Friday, August 1, 2014

Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence..
  • ES pivot 1937.92.  Holding below is bearish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Yowsa!  I'm really glad I called Thursday lower because I sure wasn't expecting a 317 point collapse in the Dow, the worst day for the market since February 3rd.  I'm still not sure I entirely understand this - disappointing earnings, interest rates, Argentinian bonds, whatever, it seems like an awful lot of wealth destruction for no really good reason.  But coming at the end of the month, we have an interesting situation, so let's see how Friday might play out as we sift through the rubble of Thursday's charts.

The technicals

The Dow: Holy inverted exponential - Thursday's 1.88% collapse in the Dow just fell off a cliff, blasting through the lower BB like it wasn't there and driving the indicators to extreme oversold levels as the 200 day MA hove into view.  This is just nuts.. It's worth nothing though that when we had out last triple digit loss back in February, the next day was higher/  However, that one came after two weeks of relentless daily falls.  This time, we're only down for about a week.  On the other hand, in February, the reversal came right as we touched the lower edge of a long-running rising RTC, back to December 2012.  Thursday's close of 16,563 is just short of that line.  So while there's nothing technically indicating a reversal here, I'd have to think  that a DCB could be in the offing if nothing else.

VIX daily
The VIX: OK, this one is definitely worth a chart.  Remember how the VIX spiked on the 17th, right through its 200 day MA, prompting my "holy moly" comment?  Well on Thursday the VIX exploded, gaining 27.16% with a green marubozu spaceship that gapped up right through the 200 day MA and left the upper BB in the dust.  Check it out.  This is the highest VIX close since April, but the rate of increase hasn't been seen since January back when, oh you remember, the big news was ... yeah right - I don't remember either.  Three months from now, we won't remember what this one was about.

But back then, the VIX retraced a bit the next day but then went on to make further highs peaking at 21.48 as Mr. Market flushed all his meds down the toilet.  But with the VIX now nearly two points above its upper BB, I have to think it's going  to retrench a bit on Friday.  The ascendance into insanity may not be over, but two in a row like this would be highly unusual.

Market index futures: Tonight all three futures are higher at 12:27 AM EDT with ES up 0.29%.  On Thursday like the Dow ES had their biggest drop since February 3rd, also blasting through their lower BB.  But this one was more riveting, coming as it did after a week of tiny moves lower.  In any case, it moved all the indicators swiftly oversold and spun the stochastic around into position for a bullish crossover Real Soon Now.  The overnight action leads me to believe that Wednesday's move was overdone and we could see some retracing on Friday.

And I'll note that the last two times ES broke under its lower BB, it bounced right off the next day.  So far, the new overnight seems to be supporting that.

ES daily pivot: Tonight the ES daily pivot swoons from 1965.25  to 1937.92.  And even after that plunge, we're still below the new pivot by a good eight points so this indicator continues bearish.

Dollar index:  The dollar managed to avoid the carnage on Thursday, up just 0.01%on a funny red spinning top.  We're still in a rising RTC and still clambering up the upper BB but this is the first credible reversal sign I've seen here in two weeks.  With RSI still pegged at 100 for now four days in a row, I can't help but think that what goes up must come down sooner or later - and it's getting pretty late.

Euro: Considering the havoc in all the other charts, the euro had a fairly tepid asymmetric spinning top doji on Thursday for just a small loss.  But the descending RTC remains intact and the indicators remain flat on the floor.  So until we see a real reversal sign, this one's going lower.  Note too that the 200 week MA at 1.3418 did not hold - a bad sign.

Transportation: Huh - well so much for my spinning top reversal at the end of a waterfall theory.  The trans on Friday  were trashed along with everything else in sight, closing just above their lower BB. We crashed right though support at 8200, stopping at the next support of 8144.  There's just nothing bullish about this chart other than the chance of a DCB on extremely oversold indicators and the lower BB touch.


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    -67
June       8      10      3           2       0.500    132

July       6       4      4           3       0.692    639

     And the winner is...

Ack!  A Baby Ruth!
The first day of most months is historically positive, but not August.  However, we took such a big hit on Thursday that convention would dictate at least a DCB on Friday - particularly since my feeling is that Thursday's action was overdone, sort of like the swimming pool scene in Caddyshack.  So I'm going to go out on a limb, claim that it's not so bad, and call Friday higher.  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.

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