Friday uncertain

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

• Friday uncertain.
  
• ES pivot 1691.75..  Breaking below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1643.00.

Recap

There were bullish indications in the charts last night and despite an early swoon Thursday morning, the market clawed its way back into positive territory with the Dow ending the day up 28 points and vindicating my call for a higher close.  With three of these U-shaped days on the books, let's see if the charts will reveal the direction for Friday.

The technicals (daily)

The Dow: On Thursday the Dow gave us a nice spinning top.  Unfortunately, this neither confirms nor invalidates Wednesday's hammer.  What it did do was push us closer to the right-hand edge of the descending RTC we're in, and drive the indicators closer to oversold.  As such this is more bullish than bearish, though the jury is still out.

The VIX:  Last night I wrote "I'm giving better than even odds of a lower VIX on Thursday.".  There were no takers since that was about right as the VIX dropped 1.93% albeit on a green gap-down inverted hammer.  VVIX is in a similar state, stuck mid-way between BB's and between overbought and oversold.  This is a very dangerous place to make calls so I won't even try.  It's a shame too, because the VIX is one of my favorite leading indicators.

Market index futures: Tonight all three futures are lower at 1:00 AM EDT with ES down by 0.07%.  Thursday ES managed to reclaim all of Wednesday's losses and a bit more with a bullish one white soldier pattern.  However, recall that last night I mentioned the 1694 level as required to exit the descending RTC for a bullish setup.  Thursday's close:1693.75.  As Maxwell Smart used to say, "Missed it by that much!"    And to complicate matters, while the stochastic appears to be getting ready to form a bullish crossover, the new overnight candle is making a dark cloud cover.  So this is now one of the more ambiguous charts I've seen in a while.

ES daily pivot: Tonight the pivot steps up from 1687.42  to 1691.75.   We were not particularly higher earlier in the day but this bump in the pivot has left ES less than a point above the new number.  While it remains bullish, a break below is entirely possible from this level and that would be a negative sign for the market.

Dollar index: Last night I thought the dollar might reverse on Thursday but alas it was not to be as the buck dropped another 0.36% to continue a now five-day slide.  This has now brought us all the way to the lower BB at 55.43 although the indicators are still not oversold.  And with the next support level not until .55.24, and remaining in a descending RTC. I'm afraid I don't see any reversal signs now.

Euro: On Thursday the euro hit it upper BB with a solid green candle to close at 1.3391 leaving it just shy of resistance at 1.3411.  Nevertheless, we now have three white soldiers marching up a rising RTC and indicators that have yet to hit overbought, suggesting an ample supply of gas in the tank for further gains.

Transportation: In a bit of positive divergence, the trans on Thursday gained a big 0.81% to the Dow's anemic (and palindromic) 0.18%.  This confirmed Wednesday's hammer and left the trans just shy of exiting the descending RTC for a bullish setup.  Indicators remain mixed though, so this chart is a bit murky.


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      6           0        0.545    543
July      10      2      4           4        0.875    486
August     6      0      0           0        1.000    373

     And the winner is...

After taking a turn for the better last night, tonight the charts are being coy.  There are at least some indications that Thursday's rally may not have much follow-through coming.  On the other hand, there aren't a lot of overtly bearish signs as there were two nights ago.  It's a puzzler.  Historically, Friday is pretty weak, but we're about to exit the worst part of August.  Which all pretty much leaves us on square one.  I'm just going to have to get up from the table and walk away from this one, folks.  You can't play Blackjack when the dealer keeps all his own cards face down.  So the call is Friday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $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 remain short at 1643.00.

Thursday higher

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

• Thursday higher, low confidence.
  
• ES pivot 1687.42.  Holding above is bullish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1643.00.

Recap

Well the market continued to lose ground on Wednesday, pretty much as I had been thinking.  However, Wednesday's candle was markedly different from Tuesday's.  Let' s consult the charts to see how this may affect the health of Mr. Market.  Say ahhh ...

The technicals (daily)

The Dow: So we look at the Dow and conclude - three black crows - or do we?  Wednesday's candle is pretty close to a hammer.  And if you look at the Dow, you'll notice that 1/3 of the stocks there were actually up.  We also have some support just below us at 15,455.  Nevertheless, the indicators continue to fall and we remain in a descending RTC.  So at best we've got a flashing yellow caution light signaling a potential end to the decline, but one which would require confirmation on Thursday.
 
The VIX:  Now then - this is where the VIX comes in.  Looke3e here - we've got a 2.04% gain on Wednesday but it came in the form of a really classic gap-up inverted hammer.  Now does this trump the bullish stochastic crossover?  Much as I love the latter, I think it might.  And a big gravestone doji on the VVIX really support that idea.  Bottom line, I'm giving better than even odds of a lower VIX on Thursday.

Market index futures: Tonight all three futures are higher at 12:34 AM EDT with ES up by 0.31%.  Wednesday's ES candle was a pretty good hammer and while the indicators are only about halfway to oversold, the overnight does seem to be confirming the reversal.  A move above 1694 would also mark a descending RTC exit for a bullish setup.  And as I write, that's just half a point away.  So this chart is now looking more bullish than last night.

ES daily pivot: Tonight the pivot steps down again from 1695.42  to 1687.42.  This fall, plus the overnight drift higher in ES means we broke above the pivot right at the changeover at midnight.  So this indicator now becomes bullish.

Dollar index: Last night I wrote "I expect another down day on Wednesday" for the dollar and that's what we got, off another 0.41%.  But this four day losing streak may be nearing an end as the lower BB is now very close at 55.54.  So although we remain in a descending RTC, I'm going to guess we might see a reversal day here on Thursday, like a hammer or some such..

Euro: I gave up on calling the euro last night but it moved in the direction its bullish candle would have suggested on Wednesday anyway, closing just shy of resistance at 1.3340.  The overnight is exactly flat so tonight is even harder to call than last night.  Therefore I'm skipping this one again.

Transportation: The trans continued their slide on Wednesday, down another 0.72% on a gap-down hammer.  With action that's looking increasingly parabolic to the down side, I'm thinking that a reversal is now close at hand, if not Thursday, then even more likely on Friday.


Accuracy (daily calls): 

I don't really have any FAQ's, but I do have some OAQ's (occasionally asked questions) and one of them is "what use is your "Dow points" column" every day?"  Well simply this - if you did MOO and MOC orders before the open based on my daily calls, for DIA when I called an up close or DOG when I called a lower close, that's the profit you would have obtained.  QED.

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      6           0        0.545    543
July      10      2      4           4        0.875    486
August     5      0      0           0        1.000    345

     And the winner is...

Tonight we're seeing some definite and clear reversal signs, more in the candles than the indicators, which have yet to reach oversold extremes.  Now I always absolutely hate catching the falling knife but we do have some positive economic news coming out of China this evening, and as far as I know we might make it through a whole day with no one on the Fed yapping about tapering.  And note that three days is the longest losing streak the Dow has had all year.  So I'm going to go out on a limb and call Thursday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $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 remain short at 1643.00.

Wednesday lower

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

• Wednesday lower, low confidence.
  
• ES pivot 1695.42.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1643.00.

Recap

The market moved lower on Tuesday, apparently on some remarks by some Fed head.  Oddly enough, this move was predictable the night before on a technical basis in the charts.  This is one reason why I like watching the futures late at night.  With continuing revelations about market moving news being leaked hours before its scheduled release, you really have to wonder who knows what and when do they know it.  For some reason, it often shows up in the futures.  So without further ado, let's take a look once again at said futures, and a bunch of other stuff too.

The technicals (daily)

The Dow: Tuesday's 0.60% drop was the Dow's biggest loss since June 28th and it took us out of a rising RTC for a bearish setup.  It also completed a bearish stochastic crossover and sent the indicators all lower off overbought.  Support around 15,572 collapsed like it wasn't even there.  That all adds up to continued lower for Wednesday.

The VIX:  Last night I wrote "the VIX is now quite low and would seem to have more upside potential than downside risk".  And that potential materialized on Tuesday as the VIX rose, for the first time in six days, up 7.43%.  This jolly green candle traded entirely outside the descending RTC we were in for a bullish trigger and also set up the stochastic very near a bullish crossover.  As I say so often, the VIX rarely spends more than a day or two on its BB's.  In all, this chart looks ready for more upside on Wednesday.  And VVIX took an even more bullish turn on Tuesday, supporting this whole theory.

Market index futures: Tonight all three futures are lower at 12:51 AM EDT with ES down by a non-trivial 0.24%.  ES suffered its worst decline since June 24th on Tuesday falling out of its last short rising RTC for a bearish trigger.and convincingly completing a bearish stochastic crossover.  The overnight continues to drift lower and with indicators just barely off overbought, I see nothing bullish in this chart tonight.

ES daily pivot: Tonight the pivot steps down from 1702.08  to 1695.42, ending its brief foray above 1700. We were below the old pivot all day Tuesday and remain below the new one, so this one remains bearish tonight.

Dollar index: Last night I wrote "I expect the buck to take another crack at the 200 MA on Tuesday".  Well was no contest as the dollar just skipped right over the 200 MA gapping down for a 0.34% loss, now on a three day losing streak.  With the 200 MA break, a bearish stochastic crossover now complete and indicators a long way from oversold, I expect another down day on Wednesday.

Euro: The euro chart is being exceptionally cantankerous lately.  It did not go down on Tuesday as I thought, but rather retraced all of Monday's losses and then some to close at 1.3307.  This gives us a bullish stochastic crossover but with the euro in alternating down/up mode now, where it's going Wednesday is anybody's guess.  I pass.

Transportation: The trans turned in a poorer performance on Tuesday than I was expecting - much worse in fact, down 1.28%.  This caused a bearish stochastic crossover with indicators still just coming off overbought.  So with no support til 6477  it looks like more downside on the way 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       6      5      6           0        0.545    543
July      10      2      4           4        0.875    486
August     4      0      0           0        1.000    297

     And the winner is...

What we're seeing tonight is a combination of bearish confirmations and continuation patterns.  In fact I'm hard-pressed to find anything bullish on any charts right now and as we enter the historically weakest part of a weak month, I'm afraid the only logical call is for Wednesday lower.

ES Fantasy Trader

Portfolio stats: the account remains at $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 remain short at 1643.00.  We've ralready recouped the worst part of out losses here and while this trade may never be a winner I'm thinking there's more retracement to come.

Tuesday lower

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

• Tuesday lower, low confidence.
  
• ES pivot 1702.08.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1643.00.

Recap

Last night the market was feeling a bit tired, and it showed with some small losses on Monday.  But that puts us back into the same tricky spot we've been in a bunch of times this year so far - is this the start of the long-awaited pullback, or just another one in a long string of fake-out breakdowns?  As always, we look to the charts for answers - seems like as good a place as any to look.

The technicals (daily)

The Dow: Monday's  46 point drop confirmed last Friday's hanging man and solidified 16,658 as new resistance, a level that was never even threatened.  Note though that the bearish action on Monday felt somewhat muted with only just over half the Dow components actually declining.  We also remain in a rising RTC and the stochastic has yet to even start forming a bearish crossover.  There's also some support at 15,582 so if we do get further downside on Tuesday, I expect it to be limited.

The VIX:  In an unusual divergence, the VIX dropped 1.17% on Monday even as the Dow and SPX moved lower too, giving up the 12 handle to close on the lower BB for the second day in a row.  There's no support until 11.32 and the indicators have only now just gone oversold, so I'm now thinking there's still some room to run lower here since the VIX did not reverse on Monday as I had expected.  But the VIX is now quite low and would seem to have more upside potential than downside risk at these levels.

Market index futures: Tonight all three futures are lower at 1:15 AM EDT with ES down by 0.21%.  ES put in a perfect star on Monday to complement last Friday's hanging man.  The overnight so far is gapping down for a bearish RTC exit, RSI has now peaked at overbought and the stochastic is close to forming a bearish crossover.  So while it's always dicey relying on a half-baked candle, this chart is still looking bearish tonight, and more so than last night.

ES daily pivot: Tonight the pivot inches up from 1701.58  to 1702.08.  We broke under the old number around 6 PM and have been drifting vaguely lower since then to remain below the new pivot so that's a bearish sign.

Dollar index: While the dollar did move a bit lower on Monday, down 0.05%, support kicked in right at the 200 day MA to limit the damage.  Still, that hardly qualifies as a reversal warning, so I expect the buck to take another crack at the 200 MA on Tuesday.  It's make or break time for the dollar..

Euro: The euro put in a fat little spinning top on Monday to cancel Friday's bullish piercing line and close at 1.3288.  The overnight action has just exited the rising RTC for a bearish setup and broken below the daily pivot.  With indicators continuing their decline from overbought, I'd say the euro;s ready for more declines on Tuesday.

Transportation: Last night I pointed out a star on this chart and wrote that "{it] makes me think that lower is on the way here on Monday".  And so it was, with the trans losing 0.77%.  We've now bounced off the upper BB and have a mildly overbought RSI.  Still no warning from the stochastic though so this chart while looking bearish is not a screaming short.  OTOH, I'd not be going long here either.

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 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   13/23  11/21

 24  6/10       38         38        +      x   1643   13/24  11/21

 25  6/17       32         40        +      -   1627   14/25  11/22

 26  6/24       13         46        -      -   1592   14/26  11/23

 27  7/1        25         42        -      -   1606   14/27  11/24

 28  7/8        42         29        +      +   1632   15/28  12/25

 29  7/15       48         22        +      +   1680

 30  7/22       42         19        +      +   1692 

 31  7/29       39         17        +      +   1692 

 32  8/5        46         27        +      +   1710 

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 majority of the poll voted bullish four weeks ago, so we were  both right.  Therefore we  continue the year with an accuracy of 15  for 28, or 54%.   The poll as a whole improves to 12 for 25 or 48% and remains in coin-flipping territory as far as accuracy goes.
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      6           0        0.545    543
July      10      2      4           4        0.875    486
August     3      0      0           0        1.000    204

     And the winner is...

Tonight, the balance of the charts continues to read bearish, though not excessively so.  Still, I believe logic dictates a call for lower Tuesday, though I'm not expecting a triple digit decline.

ES Fantasy Trader

Portfolio stats: the account remains at $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 remain short at 1643.00.  We're in too deep to ditch this trade now.  I think it would be a mistake to dump it just when the market hits a record high.

Monday lower

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

• Monday lower, low confidence.
  
• ES pivot 1701.58.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1643.00.

Recap

Last Thursday night I wrote "we will see Friday higher, but less than Thursday.  We could possibly see some sort of topping candle in the process."  And that's exactly what we got, with the Dow advancing 30 points on a classical hanging man.  Bada bing!  Now things get tricky.  Will we see a follow-through on the reversal candle or is this going to be yet another head fake of the sort we've been seeing all year?  Only the charts can say so that's where we're headed right now.

The technicals (daily)

The Dow: It's a funny thing about the hanging man - it means the Dow ended the day at its high of the session, and yet this is a bearish candle.  However, looking at the bigger picture, it doesn't look all that grim.  The upper BB is still at 15,704, the indicators are now overbought but not extremely so, we remain in a new rising RTC, and the stochastic is nowhere near forming a bearish crossover.  So overall this one has to be a question mark that will require confirmation on Monday.

The VIX:  Ah, the poor poor VIX - last Thursday I wrote "[a bunch of stuff] spells continued lower for Friday.  Next support isn't til 12.43".  Well 12.43 came and went in the blink of an eye as the VIX closed down 7.42% to break just under 12.  We're now sitting on the lower BB and have just entered oversold territory.  However, the stochastic is only halfway to forming a bullish crossover.  Still, the VIX is one of those charts that consistently respects its BB's.  So I'd expect a bounce within a day or two at the most here.

Supporting this idea is VVIX which also hit its lower BB on Friday with a hammer along with extremely oversold indicators and a stochastic positioning itself for a bullish crossover.
 

Market index futures: Tonight all three futures are lower (for a change) at 12:51 AM EDT with ES down by 0.10%.  On Friday ES put in a tall hanging man that brought the indicators back to overbought.  Coming as it does so close to passing 1700 makes me think this chart may be taking a pause on Monday.

ES daily pivot: Tonight the pivot rises from 1696.17  to 1701.58.  This marks the first time the pivot has passed 1700.  ES's drift lower in the overnight is leaving it just barely above the new pivot so I will be expecting a test before the open on Monday.  As usual, bouncing off is bullish, breaking under is bearish.  The latter is a definite possibility.

Dollar index: The dollar remains in a down/up/down oscillating pattern, down 0.54% on Friday with a bearish engulfing pattern.  But we saw an identical pattern on Wednesday and it didn't pan out.  So with 200 day MA support just below us, I'm not touching this chart.  Logic says it's going lower but this chart has been anything but logical lately..

Euro: Despite putting lower highs and lower lows for three days now, the euro remains in a rising RTC and on Friday it put in a bullish piercing pattern.  That said, the indicators are still closer to overbought than oversold and the overnight is unable to advance.  I think on balance this chart is bullish for Monday but not unequivocally so.

Transportation: Last Thursday I was worried about the trans being overextended from their pivot though I thought one more up day might be possible.  Alas it was not to be as the trans dropped 0.28% on a divergence from the Dow which was up 0.19%.  This little star at overbought levels makes me think that lower is on the way here on Monday.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      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      6           0        0.545    543
July      10      2      4           4        0.875    486
August     2      0      0           0        1.000    158

     And the winner is...

I'm starting to see some more bearish warning signs tonight compared to last Thursday.  Of particular concern are the VIX and the trans.  Then there's the fact that tonight is the first night in a while that all three futures have not been moving higher at this hour of the morning.  So despite some hesitation because this has been a tricky call all year so far, I'm going way out on a limb and calling Monday lower.

ES Fantasy Trader

Portfolio stats: the account remains at $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 remain short at 1643.00.  We're in too deep to ditch this trade now.  I think it would be a mistake to dump it just when the market hits a record high.