Friday lower

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

• Friday lower, medium confidence.
• ES pivot 1873.08.  Holding below is bearish.
• Next week bias lower technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going short at 1871.50.

Recap

Well that sure was weird.  In more than 10 years of observing the markets on a daily basis I've never seen this.  On Thursday the Dow closed exactly unchanged - down to 1/100th of a point.  This is like flipping a coin and having it land on edge.  Now here's the problem - last night I called the Dow higher.  Well it didn't close higher but it also didn't close lower.  So was I right or was I wrong?  I guess we'll just go by Blackjack rules and call it a push.  IN my defense, I'll point out that both the Nasdaq and SPX did close higher.  Ah well - no point dwelling on it - let's move on to see what Friday might have in store.

The technicals

The Dow: Last night I called this the "ah-choo" market - the sneeze waiting to happen but won't.  Well Thursday was just one more "ahh..." as the Dow formed a textbook-perfect doji.  With largely sideways motion for two days now and indicators still extremely oversold, the logical next direction remains lower.  Oh, and Thursday's trade was a bearish RTC setup.

The VIX:  Last night I said there was still no clear reversal here and while the VIX did gain 036% it did it on  a long-legged doji that simply reflects more uncertainty.  Which way this chart goes on Friday is anybody's guess.

Market index futures: Tonight  all three futures are lower at 12:34 EDT with ES down 0.07%.  ES followed Wednesday's doji with a red hanging man in dark cloud cover position.  In addition, we've finally gotten the bearish stochastic crossover I've been waiting for.  Also, the overnight is trading outside the rising RTC and that's a bearish setup.  ES would need to close above 1879.50 on Friday to cancel this.  Indicators remain highly overbought and we've been seeing some bearish divergence in both OBV and money flow which have been dropping for three days now even as ES moved higher.  To me, this all spells lower for Friday

ES daily pivot: Tonight the ES daily pivot drops for the first time in a while, from 1873.75 to 1873.08.   And we are now below the new pivot so this indicator has turned bearish.

Dollar index: Last night I called the dollar bearish and it did lose 0.07% on Thursday, but did it with a spinning top that doesn't prove much by itself.  However, with indicators now having officially topped at overbought and a newly completed bearish stochastic crossover, I'd say there's more downside to come on Friday.

Euro: Ah, it's dojis galore tonight with one more from the euro on Thursday.  Coming higher than Wednesday, it now leaves the euro in a clear, if choppy uptrend.  With a completed bullish stochastic crossover, and rising indicators not yet overbought, I'd say the euro's looking higher for Friday.

Transportation: If there's any guidance in the charts tonight, it comes from the trans which on Thursday dropped 0.42% from highly overbought levels.  That was enough to exit the rising RTC with a bearish setup and send both money flow and OBV lower.  At this point I'm willing to claim that the trans are looking lower on Friday.

Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   5       2      2           1       0.750    107
March     12       3      6           0       0.800    431
April      7       2      4           0       0.778    342

     And the winner is...

The number of bearish signs I'm seeing across the board has increased since last night, and the signs are becoming more unambiguous.  The market is now looking pretty toppy to me and seems to be ready to roll over.  Accordingly, we're just going to call Friday lower and call it a week.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $105,625 after two trades in 2014, staring with $100,000.  We are now 2 for 2 total, 2 for 2 long, 0 for 0 short.  Tonight we go short at 1871.50.