Friday lower

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

• Friday lower.
• ES pivot 1998.17.  Holding below is bearish
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: waiting on new VZ entry.

Recap

Holy moly!  I wasn't expecting the Spanish Inquisition, nor the Swiss National Bank lifting its euro cap on Thursday.  Just look at the resulting chart of the Swiss franc futures, (6S H5 on eSignal).  Amazing.  And that's all it took to take the wind out of the Dow's sails for another triple digit loss.  So with op ex week drawing to a close (and none too soon), let's see what sense we cna make of the charts tonight.

Chart of the week

Swiss franc futures, weekly

If you were short the franc last night, my condolences.  This chart is truly breathtaking.  In the 10 years I've been doing this I've never seen anything close to it.  But it's stuff like this that is the reason I don't trade manipulated currencies, and what the Swiss have been doing to theirs is manipulation pure and simple.

The technicals

The Dow:  On Thursday the Dow, contrary to my expectations, extended its losing streak to five with a 106 point dump.  The candle was ugly the indicators all turned south again but still aren't back to oversold, we broke support at 17,382, and we remain in a descending RTC.  There's also no support now til the lower BB at 17,255, a number that I expect to see at some point Friday.  The the 200 day MA, now at 17,003 is hoving back into view.  All in all, this chart looks pretty grim.

The VIX:  And on Thursday the VIX gained 4.24% on a bullish piercing line.  However, it touched its upper BB for the second day in a row.  Since that line isn't rising away, it could offer some resistance, but with the VIX now above 20 for the third day in a row,  I'm not too sure.

Market index futures: Tonight, all three futures are significantly lower at 12:47 AM EST with ES down 0.60%.  ES had another bad day Thursday giving up the 2K level and remaining in a descending RTC but finally touching its lower BB intraday.  The new overnight candle gapped down but now also seems to be finding support around there.  The question is, with five down in a row, OBV running a negative 9.2M and ES now quite overextended from its pivot, are we due for a relief rally?  Ordinarily I'd say yes but now I'm not so sure.  The whole Swiss thing may not be over yet.

ES daily pivot: Tonight the ES daily pivot dips from 2002.75 to 1998.17. But we remain considerably below the new pivot so this indicator remains quite bearish.

Dollar index:  On Thursday the dollar gained0.28% to return to its recent highs around 62.70.  This number corresponds exactly to the highs of 2010, the last time we were this high.  And with the monthly RSI having now hit 100 and the monthly stochastic %K at 99, the dollar is as overbought as I've ever seen it.  Although the monthly chart remains in a rising RTC and has a whole army of green marubozus marching higher, I'm starting to get pretty nervous that a top in the dollar is getting close, like within a month or so.

Euro:  And of course the euro took another pounding on Thursday, giving up support from 2005 and now down to 1.1622, a level we haven't seen since November 2003!  Like the dollar, monthly RSI has now hit an extreme, zero in this case, a number lower than we even got in the depths of the 2008 recession.  And there's still no end in sight.  OBV is now running an extreme negative 7M.  If this keeps up, it will hit parity with the dollar by August.  And with a resurgence of nationalism in Europe, I just have to wonder if maybe this isn't the beginning of the end for the euro.

Transportation:  The trans on Thursday completely failed to capitalize on Wednesday's reversal signs and lost another 0.39%.  It just looks continued lower from here.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      2       1           1       0.750    942

     And the winner is...

With Friday coming around, and op-ex, and all negative-looking charts, and a bunch of turmoil injected into the market by the Swiss, traders may not want to be long going into the weekend.  Also, I note that the SPX Hi-Lo indicator actually rose on Thursday, not the washout bottom you'd like to see before a rally.  And while oil rose a bit on Thursday, it did it with a red inverted hammer - not a good rally sign.

So with a nod to the fact that anything can happen on op-ex Friday, I have to think that the preponderance of the evidence suggest that we will once again see Friday lower.  That's all she wrote.  See you again Sunday night!

Single Stock Trader

VZ was one of only six stocks posting a gain on Thursday but it still doesn't look like a buy to me.