To all the brave men and women serving and sacrificing today at home and around the globe, I salute you. Your courage, honor, and dedication are greatly appreciated. I am humbled and grateful.
Inflation Forecast Update
17 hours ago
Monday, May 30, 2011
Memorial Day
To all the brave men and women serving and sacrificing today at home and around the globe, I salute you. Your courage, honor, and dedication are greatly appreciated. I am humbled and grateful.
Friday, May 27, 2011
Make or Break
Last night I suggested that the Dow could still go higher today and while it wasn't looking too promising early on, we finally did manage to eke out an 8 point gain. It's not much, but it is higher. The problem with today's action was that it formed a long spindly doji, indicating considerable indecision as to market direction. We are also still inside a descending regression trend channel that began on May 10th. It will take at least two more days of gains like the last two days before we reach the right-hand edge and a bullish setup.
On the other hand, the Dow is only now just coming off its oversold indicators and they are nowhere near the point they were at the last three market tops this month. That suggests that even if we continue in the monthlong downtrend, there's still room for some upside tomorrow.
The VIX tends to support this idea. It put in a big red candle today to close at 16.09. In fact the size of the decline suggests that the market should have gone higher today, so maybe it will tomorrow. Is the VIX ready for a reversal? Not just yet. It has not support until the 15.5 level it hit on the 19th. And then its lower Bollinger band is at 14.95, suggesting the VIX could easily go lower tomorrow, implying higher stocks.
And all three of the ES, NQ, and YM futures are up this evening (at 1:20 AM EDT), with ES up 0.17%. Not a huge gain, but it still lends weight to the bullish thesis. Then we have oil creeping higher in the overnight and as long as oil remains in a positive correlation with the market, this too is bullish for stocks.
And last but not least, the dollar did indeed go lower today as I suspected. It did find support at its 40 day MA, but the tall red candle at the end of three earlier declines suggests that it has room to go lower tomorrow again. And like the correlation with oil, the dollar is keyed to the market, only in an inverse correlation. Dollar lower, stocks higher.
Finally, tomorrow is a Friday, the last Friday of the month, and also the Friday before Memorial Day. Historically, that is a least slightly bullish. Volume is likely to be light with many of the pros already packing up for the Hamptons or other Memorial Day weekend getaways. So I'm not looking for any major swings, but the tea leaves do seem to favor the long side for Friday. But it's kind of a make or break. A down day tomorrow will cast doubt on next week too.
And my AKS trade is still cooking. AKS popped nicely through its 200 day MA on increased volume for a 2.17% gain today and that is very bullish. And so far no indicators are showing oversold and the weekly chart looks even stronger than the daily. Good trading is knowing when to hold 'em and when to fold 'em. We're going to hold AKS a while longer.
On the other hand, the Dow is only now just coming off its oversold indicators and they are nowhere near the point they were at the last three market tops this month. That suggests that even if we continue in the monthlong downtrend, there's still room for some upside tomorrow.
The VIX tends to support this idea. It put in a big red candle today to close at 16.09. In fact the size of the decline suggests that the market should have gone higher today, so maybe it will tomorrow. Is the VIX ready for a reversal? Not just yet. It has not support until the 15.5 level it hit on the 19th. And then its lower Bollinger band is at 14.95, suggesting the VIX could easily go lower tomorrow, implying higher stocks.
And all three of the ES, NQ, and YM futures are up this evening (at 1:20 AM EDT), with ES up 0.17%. Not a huge gain, but it still lends weight to the bullish thesis. Then we have oil creeping higher in the overnight and as long as oil remains in a positive correlation with the market, this too is bullish for stocks.
And last but not least, the dollar did indeed go lower today as I suspected. It did find support at its 40 day MA, but the tall red candle at the end of three earlier declines suggests that it has room to go lower tomorrow again. And like the correlation with oil, the dollar is keyed to the market, only in an inverse correlation. Dollar lower, stocks higher.
Finally, tomorrow is a Friday, the last Friday of the month, and also the Friday before Memorial Day. Historically, that is a least slightly bullish. Volume is likely to be light with many of the pros already packing up for the Hamptons or other Memorial Day weekend getaways. So I'm not looking for any major swings, but the tea leaves do seem to favor the long side for Friday. But it's kind of a make or break. A down day tomorrow will cast doubt on next week too.
And my AKS trade is still cooking. AKS popped nicely through its 200 day MA on increased volume for a 2.17% gain today and that is very bullish. And so far no indicators are showing oversold and the weekly chart looks even stronger than the daily. Good trading is knowing when to hold 'em and when to fold 'em. We're going to hold AKS a while longer.
Thursday, May 26, 2011
The VIX comes through
Well, it looks like the VIX trumps the futures. Last night I was worried about the prospect for a rally today because although the VIX was falling, generally an indicator of higher stocks to come, the futures were all down fairly substantially. As it turned out, the VIX predicted the market once again and we were rewarded with a pleasant 38 point advance in the Dow to break a three day losing streak.
Not only that, but the gain came in the form of a pattern that resembles a piercing line (though not quite). That, along with indicators that are all looking to be bottoming at rather oversold levels, suggests that there is more room to rise on Thursday.
Meanwhile, the drop in the VIX today brought it back to the middle of its Bollinger bands, with all of its indicators descending and its short stochastic in particular executing a bearish crossover. This suggests the VIX has room to fall further and that in turn suggests higher stock prices tomorrow too.
Then we have the futures. ES, NQ, and YM are all up right now at 1 AM EDT, with ES leading the way at +0.27%. ES has now exited its descending RTC channel going back to May 19th and that is a swing trade bullish trigger.
Oil meanwhile rose back over $100 today and since oil is still moving in sync with the market these days, that's also bullish. And the dollar, using my $USDUPX chart looks to be ready to continue filling the gap it formed after its big jump on Monday - also bullish for stocks.
So there you have it. All of the tea leaves seem to be in agreement tonight. I'm reaching for my long hat and would be most surprised if we didn't get another advance on Thursday at least as good as today's.
Finally, my AKS trade from yesterday is doing well. AKS closed at 14.72, up 0.28. AKS is now right at its 200 day MA. If it can move past that tomorrow, I'll hold on. If not, I'm outta there.
Not only that, but the gain came in the form of a pattern that resembles a piercing line (though not quite). That, along with indicators that are all looking to be bottoming at rather oversold levels, suggests that there is more room to rise on Thursday.
Meanwhile, the drop in the VIX today brought it back to the middle of its Bollinger bands, with all of its indicators descending and its short stochastic in particular executing a bearish crossover. This suggests the VIX has room to fall further and that in turn suggests higher stock prices tomorrow too.
Then we have the futures. ES, NQ, and YM are all up right now at 1 AM EDT, with ES leading the way at +0.27%. ES has now exited its descending RTC channel going back to May 19th and that is a swing trade bullish trigger.
Oil meanwhile rose back over $100 today and since oil is still moving in sync with the market these days, that's also bullish. And the dollar, using my $USDUPX chart looks to be ready to continue filling the gap it formed after its big jump on Monday - also bullish for stocks.
So there you have it. All of the tea leaves seem to be in agreement tonight. I'm reaching for my long hat and would be most surprised if we didn't get another advance on Thursday at least as good as today's.
Finally, my AKS trade from yesterday is doing well. AKS closed at 14.72, up 0.28. AKS is now right at its 200 day MA. If it can move past that tomorrow, I'll hold on. If not, I'm outta there.
Wednesday, May 25, 2011
Show me the money
My forecast for a higher close today was looking pretty good until a wave of selling kicked in at exactly 3:25 PM (still not sure what event triggered that) and turned a 30 point gain into a 25 point loss. The Dow now has some minor support at 12,340, then some stronger support around 12,250, then nothing down to the psychological support at 12,000 even.
And that's worth looking at now because despite some pretty oversold indicators, this market is looking nothing but weak. And even worse, all of the futures are lower right now at 12:45 AM EDT with the ES being down 0.6%, and that's pretty substantial. That said, the ES indicators are even more oversold than the Dow. In fact they're about as oversold as during the Japan reactor panic back in March.
I also note that at least my call on the VIX was correct. It did indeed retreat today from yesterday's pop above its upper Bollinger band. Given the propensity of the VIX to predict the market a day ahead, you'd think that we should be looking for some gains (finally) tomorrow.
Still, this big drop in the futures seems to be hinting that someone knows something I don't. This has me feeling rather uneasy this evening. Although technically it looks like a turn should be imminent, I can't really be as optimistic about the market right now as I was last night. I mean, the market has to turn sooner or later, and having come down so far I think it will be sooner rather than later but at this point, it is going to have to show me that the bottom is in before I can reach for my long hat again.
Trades
That said, today I picked up some of the gold miner AUY at 12.33; it closed at 12.35. AUY has been beaten down from its April highs and appears to have put in a bottom last week. Its indicators are all still low and its short stochastic has executed a bullish crossover. And it popped out of its descending RTC channel going back to April 11th, which is bullish. The fact that it's been holding its own during the recent market decline is also attractive. So we'll give this a shot and see what happens.
And that's worth looking at now because despite some pretty oversold indicators, this market is looking nothing but weak. And even worse, all of the futures are lower right now at 12:45 AM EDT with the ES being down 0.6%, and that's pretty substantial. That said, the ES indicators are even more oversold than the Dow. In fact they're about as oversold as during the Japan reactor panic back in March.
I also note that at least my call on the VIX was correct. It did indeed retreat today from yesterday's pop above its upper Bollinger band. Given the propensity of the VIX to predict the market a day ahead, you'd think that we should be looking for some gains (finally) tomorrow.
Still, this big drop in the futures seems to be hinting that someone knows something I don't. This has me feeling rather uneasy this evening. Although technically it looks like a turn should be imminent, I can't really be as optimistic about the market right now as I was last night. I mean, the market has to turn sooner or later, and having come down so far I think it will be sooner rather than later but at this point, it is going to have to show me that the bottom is in before I can reach for my long hat again.
Trades
That said, today I picked up some of the gold miner AUY at 12.33; it closed at 12.35. AUY has been beaten down from its April highs and appears to have put in a bottom last week. Its indicators are all still low and its short stochastic has executed a bullish crossover. And it popped out of its descending RTC channel going back to April 11th, which is bullish. The fact that it's been holding its own during the recent market decline is also attractive. So we'll give this a shot and see what happens.
Tuesday, May 24, 2011
The tell-tale VIX
Last night's post was titled "Looking grim" and today the Dow plunged 131 points - in the first minute of trading - grim enough for you? The Dow sliced through its 12,450 support level and kept on going Things are really looking bad now - or are they?
Let's start with the indicators. The Dow has now fallen into definitively oversold territory, with the RSI and momentum at or below levels from which rallies have started in the past. And the stochastic is getting ready to execute a bullish crossover.
Next, we have the price of oil. As I mentioned, oil is now in a positive correlation wit the market. Today, oil was down, market was down. Well in this evening's trade, oil is up - a bullish sign for stocks.
And then we come to the futures. Whereas last night all three of the ES, NQ, and YM were down down down, tonight they're all up, by 0.21%, 0.15%, and 0.2% respectively. While not major gains, it's significant that at least they're not continuing to drop in the overnight (at 1:40 AM EDT). And the trend has been steadily upward since around 7:30 PM this evening.
Next we look at the dollar index. I don't get the DXY anymore since the NYFE decided to hide it behind a paywall, so I use the $USDUPX, the Deutsche Bank US Dollar Index, which is still free, instead. And this index put in 2/3 of a bearish abandoned baby pattern today with a hugely gapped up doji. If the DUPX is lower tomorrow, watch for the dollar to decline still further. And since the dollar and the market are in an inverse correlation these days, that will be bullish for stocks.
And last but most definitely not least, we have the VIX, which for once is giving some real guidance, in the form of a big gap up today that took it not just to its upper Bollinger band, but above, opening at 20.03. The VIX was all downhill after that, putting in a tall red candle. That kind of action almost always signals a lower VIX the next day and if not then, then one day later. A lower VIX implies higher stocks.
So all in all, I'd say we're in for some higher stock prices, if not tomorrow, then definitely on Wednesday. I'd say there's a fair chance of higher tomorrow and an even better one on Wednesday. We'll see.
Let's start with the indicators. The Dow has now fallen into definitively oversold territory, with the RSI and momentum at or below levels from which rallies have started in the past. And the stochastic is getting ready to execute a bullish crossover.
Next, we have the price of oil. As I mentioned, oil is now in a positive correlation wit the market. Today, oil was down, market was down. Well in this evening's trade, oil is up - a bullish sign for stocks.
And then we come to the futures. Whereas last night all three of the ES, NQ, and YM were down down down, tonight they're all up, by 0.21%, 0.15%, and 0.2% respectively. While not major gains, it's significant that at least they're not continuing to drop in the overnight (at 1:40 AM EDT). And the trend has been steadily upward since around 7:30 PM this evening.
Next we look at the dollar index. I don't get the DXY anymore since the NYFE decided to hide it behind a paywall, so I use the $USDUPX, the Deutsche Bank US Dollar Index, which is still free, instead. And this index put in 2/3 of a bearish abandoned baby pattern today with a hugely gapped up doji. If the DUPX is lower tomorrow, watch for the dollar to decline still further. And since the dollar and the market are in an inverse correlation these days, that will be bullish for stocks.
And last but most definitely not least, we have the VIX, which for once is giving some real guidance, in the form of a big gap up today that took it not just to its upper Bollinger band, but above, opening at 20.03. The VIX was all downhill after that, putting in a tall red candle. That kind of action almost always signals a lower VIX the next day and if not then, then one day later. A lower VIX implies higher stocks.
So all in all, I'd say we're in for some higher stock prices, if not tomorrow, then definitely on Wednesday. I'd say there's a fair chance of higher tomorrow and an even better one on Wednesday. We'll see.
Monday, May 23, 2011
Looking grim
With the futures all down at this hour (1 AM EDT) by half a percent or better, oil taking a tumble down to 98.55 (remember, oil and the markets are moving in sync lately), the ES short stochastic making a bearish crossover tonight, the VIX coming off a big gain on Friday, and the dollar rising thanks to some Greeks who can't balance their checkbooks, there's no need to trot out a chart tonight. I'm just not feeling the love here. We're going down tomorrow.
Later this week may be a different story though. While last week's two day mini-rally seems to have gotten short-circuited just like the one on May 6th through 10th, the Dow is close to its important12,450 support level. I note also that the last two daily Dow stochastic cycles have been very odd. Instead of their usual oscillation between high and low values, they've been traveling between low and only neutral. Since we're now in a descending phase from a middling level, we should reach the next bullish reversal sooner. And even more strange, the Dow RSI is now in oversold territory.
But I really don't think we're in for higher prices tomorrow. Of course, I could be wrong. Lord knows I was on Friday, when I thought we'd go higher and the Dow sank 93 points instead. But hey, it could have been worse. At least I didn't predict that the world was going to end at 6 PM last Saturday.
In the meantime, the market now seems to be in one of those herky-jerky periods I despise. I guess it's great for the day traders, but I don't like it. Maybe I'll take some time off for a while.
Later this week may be a different story though. While last week's two day mini-rally seems to have gotten short-circuited just like the one on May 6th through 10th, the Dow is close to its important12,450 support level. I note also that the last two daily Dow stochastic cycles have been very odd. Instead of their usual oscillation between high and low values, they've been traveling between low and only neutral. Since we're now in a descending phase from a middling level, we should reach the next bullish reversal sooner. And even more strange, the Dow RSI is now in oversold territory.
But I really don't think we're in for higher prices tomorrow. Of course, I could be wrong. Lord knows I was on Friday, when I thought we'd go higher and the Dow sank 93 points instead. But hey, it could have been worse. At least I didn't predict that the world was going to end at 6 PM last Saturday.
In the meantime, the market now seems to be in one of those herky-jerky periods I despise. I guess it's great for the day traders, but I don't like it. Maybe I'll take some time off for a while.
Friday, May 20, 2011
A third daily gain possible Friday
Last night I was unsure of today's market but was ultimately convinced we'd go higher on the basis of the Dow's candlesticks. A two day pattern of a hammer followed by a bullish engulfing pattern is a very good indicator that higher prices will follow and that was just what happened, with a 45 point advance today.
Now we have to ask about tomorrow. There's no guidance from the futures tonight at 1 AM EDT; they're all essentially flat on the evening. We do have a clue from the VIX though. It fell today right to its long term support at 15.5. This suggests it may have a hard time going lower, though it did manage just that late last month. Even then, I see a lot more upside potential in the VIX than further downside. But since there's no VIX reversal just yet, I hesitate to call the market lower tomorrow on that basis.
Oil, however is up a bit in the overnight and with oil now in sync with the market, that would suggest a bullish bias for Friday. And the RTC system suggests a positive outlook too, since today's green candle was entirely outside the descending trend channel. That is the trigger following yesterday's bullish setup.
So all in all, I'm looking for slightly higher tomorrow, with gains limited by the limited downside left in the VIX. The indicators are still oversold, providing at least some momentum to send us higher one more day. A failure to go higher tomorrow would imply a lower close on Monday too. Tomorrow's number to watch is 12,524, today's daily pivot. We'll want to stay above this number. Watch for support to kick in at that level.
Now we have to ask about tomorrow. There's no guidance from the futures tonight at 1 AM EDT; they're all essentially flat on the evening. We do have a clue from the VIX though. It fell today right to its long term support at 15.5. This suggests it may have a hard time going lower, though it did manage just that late last month. Even then, I see a lot more upside potential in the VIX than further downside. But since there's no VIX reversal just yet, I hesitate to call the market lower tomorrow on that basis.
Oil, however is up a bit in the overnight and with oil now in sync with the market, that would suggest a bullish bias for Friday. And the RTC system suggests a positive outlook too, since today's green candle was entirely outside the descending trend channel. That is the trigger following yesterday's bullish setup.
So all in all, I'm looking for slightly higher tomorrow, with gains limited by the limited downside left in the VIX. The indicators are still oversold, providing at least some momentum to send us higher one more day. A failure to go higher tomorrow would imply a lower close on Monday too. Tomorrow's number to watch is 12,524, today's daily pivot. We'll want to stay above this number. Watch for support to kick in at that level.
Thursday, May 19, 2011
On the fence
But tonight's chart is the ES daily. The horizontal blue line is the important support/resistance level at 1338 representing the highs of February and early April, as well as the low of early May. After breaking below this line three days ago, we bounced right back up to it in one big pop today and that's exactly where we're sitting right now at 2 AM EDT. We were actually above this level earlier this evening and have been drifting lower since about 11 PM.
So that makes tonight's call a bit tough. Being as how the VIX has fallen back to its recent support level in the 16-16.25 area and how the ES is really sitting right on the fence, it's hard to say which way this will break tomorrow.
If we go by the descending regression trend channel you see in the chart, today's close took us outside the right-hand line and that is a bullish setup. If we can stay outside that point tomorrow, that will be a bullish trigger and I'll be looking for higher early next week. But given the difficulty the market has been having lately in putting together a winning streak of length greater than one, I'm a bit shy on making a call for higher tomorrow right now. I'm doubly shy given the recent "fake out breakout" on the 6th.
But just for laughs, I'll say we're going higher (if only on the strength of the Dow chart pattern), though I'm not confident enough to take out a long ES position right now. BTW, my long ES from two days ago did quite well as a swing trade. I sold today at 1333.75 and caught eight points on that one.
Meanwhile, SLV is beginning to look attractive at 34.23. The 0.618 Fibonacci retracement support held and the last four sessions give the impression that the bottom may be in. But I'm not quite ready to pull that trigger just yet either. Let's see what tomorrow brings.
Wednesday, May 18, 2011
The turnaround at hand
Hmm - well it looks like I was a day early on my call for a turnaround today, although the Nasdaq did actually manage to just barely turn positive. But the half percent loss in the Dow means I blew it. In retrospect, I think I should have paid more attention to the stochastic in the VIX yesterday. Although it put in a hanging man, it wasn't just quite out of steam yet. I believe it is now. I also should have remembered my own observations on the VIX - it often leads the market by either one or two days. In any case, yesterday's VIX hanging man was followed by a big bearish engulfing pattern today. The two of those together is a very reliable indicator that the VIX will go lower tomorrow.
In any event, this evening we have some much better confirmation of expectations for higher tomorrow. The ES today put in a doji after two straight days of losses and in this overnight it is now up a very significant 0.45%. The NQ and YM are up similar amounts, at 1:15 AM EDT. Also, although the Dow did close under its 12,530 support level today, it ended up forming a classic hammer. That, coupled with oversold indicators, is a good revresal pattern.
Also, oil was up today (and is holding higher in the overnight) and for some odd reason, lately oil is in a positive correlation with the markets.
So much as I hate to follow a missed call with another call for the same thing (because if you keep doing that, eventually you'll be right) I have a lot more confidence in tomorrow closing higher than I did last night. And to demonstrate that confidence, I took out a long position in ES at 1325.75. (I actually did this yesterday, then took some nasty heat earlier today, but patience paid off in the end and I'm now in a profit position).
In any event, this evening we have some much better confirmation of expectations for higher tomorrow. The ES today put in a doji after two straight days of losses and in this overnight it is now up a very significant 0.45%. The NQ and YM are up similar amounts, at 1:15 AM EDT. Also, although the Dow did close under its 12,530 support level today, it ended up forming a classic hammer. That, coupled with oversold indicators, is a good revresal pattern.
Also, oil was up today (and is holding higher in the overnight) and for some odd reason, lately oil is in a positive correlation with the markets.
So much as I hate to follow a missed call with another call for the same thing (because if you keep doing that, eventually you'll be right) I have a lot more confidence in tomorrow closing higher than I did last night. And to demonstrate that confidence, I took out a long position in ES at 1325.75. (I actually did this yesterday, then took some nasty heat earlier today, but patience paid off in the end and I'm now in a profit position).
Tuesday, May 17, 2011
A shot at higher on Tuesday
I looked at the daily VIX chart all the way back to the end of 2007. In this period, I found eleven other instances of a hanging man occurring at or near the upper Bollinger band. In all eleven cases, the VIX was lower the next day. This would imply that we have a shot at (finally) getting some gains in the markets tomorrow.
In addition, all three futures are all actually not down right now at 1:10 AM EDT for a change. OK, the ES is down a tiny 0.02% and the NQ is actually up just a hair, but the point is that we're not seeing the 0.2% to 0.5% drops we've been getting lately. And significantly, they've been trending higher all evening.
Finally, the Dow once again found support in the 12,530 region for the third day in a row. This number also puts it right at the bottom of a rising regression trend channel going all the way back to last June, nearly a year. This point (the bottom of the channel, not this particular numeric value) has been tested four times since then, and it has held each time. Also, the Dow indicators are now as oversold as they were during those four declines that bottomed out at the lower RTC edge.
Given this, I have to think we have a shot at going higher tomorrow. I almost hate to say it, given all the gloom and doom going around lately, but at least some of the tea leaves seem to be suggesting that. We'll see.
Silver
Meanwhile, SLV broke below its 0.5 Fibonacci retracement level at 33.85 to close at 32.85 today. The next retracement level is at 30.47. If SLV can't manage to go higher tomorrow, it's headed for this level.
Monday, May 16, 2011
Not looking good for tomorrow
I wish I could be more positive about tomorrow but right now at 12:45 AM EDT I don't really see very much positive in any of my charts right now. On Friday the Dow put in a big red candle that looks a lot (though not exactly) like a bearish engulfing pattern On the other hand, the Dow has found support at the 12,540 level for two days running ad its indicators are now closer to being oversold than overbought.
The VIX however looks to me like it has more potential to rise tomorrow than to fall, implying stocks go lower. And all three market futures (ES, NQ, and YM) are down right now, the ES in particular down by a significant 0.43% on a Sunday gap down opening. None of this is very good. However, note that the ES is right at an important support level now at 1329. If we fall below this between now and the open on Monday, then I'm definitely looking for lower tomorrow.
Either way, the entire gestalt of the market has me feeling that the time to "sell in May" may in fact be at hand.
And who knows how the market will react to the news that the big kahuna of the IMF got caught with his pants down, literally, tonight. Not that it should make a whit of difference to the price of stocks, but lately the market has been acting more squirrely than usual with respect to news events. I guess we'll just have to see.
The VIX however looks to me like it has more potential to rise tomorrow than to fall, implying stocks go lower. And all three market futures (ES, NQ, and YM) are down right now, the ES in particular down by a significant 0.43% on a Sunday gap down opening. None of this is very good. However, note that the ES is right at an important support level now at 1329. If we fall below this between now and the open on Monday, then I'm definitely looking for lower tomorrow.
Either way, the entire gestalt of the market has me feeling that the time to "sell in May" may in fact be at hand.
And who knows how the market will react to the news that the big kahuna of the IMF got caught with his pants down, literally, tonight. Not that it should make a whit of difference to the price of stocks, but lately the market has been acting more squirrely than usual with respect to news events. I guess we'll just have to see.
Friday, May 13, 2011
Very Strange
[The following post was originally written Wednesday night. However, Blogspot went down before I could post it. Therefore it did not appear until yesterday. Then Blogspot went down again last night, not only taking this post with it but preventing me entirely from writing my usual late night forecast. In this post "today" refers to Wednesady, ie. two days ago.
Since there's little point in making a forecast for a session that's already half over, I'll just (try) to republish Wednesday's post here and hope it sticks this time. One more of these and I'll be looking for a new host for the Night Owl.]
I readily confess I found today's action baffling. I guess this shows the limits of technical analysis. By all rights, last night the charts looked ready to move higher today. Instead, we got slammed, Dow down 130. I blew this one badly. And I'm still having trouble figuring out why. According to the news today, it was the fault of either the dollar, the euro, silver margins, oil speculators, the Greek debt, Chinese inflation, the Mississippi floods, Raj Rajaratnam, J.C. "zut alors" Trichet, head of the ECB, or the phase of the moon. Take your pick.
Either way, I found it untradeable. My big fear right now is that we're entering a period something like we say back in the beginning of March, where we got jerked around up and down for eight straight sessions for no real good reason before finally taking a dive all the way down to 11,555 on March 16th. Even the pattern looks the same: a three day decline followed by what looked to be the start of another uptrend, only to see it cut off well short of where it seemed to be heading.
Given this, I'm not making any market calls tonight. I'm just not getting any good guidance from my charts tonight. It's one of those times where the best course is to stand aside until the dust settles. And I'm also not sounding the all clear on SLV yet either.
Since there's little point in making a forecast for a session that's already half over, I'll just (try) to republish Wednesday's post here and hope it sticks this time. One more of these and I'll be looking for a new host for the Night Owl.]
I readily confess I found today's action baffling. I guess this shows the limits of technical analysis. By all rights, last night the charts looked ready to move higher today. Instead, we got slammed, Dow down 130. I blew this one badly. And I'm still having trouble figuring out why. According to the news today, it was the fault of either the dollar, the euro, silver margins, oil speculators, the Greek debt, Chinese inflation, the Mississippi floods, Raj Rajaratnam, J.C. "zut alors" Trichet, head of the ECB, or the phase of the moon. Take your pick.
Either way, I found it untradeable. My big fear right now is that we're entering a period something like we say back in the beginning of March, where we got jerked around up and down for eight straight sessions for no real good reason before finally taking a dive all the way down to 11,555 on March 16th. Even the pattern looks the same: a three day decline followed by what looked to be the start of another uptrend, only to see it cut off well short of where it seemed to be heading.
Given this, I'm not making any market calls tonight. I'm just not getting any good guidance from my charts tonight. It's one of those times where the best course is to stand aside until the dust settles. And I'm also not sounding the all clear on SLV yet either.
Wednesday, May 11, 2011
Still more gains possible
Yesterday I called the market higher for today and that's just what it did, to the tune of nearly Dow 76 points. After three consecutive days of gains, the question is, can we make it four? I think we can. All of the Dow indicators are just coming off oversold readings. The short stochastic looks particularly bullish. Todays' green candle took us out of the descending RTC channel too (just as the ES did yesterday) and that is a bullish trigger.
I also note no resistance in the Dow until the 12,850 area from the start of this month. The Dow's upper Bollinger band is even further away, at 12,962. And the VIX is still coming down from overbought levels. Today's drop only brought it back down to the middle of its Bollinger band range. I see nothing on the VIX chart suggesting a reversal and that is also bullish for stocks.
Finally, all three futures (ES, NQ, and YM) are up right now (1:30 AM EDT), albeit only modestly. So barring any catasrophic news items overnight, I see no reason why we can't extend the Dow's winning streak one more day on Wednesday.
I also note no resistance in the Dow until the 12,850 area from the start of this month. The Dow's upper Bollinger band is even further away, at 12,962. And the VIX is still coming down from overbought levels. Today's drop only brought it back down to the middle of its Bollinger band range. I see nothing on the VIX chart suggesting a reversal and that is also bullish for stocks.
Finally, all three futures (ES, NQ, and YM) are up right now (1:30 AM EDT), albeit only modestly. So barring any catasrophic news items overnight, I see no reason why we can't extend the Dow's winning streak one more day on Wednesday.
Tuesday, May 10, 2011
Encouraging signs for Tuesday
Last night I called the market higher today and we did indeed see a nice 46 point gain in the Dow. That was off its highs for the day, but I 'm always happier to see a string of modest advances than a single big run-up. In any case, all of the forces that were in play last night appear to be still there this evening at 12:40 AM. Admittedly the ES is down 0.24% and the NQ and YM are also down, though by lesser amounts.
However, I think I'm going to take my cue tonight from the VIX, which put in a classic bearish engulfing pattern with its long red candle today, in addition to looking rather overbought technically. This makes me look for a lower VIX tomorrow and VIX down means stocks up.
Oil meanwhile, after rising most of the day is retreating back towards the $100 mark in the overnight. I view this as positive for stocks too. So I'm moderately confident we can go at least a bit higher tomorrow.
And finally, silver, in the form of the SLV, which gave a bullish setup on Friday, gave a bullish trigger today. Sort of. While it did put in a green candle today, it did so by gapping up rather than by a steady advance and that makes me at least a little nervous. The market likes to fill gaps. If this does not happen tomorrow and silver continues higher or holds its own, I intend to take out a partial position. If it goes lower, I will wait one more day to let it sort itself out.
Trades
Today I bought a small position in AK Steel, AKS at 15.17 and that's right where it closed. AKS has hit a strong support level, is looking quite oversold, and its indicators appear to have bottomed. I think there is more reward than risk in this play, just as I think the same of the broader market at least for tomorrow. Once again, I don't think tomorrow is just yet the time to "sell in May".
However, I think I'm going to take my cue tonight from the VIX, which put in a classic bearish engulfing pattern with its long red candle today, in addition to looking rather overbought technically. This makes me look for a lower VIX tomorrow and VIX down means stocks up.
Oil meanwhile, after rising most of the day is retreating back towards the $100 mark in the overnight. I view this as positive for stocks too. So I'm moderately confident we can go at least a bit higher tomorrow.
And finally, silver, in the form of the SLV, which gave a bullish setup on Friday, gave a bullish trigger today. Sort of. While it did put in a green candle today, it did so by gapping up rather than by a steady advance and that makes me at least a little nervous. The market likes to fill gaps. If this does not happen tomorrow and silver continues higher or holds its own, I intend to take out a partial position. If it goes lower, I will wait one more day to let it sort itself out.
Trades
Today I bought a small position in AK Steel, AKS at 15.17 and that's right where it closed. AKS has hit a strong support level, is looking quite oversold, and its indicators appear to have bottomed. I think there is more reward than risk in this play, just as I think the same of the broader market at least for tomorrow. Once again, I don't think tomorrow is just yet the time to "sell in May".
Monday, May 9, 2011
Support holding, look for higher on Monday
Right now (at 1:50 AM) it's looking like the support level we hit in the ES on Friday is holding and all three futures are trading higher between 0.37% and 0.5%. Those kinds of numbers are significant. The ES daily RSI and stochastic in particular are not just in oversold territory, but have turned inflection points and that is a bullish sign. In addition, today's action (ie. the Sunday evening overnight) brings us fully outside the right edge of the descending RTC channel going back to the peak set on May 2nd and that is a bullish trigger.
The VIX meanwhile, was stymied in its attempt to go over its upper Bollinger band at 18.40 on Friday, just as I had predicted on Thursday night. With oil prices coming down, Bin Laden dead, and reasonable earnings reports coming out, I think the VIX will have trouble going higher tomorrow, implying that stocks will.
Finally, history is on our side. According to The Stock Traders Almanac, the Dow has been up 12 of the last 15 times on the day after Mother's Day. I guess all the traders have warm fuzzy feelings about mom that make them want to buy buy buy. Mondays in general are typically good.
It may yet come time to "sell in May", but I don't think tomorrow is the exact day to do it.
The VIX meanwhile, was stymied in its attempt to go over its upper Bollinger band at 18.40 on Friday, just as I had predicted on Thursday night. With oil prices coming down, Bin Laden dead, and reasonable earnings reports coming out, I think the VIX will have trouble going higher tomorrow, implying that stocks will.
Finally, history is on our side. According to The Stock Traders Almanac, the Dow has been up 12 of the last 15 times on the day after Mother's Day. I guess all the traders have warm fuzzy feelings about mom that make them want to buy buy buy. Mondays in general are typically good.
It may yet come time to "sell in May", but I don't think tomorrow is the exact day to do it.
Friday, May 6, 2011
Looking for a bottom in silver
What goes up...
Today's chart is, once again silver, specifically the SLV ETF, in weekly candles. You may recall that I called the top in silver last week and sold almost all of my SLV (now I wish I'd sold the last bit too, the one I was saving in case I was wrong). The price of SLV wobbled around my 46.50 sale price for a few more days, and then kaboom - the crash. Just look at this chart. Pretty amazing stuff, eh?
The thing is, is that just as there wasn't really any underlying reason for silver to go exponential as it did up to now (other than pure speculation), there is also no reason for it to just languish now that it has come back down to earth. Silver still has the same intrinsic uses it had before, and once the speculators have all gone on to play somewhere else, it might be worthwhile getting back in the game. But when and where might that be?
Fibonacci tells no fibs
That's where our old pal Fibonacci comes in. I drew in the weekly Fibonacci retracements from the recent high back to the long term resistance at 19.50, which is where silver stood until it started taking off just last August. Note how the giant drop in silver this week took us exactly to the 50% Fibonacci retracement, 33.85 (OK, SLV closed today at 33.72, but that's close enough). BTW - that also happens to be the 20 week MA.
Depth sounding
So just as we had the blow-off top four days ago, we're now looking for the wash-out bottom. And today just might have provided it. Check out the enormous selling volume that accompanied today's gap down action (on the daily chart, not visible here). That, plus hitting the 50% retracement is always a good sign that a bottom is at hand.
So tomorrow we will watch for a confirmation of this. If SLV can hold its current level or reverse, then we're going to consider getting back in. On the other hand, failure to hold 33.72 means a trip down to the next level at 30.47 is likely. (Then the next stop down is the 40 week MA, at 30.13). The 30.47 level also has support from the 2010 year end highs.
But the indicators are already starting to show oversold conditions.
Beware the falling knife
However, this is definitely a case where one does not want to be catching the falling knife. I still have the scars on my hands to prove it from earlier encounters with other technical train wrecks.. We are going to wait for clear signs of a reversal before coming back to this particular table. I do think we're getting very close now.
And I guess I have to own up to the fact that I was wrong big time in my call for today. I really underestimated the strength of the commodity crash and the effects it had on the broader market. Also, I've had some personal issues to deal with this week that have prevented me from devoting as much time to my charts as I normally do. But things seem to be settling down so hopefully we can get back to making some money.
The Dow forecast
And as for the Dow, we're now is a downward swing trend. The indisctors are still coming off overbought levels, so no sign of a turnaround there yet. All three futures are lower too, though not by much at all. However, the VIX today hit its upper Bollinger band to end with a doji. This could be key. As we've seen so often, once the VIX hits its upper BB, it tends to go back down within a day or two at the most. Lower VIX -> higher stocks. If we do go lower tomorrow (in stocks), I don't think it will be as bad as today. And I would not be surprised to see a reversal by Monday.
The thing is, is that just as there wasn't really any underlying reason for silver to go exponential as it did up to now (other than pure speculation), there is also no reason for it to just languish now that it has come back down to earth. Silver still has the same intrinsic uses it had before, and once the speculators have all gone on to play somewhere else, it might be worthwhile getting back in the game. But when and where might that be?
Fibonacci tells no fibs
That's where our old pal Fibonacci comes in. I drew in the weekly Fibonacci retracements from the recent high back to the long term resistance at 19.50, which is where silver stood until it started taking off just last August. Note how the giant drop in silver this week took us exactly to the 50% Fibonacci retracement, 33.85 (OK, SLV closed today at 33.72, but that's close enough). BTW - that also happens to be the 20 week MA.
Depth sounding
So just as we had the blow-off top four days ago, we're now looking for the wash-out bottom. And today just might have provided it. Check out the enormous selling volume that accompanied today's gap down action (on the daily chart, not visible here). That, plus hitting the 50% retracement is always a good sign that a bottom is at hand.
So tomorrow we will watch for a confirmation of this. If SLV can hold its current level or reverse, then we're going to consider getting back in. On the other hand, failure to hold 33.72 means a trip down to the next level at 30.47 is likely. (Then the next stop down is the 40 week MA, at 30.13). The 30.47 level also has support from the 2010 year end highs.
But the indicators are already starting to show oversold conditions.
Beware the falling knife
However, this is definitely a case where one does not want to be catching the falling knife. I still have the scars on my hands to prove it from earlier encounters with other technical train wrecks.. We are going to wait for clear signs of a reversal before coming back to this particular table. I do think we're getting very close now.
And I guess I have to own up to the fact that I was wrong big time in my call for today. I really underestimated the strength of the commodity crash and the effects it had on the broader market. Also, I've had some personal issues to deal with this week that have prevented me from devoting as much time to my charts as I normally do. But things seem to be settling down so hopefully we can get back to making some money.
The Dow forecast
And as for the Dow, we're now is a downward swing trend. The indisctors are still coming off overbought levels, so no sign of a turnaround there yet. All three futures are lower too, though not by much at all. However, the VIX today hit its upper Bollinger band to end with a doji. This could be key. As we've seen so often, once the VIX hits its upper BB, it tends to go back down within a day or two at the most. Lower VIX -> higher stocks. If we do go lower tomorrow (in stocks), I don't think it will be as bad as today. And I would not be surprised to see a reversal by Monday.
Thursday, May 5, 2011
Tomorrow going higher
Yesterday I called for the market to extend its losses today and that's what we got. However, now I believe we've hit some support and I think tomorrow goes higher.
Wednesday, May 4, 2011
More room to fall
Well the Dow was essentially flat today bu the S&P and the Nasdaq did close lower. And with another doji day and still overbought indicators, I'm still looking for further declines tomorrow.
Tuesday, May 3, 2011
Looking for lower
Hmm - that was odd. I was sure that what with "Obama Bin Laden's" demise (as Rick Santelli put it on CNBC today) and today being the first trading day of the month and also a Monday, that the market would end up. And so it was, at least early until the OBL euphoria faded, ending basically flat with just a 3 point loss.
Be that as it may, today's action formed a long doji, indicating a potential reversal is in the works. Coupled with tonight's losing futures and I have to think that we may be in for a down day tomorrow.
Be that as it may, today's action formed a long doji, indicating a potential reversal is in the works. Coupled with tonight's losing futures and I have to think that we may be in for a down day tomorrow.
Monday, May 2, 2011
Osama Bin Laden Dead!
Finally. It's about time. May you rot in Hell, Osama.
And thanks for making tomorrow's call easy. The market will be up. End of story and Hallelujah.
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