Friday, June 20, 2014

Friday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday lower, low confidence
  • ES pivot 1948.83.  Breaking below is bearish.  Switching to the "U" contract tonight.
  • Next week bias lower technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader stands aside.

Dow daily, 6/19/14
At the risk of committing the deadly sin of market hubris, I'm going to point out that last night I wrote "I'm going to go ahead and call Thursday higher, with the caveat that I don't expect a large move and it might end up as a doji day."  Now take a look at this little snippet of the daily Dow chart and notice Thursday's candle on the right hand edge.  A classic hanging man.  I rest my case.

So with that said, I batten down the hatches in anticipation of Mr. Market's revenge for thinking of myself as the world's greatest trader.  Meanwhile maybe we can get lucky again and call Friday right.

The technicals

The Dow: Since I've got the Dow chart up, you can clearly see the bullish RTC exit on Tuesday, and it was up, up and away from there.  You can also see the exponential look to the chart, and those always come to an end eventually.  And you can see Thursday's nice little hanging man, warning of a reversal on Friday.  However, the indicators are still a long way from overbought, so this is only a warning.  Had it been a real reversal, you would have been told to sell sell sell.  And with strong resistance just 30 points above, it's not clear to me that the Dow can push higher on Friday.

The VIX: Last night I also wrote about the VIX  "my expectation would be for some sideways motion rather than any further down."  And that was about it on Thursday with a scant 0.09% gain on a small green spinning top that just touched the lower BB which is now falling away.  It looks like a DCB but at these levels there seems to be more upside potential than downside risk.  So like the Dow we have another doji here.

Market index futures: Tonight all three futures are lower at 12: AM EDT with ES down  %.  Like the other charts, ES had a doji day on Thursday with a small green spinning top sitting on top of Wednesday's action.  The indicators are, somewhat surprisingly still not yet overbought and the stochastic hasn't even begun curving around for a bearish crossover.  And we're still well inside a rising RTC.  But the overnight is guiding lower so that has to give one pause.

ES daily pivot: Tonight the ES daily pivot rises again from 1942.83 to 1948.83.  The failure of ES to make any headway in the overnight now leaves us precariously less than one point above the new pivot, but still just barely bullish for the time being.  Note that we have now switched to the "U" contract.

Dollar index:  Last night I thought the dollar had a chance to move higher but refused to call it, opting instead to wait for confirmation.  Good thing too, since the dollar instead  plunged 0.34% on Thursday with a gap-down green hammer that was stopped only by the lower BB.  It drove RSI oversold but did not set up the stochastic for a bullish crossover.  Still, with 2/3 of a morning star now in place, we have to wonder if Friday might now come in higher.

Euro: And last night I also wrote "this chart still looks bullish".  And indeed, the euro gapped up on Thursday to just touch the 200 day MA before closing at 1.3611 on an inverted hammer.  This, to me, looks like the blow-off of the past six days of action featuring tiny gains one after another.  Now we have RSI overbought, though the stochastic has not graced us with a bearish crossover yet.  And there's no RTC going either so this chart remains uncertain for Friday.

Transportation: The trans on Thursday were pretty much a carbon copy of the Dow with a small doji, spinning top in this case on top of Wednesday's monster pop.  And although the indicators are amazingly still not yet overbought, we at least have a reversal warning here.


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        6       7      6           0       0.462    -6
June       7       3      3           2       0.750    176

     And the winner is...

Ah, there's a whole army of dojis marching across the charts tonight, all warning of an impending reversal.  But all of these signs require confirmation.  And to confuse the issue further, Friday is triple-witching.  According to The Stock Trader's Almanac, the Dow is exactly 50/50 on this day.  But we also have a VIX that looks ready to turn and futures that are lower in the overnight so far - not what we've been seeing the past few nights at this hour.

My best guess is that traders are going to want to lock in some of their profits from Wednesday and Thursday and not be long into the weekend given the latest geopolitical crisis in the Middle East.  So accordingly I'm going way out on a limb and calling Friday lower.  That's all she wrote.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $113,000 after seven trades in 2014, starting with $100,000.  We are now 5 for 7 total, 3 for 3 long, 2 for 3 short, and one push.  Tonight we stand aside given the expected uncertainty.

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