Friday depends on ES pivot

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

• Friday higher if ES breaks above pivot, lower if it stays below..
• ES pivot 1934.33.  Breaking above is bullish..
• Next week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

The conditional call last night worked a treat on Thursday as ES seemed to be rising above its pivot in the overnight, then tested it in the wee hours before finally breaking under at 8:15 AM and then it was all over, Jack.  The Dow closed down 110 points.  QED.  The predictive power of the pivot is not to be discounted.  So let's move on to Friday and see how the week may finish off.

The technicals

The Dow: It was pretty much a rerun of Wednesday in Dow-land on Thursday with another triple-digit loss.  The net effect was to finally drive the indicators off their extreme overbought levels where they'd taken up seemingly permanent residence.  With everything now pointing lower, we can call this chart bearish with a bit more confidence..

The VIX: Last night I wrote "it looks like there's still more upside to come on Thursday."  And sure enough the VIX took off on Thursday for an 8.26% gap-up jump that nearly took it to its upper BB.  It also nicely completed the bullish stochastic crossover and sent all the indicators well on their way from oversold to overbought.  Now if you look at the recent trajectory of the VIX it has the feel of an exponential run-up, so that makes me think a reversion is on the way soon.  But in the absence of any true overboughtedness yet, I'll say the VIX still has room to run, atr least up to the upper BB at 13.06.  Then look for a move lower.

Market index futures: Tonight all three futures are higher at 12:44 AM EDT with ES up 0.4%.  On Thursday ES had its biggest down day since May 15th.  That helped se3nd the indicators on their way from overbought to oversold and established a new descending RTC.  When will the selling end?  Well there's some support at 1922 but we'll need to see some more definitive signs than that.  Until then, there's nothing bullish about this chart - except for the small hammer now forming at the base of the sell-off, suggesting a reversal in the works.

ES daily pivot: Tonight the ES daily pivot drops from 1944.50 to 1934.33.  We're still below the new pivot, though by a lot less now.  Still, unless ES can make a successful attack on the pivot, this indicator remains bearish.

Dollar index:  The dollar had me stymied last night but it took a big hit on Thursday down over a quarter of a percent, eventually finding support at its 200 day MA.  But this move sent all the indicators lower and prompted a bearish stochastic crossover.  So I don't think the MA will hold and I'm looking for more downside on Friday.

Euro: Last night I wrote "the selling may be over for now".  And almost like I knew what I was talking about, the euro had a good day on Thursday, rising back to 1.3564 after bouncing off its lower BB.  That also set up the stochastic for a bullish crossover (but not quite).  And this action caused a bullish RTC setup do overall I'd say we're headed higher again on Friday.

Transportation: And finally last night I wrote "everything now points to lower again on Thursday."  And it was a good point because the trans got hammered, down nearly two percent on a tall tall red marubozu with increased volume.  But even that wasn't enough to send the indicators oversold.  So in the absence of any reversal signs, I'd have to guess the selling here isn't done yet.

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        6       7      6           0       0.462    -67  
June       5       2      2           1       0.714    139

     And the winner is...

When we get into the sequence of accelerating losses, I like to look at the SPX Hi-Lo index.  And what we see there is interesting.  Two days ago, this index took a huge drop, to nearly zero.  The last time we saw this was April 11th, after another two-day back-to-back sequence of big down days.  These sorts of moves in the index often presage a recovery.  Similarly, the TRIN hit 1.69 on Thursday.  The last time we were this high was May 20th, also after a big drop - and the next day was higher.

Also, while the NYSE A/D line took a hit on Thursday, it has not been exhibiting the bearish pattern lately of lower highs and lower lows.

And also, the Morningstar Market Fair Value Index, which hit a YTD high of 1.05 on the 9th., just before this latest dip, came back in to 1.04 on Wednesday (I wish they'd update these numbers to show the current day).

And also, Dr. Copper hit oversold on Thursday and looks to be getting ready to move higher.

That said, the overall gestalt of the charts tonight is still quite bearish.  What to do, what to do?  OK, here's what I think.  We haven't seen more than two consecutive days of selling all year.  As soon as Mr. Market figures out that the fact that one band of religious lunatics who hate us killing another band of religious lunatics who also hate us does not actually constitute the end of the world, we should see the selling dry up.  And as I pointed out above, there are already some signs of this, including the overnight futures.  So let's do a conditional again: if ES can break above its pivot and stay there by mid-morning Friday, we close higher, but if it doesn't we close lower.  That's all she wrote.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  Tonight we stand aside.

Thursday depends on the pivot

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

• Thursday higher if ES stays above pivot, lower if it stays below..
• ES pivot 1944.50.  Sitting on the pivot is uncertain.
• Friday bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

The nice part about calling the close as "uncertain" is that you never lose money that way.  The not-so-nice part is that you also never make money.  In this case, the technicals looked pretty bearish to me last night but I was reluctant to commit, having been burned on counter-trend calls more than once this year.  So I decided to play it safe - and let 102 Dow points get away.  But that's all part of the game, so we simply move on to the next inning to see if we can get on base Thursday.  Batter up!

The technicals

The Dow: Gosh darn it - I knew this chart looked bearish.  And sure enough, Monday's spinning top (reversal warning) was followed by Tuesday's hanging man (reversal warning) and bearish RTC exit (that's right), and then to what should have been the surprise of absolutely no one, the Dow lost 102 points on Wednesday.  So that takes care of the rising RTC and leaves the indicators overbought.  Net-net, this chart still looks bearish.

The VIX: Last night I opined in no uncertain terms, "this chart now looks bullish."  And thus it was, with the VIX up 5.55% on Wednesday with a big gap-up spinning top and a completed bullish stochastic crossover..  So it looks like there's still more upside to come on Thursday.

Market index futures: Tonight all three futures are just barely higher at 12:18 AM EDT with ES up just a single tick.  On Wednesday ES gave us a big hanging man after two days of reversal warnings.  Trading entirely outside the rising RTC, this is a bearish trigger.  But note that we've not seen any substantive decline of more than two successive days in ES all year long.  So although the indicators remain overbought, it's not clear how much muscle the bears have at this point.  While Wednesday's sell-off was the largest move in three days, it lacked conviction and the overnight action so far indicates further indecision.  And though the chart remains technically bearish, keep in mind that we haven't had a single instance of more than two consecutive days of declines all year so far.

ES daily pivot: Tonight the ES daily pivot drops from 1948.42 to 1944.50.  With ES more or less flat at the moment, this drop puts it exactly on top of the new pivot.  As I write, ES is trying to decide which side of the fence to come down on.

Dollar index:  I missed the dollar night night though in retrospect I'm wondering why.  On Tuesday the dollar hit its upper BB in a gap up.  Well sure enough, it bounced off on Wednesday for a 0.05% loss, though on a small hammer.  The stochastic is now rising but RSI and momentum are falling so that's a wash.  No call here tonight.

Euro: Last night I was anticipating the end of the euro sell-off, just a bit early though as the euro hit its lower BB at 1.3531 on Wednesday.  But that did drive the indicators oversold and started the stochastic curving over for a bullish crossover.  So I guess I'll just claim again that the selling may be over for now.

Transportation: And finally, last night I wrote "this chart now looks bearish for Wednesday."  Yes indeed, the trans dropped 0.76% in a big red candle that took them just off overbought and completed a bearish stochastic crossover.  So everything now points to lower again on Thursday.

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        6       7      6           0       0.462    -67 June       4       2      2           0       0.667    139

     And the winner is...

While the charts look bearish tonight from a purely technical viewpoint, I'm concerned about he "buy the dip" mentality that has come into play in these instances all year long so far.  And with ES sitting right on the pivot point, we have a dilemma.  Accordingly, tonight seems to be a good time to make a conditional call: if ES breaks below its pivot by mid-morning Thursday, we will close lower.  But if ES breaks above the pivot, we close higher.  This play doesn't always work, but it has a reasonable success rate.

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  Tonight we stand aside in the face of uncertainty.

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1948.42.  Holding above is bullish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

In retrospect, my original call of Tuesday being uncertain was better than the change I made to a lower close.  Although we did open lower, we continued with the pattern we've been seeing so often later with the market clawing its way back above water, though in this case by less than three points.  That said, I'll note that the SPX did close lower but my forecasts are for the Dow.  Oh well.  So let's look into how this changes the picture for Wednesday.

The technicals

The Dow: After a lopsided spinning top on Monday the Dow gave us an absolutely classic hanging man on Tuesday.  It also closed just barely outside the rising RTC for a bearish setup.  We also didn't reach the upper BB and with indicators remaining extremely overbought, you'd think that there would be a down day coming Real Soon Now.

The VIX: Ah, the poor poor VIX.  This chart is the poster child for the "I've fallen and I can't get up" movement.. After bouncing back on Monday from a big dump last Friday, the VIX was totally unable to make any headway (much to my surprise).  Instead we followed a bullish harami with a bearish engulfing pattern.  Witht eh lower BB still falling away, this chart reverts to bearish.

Market index futures: Tonight all three futures are lower at 12: 17 AM EDT with ES down  a modest 0.06%.  With a tall hanging man on Tuesday ES is clearly having problems breaching 1950.  Worse yet, this action took us just outside the rising RTC fore a bearish setup and a bearish stochastic crossover.  And FWIW, the new overnight candle is forming up as a bearish engulfing pattern, though with the usual caveat about reading into half-baked candles.  Still, on a purely technical basis, this chart now looks bullish.

ES daily pivot: Tonight the ES daily pivot dips from 1950.25 to 1948.42.  That is just enough to bring us back above the new pivot despite a slight overnight sag, so this indicator now turns bullish.

Dollar index:  At least I got this one right when I wrote "there could be more upside from here" last night.  There sure was, with a 0.20% gap up on Tuesday, right to the upper BB.  That also gave us a bullish stochastic crossover and with the indicators still rising I'd say there's still more upside available on Wednesday.

Euro:I also nailed the euro last night, writing "we have a good shot at going lower again on Tuesday."  That took the euro clear to its lower BB for a three day losing streak.  After this and with the 200 day MA now history, I'd have to wonder if that might not mark the end of the selling.

Transportation: On Tuesday the trans underperformed the Dow, losing 0.13%  I noted the reversal warning last night and it was borne out on Tuesday with a tall hanging man.  That also just gave us a new bearish stochastic crossover so this chart now looks bearish for Wednesday.

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        6       7      6           0       0.462    -67
June       4       2      1           0       0.667    139

     And the winner is...

The market continues to look technically toppy to me, even more so than last night.  But lately bearish sentiment and fifty cents will buy you a phone call (if you can still find a pay phone anymore).  So tonight I'm going to stick with what my original plan was last night.  In the face of bearish signs that require confirmation, I'm just calling Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  Tonight we stand aside as we wait for a new trend to develop. 

Tuesday lower

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

• Tuesday lower, low confidence..
• ES pivot 1950.25.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Last night when I called Monday higher I speculated that we might see a doji day.  Without committing hubris, I think Monday's lumpy spinning top for just a 19 point gain in the Dow qualifies.  So with that out of the way, without further ado let's move on to Tuesday.

The technicals

The Dow: The aforementioned Dow exhibited classic signs of ROOG Syndrome on Monday - that's Running Out Of Gas.. We've been clambering up the upper BB for three days now with each day's advance being smaller than the day before.  At some point what goes up must come down.  Monday's asymmetric spinning top is a warning of that, but one which requires confirmation so no call here.

The VIX: Once again we got an unusual positive correlation of the VIX with the market as the VIX rose nearly 4% when everything else was up too.  I wasn't quite sure last night we'd see a gain on Monday but I did note that VVIX was up.  And sure enough, the VIX was higher on Monday.  But confusingly enough, we've now got a completed bearish stochastic crossover, a doji candle, and a rising RSI just coming off oversold.  So another ambiguous chart - no call here either.  I'll just note though that VVIX is once again moving higher, so the VIX bias is to the upside.

Market index futures: Tonight all three futures are lower at 12:12 AM EDT with ES down  0.13%.  Monday's ES action featured a classic spinning top that broke away from the upper BB (finally).  Indicators remain impossibly overbought but the new candle is forming right on the edge of the rising RTC for a bearish setup.  And the overnight action so far confirms the reversal sign, so that makes this chart now look bearish.

ES daily pivot: Tonight the ES daily pivot rises once again from 1945.58 to 1950.25.  But this time for the first time in a while we've now crossed below the new pivot so this indicator now turns bearish.

Dollar index:  Last night I wrote "there's at least a chance of a move higher on Monday."  And it was a good chance indeed as the dollar took a big gap up for a 0.32% gain that blasted right through the 200 day MA.  It also set the stochastic in position to start forming a bullish crossover and sent momentum and RSI moving higher.  So it looks like there could be more upside from here.

Euro: Last night I noted that a dark cloud cover "bodes ill for the euro on Monday."   This is a high-probability pattern and it paid off on Monday with a big red candle that dumped the euro right back through the 200 day MA like it wasn't even there to 1.3588.  It also formed a bearish stochastic crossover.  So with the lower BB not far away at 1.3559 and support at 1.3596 now effectively broken, I'd say we have a good shot at going lower again on Tuesday.

Transportation: On Monday the trans put in a wishy-washy performance on a bearish inverted hammer that just played tag with the upper BB before backing off. Like the other charts, there's a reversal warning here, but one which requires confirmation.

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        6       7      6           0       0.462    -67   June       4       1      1           0       0.800    142

     And the winner is...

So tonight we have a bunch of reversal signs plus a VIX that has apparently bounced off its lower BB from a very low level.  Dr. Copper continues to look toppy and the TRIN has now turned bearish.  The purely technical call at this point would be for a lower close Tuesday but that just hasn't been working out too well lately - I've seen too many bearish setups just melt away the next day. 

But ah hey what the heck - I'm updating the post I made an hour ago and going for the counter-trend play - Tuesday lower.  No namby-pamby uncertainty for us!

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  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 1945.58.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

I took a chance last Thursday night calling Friday higher because we had already hit the upper BB, but it worked out in the end with an 88 point gain for the Dow as we continue the march into record territory.  This is admittedly something new for me.  I started following the markets eleven years ago so I've been through the 2000-2004 slump, the subsequent rise into 2007 and the Great Recession.  But I've never seen a series of one record close after another like this.  Will Monday be another?  We consult the charts for answers.

The technicals

The Dow: After last Thursday's breakout, about the only thing to do was bet on the bulls since the indicators are now completely useless, pegged on overbought.  We now have a three day winning streak going and no reversal candles so although we closed above the upper BB on Friday there's really no indication of a move lower yet..

The VIX: The big news though is the VIX which tumbled 8.13% on Friday to 10.73..  Now last Thursday I did say "it looks like more downside is possible Friday".  Good call, if I do say so myself.  This big gap-down marubozu broke through the lower BB while simultaneously sending RSI oversold and the stochastic into a bearish crossover before ever hitting overbought.  And that's bearish in my book.  I had to go out to the monthly chart to see when the last time was we closed this low - it was February 2007.  The VIX may still have some room to run lower, but history suggests it's not much.  Note too that VVIX was actually up on Friday.

Market index futures: Tonight all three futures are just barely lower at 12:24 AM EDT with ES down  0.03%.  ES, like the rest of the market continued its advance on Friday so my comments for the Dow apply here too.  However, the failure of ES to make any further headway in the overnight so far makes me wonder if it isn't planning on taking a pause on Monday.

ES daily pivot: Tonight the ES daily pivot ticks up from 1933.42 to 1945.58.  We remain above the new pivot, though by a reduced amount tonight, but it's still bullish.

Dollar index:  After Thursday's big dump, the dollar put in a not unexpected doji on Friday just above Thursday's lows.  The indicators are now well off overbought so there's at least a chance of a move higher on Monday.

Euro: And on Friday the euro was unable to capitalize on Thursday's big push above its 200 day MA, falling back with a classic dark cloud cover on very high volume.  This bodes ill for the euro on Monday.

Transportation: Like the other charts, the trans had a big day last Friday, up another 0.86%, outperforming the Dow and still short of their upper BB.  We even got  an unusual bullish stochastic crossover from a high level and as I always say, those are often good for another day or two of gains.

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        6       7      6           0       0.462    -67  
June       3       1      1           0       0.750    123

     And the winner is...

The back half of last week saw a nice run-up.  Continuing in record territory, there are no more resistance levels left.  We're also left without half our usual guidance since all the indicators are pegged on overbought and therefore have lost their predictive power.  So tonight I'm left with the candlesticks, which are uniformly bullish, the VIX, which has declined so far so fast I'm thinking it's due for a bounce, and what may be a top in copper.  What's interesting is that recently, copper tops have been followed by market declines, brief though they may be.  I guess all I can do is weigh the evidence and go with what I have, and tonight the scale comes down on the bulls' side ever so slightly.  So with some trepidation, I call Monday higher.  Could be a doji for that matter.

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  Tonight we stand aside.