Friday lower

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

• Friday lower, low confidence.
  
• ES pivot 1685.42.  Holding above is bullish.
• Next week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

I'm not quite sure how to characterize Thursday's action.  I had expected that a drop below the ES pivot would cause a lower close and it did do that, but it didn't happen until 11:35 AM, which is more like late morning than mid-morning.  Still, the idea was right.  I think I will count this as neither right nor wrong in my accuracy scorecard below.  It is starting to feel though like things are changing, so let's see if we can get some clues from the charts for Friday.

The technicals (daily)

The Dow: The intraday chart for Thursday's Dow looks pretty lackluster, ending with just a 26 point decline but that formed a small red spinning top in bearish dark cloud cover position, and we're still above the upper BB.  Indicators remain extremely overbought and the stochastic is finally moving into position for a bearish crossover so I'd say this chart is now finally looking bearish for the first time in eight days.

The VIX:  On Thursday the VIX threw me curve by rising 3.40% on a bullish harami that exited the descending RTC for a bullish setup.  It also caused RSI to bottom at oversold so there's now some signs that the VIX may be moving higher on Friday.

Market index futures: Tonight all three futures are slightly higher at 1:03 AM EDT with ES up by  a scant 0.03%.  Like the euro (below) on Thursday ES put in a tall tomahawk type hanging man that nevertheless remained inside the rising RTC.  But it also traded through the upper BB and ended up as a dark cloud cover.  And the stochastic has just now completed its bearish crossover so this chart tonight really looks like it has lost its mojo.

ES daily pivot: Tonight the pivot barely budges from 1685.67  to 1685.42. ES has been threading about the pivot all evening long indicating a lot of indecision, so there's no guidance from this tonight.

Dollar index: The downtrend in the dollar remains intact as we lost another 0.04% on Thursday to remain inside the descending RTC.  We are though now just oversold and the stochastic is flattening out in preparation for a bullish crossover but we're not there yet.  So overall, this chart continues to look negative.

Euro: And on Thursday the euro put in a tall tomahawk-style hanging man near the top of Wednesday's big gains.   It was enough to form a bearish stochastic crossover.  And the overnight is now trading outside the rising RTC so that's a bearish setup.  This chart is definitely looking toppy to me.

Transportation: Wednesday's hanging man was confirmed on Thursday as the trans dropped a hefty 1.08%, just enough to cause a bearish stochastic crossover although we do remain inside the rising RTC.  Nevertheless, there does appear to be a tide change here and lower looks more likely than higher 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       6      5      6           0        0.545    543
July      10      2      4           4        0.875    486
August    11      3      6           2        0.813    687
September  4      0      1           1        1.000    270

     And the winner is...

The tide appears to be turning and the whole market is now looking toppy to me, with bearish warning signs that weren't there a few days ago starting to pop up.  The NYSE AD line has also broken its recent series of higher highs and higher lows.  And of course we've had a decent winning streak lately that's taken us from the lower BB to the upper.  So overall, I think the logical call here is for Friday lower.  See you again Sunday night.

ES Fantasy Trader

Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15  total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13.  I'd like to go short here but I'm just so gun-shy right now after having been badly burned with two disastrous shorts this year, I'm just going to let it pass.

Thursday higher if ES pivot holds

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

• Thursday higher if ES pivot holds, else lower.
  
• ES pivot 1685.67.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

ES, 9/11/13, 5 minute bars

Wednesday was a textbook example of how a conditional call works (click on chart to enlarge).  Note how ES wandered around above the pivot  (black horizontal line) in the wee hours until 10:20 AM when the bears marshaled their forces to take a stab at punching under.  This is right in the crucial mid-morning do-or-die area


That failed.  The following candle shows another attempt but this time on much lower volume.  That failed too.  And that's all it took.  After that it was just up, up and away, and the market closed higher.  This trick doesn't always work, but when it does it's pretty cool.

The pivot point is so important.  This is just one of many, many things I learned about trading from reading Dr. Brett Steenbarger's wonderful TraderFeed blog.

9/11

And also, let us not forget that today is 9/11, a date that like December 7, 1941, will live in infamy.  And let us further not forget that while the original perpetrators of this dastardly act of cowardice may be dead and gone now, their evil beliefs, driven by a religion of unspeakable hatred, mindless bigotry and intolerance, live on.  Just a word of warning...

So now let's truck on to Thursday and make some money. 

The technicals (daily)

The Dow: So the Dow has now given us a three white soldiers, and a bullish-enough pattern, though it did hit its upper BB at 15,300 and then some on Wednesday.  RSI is now very overbought at 92.25 but the stochastic crossover is taking its time in forming a bearish crossover.  We remain solidly in a rising RTC and until I see some more stars align, I can't call this chart lower yet.

The VIX:  Last night I wrote "This chart overall continues to look bearish" and I'm glad I did because on Wednesday the VIX fell another 4.89% on a big red marubozu.  That 200 day MA break gets 'em every time.  So this keeps us well within the falling RTC and with no support until 13.50, there remains at least a bit of room to run lower here.  NB - the lower BB isn't until 13.19.

Market index futures: Tonight all three futures are mixed at 12:47 AM EDT with ES down by 0.04%, YM down 0.03% but NQ up 0.04%.  So we're basically flat, which is less positive than we've been at this hour the past few nights.  That said, ES has now given us a bullish three white soldiers like the Dow, remains in a rising RTC, and also hit its upper BB at 1688 (which also happens to be a resistance line) on Wednesday.  Indicators are now overbought to near the point of being broken, ie. losing their predictive power.  So the overall gestalt of this chart remains bullish, but the incipient failure of the overnight to follow through makes me think we're running low on gas about now.

ES daily pivot: Tonight the pivot rises once again from 1678.25  to 1685.67. Just like last night, we were above all day and remain above the new pivot even with this jump but again just about by the same small amount.  So the same observations hold: this remains bullish until ES dives under the pivot.

Dollar index: Last night like the VIX I wrote "this chart continues to look bearish", and just like the VIX, I"m glad I wrote that too as the dollar slid .0.36% on Wednesday.  The indicators continue to fall, we're now in a steeply descending RTC and there's no support til 55.56 (remember, this is $USDUPX).  So I see no sign of a turn-around on this chart tonight.

Euro: After Tuesday's bullish RTC trigger, Wednesday delivered the payoff as the euro piled on more gains to fiish at 1.3310.  Indicators are now oversold but not overly so, and a new rising RTC is intact.  So in the absence of any bearish signs, I'd have to say we could see further gains here on Thursday.

Transportation: In a perhaps telling bit of divergence, the trans gained just 0.03% on Wednesday to the Dow's big 0.89%.  And they did it on a hanging man.  And RSI is highly overbought at 97.6 now.  And we closed above the upper BB.  And we popped out the left side of the rising RTC, an unusual move that sometimes presages a pullback.  All that's missing is a bearish stochastic crossover but right now the bull case for the trans is getting pretty weak.


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    11      3      6           2        0.813    687
September  4      0      1           1        1.000    270

     And the winner is...

When the basic technicals start giving reversal warnings but nothing happens, I like to go check out my other favorite charts: the NYSE Hi-Lo index and the AD line.  And right now the Hi-Lo is stuck on 100, so no reversal sign there.  And the AD line has been putting in higher highs and lower lows for seven sessions now, so no reversal there either.  And Thursday is historically quite bullish.  Finally, the Morningstar Fair Value index now stands at 1.02, overvalued to be sure, but still below dangerously high levels that precede breaks lower.

But because we have just now hit some resistance lines and Bollinger bands, and because the futures seem to be petering out in the overnight so far, I'm a bit wary of making an out and out bullish call.  On the other hand, the bear case is still not particularly strong.  So given all this and the proximity of ES to its pivot and the similarity of the situation to last night, I'm just going to make another conditional call - same rules: if ES manages to stay above its pivot of 1685.67 by mid-morning Thursday, we close higher.  But if it breaks under decisively before then, then we close lower.

ES Fantasy Trader

Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15  total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13.  Tonight we continue to stand aside.

Wednesday higher if ES pivot holds

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

• Wednesday higher if ES pivot holds, else lower.
  
• ES pivot 1678.25.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Huh - I sure wasn't expecting a 128 point pop in the Dow on Tuesday.  I figured Mr. Market might need a rest, but you've got to hand it to him, the old guy's got legs. Sign him up for the 2016 Olympics!  So how long can he keep it up?  Let's check the morning line and see what's what on Wednesday.

The technicals (daily)

The Dow: So the Dow has now given us two white soldiers and remains firmly inside a rising RTC.  Actually, everything I said last night still applies, including the conclusion: no reversal in sight yet.

The VIX:  I was getting into the mood for a move higher from the VIX last night, but I guess I got a bit ahead of myself - the downtr3end remains intact as the VIX lost another 7.04% on Tuesday on a big gap down closing just a wee bit under its 200 day MA.  That could be key, as previous breaches of this level have led lower.  So for now, oversold indicators are about the only sign of a reversal, but past experience proves that can take a while.  This chart overall continues to look bearish.

Market index futures: Tonight all three futures are lower at 12:57 AM EDT for the first time in a while with ES down by 0.10%.  ES blew right through the resistance at 1680 I mentioned last night but that seems to have taken a toll.  The new overnight came to within half a point of the upper BB but seems to be stalling out here.  This chart is therefore looking a bit less bullish than last night.

ES daily pivot: Tonight the pivot rises again from 1664.25  to 1678.25.  ES was sufficiently above the old pivot to remain above the new one, though now by less than three points, putting the pivot in play.  So this remains nominally bullish for the time being, but we need to look out for any attempt to break below the pivot.

Dollar index: The dollar made a weak attempt to regain the 200 day MA on Tuesday but failed miserably, ending up, oddly enough, 0.03% on a bearish harami.  With indicators not yet oversold, this chart continues to look bearish..

Euro: Last night I wrote "the euro still has room to run" and so it did, closing at 1.3268 on a small green spinning top on Tuesday.  Indicators are still not quite overbought but we now have at least the suggestion of a reversal.  The indecision is continuing into the overnight, which tends to reinforce the idea that we could be going lower on Wednesday.  There does seem to be some resistance around 1.3281.

Transportation: Once again, the trans outperformed the Dow with a monster 1.93% move to the upside on a giant green marubozu that took out the upper BB at 6545, stopping only because the bell rang.  However, the action of the last four days is starting to look exponential, and that always ends badly.  With the upper BB hit while indicators are already overbought, perhaps the trans may shift into reverse 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      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    11      3      6           2        0.813    687
September  4      0      1           0        1.000    270

     And the winner is...

The technicals are now looking a bit less rosy than they were last night after two big up-days but we remain solidly in a rising RTC and the VIX is definitely not looking bearish for stocks at the moment.  So I'm going to split the difference and make a conditional call: if ES stays above 1678.25 by mid-morning Wednesday, we'll close higher.  But if it breaks below that convincingly before then, then we close lower.

ES Fantasy Trader

Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15  total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13.  Tonight we continue to stand aside.

Tuesday uncertain

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

• Tuesday uncertain.
  
• ES pivot 1664.25.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Monday was a good example of why you don't call a reversal based solely on a doji, or even an army of dojis like we saw last night.  My call to go with the futures proved to be correct and the Dow finished up a nice 141 points.  But in this business you're only as good as your next call, so let's turn our attention to Tuesday.

The technicals (daily)

The Dow: On Monday the Dow posted its biggest gain in over a month.  This tall green marubozu was enough to bring us back from the brink and recover the center of the rising RTC.  Meanwhile the indicators moved a bit higher into overbought territory, but are not yet signaling a reversal.

The VIX:  Last night the VIX was being a bit ambiguous and the results on Monday were the same.  We got a 1.39% drop, but the hammer-style candle came on the upper end of Friday's and traded outside the descending RTC for a bullish setup.  The indicators continued lower into oversold and the stochastic is starting to flatten out for a bullish crossover.  It still looks like we're getting ready for a move higher and the signs tonight are a bit stronger than last night.

Market index futures: Tonight all three futures are modestly higher at 12:45 AM EDT with ES up by 0.07%.  ES had a very good day indeed Monday, with a big green marubozu that kept us inside the rising RTC and broke right through resistance at 1676.  Indicators are now becoming quite overbought, but we've seen that movie before.  The market has shown an ability this year to remain overbought for long periods without retrenching.  There is now no resistance til 1680 and then the upper BB at 1684.75.

ES daily pivot: Tonight the pivot jumps from 1652.08  to 1664.25.   Even with that big gain and not much happening with ES in the overnight, we're still comfortably above the new pivot, so once again, this indicator remains positive.

Dollar index: On Monday the dollar gave us some direction by dropping a big 0.45% and slamming right through its 200 day MA.  With a completed bearish stochastic crossover, a bearish RTC exit, and indicators still overbought but having peaked, it's four strikes and yer out.  Look for more downside on Tuesday..

Euro: Last night I postulated "a possible move higher on Monday" for the euro and it delivered, with a big gain that gave us a two white soldiers, a bullish descending RTC exit and indicators rising off oversold.  So despite two solid advances, I think the euro still has room to run from here.  And the overnight pin action seems to be confirming that, at least so far.

Transportation: The trans outperformed nicely on Monday, up 1.40% on a green marubozu.  That keeps the rising RTC going while driving the indicators more into overbought.  However, with no resistance til 6490 and the upper BB not until 6522, this locomotive still has some room to run on Tuesday.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.

Wk.# Week   % Bullish  % Bearish  NightOwl Poll SPX  Accuracy 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   16/29  13/26

 30  7/22       42         19        +      +   1692   16/30  13/27

 31  7/29       39         17        +      +   1692   16/31  13/28

 32  8/5        46         27        +      +   1710   16/32  13/29

 33  8/12       32         41        -      -   1691   17/33  14/30

 34  8/19       23         54        -      -   1656

 35  8/26       23         50        -      -   1664 

 36  9/3        21         54        -      -   1633

 37  9/9        35         30        +      +   1655

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 bearish four weeks ago, so once again we finally both right.  Therefore we continue the year with an accuracy of 17  for 33, or 52%, back to a bit positive.   The poll as a whole rises to 14 for 30 or 47% - still contrarian territory.

This week I remained with the majority by shifting my vote to bullish, something we've not seen since the week of August 5th.  Although October is historically a dreadful month, this year we've seen a bunch of correcting happening a bit earlier than usual, so perhaps the downturn has already happened.  With things beginning to look ready for a turn-around on both the weekly and monthly charts, I'm back to bullish for the monthly outlook. 

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    11      3      6           2        0.813    687
September  4      0      0           0        1.000    270

     And the winner is...

All of the dojis we were seeing last night were effectively canceled on Monday, indicating that the current uptrend remains in force.  However, it is common for big one-day gains to be followed by a pause, something we've been seeing quite often this year in particular.  There's also a greater than usual amount of headline risk in the air surrounding Syria right now.

So while the bullish forces I've seen the paste few nights remain in place (though they're weakening a bit) I don't think the bears are ready to roar just yet.  In fact we could see Mr. Market take a rest and throw us another doji.  Therefore, logic dictates calling Tuesday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15  total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13.  Tonight we continue to stand aside.

Monday higher

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

• Monday higher, low confidence.
  
• ES pivot 1652.08.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

[The Night Owl apologizes for the lack of a post last Thursday night.  I try to avoid unscheduled skips but due to a set of unavoidable circumstances, it wasn't possible to do the analysis and put the post together in time.]

Looks like we didn't miss much on Friday - the Dow was down a bit, everything else was up a bit.  But we got some funny candles so let's take a closer look.

The technicals (daily)

The Dow: Friday's small move came in the form of a big doji.  Real big, evidently having something to do with Syria.  I scrolled back two years and couldn't find a bigger one.  In any event it left us real close, but not over the edge of the rising RTC and pushed RSI to overbought.  So there's some indecision here but it will definitely require Monday for confirmation of any reversal.

The VIX:  And on Friday the VIX gave us a big inverted hammer for a small 0.51% gain.  That brought RSI to just oversold and the stochastic is moving lower too, though not yet in position for a bullish crossover.  We remain in a descending RTC so it looks like the VIX is warning us of a reversal coming soon, but maybe not just on Monday.

Market index futures: Tonight all three futures are higher at 12:41 AM EDT with ES up by a solid 0.29%.  We got two reversal warnings last Thursday and Friday and apparently neither one panned out.  The new developing candle remains  firmly inside the rising RTC although the indicators are becoming quite overbought and the stochastic is flattening out for a bearish crossover, though probably not on Monday.  For now this chart looks bullish.

ES daily pivot: Tonight the pivot dips from 1653.92  to 1652.08.  With ES moving higher in the Sunday overnight, this leaves us above the new pivot by a reasonably bullish margin.

Dollar index: And yet another doji on Friday, this time for the dollar, giving back all of Thursday's gains.  Even with that though, we remain overbought, though right on the edge of the rising RTC.  So this chart is pretty ambiguous and requires confirmation of direction on Monday.

Euro: After crossing under its 200 day MA on Thursday, the euro bounced right back above it on Friday, retracing most of the previous day's losses.  Indicators remain oversold and the resilience shown in not caving on crossing the MA suggests a possible move higher on Monday.

Transportation: After two nice days of gains, the trans lost 0.13% on Friday on a classic spinning top.  However, this traded entirely outside the descending RTC so that's a bullish trigger.  The indicators are also not yet overbought, so this candle has to be taken with a grain of salt.  This chart still looks like it has a positive bias.


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    11      3      6           2        0.813    687
September  3      0      0           0        1.000    129

     And the winner is...

Tonight the charts reflect a lot of uncertainty, both about Syria and domestic economic news, leaving us in something of a quandary.  We're seeing dojis galore all over the place but these are just suggestions of reversal possibilities, not direct predictions.  The conservative play would be to simply call Monday uncertain, but I believe that the futures are the tie-breaker here, so I will go out on a limb and call Monday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15  total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13.  Tonight we continue to stand aside.