Friday, October 17, 2014

Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence..
  • ES pivot 1845.17.  Holding above is bullish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Thursday provided us with sort of a mini-rerun of Wednesday as the Dow continued to plumb the depths looking for a bottom.  And even thought he Dow ended down a bit both the Nasdaq and SPX managed to post minor gains (that still felt like victories).  So now we move on to the scariest day of the year, October op-ex Friday.  Boo!

The technicals

The Dow: The Dow ended Thursday down just 0.15% with a nice harami hammer to Wednesday' big brother.  With a higher low and right on the edge of the descending RTC, this is an encouraging sign.  OTOH, look what's coming: according to the Stock Traders' Almanac, this Friday was down six in a row from 2006-2010 and it's close to the infamous October massacre when the Dow imploded for a 22.6% one day loss on October 19th, 1987.  Still, with indicators remaining oversold and a completed bullish stochastic crossover, this chart looks like it's got more upside potential than downside risk.

The VIX: Last night I wrote "the VIX is ready for a fall" (though I'll admit I equivocated a bit) and sure enough on Thursday it came back 4% to 25.2.  It's now only in low-earth orbit rather than interstellar space.  But with a tall red bearish engulfing candle confirming Wednesday's tall doji, a completed bearish stochastic crossover and indicators remaining highly overbought, it looks like there's still a lot more downside available here.

Market index futures: Tonight all three futures are higher at 12: 14 AM EDT with ES up 0.28%.  After Wednesday's giant hammer, on Thursday ES gave us a long-legged doji for two reversal signs in a row.  Indicators remain pretty oversold and the stochastic has completed a bullish crossover.  The overnight (so far at least) seems to be confirming that with a decent gap-up.  It's also exiting the latest descending RTC for a bullish setup.  So despite all the Chicken Littles around, I've got to believe we're not looking at more triple digit declines on Friday.

ES daily pivot: Tonight the ES daily pivot dips from 1847.67 to 1845.17.  That still leaves us above the new pivot so this indicator remains bullish.

Dollar index:  The dollar continues to be a political football with technicals taking a back seat.  Thursday's 0.23% loss confirmed Wednesday's hanging man, but I'm not making anything out of this.  This one can go anywhere on Friday.

Euro: On Thursday the euro exited a descending RTC all the way back to July 2nd for a bullish setup after bottoming on 10/3.  Despite a small hanging man and overbought indicators, I think there's still higher to come here.

Transportation: For the third day in a row the trans outperformed the Dow in a big way with a 1.12% gain on Thursday that sealed the 200 day MA breakout and exited the descending RTC for a bullish trigger. The trans downtrend is now officially over.  And with indicators remaining oversold and a bullish stochastic crossover in full force, we're not done going higher 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    -67
June       8      10      3           2       0.500    132
July       6       4      4           3       0.692    639 August     8       7      2           2       0.588     81 September  6       6      5           2       0.571    376 October    3       5      2           1       0.444     11

     And the winner is...

Friday is op-ex day, with all the usual machinations that entails.  If I had any sense, I'd just call it uncertain and go home.  But I'm seeing a pretty decent continuation of the bullish reversal signs from Wednesday in the charts tonight.  And the SPX Hi-Lo indicator has now hit zero, which means it's got nowhere to go but up from here.  So I'm going to go out on a limb and call Friday higher, assuming it doesn't get sawn off on me by the ECB, the Greeks, the Ukraine, Ebola, angry Hong Kongers, the Middle East Head Choppers Society, falling oil, und so weiter.  That's all she wrote.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside - I am by policy boycotting the market until the VIX goes back below 20.

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