Friday, May 2, 2014

Friday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday uncertain.
  • ES pivot 1877.33.  Breaking below is bearish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Well on Thursday the Dow defied history by losing 22 points in a limited range session.  Let's see what that means for Friday.

The technicals

The Dow: On Thursday the Dow gave us a small spinning top that left us right on the lower edge of the rising RTC for a bearish setup.  The promise of the bullish stochastic crossover did not materialize and the indicators mostly turned lower so this chart is now looking bearish.

The VIX:  We also got some rare divergence with the VIX falling 1.19% on a day when the broader market was also lower.  I'm trying to understand what that means but in the meantime with no reversal candles, falling indicators not yet oversold and a good descending RTC going, it looks like the VIX could still go lower on Friday.

Market index futures: Tonight  all three futures are basically even at 12: 53EDT with ES dead flat and YM down just 0.02%. Thursday's red spinning top in ES and its failure to break resistance at 1880 suggests a possible move lower on Friday.  But the indicators are confused, with half moving lower and the rest moving higher.  This chart isn't at all clear.

ES daily pivot: Tonight the ES daily pivot rises from 1874.83 to 1877.33.   We remain above the new pivot, but just barely, so this indicator could turn bearish easily enough.

Dollar index:On Thursday the dollar put in a small bullish harami cross that while it remains inside the descending RTC suggests a reversal higher might be possible Friday.  Oversold indicators support that idea.

Euro: After big gains Wednesday the euro put in a gravestone doji on Thursday near the top of its rising RTC.  With indicators now topped at overbought and the overnight going nowhere, I'd say the euro goes lower on Friday.  And that would square with my call for a higher dollar.

Transportation: And finally more surprising divergence as the trans gained an impressive 0.671% to the Dow's 0.13% loss on Thursday.  With a razor thin rising RTC and three white soldiers, and no resistance til 7760, it looks like the trans could move higher again Friday.


Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      6           0       0.333
February   5       2      2           1       0.750    107

March     12       3      6           0       0.800    431
April      9       3      5           0       0.750    482

May        0       1      0           0       0.000    -22

     And the winner is...

There's something strange going on here that I don't quite get.  It's not normal for the VIX to go lower but the market to also go lower.  And it's not normal for the Dow and trans to be inversely correlated.  And I can't predict what I don't understand, so I'm just going to declare Friday uncertain and start over again next Monday.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we stand aside.

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