Friday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Friday higher, low confidence.
• ES pivot 1742.25.  Holding above is bullish.
• Next week bias higher.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Last night's reversal signs paid off on Thursday as the Dow rose 188 points to afford me some level of redemption.  With that we have now retraced most of last weeks big dive.  Now we ask, is this the start of a new trend or is the relief rally over and another bear leg setting up?  The charts will set us straight as we look to Friday's close.

The technicals (daily)

The Dow: Monday night I wrote "Much has been made about the Dow breaking its 200 day MA.   But that's not always instantly fatal.  Three of the last four times this happened, the Dow popped back above the MA within a day or two. "  And how about that - we got one day breaking under the MA (Monday), then two days knocking on the door, and then Thursday, hey presto - right back above the 200 day MA we went  Remember this the next time you see something fall below its 200 day MA and then everyone starts running around like a head with its chicken cut off.

So with the indicators only just coming off oversold now and a bullish RTC exit in place and a bullish stochastic crossover, this chart now looks nothing but higher.

The VIX:  Last night I wrote "the candle and overbought indicators suggest lower to come."  Well let's hear it for the candlesticks because on Thursday the VIX plunged 14% in a move that also dropped it right out of its rising RTC for a bearish setup and confirmed the bearish stochastic crossover.    Booyah!  So the tea leaves all seem to point to further declines here.

Market index futures: Tonight all three futures are higher at 1:03 AM EST with ES up by 0.16%.  Thursday provided us with a nice green marubozu that almost completely retraced Monday's big dump and brought us back to that 1771 level that used to be support and is now resistance.  But with the indicators still rising and less than halfway to overbought, there seems to be enough gas in the tank to mount a successful assault on this level.  Overall this chart continues to look bullish.

ES daily pivot: Tonight the pivot jumps from 1742.25  to 1760.08.  Even at that, ES is still almost 10 points above the new pivot so this indicator remains bullish tonight.

Dollar index: Last night I wrote that a "bearish stochastic crossover though suggests lower to come" and that's just what happened on Thursday with the dollar losing 0.16% on a big bearish engulfing candle.  That crossover is now complete and RSI has peaked at overbought.  The momentum is now lower so I'd say the selling has further to go.

Euro: Last night I wrote "continued higher looks likely" and I got that one right too as the euro exited its descending RTC for a bullish setup with accelerating gains.  So with no resistance til around 1.3669 and indicators now on the move off oversold, it looks like there's more upside left here.

Transportation: ON Thursday the trans had a good day, up 1.50% on a marubozu that confirmed Wednesday's hanging man and brought the stochastic back to life bull-wise.  With indicators still recently off oversold, this chart continues to look positive.

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.

Wk.# Week   % Bullish  % Bearish  NightOwl Poll SPX  Accuracy Poll

 2013                                                  32/52  25/48

  2014

 01 12/30       50         23        +      +   1841     0/1    0/1

 02  1/6        40         44        +      -   1831     0/2    1/2

 03  1/13       ??         ??        +      ?   1842

 04  1/21       36         41        -      -   1839

 05  1/27       35         43        -      -   1790

 06  2/3        21         46        -      -   1783

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  four weeks ago I voted bullish but the majority of the poll ovoted bearish.  Therefore, for the first time since I've been doing this, the poll was right and I was wrong.so we were both right.  So for the second week in a row, I was wrong for a YTD accuracy of zippo.  And the poll as a whole is now at 50%. These numbers will obviously change as the year goes on.

Part of the problem is that my technical analysis does not spot tops, only when a trend is over.  So I will generally miss a top and that's what's been going on for the last two weeks.  For the record, I voted bearish again this week for the third time in a row.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   2       1      1           0       0.667    -67

     And the winner is...

The charts tonight aren't screaming buys but they're also definitely not bearish so I'm just going to go ahead and call Friday higher.  See you again Sunday night (assuming I'm not OD'ing on the Olympics which is a definite possibility by then).

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 higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday higher, low confidence.
• ES pivot 1742.25.  Holding above is bullish.
• Friday bias uncertain.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

I'm awfully glad that I called the Dow "uncertain" for Wednesday, as it crossed the zero line, let's see, one, two, three, uh, a bunch of times before finally closing down all of five points.  When will all this indecision resolve?  We whip through the charts in a hurry tonight because I had a long day, having had to get up at the crack of 9:30 AM so I'm just way too tired to do a lot of typing right now.

The technicals (daily)

The Dow: A doji, knocking on the 200 day MA's door for the second day in a row.   Indicators still oversold, Thursday may do it.

The VIX:  Up 4.4% on Wednesday on a bearish harami, not quite centered.   Vaguely looks like a symmetrical triangle - that would be bad as it portends a higher VIX.  But the candle and overbought indicators suggest lower to come.

Market index futures: Tonight all three futures are higher at 12:40 AM EST with ES up by 0.24%.  ES spinning top Tuesday, doji star Wednesday, support at 1737 holding, oversold indicators, positive overnight pin action all suggest higher on Thursday.

ES daily pivot: Tonight the pivot dips from 1743.75  to 1742.25.  That leaves ES a bit higher above the new pivot than before so this indicator is now bullish.

Dollar index: Down a bit Wednesday on an inverted hammer, but these candles are all disjointed and not telling a real story.  Bearish stochastic crossover though suggests lower to come..

Euro: Slow drift higher, nearly out of descending RTC, indicators continue oversold, continued higher looks likely.

Transportation: A hammer here on Wednesday, bouncing off lower BB.  Support at 7052 continues to hold.  Oversold indicators also support a move higher.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   1       1      1           0       0.500   -253

     And the winner is...

Tonight I'm going with the bulls, more out of an absence of bearish signs than any roaring bullish signs.  So it's Thursday higher.

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.

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Wednesday uncertain.
• ES pivot 1743.75.  Holding below is bearish.
• Rest of week bias uncertain.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Last night I wrote "Much has been made about the Dow breaking its 200 day MA.   But that's not always instantly fatal".  And sure enough, the world did not come to an end on Tuesday as the Dow rebounded a decent 72 points to return to just below that MA.  But now things get tricky - was this just a relief rally, a DCB, or is there another leg down coming?  We'll see what the charts have to say about that.

The technicals (daily)

The Dow: Last night the Dow looked ripe to me for a DCB and that's pretty much what we got on Tuesday.  The 200 day MA is now resistance and we remain in a descending RTC  but the indicators remain oversold.  So we're kind of between the proverbial rock and the hard place here.  This chart seems vaguely bullish but that requires confirmation so I'm not taking the one on tonight.

The VIX:  Last night I wrote "the VIX is ready to move lower" and it did on Tuesday, down almost 11%.to form a nice bearish harami.  Even at that, indicators are not yet off overbought and the stochastic just squeaked out a bearish crossover.  So I'd say more downside seems possible here on Wednesday.

Market index futures: Tonight all three futures are lower at 12:13 AM EST with ES down by 0.20%.  After Monday's huge red marubozu, Tuesday's comparatively small gains look like a classic DCB.  And the overnight's not looking too promising.  So far, support around 1740 is holding and indicators remains fairly oversold.  But like the euro (below) it's not clear where the next leg up is coming from.  I'd expect ES to sort of muddle along at these levels for a few days from here.

ES daily pivot: Tonight the pivot rises from 1749.50  to 1743.75. The evening-long slide in ES leaves us below the new pivot despite the drop so this indicator is now bearish.

Dollar index: I missed the dollar, which rose a bit rather than falling but produced a small harami doji that lifted indicators to fairly overbought levels.  The stochastic is leveling out in anticipation of a bearish crossover so  I still have to think that the next move is lower.

Euro: Last night I didn't think the euro had it in it to move higher and indeed it settled of a red spinning top on Wednesday.  We remain pretty much in the same boat tonight so I have to draw the same conclusion - the euro will be hard-pressed to advance on Wednesday.

Transportation: Last night I wrote "I'd not be going short right here" and good thing too as the trans posted a big 1.15% gain on Tuesday bouncing nicely off their lower BB.  RSI is now just off oversold so further gains are not out of the question.


Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   1       1      0           0       0.500   -253

     And the winner is...

The charts tonight are not nearly as clear as they were last night.  While the patterns are at least a bit bullish, they don't seem to have a lot of oomph behind them.  However, I'll note that the Morningstar Market Fair Value Index dropped to 1.00 on Monday for the first time since last October 9th, when the Dow oddly enough also last hit its 200 day MA.  And that marked the exact end of a three-week slide back then.

So technically we remain oversold and I see more upside potential than downside risk.  However, there's also more economic news coming out on Wednesday and it hasn't been all that great lately and the market seems to be paying close attention.  Therefore, I reluctantly call Wednesday uncertain.

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.

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Tuesday higher, low confidence.
• ES pivot 1749.58.  Holding below is bearish.
• Rest of week bias uncertain.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Well that was probably my worst call of the year.  The Dow obviously did not go up on Monday.  So much for the power of the first trading day of the month.  Instead, weak economic news sent the Dow down 325 points in an ugly sell-off that had whiffs of panic in the air.  So as the bears continue to roar, let's see where Tuesday's is headed.

Olympic Alert:  The Night Owl is a self-confessed Olympaholic.  And I have a particular thing for the Winter Olympics.  I just can't get enough of all the winners and the lugers.  So while I'm not at the moment planning on taking the whole two weeks off, if I get wrapped up in some exciting hockey game or death-defying downhill that runs into overtime, I may take a pass on the blog that night.  Hey, being retired has its privileges.

The technicals (daily)

The Dow: Last night I wrote "the 200 day MA is now within easy striking distance at15,465.  Given recent moves, we could hit that in a day or two. " Too bad I didn't pay more heed to that when I finally decided to call the market higher, because the Dow just crashed right through support at 15,712 and then the 200 day MA at 15,474 on Monday like buttah, stopping only because the bell finally rang at 4 PM.  This leaves us well inside the descending RTC with indicators mired at oversold.  The only hope for the bulls at this point is for a DCB on Tuesday.  The rest of this chart is just plain ugly.

The VIX:  ANd while the Dow dumped, on Monday the VIX rocketed up 16.46% to close at its highest level since last June.  And in so doing it not only closed way above its upper BB but also smashed through its 200 week MA at 19.39.  And that's actually a good sign (well bearish for the VIX) because six of the last eight times the VIX broke above its 200 week MA, it came right back down hard within a week.  The two times it didn't were back in 2011 and 2010 when everyone was wringing their hands about Greece.  (Remember the Greeks?  Me either).  So if the VIX looked toppy last night, it looks really toppy tonight.  I may have been a day early, but I'm going to claim once again that the VIX is ready to move lower.

Market index futures: Tonight all three futures are significantly higher at 12:30 AM EST with ES up by 0.42%.  Last night at this time, I pointed out a symmetrical triangle in ES and wrote "I'd expect the break in a day or two, perhaps back to support at 1770".  Well ES broke hard on Monday and 1770 went by in the blink of an eye.  So did 1758 and 1739.  But it looks like this move may have shaken out the weak hands and the bargain hunters are stepping in.  I've been burned in the past by paying too much attention to the futures, last night being a good example, but I have to think that a nearly half percent gain before 1 AM is not the sign of a market that's planning on continuing lower on Tuesday.

ES daily pivot: Tonight the plunges from 1775.33  to 1749.58.  Even with the gains in the overnight, that still leaves ES a good 10 points under the new pivot so this indicator remains bearish.

Dollar index: On Monday the dollar lost 0.36% on a pattern that's vaguely evening star meets abandoned baby.  Either way, it pushed the indicators overbought, and dropped the dollar out of an admittedly short rising RTC.  So this chart now looks bearish.

Euro: Last night, in the face of two steep daily declines I wrote "I still have to think a reversal is coming soon".  And that's what did in fact happen on Monday with the euro recovering nearly 2/3 of last Friday's losses.  The indicators remain oversold, we've now bounced off the lower BB, and the stochastic is close to making a bullish crossover.  But we've fallen under the daily pivot as the overnight has been drifting lower.  The stage is set for further gains but the euro will have to break above 1.3514 for that to happen.  And I'm not sure it's got the requisite moxie at the moment.

Transportation: Like the Dow, the trans took a huge hit on Monday and closed below their lower BB, confirming Friday's doji in a big way.  They closed exactly on a good support line at 7054 and holding that is critical.  But the trans have been good about respecting their lower BB so this chart looks ready for a DCB at the least.  I'd not be going short right here.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   0       1      0           0       0.000   -325
 
 For the record, I finished the month of January up 0.50%.

     And the winner is...

Once again, we got a down Friday followed by a down Monday - a bad sign.  However, in the short-term I think the selling has been overdone.  Much has been made about the Dow breaking its 200 day MA.   But that's not always instantly fatal.  Three of the last four times this happened, the Dow popped back above the MA within a day or two.  The one exception was in November 2012 when the market was worrying about the debt ceiling, the government shutdown, or one of 20 other disasters that never happened.  So with many charts at extremes that practically beg for reversals, I just have to hold my nose and cross my fingers (that's not easy to do) and call Tuesday higher.

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.

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Monday higher, low confidence.
• ES pivot 1775.33.  Holding above is bullish.
• Rest of week bias uncertain.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Well now that was interesting.  January is done and the famous First Five Days of January Indicator flopped.  And the entire January Barometer itself was an epic fail.  People have been talking up the Stock Traders Almanac pointing out that a down January is only a 50-50 chance of a down year.  But if you look at the chart there (on page 18) you'll see that there were only two up years when the loss in January was greater than 3.8%.  And this year the Dow lost 5.3%.  There were only six Januaries with bigger losses and two of those were in the outlier years of 2008 and 2009.  Clearly the greater the loss in January, the greater the odds of a losing year.  And this January came in way down the list.

So I am starting to feel bearish on the rest of 2014.  But that's still a long ways off so let's see what the charts have to say about Monday.

The technicals (daily)

The Dow: Oh and that's the other thing - it is known that a series of down Fridays followed by down Mondays is a bearish sign and we've been getting a bunch of those lately, in marked contrast to last year.  Last Friday's 150 point decline in the Dow  on a normally bullish day closed out the week and the month on a decidedly negative note.  The candle itrself was bearish engulfing and it pushed the Dow back into a month-long descending RTC.  And to top it off, the 200 day MA is now within easy striking distance at15,465.  Given recent moves, we could hit that in a day or two.  The stochastic is just pancaked at oversold so this chart now looks bearish.

The VIX:  Last Friday the VIX popped right back up to its upper BB but did it on a red hanging man.  While the VIX is showing more propensity to stick around its upper BB lately rather than falling back immediately, this pattern makes me think that a move lower is coming in a day or two.

ES daily

Market index futures: Tonight all three futures are higher at 12:36 AM EST with ES up by 0.20%.  Lst Friday we got something of a spinning top out of ES but it looks to me like there's a symmetrical triangle developing - check it out here.  (The three descending parallel lines are last week's RTC).  Since it was entered from above, we should expect a 3 out of 4 chance of the exit to be lower.  Since the triangle is nearly complete, I'd expect the break in a day or two, perhaps back to support at 1770.

ES daily pivot: Tonight the pivot drops from 1780.32  to 1775.33.  The move combined with a higher ES, puts it back above the new pivot, so this indicator turns bullish.

Dollar index: Last Thursday night I wrote "more upside is not out of the question for Friday".  And indeed the dollar rose another 0.26% gapping up again to nearly touch its upper BB, which is also resistance.  But the indicators are still only about halfway to overbought, so Monday could be a topping day for the dollar.

Euro:   I thought the euro might bottom on Friday, but while it did move decisively lower breaking support at 1.3550, the resulting red candle is hardly a reversal sign.  But we've now hit the lower BB and the indicators are getting extremely oversold (RSI = 0.46) so I still have to think a reversal is coming soon.  We're basically flat in the overnight so far and that's an encouraging sign for a move higher.

Transportation: Last Fridqy the trans were not hurt nearly as badly as the Dow, down just 0.18% on a long-legged doji.  The trans have been alternating daily gains and losses for a week now ad with this doji plus the absence of an RTC, this chart is just too tough for me.


Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64

     And the winner is...

The charts are looking mostly bullish tonight, and with the first day of February having a stellar reputation for the bulls, I'm going to call for a close of Monday higher.

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.