Friday uncertain

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

• Friday uncertain.
• ES pivot 1877.33.  Breaking below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Well on Thursday the Dow defied history by losing 22 points in a limited range session.  Let's see what that means for Friday.

The technicals

The Dow: On Thursday the Dow gave us a small spinning top that left us right on the lower edge of the rising RTC for a bearish setup.  The promise of the bullish stochastic crossover did not materialize and the indicators mostly turned lower so this chart is now looking bearish.

The VIX:  We also got some rare divergence with the VIX falling 1.19% on a day when the broader market was also lower.  I'm trying to understand what that means but in the meantime with no reversal candles, falling indicators not yet oversold and a good descending RTC going, it looks like the VIX could still go lower on Friday.

Market index futures: Tonight  all three futures are basically even at 12: 53EDT with ES dead flat and YM down just 0.02%. Thursday's red spinning top in ES and its failure to break resistance at 1880 suggests a possible move lower on Friday.  But the indicators are confused, with half moving lower and the rest moving higher.  This chart isn't at all clear.

ES daily pivot: Tonight the ES daily pivot rises from 1874.83 to 1877.33.   We remain above the new pivot, but just barely, so this indicator could turn bearish easily enough.

Dollar index:On Thursday the dollar put in a small bullish harami cross that while it remains inside the descending RTC suggests a reversal higher might be possible Friday.  Oversold indicators support that idea.

Euro: After big gains Wednesday the euro put in a gravestone doji on Thursday near the top of its rising RTC.  With indicators now topped at overbought and the overnight going nowhere, I'd say the euro goes lower on Friday.  And that would square with my call for a higher dollar.

Transportation: And finally more surprising divergence as the trans gained an impressive 0.671% to the Dow's 0.13% loss on Thursday.  With a razor thin rising RTC and three white soldiers, and no resistance til 7760, it looks like the trans could move higher again Friday.

Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
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        0       1      0           0       0.000    -22

     And the winner is...

There's something strange going on here that I don't quite get.  It's not normal for the VIX to go lower but the market to also go lower.  And it's not normal for the Dow and trans to be inversely correlated.  And I can't predict what I don't understand, so I'm just going to declare Friday uncertain and start over again next Monday.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 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 1874.83.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Ho hum - it turned out to be something of a sleeper Fed pronouncement Wednesday, with Mr. Market registering just a slight knee-jerk in response to the news.  Well at least we closed out April on a positive note and the Dow finally went positive (by 0.02%) for the year.  Now we face the merry month of May.  To quote those noted market analysts The Clash, "Should I stay or should I go?"  Maybe the charts can tell us.

The technicals

The Dow: The Dow actually did quite well on Wednesday with I believe a new record close, remaining in a new rising RTC and stopping just short of resistance at 16,590.  Interestingly we got a new bullish stochastic crossover from a high level and this is a high probability play that's usually good for a day or two of further upside.

The VIX:  Last night I wrote "the candles are looking bearish" and so they were with the VIX dropping another 2.19% on Wednesday on a red bearish engulfing marubozu that followed three straight failures to recapture the 200 day MA.  This also sent RSI lower before ever reaching overbought and formed a new bearish stochastic crossover.  So with no support til 13.05, I'd say the selling isn't done here yet.

Market index futures: Tonight  the futures are mixed at 12:39 EDT with ES down 0.07% but NQ up 0.07%.  ES had a nice day on Wednesday, advancing to the 1880 resistance zone.  Unfortunately, the new overnight candle is having some problems at that lofty altitude and is currently looking like a dark cloud cover.  And while we do have a completed bullish stochastic crossover, OBV,, momentum, and RSI have all turned lower.  Only money flow continues to move higher.

ES daily pivot: Tonight the ES daily pivot rises from 1870.67 to 1874.83.  Once again we remain above the new pivot (though by less than last night).  Still, this indicator continues bullish.

Dollar index: Last night I noted the rise in the dollar but also the apparent beginnings of a bearish evening star.  Well this star Paid off in a big way on Wednesday as the dollar dunked 0.44% with a big gap-down marubozu, effectively completing the pattern.  This is bearish but there's support not too far below, so Thursday could be a bottoming day.

Euro: Ah, that pesky euro.  It fooled me big time on Wednesday.  Instead of going lower it posted a big gain all the way back to1.3870.  That took it  to overbought levels and near resistance.  So we look at the overnight for clarity, but there's not much to be found as the euro is generally just wandering sideways in the overnight.  This one is too tough to call.

Transportation: On Wednesday the trans handily outperformed the Dow motoring 0.72% higher for a bullish exit to a descending RTC and a new bullish stochastic crossover with a long way to go til overbought.  So with two white soldiers now on the march, looks like there's room left to run higher on Thursday.

Performance:

With April now closed, here are my cumulative 2014 YTD trading results so far, compared to the Dow, my benchmark.  I've started including the results of my traditional IRA too.

        Trading    IRA       Dow
Jan.     0.50%             -5.30%
Feb.     3.94%             -1.94%
Mar.     6.01%    6.14%    -0.72%
Apr.     8.22%    8.46%     0.02%

 And here's a day-by-day plot of my trading account balance:

2014 trading balance, Jan. - Apr.

You can see we started off well but hit a rough spot late in January and then kind of stagnated for much of March, but April did quite well.

Again, my trading goals, in ascending order of difficulty, are:

1. Don't lose money.
2. Make money.
3. Beat the Dow.
4. Get an annual return around 30%.

So far this year we continue to do well with an annual run rate YTD of 24.66% trading, easily outperforming the benchmark.  While I'd like to see a 30% annual return, 24%+ is still not too shabby.  Even Bernie Madoff only promised his victims 20%.

Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   5       2      2           1       0.750    107
March     12       3      6           0       0.800    431
April      9       3      5           0       0.750    482

     And the winner is...

Well they say to sell in May, but they never say when in May.  Right now, based on tonight's charts I don't think it's going to be the 1st.  Most of the charts are looking bullish tonight and May 1st is historically quite bullish.  The only fly in the ointment is that ES seems to be losing some steam in the wee hours.  I always hate going against the futures, but given that the rest of the evidence is bullish, I will simply nervously declare Thursday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we stand aside.

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1870.67.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Last night the charts were a bit on the confused side, but we were able to correctly resolve the ambiguities and were rewarded with an 87 point gain in the Dow on Tuesday.  We now move on to the last day of April to figure out how we might close out the month.

The technicals

The Dow: On Tuesday the Dow exited its (admittedly short) descending RTC for a bullish setup on increased volume that handily confirmed Monday's tomahawk candle.  (Recall that the tomahawk is my own invention.  It is bullish like a hammer, but with a small upper shadow showing.)  Money flow and OBV continue to rise while the stochastic appears to be squeezing in for a bullish crossover in a day or two.  Overall, the pattern here now looks bullish.

The VIX:  This was a chart that perplexed me last night.  In the end, the inverted hammer and failure to capture the 200 day MA won the day and the VIX sank 1.86%.  While the indicators continue to rise off oversold, the candles are looking bearish.  This notion is reinforced by VVIX which broke through two levels of support on Tuesday with a red marubozu.

Market index futures: Tonight  all three futures are lower at 1:31 EDT with ES down 0.17%.  On Tuesday ES had a small gain that was nevertheless enough to just break out of its descending RTC for a bullish setup, and also form a bullish stochastic crossover.  However, both money flow and OBV have now turned negative and the overnight isn't showing any follow-through, so it's not at all clear that ES can move any higher on Wednesday.

ES daily pivot: Tonight the ES daily pivot rises from 1860.58 to 1870.67.   We just crossed under the new pivot at midnight so this indicator now turns bearish.

Dollar index: On Tuesday the dollar took a big gap up for a 0.15% gain that also just formed a bullish stochastic crossover.  But this candle forms 2/3 of a bearish evening star pattern so we need to wait for confirmation on Wednesday for this one.

Euro: I thought the euro would go higher on Tuesday but it was not to b as it instead very nearly fell out of its rising RTC.  The new overnight is in fact trading outside, so that's a bearish setup.  We also now have a new bearish stochastic crossover, so this one is looking lower for Wednesday.

Transportation: On Tuesday the trans confirmed Monday's reversal doji with a 0.43% gain.  The stochastic is flattening out though not at a bullish crossover yet.  But this move up wasn't enough to get us out of a descending RTC so I'm not all-in on the bull case here.

Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   5       2      2           1       0.750    107
March     12       3      6           0       0.800    431
April      9       3      4           0       0.750    482
 

     And the winner is...

Hmm - there are still some mixed signs on the charts tonight but the preponderance of evidence has shifted from bullish to bearish.  However, with a Fed announcement due on Wednesday, I am going to stick to my official policy which is to never make a call on Fed days.  The last two times I tried to break this rule I got my head handed to me.  So while I will come out and say that technically the market is looking lower, the official call is simply for Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we stand aside in view of the "uncertain" call.

Tuesday higher

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

• Tuesday higher, low confidence..
• ES pivot 1860.58.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Wow - what a roller coaster ride.  We were up, then we were down, then we were up.  It was a great day for the day traders and an interesting one from the swing trading point of view.  We examine this further from tonight's charts.

The technicals

The Dow: On Monday the Dow just couldn't figure out where it wanted to go, finally ending 87 points higher, though if the bell had rung 30 minutes later, it might have been down 87.  It was just one of those days.  The conclusion is evident in the indicators, with momentum, money flow and OBV all rising but RSI and the stochastic falling.  The daily candle is similarly indecisive, so I just don't know where this one leaves us.

The VIX:  For the second day in a row the VIX challenged the 200 day MA and was rejected, losing 0.64% on a tall inverted hammer.  And confusion is evident here too as momentum is falling but the stochastic and RSI are rising.  I have to say, I don't get this chart either.

Market index futures: Tonight  all three futures are higher at 12:21 EDT with ES up by 0.12%.   On Monday ES gave us a tall tomahawk (a hammer with a protruding upper shadow).  RSI has just come off overbought but the other indicators are as confused as the other charts.  Still, with positive pin action in the overnight so far, this chart might be signaling a move higher for Tuesday.

ES daily pivot: Tonight the ES daily pivot dips from 1862.25 to 1860.58.  After popping above the old number at 3:15 PM Monday, we remain above the new pivot so this indicator now becomes bullish.

Dollar index: On Monday the dollar resumed its odd march lower backwards from last week by dropping 0.07% on a fat green spinning top.  The indicators are not yet oversold though and with a descending RTC in effect and no nearby support, my best guess is there's more downside to come.

Euro: The euro meanwhile continued its rally on Monday with a tall green spinning top  It has only just entered overbought so it looks like the rally isn't over yet.  Indeed the new overnight continues higher in a ruler-straight rising RTC.

Transportation: And finally, indecision was also on display in the trans which lost all of 0.02% on Monday on a classic doji.  Here too  half the indicators are rising and the other half falling.  This all leaves us with no good guidance for this chart at all.

Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   5       2      2           1       0.750    107
March     12       3      6           0       0.800    431
April      8       3      4           0       0.727    395


     And the winner is...

I had to think long and hard about the charts tonight because we're getting some mixed signals.  In addition to the usual suspects, I'll note that the NYSE A/D line looks like it might be moving higher and the TLT looks like it might be moving lower.  Ultimately, while the situation isn't all that clear tonight I think we have enough evidence, just barely, to call Tuesday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we stand aside - this is far from my ideal trade entry and I want more of an edge before committing again.

Monday lower

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

• Monday lower, low confidence.
• ES pivot 1862.25.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader stands aside.

Recap

Last Friday was a textbook-perfect example of the regression trend analysis technique.  Thursday traded outside the rising RTC for a bearish setup with a sdoji star.  And on Friday, boom, the bearish RTC trigger as the Dow dumped a quick 140 points.  Earnings, Putinoia, whatever - the technicals showed the way.  Now we gear up to do battle with Mr. Market once again as we bid farewell to April and say hello to (sell in?) May.

The technicals

The Dow: The Dow set the tone quickly last Friday, tanking right out the gate and it was all downhill from there.  This move solidified a bearish stochastic crossover and sent the indicators lower, though still overbought.  So this chart per se continues to look bearish.

The VIX:  I took a pass on this chart last Thursday night and it's just as well since I didn't expect a gap-up 5.56% jump that tested the 200 day MA.  That probe was rejected but we're still oversold and the inverted hammer notwithstanding, there's plenty of gas left in the tank for another crack at the MA on Monday.

Market index futures: Tonight  the futures are mixed at 12:11 EDT with ES up all of one tick but YM down one - call it essentially flat.  On Friday, unlike some other charts, ES only produced a bearish RTC setup, not a trigger.  Recall that a chart has to trade outside its RTC on two successive candles for a trigger.  Still with the indicators having clearly topped at overbought and continuing lower and the bearish stochastic crossover now in full bloom, this chart continues to look bearish for Monday.

ES daily pivot: Tonight the ES daily pivot falls from 1873.08 to 1862.25.   Even with that drop, the failure of ES to make any headway in the Sunday overnight keeps us below the new pivot so this indicator continues bearish.

Dollar index: Last THursday I said "I'd say there's more downside to come on Friday." and it's good I said it because the dollar lost 0.07% on Friday, though admittedly with a stubby green hammer.  he dollar also stopped right at support on Friday so with the indicators halfway between overbought and oversold, there's at least a chance of a move higher on Monday.

Euro: Last Friday the euro put in a doji in evening star position.  And so far in the overnight we seem to be getting some significant confirmation with the euro down 0.10% on a bearish engulfing pattern.  The indicators have also peaked before even reaching overbought - that's always a bearish sign.  So I'd say it's likely the euro goes lower on Monday.

Transportation: On Friday the Dow tanked but the trans got simply run over, losing 1.61%, almost double the Dow's loss.  That's a clear bearish RTC trigger and bearish stochastic crossover.  Even at that, we're still overbought, so I'd say it's likely there's more downside to come on Monday.

Accuracy:

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
February   5       2      2           1       0.750    107
March     12       3      6           0       0.800    431
April      8       2      4           0       0.800    482


     And the winner is...

There are still no reversal signs in the charts tonight and the technicals continue to look bearish, so the only logical call is for Monday lower.

ES Fantasy Trader

Last THursday night I finally saw what is pretty much my ideal trade setup, a bearish RTC exit coupled with a bearish stochastic crossover, and the expected move had not yet started at the time I like to enter trades - around midnight to 2 AM.  So I took advantage of it was was rewarded on Friday with a nifty 12 point gain.  Not bad for 12 hours of work, most of which I spent sleeping.  Admittedly I left some money on the table as ES kept going lower, but such is life.  I can't complain.  Reminder, I post all these trades live on Twitter @nightowltrader.

BOT    10    false    ES    JUN14 Futures     1859.50    USD    GLOBEX    APR 25 12:53:30
SLD    10    false    ES    JUN14 Futures     1871.50    USD    GLOBEX    APR 25 00:32:06

Portfolio stats:  the account now rises to $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we stand aside, on the off chance of a DCB on Monday.