Friday, January 31, 2014

Friday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday uncertain.
  • ES pivot 1780.92.  Holding below is bearish.
  • Next week bias higher.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

It was difficult and a bit scary to call Thursday higher after Wednesday big plunge in the Dow but no guts, no glory as they say, and we were rewarded with a nice 110 point rebound.  Now with just one day left in the week and the month, let's see if we can go out with a winner with the help of the charts.

The technicals (daily)

The Dow: The Dow retraced a bit more than half of Wednesday's losses to close at 15,848, a level that has served as both support and resistance in three of the last four days.  It also leaves us right on the edge of the descending RTC, just short of a bullish setup.  And RSI and the stochastic are forming a shallow bottom that looks more bullish than bearish.  I have to think there's more upside due here.

The VIXThe VIX meanwhile did move lower, but only by .0.35% on a funny gap-down green candle.  Like the Dow, it is attracted to a particular level, in this case 17.24.  However, here there's no RTC so we're left with indicators that remain overbought suggesting that the next move is lower.

Market index futures: Tonight the futures are decidedly mixed at 12:52 AM EST with ES barely lower by 0.04%, YM off 0.10% but NQ up a solid 0.31%. ES is having trouble finding a direction with the last four days in a row alternating red and green.  Support around 1772 continues to hold but there doesn't seem to be much gas in the tank to propel a move higher, so we kind of sputter along.  I'm not feeling the love here tonight.

ES daily pivot: Tonight the pivot ticks up from 1778.83  to 1780.92.  After crossing below the old number just before midnight, ES reversed and is now knocking on the door of the new pivot, showing interest in mounting an attack on it.  This sort of pattern is inherently unstable so this indicator is indeterminate tonight.

Dollar index: Finally the dollar snapped out of its doldrums with a big 0.76% gap up on Thursday.  That leaves a lot of blank space wanting retracing, but the dollar has not been good about doing that right away and with the upper BB coming into view, RSI now only just off oversold and a bullish stochastic now clearly completed, more upside is not out of the question for Friday..

Euro: Last night I wrote "the only call here is for even more continued downside" and continue it did with the euro tumbling all the way back to 1.3550, stopping right on a support line.  The overnight is flat and the indicators are now in No Man's Land between overbought and oversold so the only question now is whether the support will hold on Friday.  My best guess is that we could get a bottoming day here.

Transportation: The stick sandwich pattern I mentioned last night here paid off on Thursday with a 1.55% gain for the trans that broke the resistance at 7274.  With indicators still only just off oversold, this chart now looks at least mildly bullish.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      5           0       0.333

     And the winner is...

Historically the last day of January is positive, but this hasn't been a typical January and I'm not getting a good reading either positive or negative from the charts tonight so I'm afraid I'm just going to play it safe and call Friday uncertain.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $103,000 after the first trade of 2014.  We are now 1 for 1 total, 1 for 1 long, 0 for 0 short.  Tonight we stand aside.

Thursday, January 30, 2014

Thursday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher, low confidence.
  • ES pivot 1778.83.  Holding below is bearish.
  • Friday bias higher.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Huh - well that's what I get for violating my own rule of not calling Fed days.  Instead of going up, the Dow rook  a 190 point dump on Wednesday..  At least I did not commit any ESFT money to this.  But with this unexpected turn of events we now need to consult the charts to see how this may affect Thursday.

The technicals (daily)

The Dow: On Wednesday the Dow took a major reversal with a big red bearish engulfing marubozu that killed the incipient rising trend and closed below the lower BB stopping right on support at 15,727.  That puts us right back in a tight (Pearson's = 0.961) descending RTC while leaving the indicators oversold and squashing what had looked like a bullish stochastic crossover last night.  So at this point, this chart returns to bearish - and news flash - the 200 day MA is coming into view at 15,455.  Uh oh!

The VIXI have to say I was very surprised to see the VIX move up nearly 10% on Wednesday.   That leaves it back above the upper BB for the third time in four days, complete with bearish stochastic crossover, so I'm like, what the heck?  But what goes up must come down and this is still a technically bearish pattern so all I can do is claim once again that the VIX is going lower from here.  I certainly wouldn't be going long a chart like this.

Market index futures: Tonight all three futures are higher, just like last night at 1:03 AM EST with ES up by 0.17%.  Despite a tall red candle on Wednesday, ES found support once again at precisely 1771.  And the new overnight is moving higher from there, so with indicators remaining oversold that is a bullish sign.  We also now have a bullish RTC trigger though the channel was admittedly only three candles long so I'd take this one with a grain of salt.  Nonetheless I have to believe this chart looks like it has more upside potential than downside risk.

ES daily pivot: Tonight the pivot drops again from 1785,42  to 1778.83.  After a move lower early Wednesday we remai below the new pivot so this indicator is now bearish.

Dollar index: On Wednesday the dollar put in a not very interesting move that leaves the $USDUPX jittering around in a range of 54.86 to 55.04.  We're now quite oversold but this currency just refuses to get into gear, so after being wrong last night I'm just going to have to wait & see on this one..

Euro: The euro has been in a weird slow drift lower for a week now with a whole train of dojis  They nonetheless form an excellent, if shallow descending RTC.  At least I was right when I wrote last night "I see more downside to come here".  So with the overnight running lower again, I guess the only call here is for even more continued downside. 

Transportation: The trans on Wednesday put in an unusual pattern called the stick sandwich, with a green candle "sandwiched" between two red ones.  And it's a bullish reversal pattern.  Supporting this is a stochastic that remains on the verge of a bullish crossover and other indicators that are close to oversold.  My best guess here is that the next move is higher.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      10      5           0       0.286

     And the winner is...

Hmm - well after being badly wrong for Wenesday it's hard for me to come back and say the same thing again, but most of the signs I see tonight are technically bullish so that's how I'm calling it - Thursday higher.  That's all, she wrote.

ES Fantasy Trader

Portfolio stats:  the account rises to $103,000 after the first trade of 2014.  We are now 1 for 1 total, 1 for 1 long, 0 for 0 short.  Tonight we stand aside.

Wednesday, January 29, 2014

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, low confidence - Fed day.
  • ES pivot 1785.42.  Holding above is bullish.
  • Rest of week bias higher.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Tuesday's action played out picture-perfect just like a candlestick charting textbook.  We had an exponential run lower in the Dow ending with a spinning top bottom.  And that was confirmed with Tuesday's 91 point gain.  Bada bing!  Now let's see where Wednesday's headed.

The technicals (daily)

The Dow: The Dow's advance on Tuesday caused RSI to bottom from very oversold and moved the stochastic very close to a bullish crossover.  This chart now looks decidedly bullish.

The VIXLast night I wrote "this one still has more downside to go" and that's just where the VIX went on Tuesday, down nearly 10% on a tall red marubozu that took RWI off extreme overbought, caused a bearish stochastic crossover, and finally got us back below the upper BB.  So the outlook remains bearish for the VIX.

Market index futures: Tonight all three futures are higher at 12:33 AM EST with ES up by a solid 0.49%.  Tuesday's gains were a big bullish engulfing candle that bottomed out RSI and completed the stochastic's bullish crossover, getting ES off the lower BB.  This chart now looks solidly bullish.  

ES daily pivot: Tonight the pivot inches up from 1778.25  to 1785.42.  ES remains well above the new pivot so this indicator remains bullish.

Dollar index: Last night I wrote "I see more upside here" and we got just a tad, with the dollar up 0.06%.  The stochastic is just about to do a bullish crossover and RSI has begun moving higher so I'd say Wednesday looks higher for the dollar.

Euro: Last night I wrote "this chart looks like it's going to drift lower" and that's just what it did Tuesday, posting a small loss on a small hanging man.  RSI remains overbought, the stochastic just completed a bearish crossover, and the overnight is continuing the decline so I see more downside to come here.

Transportation: The trans had an excellent day on Tuesday gaining just over 1% on a tall green bullish engulfing marubozu over Monday's candle that touched the lower BB.  RSI remains just barely oversold and the stochastic remains low - its next move will have to be a bullish crossover.  So this chart looks positive now.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  I have updated last week's numbers here.  And the week before never did appear so it remains listed with "??".

Wk.# Week   % Bullish  % Bearish  NightOwl Poll SPX  Accuracy Poll
  1  12/31      40         48        -      -   1402   0/1
  2  1/7        47         30        +      +   1466   1/2
  3  1/14       52         15        +      +   1472   2/3
  4  1/22       50         21        +      +   1486   3/4
  5  1/28       44         26        +      +   1503   4/5
  6  2/5        40         36        +      +   1513   5/6
  7  2/11       43         25        +      +   1518   6/7
  8  2/19       21         43        -      -   1520   6/8
  9  2/25       30         52        -      -   1516   6/9
 10  3/4        29         39        -      -   1518   6/10
 11  3/11       41         26        +      +   1551   7/11
 12  3/18       41         37        +      +   1561   8/12
 13  3/25       31         38        +      -   1557   8/13    9/13
 14  4/1        38         38        +      x   1569   9/14    9/13
 15  4/8        32         50        -      -   1553   9/15    9/14
 16  4/15       33         50        +      -   1589   10/16   9/15
 17  4/22       19         63        -      -   1555   10/17   9/16
 18  4/29       33         58        -      -   1582   10/18   9/17
 19  5/6        50         31        +      +   1614   11/19  10/18
 20  5/13       37         37        +      x   1634   12/20  10/18
 21  5/20       50         25        +      +   1667   12/21  10/19
 22  5/28       37         33        +      +   1650   12/22  10/20
 23  6/3        29         38        -      -   1631   13/23  11/21
 24  6/10       38         38        +      x   1643   13/24  11/21
 25  6/17       32         40        +      -   1627   14/25  11/22
 26  6/24       13         46        -      -   1592   14/26  11/23
 27  7/1        25         42        -      -   1606   14/27  11/24
 28  7/8        42         29        +      +   1632   15/28  12/25
 29  7/15       48         22        +      +   1680   16/29  13/26
 30  7/22       42         19        +      +   1692   16/30  13/27
 31  7/29       39         17        +      +   1692   16/31  13/28
 32  8/5        46         27        +      +   1710   16/32  13/29
 33  8/12       32         41        -      -   1691   17/33  14/30
 34  8/19       23         54        -      -   1656   17/34  14/31
 35  8/26       23         50        -      -   1664   17/35  14/32
 36  9/3        21         54        -      -   1633   17/36  14/33
 37  9/9        35         30        +      +   1655   18/37  15/34
  28 9/16       40         28        +      +   1688   19/38  16/35
 39 9/23        52         36        +      +   1710   20/39  17/36
 40 9/30        39         43        +      -   1692   21/40  17/37
 41 10/7        30         33        +      -   1691   22/41  17/38
 42 10/14       48         22        +      +   1703   23/42  18/39
 43 10/21       57         30        +      +   1745   24/43  19/40
 44 10/28       59         19        +      +   1760   25/44  20/41
 45 11/4        42         25        +      +   1762   26/45  21/42
 46 11/11       39         39        +      x   1771   27/46  21/42
 47 11/18       52         30        +      +   1798   27/47  21/43
 48 11/25       58         29        +      +   1805   28/48  22/44
 49 12/2        56         26        +      +   1806   29/49  23/45
 50 12/9        55         30        +      +   1805   30/50  24/46
 51 12/16       30         43        +      -   1775   31/51  24/47
 52 12/23       38         29        +      +   1818   32/52  25/48
 01 12/30       50         23        +      +   1841     0/1    0/1
 02  1/6        40         44        +      -   1831 
 03  1/13       ??         ??        +      ?   1842
 04  1/21       36         41        -      -   1839
 05  1/27       35         43        -      -   1790

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  The "Poll" column is how the majority of participants voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that both I and the majority of the poll voted bullish four weeks ago so we were both right.  Therefore we can now finally close out the predictions for 2013:  the Night Owl ends with an accuracy of 32 for 52, or 62%.   And the poll as a whole rises a bit to 25 for 48 or 52%.  Not too shabby for a game where you're doing well to be batting .500.  Starting next week we'll drop the 2013 numbers and continue on with 2014.

We also see that our first prediction for 2014 was wrong.  This will no doubt improve as we go on.

This week we see that I voted bearish for the second week in a row, the first time I  changed from bullish since last September.  I'm seeing signs of bearish RTC exits and stochastic crossovers that concern me enough to vote a minus sign.  The failure of the 2014 January barometer is also of concern.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      9      5           0       0.308

     And the winner is...

I normally call Fed days as "uncertain" just as a matter of policy because there's never any way of being sure just what odd things will come out of their mouths.  But tonight the charts are looking rather strong technically and the futures are up significantly, much more than they usually are on a Tuesday pre-Fed evening.  That makes me think that "they" know something I don't, so I'm going to break my policy go out on a limb and call Wednesday higher.  That could all go south if Uncle Ben says something Mr. Market doesn't want to hear.

ES Fantasy Trader

Well it's nice that we had a successful first trade of the year as we made a quick six points on last night's trade.  Not bad for ten hours of work (most of which I slept through).  And since I get asked this - I entered the trade because I saw a collection of reversal signs, particularly the bullish stochastic crossover that suggested a high probability trade.  And I exited because it looked like the short-term momentum had been exhausted.  While this one might run further, the ESFT is about trading not investing, so if a trade is profitable the next day, I'll book it and live to trade again.

Portfolio stats:  the account rises to $103,000 after the first trade of 2014.  We are now 1 for 1 total, 1 for 1 long, 0 for 0 short.  Tonight we stand aside, having missed the next big upside move earlier this evening.

SLD    10    false    ES    MAR14 Futures     1787.25    USD    GLOBEX    11:05:35
BOT    10    false    ES    MAR14 Futures     1781.25    USD    GLOBEX    00:49:06

Tuesday, January 28, 2014

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence.
  • ES pivot 1778.25.  Holding above is bullish.
  • Rest of week bias higher.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader goes long at 1781.25.

Well we were close.  I thought the Dow was going to end its slide on Monday and indeed it actually did start to move higher around noon until a late wave of selling blew in just 45 minutes before the close to ruin my call.  But I think the primary thesis remains intact so let's see where Tuesday may lead us.

The technicals (daily)

The Dow: Monday saw another 41 points down in the Dow but it came in the form of a spinning top at the bottom of Friday's big dump  While these generally require confirmation, with RSI now extremely oversold, the stochastic moving into position for a bullish crossover, and the fact that the entire candle was under the lower BB, I'm even more optimistic for a reversal now.

The VIXAnd the VIX put in a doji of its own, dropping 3.97% on Monday.  But even that left the entire candle above its upper BB - highly unusual.  And with the indicators remaining way overbought, I'm thinking this one still has more downside to go.

Market index futures: Tonight the futures are mixed at 12:45 AM EST with ES up by a nice 0.31%, YM up even more, but NQ down a big 0.66%. ES gave us a classic spinning top on Monday and RSI looks to have bottomed now.  THe stochastic is flattening out in preparation for a bullish crossover.  The developing candle is bullish engulfing and the move so far is already enough to qualify as a bullish RTC setup.  OBV has also bottomed, so this chart is definitely looking bullish now.

ES daily pivot: Tonight the pivot falls from 1796.67  to 1778.25.  Unlike last night, this drop was enough to put ES above the new pivot so this indicator now turns bullish.

Dollar index: On Monday the dollar gave us a small gain on a bullish engulfing candle that confirmed Friday's spinning top reversal.  Indicators are now just about oversold and the stochastic is nicely set up to form a bullish crossover in a day or two so I see more upside here..

Euro: After a big jump last week the euro has been consolidating in the upper part of that move around 1.3684.  After two doji days we're seeing a small gain in the overnight, but we're also getting a bearish stochastic crossover, so this chart looks like it's going to drift lower.

Transportation: On Monday the trans dropped another 0.82% on a stubby spinning top that bounced off their lower BB and drove the indicators oversold.  The last five times the trans have hit their lower BB, they've reversed the next day.  I see no reason why Tuesday should be any different.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    3      9      5           0       0.273

     And the winner is...

Monday had the characteristics of a bottoming day .  All of the bullish technical signs in the charts last night are still there tonight but even more so, so I'm just going to claim that we'll close Tuesday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $100,000 as we go long tonight at 1781.25 for our first trade of 2014.

Monday, January 27, 2014

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1796.67.  Holding below is bearish.
  • Rest of week bias uncertain.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside

Several times a year, the stock market holds a sale.  Last Friday was one of those times as the Dow cratered 318 points.  I'm awfully glad I called Friday lower as that erased all of my January prediction losses in just two days.  Now we get to the tricky part - calling the bottom.  Is it over yet?  The charts now speak.

The technicals (daily)

Dow daily
The Dow: OK, this one is definitely worth a picture.  Friday's big 2% drop is a classic, and I do mean classic example of an exponential run, and in this case a run-down.  Just the way bubbles end in explosive exponential run-ups, the opposite direction moves also finish the same way.  Just look at how these accelerating daily losses absolutely fall off the cliff.  Friday's move crashed through the 16K level like it wasn't there, it began lower than the upper BB and closed way under the lower BB.  You don't see that very often.

The three parallel lines are the rising and then descending RTC's.  The green bar at the bottom  shows how RSI is now oversold and the lowest chart is the stochastic which is now down to levels from which reversals come.  I think Friday's sell-off was way overdone and we can expect a DCB on Monday, if not the inevitable end of the exponential breakdown.

The VIXWow, this is the night for charts.  Check out this one of the daily VIX (and by the way I called this one wrong in a big way last Thursday).  On Friday the VIX blasted up for a 31.74% moonshot, gapping right up past its 200 day MA (dotted orange line), then on through its upper BB (narrow blue line), and then through resistance at 16.66 for its biggest one day gain since last April.  Holy moly!

VIX daily
That was enough to drive RSI (first chart below the VIX) to nearly 100 and bring the stochastic to overbought levels (though not yet a bearish crossover).  As I always say, the VIX rarely spends more than a day or two above its upper BB, and we're there now in a big way.  The last eight times the VIX went on a one-day gap-up rampage (that's where I stopped counting), it went lower the next day.  Eight for eight.  So I'm looking for a lower VIX on Monday.

Market index futures: Tonight all three futures are higher at 12:30 AM EST with ES up by 0.20%.  ES of course got crushed on Friday like everything else, crashing through multiple levels of support at 1820, then 1813, then the lower BB at 1804, then the 1800 level itself, then 1787 before finally coming to rest at 1782.  That was enough to send RSI very oversold and bring the stochastic down to levels from which reversals have come in the past.  The new overnight candle is forming as a decent hammer, so that's encouraging for Monday.

ES daily pivot: Tonight the pivot dives from 1827.33  to 1796.67.  Friday's dump was so big we're still below the new pivot and by a good 10 points so this indicator has to be considered bearish.

Dollar index: Somewhat surprisingly, the dollar moved hardly at all on Friday, up just 0.02% on a little doji.  The stochastic is turning around for a bullish crossover so I'd be looking for a move higher in the next day or two..

Euro: And the euro of course had its big upward move last Thursday, giving us on Friday a small inverted hammer at the higher end of that run.  Indicators are near, but not yet overbought so there's at least a suggestion here of a move lower on Monday.

Transportation: On Friday the trans got absolutely crushed, down a breath-taking 4.11% and traveling almost the entire way from upper BB to lower BB in just one day.  But even at that, the stochastic only just began a bearish crossover, though this may be more a case of being slow to react.  In any event, the trans are usually pretty good at recovering from sharp one-day sell-offs so I'd not be surprised to see at least modest gains here on Monday.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    3      8      5           0       0.273

     And the winner is...

It's easy to get spooked when you see the Dow down 318 in one day but the technicals are actually looking somewhat encouraging at the moment.  The SPX Hi-Lo index took a big spike down to 45 on Friday.  Whenever you see that, that's usually a good sign a reversal is near.  Also, the NYSE A/D line hit -2252, its lowest level in six months.  Extreme low reading here are also bullish.  Then we have the Dow going pure negative exponential and we know how those always end.  And we have a classic VIX blow-off top that augers a move lower in a day or two.  And finally the futures aren't continuing to sell off in the overnight so all things considered as spooky as it may feel, I'm going to call Monday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $100,000 as we wait for the right moment to enter our first trade of the year.  While I do think we're going lower on Friday, I still don't have a good enough edge to warrant going short just yet, so we'll just stand aside again.  There's no rush.