Friday, October 10, 2014

Friday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday lower, low confidence.
  • ES pivot 1936.25.  Holding below is bearish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Criminey!  I sure picked a bad day to be wrong, with the Dow cratering 335 points on Thursday, thanks to Mario Draghi or 10 other reasons.  Once again the picture has changed so we'll examine the charts, for whatever they're worth, to see where Friday might be headed as the spooky month of October continues its grand tradition of scaring the pants off you, or dresses, or whatever you wear.

The technicals

The Dow: Instead of side-by-side lines, the Dow has now given us an equally rare stick sandwich pattern.  While this is nominally bullish,. there are suggestions that in practice it is actually a continuation pattern, which would spell more downside.  With the 200 day MA hoving into view at 16,591, I'd expect the Dow to want to take a look at it, just the way it did on August 7th.  With a bearish stochastic crossover in place and indicators not yet oversold (even after this bloodbath), this seems like the next stop.

The VIX:  Holy moly - what a difference a day makes.  We went from a big bearish engulfing pattern on Wednesday to a giant.bullish three outside up on Thursday.  This outsized 24% rocketship closed well above the upper BB but even at that the indicators are not yet overbought and we have a fresh bullish stochastic crossover in place.  So it's not out of the question to see even more upside on Friday.  It's worth nothing we blasted right through yearlong resistance around 17.30 like it wasn't even there, not to mention the 200 week MA.  We may now be looking at something like the end of January when the VIX hit 21.5.

Market index futures: Tonight all three futures are lower at 12:27 AM EDT with ES down  0.29%.  ES, like the Dow gave us the stick sandwich treatment on Thursday.  This chart looks vaguely like it's putting in a megaphone pattern but with all this turbulence lately, it's hard to say.. In any case, the new overnight has already broken support at 1925 and remains well inside a descending RTC.  At this point a test of support at 1900 isn't out of the question.

ES daily pivot: Tonight the ES daily pivot dives from 1947.92  to 1936.25.  We remain below the new pivot so this indicator turns bearish again.

Dollar index:  On Thursday the dollar put a stop to its three day losing streak with a 0.29% bullish piercing pattern.  Indicators though are still not quite oversold and we remain in a descending RTC, so this reversal warning has to be taken with a grain of salt.

Euro: Meanwhile, the euro on Thursday tried to capitalize on Wednesday's gains but failed, ending the day at 1.2693 on a bearish red spinning top harami.  The stochastic is about to put in a bearish crossover and the indicators are almost overbought

Transportation: Another piece of bad news - the trans took it on the chin even worse than the Dow on Thursday, down 2.41% and just laughing at Wednesday hammer.  Next support is 7972 and with a completed bearish stochastic crossover, I'm fairly sure we'll visit that level on 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        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    1       3      2           1       0.400   -148

     And the winner is...

With all the charts looking quite bearish and some important support levels just below us, and with ES seeming to be wanting to have a look at them, I've got no other choice than to batten down the hatches and call Friday lower.  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 - this roller coaster is a bit too wild for me.

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