Friday uncertain

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

• Friday uncertain.
• ES pivot 1971.33  Holding above is bullish.
• Next week  bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ still barely a swing trade buy.

Recap

Well it was another wild and woolly day on Wall Street Thursday.  It ended up being pretty much a rerun of Wednesday with the Dow jumping big right out the gate, then fading promptly at 2 PM only to recover and go blasting into the close at the highs of the day.  And with the Dow's 369 point advance, the Night Owl has now recovered all of the sickening three and a half percent loss she suffered on Monday and then some, just like that.   I didn't even trade it. Of course I didn't sell anything but what I did do was spend a lot of time kicking myself because I didn't have any cash to put into the market.  I had some bills to pay that used all y cash this month and the timing wasn't good. It really was an extraordinary opportunity though.  Oh well, that's life.  Now let's set our sights on Friday as the month winds down.

The technicals

The Dow:  It was pretty nuts. The Dow was all over the map on Thursday but in the end gave us a lovely tall textbook green marubozu that traded entirely outside the latest descending RTC for a clear bullish setup.  The indicators are only just now off oversold, continue to rise smartly, and the stochastic has a nicely completed bullish crossover going.  This chart now looks full-on bullish.

The VIX:  Last night I wrote that "this chart now looks full-on bearish'.  And so it was, with the VIX gapping down 14% on Thursday on its second red spinning top in a row.  That was also enough to leave the rising RTC for a bearish setup.  With indicators still overbought and the stochastic descending in a bearish crossover, it looks like there's still more downside available here.

Market index futures: Tonight, all three futures are lower at 1:52 AM EDT with ES down 0.38 %.  Considering the advances we saw on Wednesday, the continuing rise in ES on Thursday was nothing short of extraordinary.  It finally sent the indicators off of oversold with a bullish stochastic crossover in full effect.  So with the confirmation on Tuesday of Monday's doji star and now two white soldiers, this chart looks continued bullish.  The only problem is that a non-trivial decline in the new overnight is raising the caution flag.

ES daily pivot: Tonight the ES daily pivot jumps again from 1910.50 to 1971.33.  ES continues above its new pivot so this indicator continue bullish.

Dollar index:  Last night I wrote "we're good for more advances on Thursday".  And indeed the dollar gapped up over half a percent on Thursday to jump right back over its 200-day MA which was also the second day it traded  outside its descending RTC so that's a bullish trigger.  On the other hand it was also a gravestone doji . But indicators are not yet overbought so in the presence of conflicting indicators I'm not calling this chart tonight.

Euro:  Last night I wrote tht "this chart now looks continued bearish.".  And indeed it was with the euro gapping right back down under its 200-day MA on a red spinning top to close back down to 1.1243.  That makes it three down in a row now and Thursday's candle was a bearish trigger on a rising RTC exit.  With all the indicators now descending smartly off overbought but not yet down to oversold it looks like there's more downside coming here on Friday.

Transportation:  And finally, on Thursday the trans outperform the Dow with a nice tall green marubozu of their own. This one also exited their descending RTC for a bullish setup. Indicators are all rising off the bottom and only just off oversold, and we have a clear bullish stochastic crossover.  So there's really nothing bearish about this chart at all tonight.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August     9      2       2           2       0.846   2199

     And the winner is...

Another tough one.  Last night I was worried the market may have run too far too fast.  Those concerns are only doubled tonight, particularly since the futures appear to have done a turn-around.  Also this is now Friday and traders may once again not want to be long over the weekend given recent events.  There's also Jackson Hole and who knows what announcements are likely to pop out of that.  And with the VIX lower but still around 26 this one is just too risky for me to call one way or the other.  If I had to take a wild guess I'd give better than even odds we go lower, but officially I'm just going to call Friday uncertain.  That's all she wrote.  See you again Sunday night!

Single Stock Trader

Last night I said they were still more room to run in VZ and indeed on Thursday it gave us a nice 2% gap-up pop but did it on a hanging man.  Still, the indicators remain closer to oversold then overbought so I'm not quite ready to call this one lower yet.  I think you could still get in on this trade but I also think at least half the money has already been made in this trade.

Thursday uncertain

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

• Thursday uncertain.
• ES pivot 1893.75  Holding above is bullish.
• Friday  bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ still a swing trade buy.

Recap

Fed's Dudley says, "Not so fast!"

Wednesday morning started out pretty much like a rerun of Tuesday with a big jump upwards followed by a slide back down again. But in the middle of the day Dudley Doright came to the rescue with some welcome comments about the possibility of a delay in Fed interest rate rate hikes. That sounded the all-clear and the Dow began moving higher again. Not even the 2 PM margin call stumble could keep it from finishing it session highs. As we move on into the home stretch for this crazy month let's look at the charts to see if the bottom is in or what as we ponder Thursday.

The technicals

The Dow:  The double hammer pattern that we've seen over the past few days, one normal in one inverted finally proved to be too much for the bears and on Wednesday.  The day ended up on a 619 point tear.  That retraced all of Tuesday's losses plus most of Monday's losses.  It also confirmed a new bullish stochastic crossover and caused all of the indicators to bottom at oversold.  They are all now rising nicely.  Ordinarily, I'd say we're due for a pause but these are not ordinary times. The candle itself is a tall green marubozu and the indicators are all still oversold so I'd say this chart now looks technically bullish.

The VIX:  Earth to VIX, you're now cleared for reentry. On Wednesday the VIX dropped nearly 16% on a lopsided red spinning top, its first red candle in 7 sessions.  Indicators have now all clearly topped and are descending though still overbought.  We also have a nicely completed bearish crossover so this chart now looks full-on bearish.

Market index futures: Tonight, all three futures are marginally higher at 12:21 AM EDT with ES up  0.06%.  ES had an amazing day on Wednesday rocketing all the way back up to 1938.  And that big move still left the indicators oversold.  They're all rising now and we have a completed bullish crossover.  So with Tuesday's giant doji star confirmed, technically this chart looks continued bullish.

ES daily pivot: Tonight the ES daily pivot rises again from 1893.75 to 1910.50.  That still leaves ES comfortably above its new pivot so this indicator continues bullish.

Dollar index:  On Wednesday the dollar rose nicely with a gap-up green hanging man that stopped only at its 200-day MA.  The indicators are now just off oversold and the stochastic has completed a bullish crossover.  We've also exited a descending RTC and that's a bullish setup. Now if the dollar can just clear resistance at the MA we're good for more advances on Thursday.

Euro:  The euro meanwhile made it two down in a row following Monday's high of 1.1718.  On Wednesday it closed at 1.1352 stopping exactly on its 200-day MA.  But all of the indicators are now off overbought and descending nicely with a completed bearish stochastic crossover and Wednesday's candle exited a week-long rising RTC so that's a bearish set up. That means this chart now looks continued bearish.

Transportation:  Finally, the trans also had a great day on Wednesday solidly establishing support at 7467 and giving us a tall green marubozu. That retraced all of Tuesday's losses and nearly half of Monday's.  The indicators remain oversold are now rising off the bottom and we have a completed bullish stochastic crossover.  That all means this chart now looks bullish.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August     9      2       1           2       0.845   2199

     And the winner is...

OK, so here's the problem I'm having tonight.  All the charts are looking technically bullish, but with the VIX still over 30 and the futures basically flat in the overnight so far it feels like flipping a coin and having it land on its edge.  The slightest breeze could make it fall over either way.  And with the  wind gusting from all points of the compass lately, this weather-owl isn't taking any chances: Thursday uncertain, Jack.

Single Stock Trader

After a crazy exponential run-down last week and into Monday, VZ moved higher on Tuesday but finished with the disappointing red candle. But then it redeemed itself on Wednesday with some nice gains.  All the indicators have finally bottomed and are moving higher steadily.  The stochastic in particular now has a nice looking bullish crossover in effect . We've also finally peeled away from the lower BB and it looks like there's still more room to run higher on Thursday.

Wednesday higher

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

• Wednesday higher.
• ES pivot 1893.75  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ now a swing trade buy.

Recap

Well it was another wild day on Wall Street Tuesday as the Dow opened up big as I had expected only to see all those gains evaporate after 3 o'clock when apparently the Chicoms decided to lower their interest rates again. That led to a 205 point loss for the Dow which makes four 200 point plus moves in a row and is apparently the only time in its entire history that that has happened.

So just what the heck is going on here? The market's crashing, the market's not crashing. The Fed is going to raise rates in September, the Fed is going to raise rates next March. We're in a correction, we're not in a correction. The economy is fundamentally fine, the economy is fundamentally flawed. Just who are you supposed to believe? Personally, the only thing I believe is the charts - so let's get right over there and see if we can make any sense at all out of this craziness.

The technicals

The Dow:  The Dow just continues to get jerked around by the Chicoms. On Monday we got tall hammer which is a good reversal sign and on Tuesday we ended up with a tall inverted hammer, also a good bullish reversal sign.  And this one was accompanied by a bullish stochastic crossover and highly oversold indicators (RSI is now 3.48).  The losing streak is now 6 in a row and as we've mentioned four in a row for 200 point plus moves lower so there has to come a point where the selling is exhausted.  Technically this chart looks like its going higher but with the VIX still nearly 40 there's just no telling.

VVIX, daily

The VIX:  Last night I said the VIX looked ready to move lower and indeed that's just what happened on Tuesday with an 11.59% decline - although it was on a green spinning top.  Still that candle is in a bearish harami position and the indicators have now peaked at overbought and are proceeding lower.  Also the stochastic just gave us the bearish crossover and it's at a very high level which means that it's more likely for the VIX to move lower than higher from here. 

Even more interesting, and this is a chart I haven't seen anyone mention lately, is the VVIX, which basically measures the volatility of the VIX.  Just take a look at this. The long term historical mean of the VVIX is 86. On Monday it hit an astonishing high of 212.  Then on Tuesday it gapped down hard to end at a still breathtaking 192 on a small green spinning top. Those three most recent candles put together constitute a good evening star and that's a bearish pattern. We also have a bearish stochastic crossover and indicators that are still overbought but now starting to move lower. That all portends a lower VIX. And that means that the market is likely to move higher Real Soon Now.

Market index futures: Tonight, all three futures are higher at 1:04 AM EDT with ES up 1.32%,  On Tuesday ES put in what ended up being a super tall long-legged doji star sitting at the bottom of Monday's candle. With RSI now at an extraordinarily low 0.63 and the stochastic lying flat on the floor one would think that there's a lot more upside potential here than downside risk. But the volatility just keeps on coming in the overnight .

ES daily pivot: Tonight the ES daily pivot ticks up  from 1889.00 to 1893.75.  An overnight rally in ES has now put it back above its new pivot so this indicator is once again bullish.

Dollar index:  After a big gap down on Monday the dollar gapped right back up again retracing 50% of those losses on Tuesday.  Monday's 1.27% gain was enough to form a bullish stochastic crossover and send the indicators higher although they are still oversold. We're also still in a descending RTC but nearing the right-hand edge.  All in all this chart looks like it might have possibilities to move higher again on Wednesday.

Euro:  Meanwhile volume continue to be extraordinarily high in the euro trade on Tuesday and after a tall green candle on Monday the euro fell right back down again on Tuesday with a red inside harami to close at 1.1429. The overnight is gapping up higher once again so with the current muddled state of affairs who knows where this one is going on Wednesday.

Transportation:  Despite an exponential run down in the trans, there seems to be no stopping this headlong rush to oblivion. I extrapolated the descending RTC and if the trend continues falling at the current rate they will hit zero by November 8th of this year. That's right, absolute zero. The losing streak is now six days and despite massively oversold indicators the stochastic has yet to form a bullish crossover.  In fact its lines are now falling off the bottom of my chart - I can't even see them anymore.  So I still can't call a reversal here yet.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August     8      2       1           2       0.833   1580

     And the winner is...

I'm probably taking my life in my hands by saying this, but purely technically we now have two very good reversal candles:  a giant hammer followed by a giant inverted hammer.  And all the charts remain crazy overextended in all sorts of directions so the only logical call is for Wednesday higher.  But Lord knows, the market has been anything but logical recently.  All it will take to derail this is one peep out of the Peeple's Bank of Communist China or some inopportune sound bite from a Fed head given that the VIX is still up there in outer space somewhere.  Either way, should make for an interesting session.

In closing, there is an interesting chart I would like to show you.  

Morningstar Market Fair Value Index

 I grabbed this chart from Morningstar's great website (click the image to enlarge). This is their market fair value indicator that tells whether the market as a whole is overbought (the red areas) or oversold (the blue areas). Today this indicator hit 0.89.  The last time we were at this level following an extended period of being overbought was back on August 4th, 2011. Notice the similarities between the situation we have now and what was going on back in 2011. You have an extended period of being overbought after which we hit the break-even level then we have a double bottom of oversold conditions followed by a big crash . In 2011 we ended up hitting 0.79 on October 4th.

Now it's interesting to note that if you look at the Dow in 2011 both August and September were truly crummy months. But once September was over October took off and we went on a 7month winning streak..  If history is any guide, this would imply that we have another month of downward pressure before seeing a significant rally into the end of the year.  Just sayin'.



Single Stock Trader

Last night VZ looked like a good buy. And on Tuesday it indeed opened way higher and then continued upwards only to give it all back in the end. Leaving us right where we started. However the indicators are still way oversold and the stochastic is just microns away from a bullish crossover so I still have to think that this chart has possibilities.  The fact that support at 40.47 held is encouraging.

Tuesday higher

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

• Tuesday higher.
• ES pivot 1889.00  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ still not a swing trade buy.

Recap

Words simply fail me. I thought last Friday's action was crazy but Monday topped them all.  Just for Laughs, I drew a descending RTC matching the current collapse and it shows that if this trend continues the dad will hit zero on December 8th of this year. Obviously Mr. Market is totally off his meds and has gone completely psycho. But we need to maintain some sort of stability and the charts are going to have to provide that as we take a look at Tuesday to see when this insanity may end.
The technicals

The Dow:  This was absolutely amazing.  On Monday the Dow put in the mother of all hammers, let's call it Thor's hammer with more than a 1000 point spread from top to bottom. We also saw selling volume reach a climax that exceeded even last Friday's crazy option expiration levels and finally sent the stochastic starting to curve around for a bullish crossover. Meanwhile RSI hit 7.5 which is well below the level from which reversals usually come .  This is capitulation if I ever saw it.  With a candle that traded entirely below the lower BB this is about as good a reversal indicator as I have ever seen.  Ever.

The VIX:  I thought Friday's VIX candle was crazy but on Monday the VIX picked up right where it left off finally topping out at over 53, a level that we haven't seen since the collapse of Lehman Brothers in October 2008. That only served to enhance the hyperbolic nature of the current run-up and we know how those things always end.  Always.  The indicators have now hit impossibly overbought levels with RSI almost 98 and the stochastic finally curving around for a bearish crossover..  It is completely amazing to me that the VIX should now be at levels we haven't seen since the Great Recession. I don't care what's going on in China, this doesn't make any sense whatsoever. With a gigantic inverted hammer the VIX now looks more than ready to come crashing back down to earth and reality.

Market index futures: Tonight, all three futures are finally higher at 1:09 AM EDT with ES up  an astounding 2.34%.  That's n even bigger move up than the crash lower we saw last night.  I'm really running out of superlative adjectives here looking at the daily chart for ES. On Monday the selling simply accelerated as ES fell right over a cliff falling all the way down to 1831 before finally recovering a bit. With 5 days of ever taller red candles this is a textbook perfect inverse exponential and it's one that looks about ready to end. And the overnight seems to be supporting that theory. ES has now already retraced about 20% of Monday's losses and that's causing the stochastic to just barely give us a brand new bullish crossover while the rest of the indicators are still quite oversold. This to me looks ready to reverse on Tuesday.  Heck we've already retraced half of Monday's losses and it's still only 1 AM.

ES daily pivot: Tonight the ES daily pivot crashes again from 1989.25 to 1889.00.  That amazing 100 point drop, plus the gain in ES is enough to put it (finally) back above its new pivot, so this indicator now turns bullish.

Dollar index:  Along with everything else on Monday there was outsized action in the dollar as it cratered an amazing 1.74%, crashing right down through its 200-day MA.  And like the other charts, it's gone inverse hyperbolic with a series of gap-down candles with the gap getting larger and larger everyday. You'd think this is never going to end but this kind of pattern always ends with a big reversal .  And with a giant spinning top on the books it looks like this is as good a time as any for that reversal to happen.

Euro:  The euro meanwhile made a perfect mirror-image of the action in the dollar, rocketing right back up through its 200-day MA and through resistance at 1.1461 to close at 1.1603. a And like the other charts we have a classic exponential pattern here that's now got the indicators quite overbought and the stochastic in position for a bearish crossover.  So it looks like the euro is ready to come back in for a landing pretty soon and the overnight is in fact finally, finally guiding lower in non-trivial fashion lending support to that theory.

Transportation:  On Monday , the trains were pretty much a carbon copy of the Dow - giant hammer candle, indicators at extreme oversold levels. trading entirely below the lower BB with a stochastic just about to curve around for a bullish crossover.  It looks like we're about out of sellers, so I think this one is finally ready to reverse.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August     8      1       1           2       0.909   1785

     And the winner is...

We have some really rare and freaky chart patterns going on the past two days.  With everything at such extreme oversold/overbought levels, it's high time for a reversal.  I'll note also that the SPX Hi-Lo indicator hit zero on Friday.  It doesn't get any lower than that.  And of course with the futures rallying hard in the overnight I'm reasonably confident that I can call Tuesday higher.

Single Stock Trader

On Monday Verizon put in the spinning top to end all spending tops. After bottoming at an incredible 38.06 it shot right back up again to finish at 44.74, still lower than its lower BB on massively increased volume.  It also formed a bullish stochastic crossover and RSI has now hit one which is amazing in itself.  This is about as good a reversal indication as you're ever going to see and in this crazy world we've got going right now I have to call it a buy.

Monday big time lower

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

• Monday lower.
• ES pivot 1989.25  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ still not a swing trade buy.

Recap

Trouble ahead, trouble behind...

Well I guess there's not much I can say about Friday's collapse that hasn't already been said.  I sat  there watching the market go off the rails all afternoon like some rubber-necker gawking at a bad car crash. I had to scroll my Dow chart all the way back to 2008 to find the last similar incident of such a bad sell off - and that was in October '08 when Lehman Brothers collapsed.  Is the current state of things (which I gather is largely due to fears of Chinese book -cooking) really as bad as that was?  Let's take a look at the charts and see if we can sort some reality from the smoking wreckage and get a clue as to where Monday's going.

The technicals

Dow daily

The Dow:  Well now here's something you don't see every day:  In fact  this is something I've never seen in more than 10 years of doing this. Technically we had a bearish setup on a rising RTC exit last Wednesday as you can see from the chart.  Then on Thursday we got a confirming bearish trigger and finally on Friday we got the payoff in a 500 point plus dive.

But what's most concerning about this chart is the lower red line slightly increasing to the right that represents the lower line of a rising RTC that goes all the way back to the bottom of the Great Recession back in March of 2009.  Any breach of this line represents a bearish setup of that rising RTC. In other words the Dow has been rising more or less continuously ever since then. Any break of that line indicates the clear possibility that the long-running bull market ever since is now over. 

But in the short term at least we're looking at a market that has gone not just inverse parabolic but inverse hyperbolic.  Of course this may be exaggerated because last Friday was an options expiration day but still this is about is overdone as I've ever seen and that goes back to the Great Recession. So I've got to think there's a short-term reversal coming Real Soon Now.

VIX daily

The VIX:  And now here's something even more astonishing.  Check out this chart of the VIX.  It pretty much speaks for itself.  This one's headed straight to the moon, Alice.  Normally, I'd say it's more than ready to come crashing back down, but the past few days have been anything but ordinary.


Market index futures: Tonight, all three futures are wildly lower at 12:19 AM EDT with ES down an astounding  2.28%!  I have never ever seen a move of this magnitude in the overnight.  What the heck - did Martians just land in China or something??

ES daily pivot: Tonight the ES daily pivot crashes again from 2042.58 to 1989.25.  I believe this is the biggest one-day drop in the pivot I've ever seen and I've been doing this since 2003.  That leaves this indicator beyond bearish - it's just plain spooky.

Dollar index:  On Friday the dollar took its own impressive move with a huge one percent gap-down red candle that busted its 200 day MA.  That sent the indicators oversold but not overly so.  And jeez, this thing traded entirely below its lower BB.  But without a bullish stochastic crossover and no nearby support, I can't call it higher yet.

Euro:  And in perfect mirror image fashion, on Friday the euro broke up through its own 200 day MA for a four day winning streak to close at 1.1450, its highest since May 15th.  That sent the indicators overbought but they continue to rise and with a steep rising RTC in effect, there's no calling this lower.

Transportation:  The trans on Friday were pretty much a copy of the Dow, so everything I wrote there applies here too.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August     7      1       1           2       0.900   1197

     And the winner is...

Earlier Sunday afternoon, I was all set to be writing about how Friday's action looked like a classic panic-driven washout and how the selling would be about exhausted.  But judging by the futures this evening, that's clearly not the case.  Apparently, a bunch of stops are getting triggered and they're all diving for the exits at once.  This is the sort of market that separates the Night Owls from the parakeets.  It pretty much defines what it means to take the heat, and it's getting pretty hot.  As for me, when the VIX went over 20, I stopped trading.  I think there's going to be a great buying opportunity soon, but it ain't gonna be on Monday.  This call is easy: Monday lower - much lower.

Single Stock Trader

VZ took a dive last Friday along with everything else in the market although it wasn't hurt as bad as most of the rest of the Dow.  We got an inverted hammer making that the second one in a row.   It was enough to drive the indicators extremely oversold and we're now looking at a waterfall inverse exponential pattern.  We also have strong multi-year support not too far away at 45.80 and then the lower BB 45.74 just below that .  It's still not quite my ideal setup as the stochastic has not yet formed a bullish crossover but it's pretty darn close so if the market is looking at all decent on Monday morning at the open I wouldn't be adverse to buying this here.  Unfortunately, that doesn't look like it's going to happen.