Friday lower

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

• Friday lower, low confidence.
• ES pivot 1936.25.  Holding below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

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

The technicals

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

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

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

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

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

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

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

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       8      10      3           2       0.500    132
July       6       4      4           3       0.692    639
August     8       7      2           2       0.588     81
September  6       6      5           2       0.571    376
October    1       3      2           1       0.400   -148

     And the winner is...

With all the charts looking quite bearish and some important support levels just below us, and with ES seeming to be wanting to have a look at them, I've got no other choice than to batten down the hatches and call Friday lower.  That's all, she wrote.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside - this roller coaster is a bit too wild for me.

Thursday higher

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

• Thursday higher, low confidence.
• ES pivot 1947.92.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Yup - that's why I called Wednesday "uncertain".  There was nothing in the technicals (that I could see anyway) that presaged a275 point pop in the Dow.  That recouped all of Tuesday's losses, and Monday's too leaving us pretty much back to square one.  Perhaps the charts can point the direction to square two (ie. Thursday) now.  Let's take a look.

The technicals

The Dow:  On Wednesday the Dow was nothing but up, up and away with a 1.64% gain giving us a very rare black and white narabi pattern as Tuesday's and Wednesday's candles were nearly identical, first red, then green.  These commonly indicate continuation in the direction of the second candle, so this one is bullish.

Wednesday's advance was halted by resistance at 17K but with the indicators still only just barely off oversold, it would appear that there might be enough mojo left to break this on Thursday - assuming the wild oscillating up/down thing doesn't continue.

The VIX:  Now here's an interesting clue.  While the Dow pretty much mirror-imaged Tuesday's trading the VIX took a big hit on Wednesday, down12.15% on the mother of all bearish engulfing patterns.  It went about 3/4 of the way from the upper BB to the lower in one shot/  And that still didn't send the indicators oversold..  One thing I've noticed about the VIX lately - one big fall begets another.  And with no resistance now til 14.53, I wouldn't be surprised to see the VIX visit this number on Thursday.

Market index futures: Tonight all three futures are higher at 12:29 AM EDT with ES up 0.14%.  ES had a great day Wednesday, even better than the Dow with a big bullish engulfing pattern made even more impressive by the positive overnight pin action.  The indicators seem to be sorting themselves out and are now all pointed higher with a ways to go yet before hitting overbought so this chart looks bullish to me.

ES daily pivot: Tonight the ES daily pivot jumps from 1936.17 to 1947.92.  We remain well above the new pivot so this indicator turns bullish.

Dollar index:  Last night I said the short term looked lower for the dollar and it was indeed, with a big 0.43% loss on Wednesday to remain inside a new descending RTC.  Indicators are now falling nicely but still not oversold so it's not out of the question that there's more downside left here for Thursday.

Euro: The euro chart is even more interesting.Tuesday's gain was a bullish RTC trigger on a short falling RTC (to 9/16).  Wednesday's gain was a bullish setup on a much longer falling RTC (to 8/15).  And with rising indicators confirming this, it looks like the euro has bottomed, at least for now, and has more upside left on Thursday.

Transportation: The trans on Wednesday wasn't quite as stellar as the Dow but still managed a respectable 0.95% gain and interestingly on a big hammer.  That's a decent bullish reversal sign.  The indicators are all in disarray probably because of all the wild swings lately, but just looking at it I'd say there's a good chance of going higher on Thursday 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      5           0       0.750    482
May        6       7      6           0       0.462    -67
June       8      10      3           2       0.500    132 July       6       4      4           3       0.692    639 August     8       7      2           2       0.588     81 September  6       6      5           2       0.571    376  October    1       2      2           1       0.500    187

     And the winner is...

Tonight the charts are all looking fairly bullish so I'm going with that and calling Thursday higher, though I'm certainly not expecting as big a run as we saw Wednesday.

ES Fantasy Trader

Portfolio stats:  the account remains at $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside - this roller coaster is a bit too wild for me.

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1936.17.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Well I am certainly glad I called Tuesday as "uncertain" because I sure wasn't expecting a 273 point dive in the Dow.  Holy moly!  Once again, this changes the picture so we return to the charts as every night  for clues to Wednesday' close.

The technicals

The Dow:  With a big dump straight out the gate, it looked like that was it for the Dow on Tuesday.  But then things got worse, with a late afternoon sell-off doubling the loss and ending only when the bell finally, and mercifully rang.. The 1.6% loss confirmed Monday's doji in a big way, drove the indicators back to oversold and turned an incipient bullish stochastic crossover right into a bearish one.  So the only hope now is for a DCB on Wednesday.

The VIX:  The VIX meanwhile confirmed Monday's bullish engulfing pattern in a big way with an 11.25% gap-up rocket ship that brought it all the way back to year-long resistance at exactly 17.20.. It also sent the indicators higher again and formed a bullish stochastic crossover.  But being at strong resistance now, it's not clear that the VIX will be able to push further on Wednesday.

Market index futures: Tonight all three futures are higher at 12:26 AM EDT with ES up 0.16%.   ES had a big loss on Tuesday that confirmed Monday's spinning top and short-circuited a nascent uptrend to break under support at 1938.  It also turned a bullish stochastic crossover right back into a bearish one.  The small overnight gains may either be a DCB or just a fake-out for Wednesday - there's nothing really bullish about this chart.

ES daily pivot: Tonight the ES daily pivot plunges from 1959.17 to 1936.17.  And even with that ES remains below the new pivot so this indicator turns bearish. 

Dollar index:  Last night I wasn't ready to commit to a dollar decline, but by Tuesday morning, it was clear that we were going lower, down another 0.31% to form a new, steep descending RTC and send the indicators all off overbought and moving lower. I did however make a case for a lower dollar in a comment Wednesday afternoon which I'll reprint here for those who missed it:

"[T]he dollar seems to be at a crossroads at the moment. Medium term, if you look at the monthly chart, you will see that the dollar has now hit its upper BB, is quite overbought, and is now at levels from which it has declined the last three times we were here (once each in the past three years).

It is forming a monthly evening star and a monthly bearish stochastic crossover. So I'm looking for an intermediate decline in the dollar.

The short-term picture supports this as the dollar is falling out of its daily rising RTC for a bearish setup.

Long term though, it looks like strength in Germany and ECB efforts wrt the euro will keep the dollar moving higher. There was just a thing on CNBC where they claimed that the goal was to send the euro to parity by "twenty seven". It's not clear if they meant 2017, 2027, or something else. Either way, I wouldn't be converting my IRA to euros right now."

Euro: And while the aforesaid euro did manage to post a gain on Tuesday, it was only to 1.2670, right at weekly resistance, with a tall doji.  And the overnight seems to be confirming that, down 0.24% so far.  We do have a bullish RTC exit but I'm going with the candles here and calling the euro lower on Wednesday.

Transportation:  On Tuesday the trans took it on the chin even harder than the Dow (not a good sign) to break support at 8242 with a 2.5% loss, their worst showing since, uh, all of four days ago.  But even that wasn't enough to send the indicators oversold, though it did force a bearish stochastic crossover.  Next support isn't til 7990 (yikes!) and right now there's nothing bullish about this chart.

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       8      10      3           2       0.500    132
July       6       4      4           3       0.692     639
August     8       7      2           2       0.588     81
September  6       6      5           2       0.571    376 
October    1       2      1           1       0.500    187

     And the winner is...

With all these wild triple digit swings lately, I'm surprised the VIX is only at 17 - it feels more like 27.  It's driving the indicators crazy and it's also driving me crazy.  While the overall look of things tonight remains bearish, I'm hesitant to call it so just because of the irrational way Mr. Market has been acting the past few weeks.  So as the spooky month of October rolls on, I'm pulling the sheets up over my head, leaving the light on, and calling Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside. 

Tuesday uncertain

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

• Tuesday uncertain.
• ES pivot 1959.17.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

The market started off nicely Monday morning but had second thoughts after an initial burst of energyery and after only a token attempt at a rally in the afternoon, we finished with the Dow down 18 points.  But the resulting candles are interesting so let's take a look right now and figure out Tuesday's direction.

The technicals

The Dow: The net result of Mondays' roller coaster for the Dow was a long-legged doji as continuing upward momentum meets profit-taking.  And the 17K level is of course now back to being resistance.  The indicators continue rising off oversold but we remain in a descending RTC and with the doji, this chart is too tough to call tonight.

The VIX: After Friday's big gap down, the VIX rebounded Monday with a 6.25% gain on a classic bullish engulfing pattern.  However, the indicators continue to fall towards oversold and with the trade outside the rising RTC, this was technically a bearish RTC trigger.  But there's too much conflict here for me - no call..

Market index futures: Tonight all three futures are just a bit lower at 12:44 AM EDT with ES down  0.04%.  On Monday ES put in a red spinning top sitting on top of Monday's big gain and OBV is back to declining again.  The indicators are quite confused, with RSI falling, momentum rising, and money flow falling.  The overnight is also confused, trading lower but rising on a small gap down candle.  It's anyone's guess where this chart is going.

ES daily pivot: Tonight the ES daily pivot rises from 1953.50 to 1959.17.  And that's enough to put ES back below its new pivot so this indicator now turns bearish.

Dollar index:  On Monday the dollar lost nearly a full percent but still managed to stay inside its rising RTC.  Indicators though are giving a sign of finally starting to come off extreme overbought.  Still, the action remains choppy, so it's hard to say if this one day decline means much, especially given the powerhouse the dollar's been lately.

Euro: And the euro also reversed course Monday, closing up to 1.2633, just inside its descending RTC.  But indicators have now finally come off oversold and the overnight is trading outside the descending RTC for a bullish setup on a bounce off the lower BB.  So there's at least a chance of a move higher here on Tuesday.

Transportation: The trans took me by surprise on Monday as I wasn't expecting a 1.15% slide as resistance at 8500 proved to be a level too far and derailing what looked like the start of a promising uptrend.   Instead we're left with an ugly dark cloud cover, though the indicators are still rising.  With no real trend going on here, this chart too is just a bit too opaque for me tonight.

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       8      10      3           2       0.500    132 July       6       4      4           3       0.692    639
August     8       7      2           2       0.588     81 September  6       6      5           2       0.571    376 October    1       2      0           1       0.500    187


     And the winner is...

Tonight I'm seeing a lot of conflicting readings in the charts as the market tries to digest last Friday's big gains.  In fact, there's enough confusion here that the only thing I can really do it call Tuesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside. 

Monday higher

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

• Monday higher, low confidence.
• ES pivot 1953.50.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Last Friday saw a nice bounce as the Dow gained 1.24% to close back above 17,000.  This move makes for some interesting chartage, so let's check out the charts and figure out where Monday's headed.

The technicals

The Dow: Friday's big 209 point pop in the Dow constituted a classic morning star, and this is a major bullish reversal pattern.  Confirming that is a now fully formed bullish stochastic crossover.  The indicators are now also all off oversold and we're very close to a bullish RTC exit so this chart looks clearly bullish form here.

The VIX: Last Thursday I wrote "there's more room to run lower here on Friday.".  Well after spending a highly unusual seven of the last nine noodling about its upper BB, the VIX finally gave it up on Friday confirming Thursday's inverted hammer, gapping down 10% to fall right out of its rising RTC for a bearish setup.  We also got a completed bearish stochastic crossover and the indicators continue to descend, just off overbought.  VVIX is along for the ride so this chart looks like its got more downside on Monday.

Market index futures: Tonight all three futures are higher at 12: 32 AM EDT with ES up a decent 0.27%.  ES's gains on Friday were even more dramatic than the Dow's, completing a morning star and exiting its descending RTC for a bullish setup.  Indicators are all rising off oversold and surprisingly considering the big bump on Friday, we're still getting some positive pin action in the Sunday overnight, which makes it all the more impressive.  So this chart just looks plain bullish.

ES daily pivot: Tonight the ES daily pivot leaps from 1934.17  to 1953.50.  And even with that impressive gain, we're still above the new pivot, so this indicator remains quite bullish.

Dollar index:  Well this is one that fooled me.  The dollar did not go lower on Friday, instead having its biggest day in a month, gapping up a huge 1.32% to break out of its upper BB and the left side of its rising RTC.  The mighty dollar is now at levels not seen in four years, and it looks like there's still nothing to stop it.

Euro: And meanwhile the euro collapsed on Friday, giving up all of Thursday's gains and then some to hit its lower BB and close at 1.2515 for a two year low there. Indicators remain useless lying oversold on the floor and the descending RTC remains firmly in place.  There's no sign of a turnaround here.

Transportation: Last Thursday I wrote "this chart really looks ready for more upside" and was it ever, gaining a big 2.12% on Friday to bounce right back into the middle of last week's congestion zone around 8482.  But with indicators now all clearly rising off oversold and a nice bullish stochastic crossover in place, it looks like there's still more upside available even after Friday's great run.

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       8      10      3           2       0.500    132
July       6       4      4           3       0.692    639
August     8       7      2           2       0.588     81
September  6       6      5           2       0.571    376
October    1       1      0           1       0.667    205

     And the winner is...

After hitting 11, its third lowest level of the year on Thursday, the SPX Hi-Lo indicator rebounded nicely on Friday.  That's always a good sign on a bottom.  Also, the Morningstar Market Fair Value Index hit 0.99 on Thursday, its first undervalued reading of the year so far, another bullish sign.  Tonight the charts still look bullish.  So in the absence of any reason not to, I will simply call Monday higher.

ES Fantasy Trader

Late Thursday night Mr. Market handed me a gift in the form of a trade setup too good to pass up.  It was really my ideal setup - a big hammer following a long downtrend with oversold indicators and positive follow-through.  At the time I wrote that it was "just about the perfect setup for my system".  This was the prettiest one I've seen all year so I jumped on it and was rewarded Friday morning with a dandy 14.75 point gain - not too shabby.  Here's the trade:

SLD    10    false    ES    DEC14 Futures     1957.25    USD    GLOBEX    OCT 3 11:40:41
BOT    10    false    ES    DEC14 Futures     1942.50    USD    GLOBEX    OCT 3 00:10:52

Portfolio stats:  the account now rises to $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside.  

Reminder: you can follow these trades live on Twitter @nightowltrader.  And since I was asked about this, these trades are almost always entered late at night, like around 12  - 1 AM Eastern time.  I always plan to exit sometime the next trading day, though if I've got a loser that looks like it might come back, I'll hold on.  There are no stops and no targets.  I don't usually wake up until 11 AM, so if I'm long and the market peaks at 10 and then craters, then there go my profits.  Hey, you gotta sleep sometime.

I always buy on the ask and sell on the bid, to make things fair.  As soon as I place the trade, I send the tweet.  But there's no guarantees it will make it.  I've had Twitter fail to post a tweet twice now since I started doing this.  If my computer crashes just before posting the tweet, there could be a delay.  And remember, these are paper trades.  There's no way I could sleep at night knowing I've got 10 ES contracts at risk for real with no stops overnight, not that I could even afford to trade that many in the first place.  That's why it's called "fantasy trading".  The point of the exercise is largely to demonstrate my street cred.