Friday, February 7, 2014

Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1742.25.  Holding above is bullish.
  • Next week bias higher.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Last night's reversal signs paid off on Thursday as the Dow rose 188 points to afford me some level of redemption.  With that we have now retraced most of last weeks big dive.  Now we ask, is this the start of a new trend or is the relief rally over and another bear leg setting up?  The charts will set us straight as we look to Friday's close.

The technicals (daily)

The Dow: Monday night I wrote "Much has been made about the Dow breaking its 200 day MA.   But that's not always instantly fatal.  Three of the last four times this happened, the Dow popped back above the MA within a day or two. "  And how about that - we got one day breaking under the MA (Monday), then two days knocking on the door, and then Thursday, hey presto - right back above the 200 day MA we went  Remember this the next time you see something fall below its 200 day MA and then everyone starts running around like a head with its chicken cut off.

So with the indicators only just coming off oversold now and a bullish RTC exit in place and a bullish stochastic crossover, this chart now looks nothing but higher.

The VIXLast night I wrote "the candle and overbought indicators suggest lower to come."  Well let's hear it for the candlesticks because on Thursday the VIX plunged 14% in a move that also dropped it right out of its rising RTC for a bearish setup and confirmed the bearish stochastic crossover.    Booyah!  So the tea leaves all seem to point to further declines here.

Market index futures: Tonight all three futures are higher at 1:03 AM EST with ES up by 0.16%.  Thursday provided us with a nice green marubozu that almost completely retraced Monday's big dump and brought us back to that 1771 level that used to be support and is now resistance.  But with the indicators still rising and less than halfway to overbought, there seems to be enough gas in the tank to mount a successful assault on this level.  Overall this chart continues to look bullish.

ES daily pivot: Tonight the pivot jumps from 1742.25  to 1760.08.  Even at that, ES is still almost 10 points above the new pivot so this indicator remains bullish tonight.

Dollar index: Last night I wrote that a "bearish stochastic crossover though suggests lower to come" and that's just what happened on Thursday with the dollar losing 0.16% on a big bearish engulfing candle.  That crossover is now complete and RSI has peaked at overbought.  The momentum is now lower so I'd say the selling has further to go.

Euro: Last night I wrote "continued higher looks likely" and I got that one right too as the euro exited its descending RTC for a bullish setup with accelerating gains.  So with no resistance til around 1.3669 and indicators now on the move off oversold, it looks like there's more upside left here.

Transportation: ON Thursday the trans had a good day, up 1.50% on a marubozu that confirmed Wednesday's hanging man and brought the stochastic back to life bull-wise.  With indicators still recently off oversold, this chart continues to look positive.

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.  I have updated last week's numbers here.

Wk.# Week   % Bullish  % Bearish  NightOwl Poll SPX  Accuracy Poll
 2013                                                  32/52  25/48
 01 12/30       50         23        +      +   1841     0/1    0/1
 02  1/6        40         44        +      -   1831     0/2    1/2
 03  1/13       ??         ??        +      ?   1842
 04  1/21       36         41        -      -   1839
 05  1/27       35         43        -      -   1790
 06  2/3        21         46        -      -   1783

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  four weeks ago I voted bullish but the majority of the poll ovoted bearish.  Therefore, for the first time since I've been doing this, the poll was right and I was we were both right.  So for the second week in a row, I was wrong for a YTD accuracy of zippo.  And the poll as a whole is now at 50%. These numbers will obviously change as the year goes on.

Part of the problem is that my technical analysis does not spot tops, only when a trend is over.  So I will generally miss a top and that's what's been going on for the last two weeks.  For the record, I voted bearish again this week for the third time in a row.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      6           0       0.333

February   2       1      1           0       0.667    -67

     And the winner is...

The charts tonight aren't screaming buys but they're also definitely not bearish so I'm just going to go ahead and call Friday higher.  See you again Sunday night (assuming I'm not OD'ing on the Olympics which is a definite possibility by then).

ES Fantasy Trader

Portfolio stats:  the account remains at $103,000 after the first trade of 2014.  We are now 1 for 1 total, 1 for 1 long, 0 for 0 short.  Tonight we stand aside.

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