for Thursday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $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.  Tonight we go long at 1597.75 based on what looks like a confirmation of an end to the downtrend along with a developing turn-around.  Reminder - you can follow these trades live on Twitter @nightowltrader. 

Wednesday higher

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

• Wednesday higher, low confidence..
  
• ES pivot 1575.83.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Last night I was thinking it was looking like we were near a reversal point but the recent down moves have been so vicious I couldn't bring myself to call it for Tuesday.  Too bad too, because the Dow put in a handy 101 point gain apparently courtesy of some BTE housing numbers.  It wasn't really the doji I was half-expecting and in a way this move makes figuring out Wednesday harder.  But we're up to the challenge, so let's rock & roll.

The technicals (daily)

The Dow: The Dow retraced most of Monday's losses with a bullish inside harami on Tuesday while remaining oversold.  This move was also enough to exit the descending RTC for a bullish setup, and the bullish stochastic crossover is now complete.  And support in the 14,670 area held up nicely, so this chart is looking promising for Wednesday.

The VIX:  Last night I wrote "I'm ready to give better than even odds that the VIX moves lower on Tuesday."  Turns out no one was willing to take me up on that and it was just as well, since the VIX dropped 8.16% on a big gap-down red doji - the third doji in as many days.  With a bearish stochastic crossover now complete, RSI just coming off overbought, and a classic bearish evening star now complete on the VVIX, I'd say the VIX is headed lower again on Wednesday.

Market index futures: Tonight all three futures are lower at 1:06 AM EDT with ES down by 0.33%.  On Tuesday, ES put in a bullish harami like the Dow, and that was just good enough for a bullish RTC exit setup.  We remain oversold though the bullish stochastic crossover kind of fell apart.  ES seems to be having a bit of trouble finding any traction in the overnight but the technicals seem to be favoring a move higher on Wednesday at this point.

ES daily pivot: Tonight the pivot advances from 1568.58  to 1575.83.  After declining in the evening trade, ES just nicked the corner of the new pivot and remained above, just barely.  But as I write, it tested the new pivot.  So far it looks like it's going to be successful, but sitting less than one tick above the pivot now, it's far from certain.  So no guidance from this metric tonight.

Dollar index: I was looking for the dollar to move lower on Tuesday and it did - sort of.  The candle opened and closed below Monday's midline but the result was a net gain of 0.21%.  However, it traded entirely outside the rising RTC so that's a bearish trigger.  And RSI got even more overbought (90.9) and the stochastic is within a hair now of a bearish crossover.  So I'm going to stick to my call for a lower dollar on Wednesday..

Euro: My expectation for a higher euro on Tuesday was also wrong as it gave up all of Monday's gains plus a bit more, though it retested the 200 day MA and once again, it held.  A third test is underway as I write with the euro exactly on the 200 MA at 1.3074.  With indicators now even more oversold than Monday, I'm expect4ing the 200 MA to hold up which would mean a higher euro on Wednesday and that would square with my call for a lower dollar.

Transportation: As the trans had been leading the Dow lately, so it did once again on Tuesday but this time to the upside as it gained 1.85% to the Dow's 0.69%.  The candle was also a bullish one white soldier.  It also easily exited the descending RTC for a bullish setup, peeled off the lower BB after three days, and the stochastic executed a bullish crossover.  So everything is looking positive for Wednesday on this chart.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Note that I've corrected the data in the accuracy columns due to a mistake I made in week 13 but only just noticed now.
 

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    9/13

 14  4/1        38         38        +      x   1569   9/14    9/13

 15  4/8        32         50        -      -   1553   9/15    9/14

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

 17  4/22       19         63        -      -   1555   10/17   9/16

 18  4/29       33         58        -      -   1582   10/18   9/17

 19  5/6        50         31        +      +   1614   11/19  10/18

 20  5/13       37         37        +      x   1634   12/20  10/18

 21  5/20       50         25        +      +   1667   12/21  10/19

 22  5/28       37         33        +      +   1650   12/22  10/20

 23  6/3        29         38        -      -   1631

 24  6/10       38         38        +      x   1643

 25  6/17       32         40        +      -   1627 

 26  6/24       13         46        -      -   1592

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 both wrong.   Therefore we  continue the year with an accuracy of 12  for 22, or 55%.   The poll as a whole drops to 10  for 20 or 50%.

This week we see that bullish sentiment has now dropped to its lowest level not only of the year so far, but all the way back to October 2011, and is now nearly just one third of what it was a week ago.  Presumably, last week's action had a lot to do with this.   Interestingly though, bearish sentiment only rose 6% and remains below the peak of 58% we hit on April 29th.  Still, this sort of sentiment shift is making me lean in the direction that the poll may now be flashing a contrarian signal.  For my part, both the weekly and monthly SPX charts were looking pretty gloomy at the close last Friday, and that's mostly what I base my vote on.

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       4      5      5           0        0.444    279

     And the winner is...

The technical signs are by and large bullish tonight with the lone exception of the futures.  I'll note again that the last week in June is historically quite weak and this may still reassert itself as it did on Monday.  But much as I hate going against history and the overnight futures (because I always feel that someone else out there knows something I don't) I'm going to have to follow the preponderance of evidence as outlined above and call Wednesday higher.

BTW - the $RHSPX chart I put up in this spot last night played out rather nicely on Tuesday, wouldn't you say?

ES Fantasy Trader

Portfolio stats: the account remains at $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.  Tonight we stand aside because of the disconnect between the futures and the technicals.

Tuesday uncertain - doji possible

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

• Tuesday uncertain - turn-around doji possible.
  
• ES pivot 1568.58.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

I thought we were going lower on Monday but I wasn't expecting to see another 140 points drop off the Dow, though that was at least better than the morning lows that were another 100 points lower than that.  So the broad-based selling goes on (and on and on).  Tonight we search for the light at the end of the tunnel - and pray it isn't the proverbial oncoming train.

The technicals (daily)

The Dow: Mr. Market continued his wayward ways on Monday, first dumping 240 points, then recovering nearly all of it before giving half of that back.  In the end, we got what had been looking like a promising hammer but morphed into just another non-descript red candle that kept us locked in a steeply descending RTC as we continued dribbling down the lower BB.  RSI finally did go oversold and the stochastic began to flatten out a bit, but it's still a few days away from a bullish crossover.  Bottom line - this chart's not looking any prettier than it did last night.

The VIX:  I'm glad I didn't go for the tempting doji bait last night since it was non-confirmed in a big way as the VIX jumped 6.4% Monday on a long-legged red spinning top whose real body traded entirely above the upper BB - most unusual.  We're now above 20 for the third time in three days, a level not seen since last December as everyone was wringing their hands over that fiscal cliff baloney.  At this point, I'm thinking the VIX is about ready to come back down, especially since VVIX put in an evening star on Monday that was stopped by a strong resistance line.  I'm ready to give better than even odds that the VIX moves lower on Tuesday.

Market index futures: Tonight all three futures are lower at 1:32 AM EDT with ES down by 0.21%.  There's really nothing good to say about this daily chart.  We remain in a descending RTC in a four day losing streak with the new candle looking to make it five.  The good news is that there's a measure of support at 1560, RSI has finally gone oversold, and the stochastic has just now eked out a bullish crossover (though that's contingent on no further declines).  We are now below the levels from which other recent reversals have come so I have to think we're starting to be due for one - maybe not on Tuesday but soon - though I guess it might not be til next Monday since the first of the month is historically strong.

ES daily pivot: Tonight the pivot tumbles from 1583.92  to 1568.58.  ES just can't catch a break - every time the pivot drops, so does ES and tonight is no different.  We're still below the new pivot by a good six points, so that remains bearish.

Dollar index: Last night I wrote "the dollar could continue to move at least a bit higher on Monday".  And the dollar put in a strange gap-up red marubozu that nonetheless did result in a 0.14% gain.. That also just barely exited the steeply rising RTC for a bearish setup.  RSI is pretty overbought now (86) and the stochastic is starting to flatten out for a bearish crossover, so it's looking like the dollar's recent uptrend may be coming to an end, if not Tuesday then on Wednesday.

Euro: And last night I also wrote "we could see more downside here on Monday.  I'd not be surprised to see the 200 MA tested."   That would be 1.3071.  Well the low on Monday was 1.3065.  Bada bing!  After that test failed, we ended up with a green hammerish looking thing that indeed closed down on the day at 1.3130.   That leaves us still in a descending RTC but RSI is now more oversold and the stochastic just squeaked out a bullish crossover.  The overnight is just meandering around unchanged so I'd say at this point we might see a higher euro on Tuesday.  That would reinforce my guess that the dollar is getting ready to move lower.

Transportation: The trans continue to guide the way lower, losing another 1.96% on Monday to remain in a steep descending RTC.  RSI here is now well into oversold (12.96) and the stochastic is low and finally starting to flatten out for a bullish crossover.  Still it's a bit too early to call a reversal 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      7      5      5           3        0.667    328
May        3      4      6           4        0.636     85  
June       4      5      4           0        0.444    279

     And the winner is...

I believe we're starting to see signs on a number of charts that the current downtrend is becoming played out.  I'd like to show you today's SPX hi-lo index, courtesy of stockcharts.com (click on the image to enlarge).

$RHSPX daily, from stockcharts.com

Notice how we hit  38.46 on Monday, almost equal to the low of 38.36 on February 28th.  The Dow went on an eight day winning streak after that.  The market was also up shortly after every other downward spike on this chart too.  This reinforces my view that we're due for a rally soon.  However, we're not in the business of catching falling knives here (been there, done that, got the scars to prove it), so I'm going to compromise.  Rather than calling the market lower once again, I'm going to declare Tuesday uncertain, since it looks like we could be near a turning point but I'm not quite sure if it will be right away or not.  Tuesday could be the turnaround day - watch for a doji.

ES Fantasy Trader

Portfolio stats: the account remains at $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.  Tonight we stand aside on the "uncertain" call.  I think the majority of the current run is over and this is not the time to be getting short.

Monday lower

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

• Monday lower, low confidence.
  
• ES pivot 1583.92.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Whoa - Mr. Market is definitely off his thorazine and has clearly lost his tenuous grip on reality.  The fact that the economy is improving was enough to send the Dow into a tail spin last week.  We were up triple digits, we were down triple digits, up down up down.  Looks like we're back to the "good news is bad news" bizzaro world scenario we see so often on Wall St..  What the heck's going on here?

My dad was an awesome investor.  He definitely had the Midas touch.  He somehow always managed to buy low and sell high.  And he was a psychiatrist.   I'd ask him for the secret to his success and he's tell me that he would "psychoanalyze the market" like it was one of his patients.  Forget efficient market theory, we're after psychotic market theory here and someone's having a full-blown schizo attack right now.  Unfortunately, I never decided to go into medicine so all I can do tonight is psychoanalyze the charts.  Ach so, Mr. Market, vat seems to be ze problem?

The technicals (daily)

The Dow: On Friday, the Dow posted a 41 point gain after seeming like it would never rise again.  It wasn't much of a retracement but it was a classic spinning top warning of a bullish reversal.  This was perhaps made more impressive coming on a quadruple witching day.  Although the indicators are still not quite yet to oversold levels, being as we mostly traded below the lower BB on Friday I'm thinking this chart could be ready to rally on Monday.

The VIX:  And also on Friday, the VIX posted a long-legged doji that did indeed fall back below the upper BB, as I had expected, dropping 7.75%.  Of course, this does leave the door open to another move higher on Monday, so in the absence of an RTC and with the indicators kind of wandering about in no-man's land, I'm going to take a pass on this important chart tonight.  Could go either way.

Market index futures: Tonight all three futures are lower at 12:37 AM EDT with ES down by a non-trivial 0.41%.  Like a bunch of other charts, on Friday ES put in a doji closing below its lower BB.  That also drove RSI oversold but the stochastic, which is now getting down there too still isn't in position for a bullish crossover.  And with the negative follow-through in the overnight so far tending to non-confirm Friday's doji, we could see ES following the lower BB down again on Monday.

ES daily pivot: Tonight the pivot drops  from 1594.67  to 1583.92.  ES's move lower was enough to keep us below the new pivot even after that fall so this one remains bearish.

Dollar index: The developing evening star for the dollar did not pan out last Friday and instead of falling, the dollar gained another 0.51% to cap an impressive three day run.  But we're now officially overbought and just about up to the upper BB.  OTOH, the stochastic is not yet where I'd like to see it for a bearish reversal, so the dollar could continue to move at least a bit higher on Monday.

Euro: With another big drop on Friday, the euro is now showing a bearish three black crows pattern and is firmly in a steeply descending RTC.  And in the overnight, it's even lower, gapping down a big 0.33% so far in trading that's entirely below the lower BB.  The euro has now moved to within striking distance of its 200 day MA at 1.3071 and although RSI has now gone overbought, the stochastic isn't yet setting up a bullish crossover, so we could see more downside here on Monday.  I'd not be surprised to see the 200 MA tested.  And that would square with my view of a higher dollar.

Transportation: Diverging from the Dow on Friday, the trans dropped 0.52%, but also on a spinning top and also closing below the lower BB.lower BB for a day or two and that would temper my optimism for the Dow chart.


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       3      5      4           0        0.375    139

     And the winner is...

The guidance tonight seems to be mostly negative, the daily Dow chart notwithstanding.  And the weekly charts are even more so.  And this coming week is historically quite bearish.  And with no economic news coming out on Monday to throw a monkey wrench into the works, I'm going to go with what I see, and that's Monday lower.  But I think the big selling of last week is about done and we may see a move higher by Tuesday or Wednesday.

ES Fantasy Trader

Portfolio stats: the account remains at $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.  Tonight we stand aside for much the same reason as last Thursday - after nearly a half percent move in the overnight so far, I don't want to end up on the wrong side of this market by morning.