Friday uncertain

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

• Friday uncertain.
• ES pivot 1317.33.  Breaking under is bearish..
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Things were looking pretty good for my call for a lower close today until a sudden turn higher in the last 45 minutes of the day that resulted in a 34 point gain in the Dow - for no real reason I can see.  At least I made some money today since I'm always net long to some extent.  (I never trade the first $25K of my account which I hold in reserve to ensure I don't run afoul of the PDT rules).  So let's figure out now where Friday may go.

The technicals

The Dow: The bearish doji/dragonfly doji combination was not confirmed today.  However, today's gains were in the form of a hanging man, which is also a bearish reversal warning.  But it too requires confirmation, so we're no further ahead tonight than last night.  At least we broke over the 12,500 resistance line and that is undeniably bullish as are the rising indicators just exiting oversold territory.

The VIX:  At least I got this part right in calling for a lower VIX Thursday.  We got another 3.5% decline on the payoff of yesterday's bearish RTC trigger.  With the indicators again in motion lower, there's no reason why the VIX can't move lower again on Friday.

Market index futures: At 1:13 AM EDT all three futures are in the red with ES down 0.28%.Today's green candle surprised me by breaking above the 1316 resistance.  However, we're in the process of retracing those gains right now.  This sort of choppy action is hard to figure and reflects the news-driven nature of this market.  Every time the butler to the third assistant secretary of the vice-chancellor in charge of buffing the conference table at the ECB makes an announcement, like say "dinner is served", the market changes direction.

ES daily pivot: Tonight the pivot rises from 1309.58 to 1317.33.  With ES drifting vaguely lower in the overnight we just nicked this level at midnight but bounced off and are therefore still higher.  I outsmarted myself last night by discounting the power of the pivot (we were above it at this time then too).  Staying above the pivot is a positive sign.

Dollar index: Very interesting.  Thursday saw the dollar gain 0.31% while the Dow also went up, almost as much.  Usually, a rising dollar signals lower stocks.  In any case, the dollar is right back in its month-long rising RTC.  This chart shows no indication of it moving lower on Friday.

But the related chart to watch right now is actually the euro, which is now so beaten down I had to go to the weekly chart to find the last time we were at these levels (and that would be the end of June 2010).  The important thing there is that that level is close to the 2010 low of 1.20, which would provide important support and imply a declining dollar soon.  But if stocks can manage to rise even with the dollar rising too, it looks like a win-win.  Or something funny is going on.

Transportation: The trans gained 0.81% today and in so doing confirmed the RSI bullish trigger.  In fact they are now in a new rising RTC.  And along with rising indicators, this chart looks ready to move higher still on Friday.


History: According to The Stock Traders Almanac, Friday is historically just slightly bearish

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     8      7      2           1
 
     And the winner is...

This market's got more chops than a kung-fu movie and I'm getting tired of getting whipsawed and just generally beaten up.  With the mixed messages continuing, no clear trend in sight, no end in sight to the news mania, and a holiday weekend coming up, I'm not playing this game.  So no call for Friday.  It's just too tough.  Happy Memorial Day to all.

ES Fantasy Trader

Tonight I dumped last night's short position.  It was looking pretty good the first half of the day.  Then I had to go out this afternoon and run some errands.  By the time I got home the market had rallied and the trade was a loser.  With the long descending RTC done and a bias higher, I decided to pull the plug on it before it got any worse.  Portfolio stats: the account now falls to at $117,500 after 37 trades (28 wins, 9 losses) starting from $100,000 on 1/1.  Tonight we stand aside to avoid more whipsaw.

BOT    10    ES    false    JUN12 Futures     1321.75    USD    GLOBEX  19:47:50    

SLD    10    ES    false    JUN12 Futures     1310.75    USD    GLOBEX  00:45:33 

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
MA - Moving Average
PDT - Pattern Day Trader
RTC - Regression Trend Channel

Thursday lower again

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

• Thursday lower - low confidence
• ES pivot 1309.58.  Breaking under is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1310.75.

 Quote of the Day

"You cannot work 35 hours a week, want to retire by 50 with full pension, have eight weeks of holiday and expect to be bailed out by people who work their butts off either in northern Europe or in China. Life does not work like that."

                      - Johann Rupert, head of Swiss company Richemont, on Greece

Recap

This really was an odd day.  In the eight years I've been trading full-time, I've never seen a day like today.  Oh sure, we've seen plenty of doji days, but never a half-pipe like today.  All morning it was nothing but gloom and doom.  Then suddenly at noon the sun came out and it was up up and away.  Thankfully the Dow finished down a tad so my call for the day was ultimately correct.  What does this all mean?  Read on...

The technicals

Dow 15 minutes.

The Dow: Check this out.  Tonight I officially announce the discovery of a new pattern: the Happy Face day.  Unfortunately, there isn't quite as much to smile about on the Dow daily chart - a classic bearish dragonfly doji.  And with a star doji the day before, I have to wonder if Mr. Dow might not be sporting a frown at this time Thursday.  Seriously.

The VIX:  And we got more funny business from the VIX today.  It went down 0.67% but you'd never know it from the red candle which played out almost entirely above yesterday's green one.  It's not really a classic dark cloud cover, but it does make you think of one.  And declining indicators support the idea of a lower VIX and that would be good for stocks.

Market index futures: At 12:49 AM EDT all three futures are in the red with ES leading the way lower, down 0.34%.  The daily chart is pretty much the same story as the Dow: a star on Tuesday followed by a dragonfly doji today.  And the overnight (so far at least) is confirming that as a bearish indicator by moving lower.  Although the indicators are only just coming out of oversold territory, it's always possible for their trip higher to be cut short in an environment like this when Europe starts up their annual summer theatre.  And note that while the 1316 level has proven to be a ceiling the past three days, there's nothing but thin air below until 1290.

ES daily pivot: Tonight the pivot steps down from 1316.25 to 1309.58.  Oddly enough, this now puts us above the new pivot, but not by much..  Ordinarily, I'd call breaking above the pivot bullish, but because of its proximity and the fact that ES has been trending lower since 10:30 PM, it's not looking too promising.

Dollar index: Adding to the Kafakesque goings-on, today the dollar went straight up, gapped up a jumbo 0.72% in fact.  This was not a smiley face, it was a rocket ship.  Ordinarily, such a move up would tank the market, but it did not.  Hmmm....  In any case, this puts us right back in the month-long rising RTC.  Ordinarily, I'd say this is bad for stocks, but with pin action like this, who knows.

Transportation: The $TRAN, widely viewed by many as a leading indicator of the market, today decisively popped up out of its month-long descending RTC.  That's a bullish setup.  But it formed a hanging man doing it - not a good sign.  And the bullish setup always requires one more day confirmation for proof.  So we'll see how this plays out on Thursday.


History: According to The Stock Traders Almanac, Thursday is historically slightly bullish.

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     8      6      2           1
     And the winner is...

I don't really like markets like this because right now they're driven entirely by politics in Europe.  Adding to the uncertainty, we're back to some mixed technical messages again.  But even aside the politics, I'm not liking the combination of a star and a dragonfly doji so I'm going to call Thursday lower.  I'm still not giving up entirely on the bullish RTC breakout in the Dow, but that may have to wait til Friday.  For the time being, the best I can say is that the month-long May downtrend is over.


ES Fantasy Trader

Looks like my decision to pull the plug on my ill-fated long trade last night was a good one, since ES just kept going lower.

Portfolio stats:  the account remains at $123,000 after 36 trades (28 wins, 8 losses) starting from $100,000 on 1/1.  Tonight we go short at 1310.75.

CUA (Commonly Used Acronyms)

BB - Bollinger Band
MA - Moving Average
RTC - Regression Trend Channel

Wednesday maybe lower

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

• Wednesday lower - low confidence
• ES pivot 1316.25.  Holding below is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Grrrr.  Close but no cigar.  I called for a higher close today and if the market had closed just 2 minutes sooner I would have been right.  As it was, the Dow managed to snatch defeat from the jaws of victory and ended the day down a mere 1.67 points on a late-day sell-off.  But it felt worse than that after having been up 50 or 60 most or day day until 3 PM when, gosh I don't know - I was out shopping for groceries.  Something happened, probably those freakin' Greeks again and down we went.  Oh well, the past matters little here and tonight we focus once again on tomorrow.

One million dollars!

Oh and how about that Face-plant Book today?  Down another 9%.  Boo wah hah hah - best trade I never made.  I just don't get this company.  What is Facebook anyway?  It's a web site.  Just like this one.  They have shared information, I have shared information.  The only difference I can see is that they have a membership that's five orders of magnitude larger than I do.  So if they're worth $100B, give or take a few mil, then I should be worth ... one million dollars!  And so far I haven't exactly been deluged with offers from MS or JPM to buy me out.  But hey, feel free - I'm open to negotiations.  I've even got my ticker symbol picked out: NOT, for Night Owl Trader.

I mean c'mon guys - a hundred billion smackers for a web site?  OK, so they have ads.  I can get rid of all of their ads instantly using the AdBlock Plus add-on for Firefox.  If I want to send photos to my friends, I've got their email addresses.  Drag & drop, click send, done.  Like I said - I don't get it.

The technicals

The Dow: It was fun while it lasted but at the end of the day the Dow left us with a classic doji sitting right at the top of yesterday's close, and a classic case of indecision.  On the plus side, today's action (or inaction) traded completely outside the declining RTC and so that's a bullish trigger.  On the minus side, a doji is a reversal warning and it's not uncommon to see some give-back for a day or two following the exit of a a down RTC like this.  So I view this more as a blinking caution light than a red flag.

The VIX:  The VIX did not really follow through on its bearish RTC setup from yesterday, gaining 2.14% instead on a spinning top just under the recent rising RTC.  Technically, it's still a bearish trigger, but a weak one.  And there's not much help from the futures which are pretty much in the same position - just a lot of indecision.

Market index futures: Same story in the futures as ES put in a doji just like the Dow today.  The only guidance is coming from the overnight, where all three futures are in the red with ES down a non-trivial 0.55% at 1:20 AM EDT.  It's still a bullish trigger, since we're now two days outside the descending RTC. it just doesn't feel like one.

ES daily pivot: Tonight the pivot jumped from 1306.33 to 1316.25.  Combined with ES trending lower in the overnight, we crossed under at midnight which now puts us eight points down - not a good sign.

Dollar index: The dollar today did not continue lower as I was expecting, but instead gained 0.51% to exit an admittedly short descending RTC for a bullish setup.  This move was also enough to send the indicators back up.  Basically, it's not about technicals here right now, it's the politics, baby.  The politics of Europe (not of dancing).

Transportation: The $TRAN chart today played out just like the Dow, albeit ending up 0.1% but with a similar doji.  Just more indecision here.


History: According to The Stock Traders Almanac, Wednesday is historically very bearish.

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     7      6      2           1
     And the winner is... 

A very strange night.  There is almost no guidance from any of my usual charts tonight.  So given that I have to fall back on the futures, and they're saying it's likely we'll see a lower close Wednesday.  This is not out of keeping with the idea that exiting this long descending RTC will lead to a rally.  Especially after long declines, it often takes a day or two for the counter-trend to get into gear.  Wednesday may be one of those days.

ES Fantasy Trader

OK, that's it, I'm done.  Tonight I finally gave up on my long-running long play from 1365, cashing out at 1310.75 for my biggest loss of the year - 54.25 points.  Ouch!

Portfolio stats:  the account plummets  $27,125 to  $123,000 after 36 trades (28 wins, 8 losses) starting from $100,000 on 1/1.  While I do think we still have room to run higher, I also think I'll be able to get back in at a lower level.  Nevertheless, tonight we're standing aside in view of all the dojis running around on the charts right now.

Tuesday higher

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

• Tuesday higher - low confidence
• ES pivot 1306.33.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Ha - now that's what I'm talking about.  We finally got the up day I've been expecting for a few days now.  And it was a solid move higher on average volume.  Now of course, the question becomes, was this a one-off?  After all, the Dow has not managed two consecutive up days since April 26th.  Or are we going to see some sort of rally from here?  The charts just may hold a clue.

The technicals

Dow daily

The Dow: We begin with the Dow.  Three notable things here.  First, today's solid green candle compares favorably the recent down days we've had.  This was not some wimpy 20 point blip but a solid 135 point gain.  Second, it was big enough to take us to a close outside the descending RTC for the first time since it began on May 2nd.  That is the classic RTC bullish setup.  One more close outside and we get a bullish trigger.  And last, note the Lazarus Effect as all five indicators have now - finally - risen from the dead, a very bullish sign.  All in all, I'm liking today's chart a lot, something I haven't been able to say in a while now.

The VIX:  After spending an eternity clambering up its upper BB, the VIX finally relented today in a big way, dropping 12.31% back to 22.  It's 200 day MA acted as sort of remote control resistance and we stopped just a bit outside of the rising RTC here.  Close, but it still counts as a bearish setup.  And with its indicators now clearly dropping off their overbought peaks, there would appear to be more downside to come for the VIX.

Market index futures:All three futures are in the green at 1:52 AM EDT, though by smaller amounts than last night.  ES is up 0.15%.  Today's huge green candle in ES took us right to the very edge of the descending RTC, just shy of a bullish setup.  But with the overnight sustaining the gains, we're now outside the channel, a good indication that the downtrend is over, particularly since this one has a strong Pearson's coefficient of 0.971.

ES daily pivot: Tonight the pivot rises (finally) from 1297.00 to 1306.33.  With ES pretty much flat in the overnight so far, we're still above the new value, but now only by half as much.  However, as I write this section, ES has begun moving higher again..  Anyway, it's still a positive sign.

Dollar index: Last night I showed this chart pointing out a possible bearish candlestick pattern.  Sure enough, it was confirmed today as the dollar dropped another 0.24% and as a bonus, closed outside it recent rising RTC.  Just as the Dow gave us a bullish setup, this for the dollar is a bearish setup.  All signs here point to more dollar downside Tuesday.

Transportation: As bad as the trans looked yesterday, that's how good they looked today.  With the Dow up 1.09%, $TRAN was up a giant 2.65%, blasting right back up through the 200 day MA in a big way.  This solid green bullish engulfing pattern looking very promising.  The fact that it came seemingly out of nowhere, chart-wise, is even more encouraging.  A reversal higher when the signs are pointing lower is something to pay attention to.


And as an aside, we note that copper had a good day too, giving us a bullish setup out of its own descending RTC.  Just what the Doctor ordered!


History: According to The Stock Traders Almanac, Tuesday is historically fairly bearish.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

 16  4/16       26         48        -     1370  13/15
 17  4/23       30         48        -     1379  14/16

 18  4/30       44         32        +     1403

 19  5/7        23         50        -     1350

 20  5/14       32         44        -     1353

 21  5/21       30         52        -     1295

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bearish call on 4/23 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 14 for 16.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So with one third of the year gone the poll's accuracy rises to 88% YTD.  Not too shabby.

This week it's interesting to note that while bearish sentiment jumped considerably since last week, bullish sentiment dropped just 2 points.  We are now at the highest bearish reading of the year, not surprisingly perhaps given the price action we've seen this month so far.  Still not quite the numbers I'd like to see for a contrarian bullish call though.  And for the record, I voted bearish once again this week based on my reading of the monthly SPX chart.

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     7      5      2           1

     And the winner is...

It seems like every night recently we've been getting mixed messages from the charts - some say up, others say down.  Tonight though, everything seems to be pointing up so I'm going to call for another higher close Tuesday.  I say this with some trepidation since the bears have been so solidly in control all month and after a big gain like today, you might expect some profit taking to follow.  But this reversal has a solid feel to it.  If I was just returning from a 20 year trip to Mars and saw today's Dow chart for the first time, I'd definitely not be wanting to short it.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.   We're still feelin' the heat and basking in its glow, although we did make back a good chunk of our as yet unrealized losses today.
 

Monday just maybe higher

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

• Monday higher - medium confidence
• ES pivot 1297.00.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Well Friday just gave us more of the same old same old, with the Dow sinking yet again, down another 73 points.  Not even the Facebook hoopla could save this sorry session.  Speaking of which, I'd like to tell you a little market joke.  Here it is:

So what's the joke?  Well this is Facebook's opening day, told in 5 minute candles.  Let's walk through it:

FB is where?

11:30 AM - And they're off!  After pricing at 38, we're out the gate at 42.05.  In the first minute of trading, we hit 45.00 on the dot.  Or maybe we didn't.  With Nasdaq unable to provide confirmations for 30 minutes, who knows what the heck's going on.  We might as well be reading ticker tape clattering out of little glass domes.  Then it's all downhill from there.  Who the heck bought this at 45???

11:45 AM - FB drops right back to 38.  10 seconds later my phone rings.  It's my broker.  The same one who told me a month ago that he had no FB shares for me.  Now he's got some.  You don't say.  I decline.

11:50 AM - Boing! FB bounces off the IPO price back to 41.95 (but no higher) and then starts wandering lower.

2:50 PM - The early worms decide to give everyone else the bird and cash out.  Back down to 38 we go.

3:35 PM - FB finds more support than a pair of carbon steel suspenders.  It trades for 10 straight candles down to exactly 38.00, but not a penny lower.

4 PM - FB closes at 38.15.  The IPO boys made 15 cents.  Everyone else lost money.  Big whoop.

Then there's the odd little ping pong match that occurred in the after hours where it bounced between 38, on the dot and 42, yes, on the dot before closing at 38.42.  What the heck was that all about?

And people wonder why the "average investor" distrusts the markets.  This chart isn't a joke, it's just shameful.  So let us now turn attention instead to some charts that are more meaningful and less manipulated.

The technicals

The Dow:My closing comment on this last week was "no turn-around in sight".  And indeed the Dow continued its relentless march towards its 200 day MA, now just 170 points below us.  And we're still stuck in the descending RTC.  Given its current slope (and there are still no signs of a turn on this chart) we'll hit the MA on Tuesday.  That will be the day of reckoning.  You heard it here first: 12,198.73 is the Dow's Alamo.  If we break that support, heaven help us.

The VIX:  Just as the Dow is marching down to its 200 day MA, the VIX is marching up to its own, at 25.77, just 0.67 up from Friday's close.  That is easily in striking distance for Monday.  If we break above that level it will be bad, very bad.  But if we bounce off, look for an end to the market downtrend.  Monday will tell this tale.  Should be interesting.  I will have my VIX chart front & center on Monday.

Market index futures: There are two bright spots tonight.  The first is that all three futures are up by significant levels at 1:46 AM EDT, with ES gaining 0.48% (NQ is up 0.6%).  But with ES just marching down toward its own 200 day MA (at 1268.66, now just 28 points away) and remaining firmly inside a long descending RTC, why would the futures all be up like this?  Perhaps traders like the vague hand waving emanating from Camp David this weekend or are anticipating some sort of big announcement from our Empty Suit of a president on Monday.  Maybe.  But I've seen this movie before and every time I try to kick this football like Charlie Brown, Lucy yanks it away in the morning.  We'll see.

ES daily pivot: Ah, the pivot.  Tonight it takes yet another drop this time from 1310.83 down to 1297.00.  But with the rally in ES so far overnight and this drop, we are now testing the pivot as I write.  And as I return to this section, ES has now crossed the pivot.  That is a positive development.

Daily dollar ($USDUPX)

Dollar index: The other bright spot in tonight's charts is that the seemingly unstoppable dollar may have finally run its course.  I'm not quite sure what to call this - see for yourself.  This is sort of a cross between an evening star and a bearish two crows.  Whatever it is, it's looking like a top to me.  And note how the indicators have finally come off their "overbought broken" levels, regaining their predictive power.  That points to a lower dollar which would mean higher stocks.

Transportation: But I've saved the worst for last.  Last Thursday, the trans took a big dump stopped only by their own 200 day MA.  But on Friday they just continued down from there, dropping another 1.3% despite glaringly oversold indicators.  This, folks, is bad news indeed.  The last time we broke under the 200 MA from above was August 1, 2011 at 5160 when the Dow was at 12,132 (oddly enough, real close to where we are now).  Seven days later, the Dow closed at 10,720, a 1412 point loss.  That's some scary stuff, eh kids?


History: According to The Stock Traders Almanac, Monday is historically slightly bullish.

Accuracy: 

Month right  wrong  no call  conditional
April   7      9      2
May     6      5      2           1
     And the winner is...

As far as Monday is concerned, all is not as gloomy as it was for most of last week.  The problem is that we're getting some severe mixed messages.  The $TRAN chart is very bad, but there's a sign of hope in the VIX, and the dollar and ES both look quite positive.  So what's it gonna be?  I'm going way way waaaaay out on the limb here and at the risk of being the Owl who cried Wolf, I'm calling Monday higher.  Partly because of the G-8 politics and partly because this streak is just getting much too old to go on much longer.  I just have this feeling about it tonight.

But I will add the usual caveat - if ES has broken back under the pivot by the open, all bets are off.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.  At this point we're in too deep to get out now.  But perhaps that's the problem.  Maybe I should just throw this trade into the volcano to appease the angry market gods.

Friday uncertain

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

• Friday uncertain.
• ES pivot 1310.83.  Holding below is bearish..
• Next week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Ugh.  Not only did we not go higher today as I thought the charts might be suggesting, we had one of the biggest losses in the current downtrend.  The Dow is now down five straight and 11 of the last 12.  Its indicators have been oversold for nine days straight now.  And still no end in sight...

The technicals

The Dow: Last night I suggested that it would take a 90+ point loss to keep us inside the descending RTC.  Well we got that and more, blowing off another 156 points today.  And with today's close at 12,442, the 200 day MA now comes into view on my chart, at 12,196.  That's now just 240 points away.  With what's been going on lately, we could easily be there in a day or two.  And there is only one minor line of support above that, at 12,200.  So tonight we remain solidly inside the descending RTC on a solid red candle.  And despite impossibly oversold indicators, there is still no turnaround in sight.

The VIX:  After three days of small gains where it looked like the VIX was getting ready to move lower, today it instead shot up10%, way above its upper BB.  This is now looking just like last August when the VIX broke through its upper BB and refused to come down. The only hope here is the looming 200 day MA at 25.86 which will serve as resistance.  But even that has only worked 50% of the time in the past few years.  Still, the RTC is finally looking like it's making a bearish crossover.  And the VIX has now been overbought for 10 straight sessions.  I went all the way back to 2007 and was unable to find any other time that was even close to this, even through the Great Recession.  I want to say the VIX has to come down soon, but everything seems to be going crazy here and not working the way one would expect.

Market index futures: Tonight the futures are gloomier than they've been this entire downturn.  At 1:346 AM, all three are significantly in the red with ES down another 0.58% and moving lower as I write.  And the 200 day MA is coming into play on this chart too, at 1268.09.  That's just 26 points away now.  And like the Dow, we can be there in a day or two if the current sell-off continues.  Today's loss and the continuing overnight decline have actually taken us way off the left edge of the declining RTC - very unusual.  Supposedly, this can signal the end of a decline but that remains to be seen.

ES daily pivot: Tonight the pivot drops again from 1327.67 to 1310.83.  But with ES in freefall, we're just as far below it now as earlier today.  Very negative.

Dollar index: The dollar rose again today.  Technically, it's nearing a big resistance level and it is now unbelievably overbought - RSI has been stuck on 100 for 8 straight days now.  Now what goes up really must come down.  It's just that in the current environment, there's no way to tell when that will be.  The dollar remains firmly stuck in its rising RTC and that's about the only remaining working indicator we have.

$TRAN daily

Transportation: And as if the Dow's 1.24% loss today wasn't bad enough, check out this chart of the trans.  This widely watched predictor crashed a whopping 3.18% today.  And notice how it stopped exactly on its 200 day MA of 4938.18.  Tomorrow becomes crucial.  The last time we ran into the 200 MA from above, we bounced off and went higher.  This time we are vastly more oversold.  The canonical expectation is that we'll reverse here and the market will rally.  But things have been so unusual lately, who knows.  And if we don't bounce off, then it's look out below. 


History: According to The Stock Traders Almanac, Friday is historically bearish.

Accuracy:

Month right  wrong  no call  conditional

April   7      9      2
May     6      5      1           1
     And the winner is...

Impossible to tell.  There is absolutely nothing in the charts tonight to suggest that this downtrend is even close to coming to an end.  But Friday is a triple witching day and on top of that we've got Facebook going IPO.  And we are now so overextended to the downside, the market just has to have an up day soon.  If you go back to my last post on market streaks here, you will see that until now the longest losing streak in the Dow was of length 10.  On the other hand, we are now completing only our third straight losing week, and we've seen much longer weekly losing streaks than this.  The record there is seven.

But in any case, given that the charts are not working the way I expect and the fact that we are at so many extremes in so many places, there's no way I can make a meaningful prediction here.  So I'm now officially taking a break and moving to the sidelines until some sanity returns to the markets.  No call tonight.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.  At this point we're in too deep to get out now.  But perhaps that's the problem.  Maybe I should just throw this trade into the volcano to appease the angry market gods.

Thursday higher

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

• Thursday slightly higher, medium confidence.
• ES pivot 1327.67.  Holding above is bullish..
• Friday bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Quote of the Day

“You have to fight self-deception. Human beings are experts at it. I do it, too.”                                        - Jamie Dimon, June 2009

Recap

For a while early on today it was looking like my call for a lower close was going to be wrong, but the Dow obliged by giving up all its early gains and then 33 points more for its 10th loss in 11 days.  To quote noted stock gurus Devo, "Lord how long can this go on?"  We go to work in our coal mine tonight to find out.

The technicals

The Dow:Although the losing streak continues seemingly without end, I'm starting to notice a few signs of change.  Today's tall gravestone doji had a feel of something of a bottom being put in.  The indicators remain uselessly oversold but we are at least edging very close to the boundary of the RTC.  In fact it will take a loss of more than another 90 points on Thursday to keep us inside this channel.  Absent that we'll be getting a bullish setup.  Now of course we could easily see that kind of loss - we've seen that and more recently, but I'm getting a feeling we're nearing a turning point here.

The VIX:  The VIX closed right on its upper BB today at 22.27 for the third day in a row.  That's about as long as the VIX ever spends at those levels.  Today's 1.37% gain only increased my expectations of a lower VIX on Thursday and that would be bullish for stocks.  We do remain firmly inside the rising RTC and there's on indication of a bearish stochastic crossover yet though, so it's not out of the question to see the VIX move higher one more day, but I think this move is near the end now.

Market index futures: Tonight all three futures are up by non-trivial amounts at 1:02 AM with ES leading the way, up 0.55%.  This puts us exactly on the edge of the latest descending RTC.  If we can just hold onto the current levels around 1330, we'll have a bullish setup by Thursday's close.  The fact that we are already above today's regular open, after another bad day in ES creates a bullish engulfing pattern.  The candle is admittedly not cooked yet, but this  is a more encouraging sign than I've seen here in weeks.  Rob Hanna's Quantifiable Edges blog today has a quantitative assessment of this phenomenon.  And also note that RSI, momentum, and OBV have now all hooked up from very oversold levels.  This reawakening of the indicators, or the Lazarus Effect, is always a strong sign of a reversal at hand.

ES daily pivot: Tonight the pivot falls yet again from 1333.58 to 1327.67.  Combined with ES now being up smartly in the overnight, we've just crossed the pivot, always a positive sign.

Dollar index: Today the dollar gapped up to form a spinning top that is 2/3 of a bearish evening star.  Momentum actually decreased a bit for the first time in 8 days.  A lower dollar tomorrow would confirm the pattern and suggest even more downside here, which would be good for stocks.

Transportation: Today the trans gave back all of yesterday's gains plus a bit more but did it on a really tall inverted hammer that extended a support line at 5100.  Two more days of this sort of action would provide a bullish RTC exit.  As it is, this chart is at least showing some signs of a bottom being near.  Interestingly, the copper chart put in the same pattern today.


History: According to The Stock Traders Almanac, Thursday is historically fairly bullish.

Accuracy:

Month right  wrong  no call  conditional

April   7      9      2
May     6      4      1           1
 
     And the winner is...

Tonight, I'm going out on a limb and calling Thursday higher.  I'm finally seeing a bunch of reversal signs in the charts I follow and this losing streak is getting pretty old.  This doesn't mean I'm expecting a big rally, but it does look to me that we'll at least see some green on Thursday.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.  We're just so oversold now I really hate to throw in the towel at this late stage in the game. There's nothing worse than throwing in the towel and taking a big loss at what turns out to be the bottom.

Wednesday lower still

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

• Wednesday lower - medium confidence..
• ES pivot 1333.58.  Breaking above is bullish.
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

I thought I was finally going to be vindicated when I woke up this morning to find the markets actually up for a change.  No such luck as all the gains went pfft after lunch and left us with a sour 63 point loss in the Dow.  Is this ever going to end?  I'll check the charts as I do every night, though I'm starting to wonder why I bother.

The technicals

The Dow: Today the Dow extended its losing streak to 9 out of the last 10.  This is really starting to get up there in terms of streak length, implying some sort of rally must be coming soon.  On the negative side, we broke through another support level today at 12,710 and are still firmly inside the descending RTC.  Until I see this change, there's no reason to call a reversal.  The indicators are now all useless, stuck on broken oversold.

The VIX:  The one bright spot I can find in an otherwise bleak landscape is the VIX, which today managed only a small 0.46% gain in the form of a spinning top centered about yesterday's action and closing just above the upper BB.    It is notable that despite all the jitters over Greek elections, or whatever their latest problems are, the VIX did not rocket up into the mid 20's as we were seeing last spring.  This one is looking to me to be ready to come back down and that would be good for stocks.

Market index futures: Yesterday's loss in ES was followed by more losses today and the overnight is moving lower still.  At 1:42 AM EDT all three futures are once again in the red, with ES now down a disturbing half a percent.  Of greater concern is that we exited a descending RTC four days ago but the bullish setup totally failed.  That is quite rare.  We're now in another descending RTC with seemingly no turnaround in sight.

ES daily pivot: Tonight the pivot drops yet again from 1339.42 to 1333.58.  And with ES doing nothing but drifting lower, we're just as far below the pivot now as we were in the evening hours.  Another negative sign.

Dollar index: After putting in what technically looked like a good bet for a peak yesterday, the dollar instead rocketed even higher, up a whopping 0.78% on the day.  Technicals no longer matter here - the dollar is now being driven by the euro which sank to a level not seen since mid-January today, in a 12 day run to the basement.  And neither the dollar nor the euro are near any S/R lines right now.  This one looks bad, folks.

Transportation: The trans today actually gained 0.13% while the rest of the market marched lower.  Leading indicator?  Perhaps, but here too we remain stuck in a descending RTC here too.  I'm tired of trying to catch one falling knife after another here, so now I'm going to wait for an RTC exit before sounding the all-clear.


History: According to The Stock Traders Almanac, Wednesday is historically slightly bullish.

Accuracy:

 

Month right  wrong  no call  conditional

April   7      9      2
May     5      4      1           1
     And the winner is...

I really hate to be the bearer of bad news, but it's not looking good at all tonight.  The only positive I see is the VIX, but even that could spend another day around its current levels before heading lower.  I see nothing on the other charts indicating an end to the carnage so I just have to call Wednesday lower.  I'm just not feeling the love.  Not one bit.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.  We're just so oversold now I really hate to throw in the towel at this late stage in the game.

Tuesday higher only if pivot passed

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

• Tuesday higher - low confidence..
• ES pivot 1339.42.  Breaking above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

My thesis last night was that we'd go higher just because the charts were looking so beaten down.  But today's ugly 125 point loss in the Dow reminds us of why the old saying "Never buy a stock just because it's down" got to be an old saying.  In my defense, I will point out that I made my call conditional on ES crossing up above its pivot in the morning.  Well ES never got close to the pivot and so down we went.  I have a feeling that tonight the pivot may be, uh, pivotal.  Let's take a closer look at the charts and see what we can see.

The technicals

The Dow: Just as we were on the edge of the descending RTC, we got another nosedive today, with the Dow tanking another 125 point thanks to those freakin' Greeks again.  I'm getting tired of this.  Maybe it's time to break up Greece.  Give it to the Albanians.  You never hear of any fiscal crises i Albania, do you?  Uh well anyway, today's plunge brought us right back into the center of the RTC and broke April's support of 12,725.  We're now down 8 of 9 and the indicators are all broken on the floor after a six day oversold run.  You have to go back to last August to find a longer run when it took 10 days of oversold levels before we caught a rally.  But there's still no sign of a reversal yet on this chart.

The VIX:  On the other hand, there are several reversal signs on today's VIX chart.  One, we gapped up for a 10% pop that took us right through the upper BB.  As I always note, the VIX rarely spends more than one day at such levels before coming down.  Two, it formed a hanging man in the process.  Three, it also popped out the left side of the rising RTC.  And finally, closing at 21.87, it is very far from its pivot of 19.48.  The futures are showing a similar setup.

That said, we had a similar pattern last month and after a big gap up on April 9th, the VIX rose even more on the 10th (but it did come back down two days later).

Market index futures: At 1:35 AM EDT, the futures are actually finally all in the green for a change, and by non-trivial amounts.  ES is up 0.39%.  Today's big dump took us cleanly out of the recent consolidation and may have set the stage for the bounce we've all been waiting for.  RSI actually just turned higher for the first time in 9 days.

ES daily pivot: Tonight the pivot take another big step down from 1352.42 to 1339.42.  With ES actually drifting higher in the overnight so far, this puts us just knocking on the door.  You can see how the last five five-minute candles have peaked just below the pivot, looking for a chink in the armor.  If we can break through, that will be a big plus for Tuesday.

Dollar index: Today the dollar gapped up big time for a 0.43% gain that took us way above the upper BB and still inside the rising RTC.  The indicators are all now solidly broken overbought.  These sorts of situations don't last forever though and what goes up must come down, to coin a phrase.  And I'd say we're getting ready to come down real soon now.

Transportation: The trans hit a support line at 5090 today and bounced off.  However, they remain stuck in a declining RTC and have been tracking the lower BB for four days now.  Meanwhile the indicators are as oversold as they were after the big slide last November.  Although there's no evidence of it right now, we remain overdue for a bounce.


History: According to The Stock Traders Almanac, Tuesday is historically fairly bullish.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

 16  4/16       26         48        -     1370  13/15
 17  4/23       30         48        -     1379   

 18  4/30       44         32        +     1403

 19  5/7        23         50        -     1350

 20  5/14       32         44        -     1353

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bearish call on 4/16 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 13 for 15.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So after 16 weeks the poll's accuracy rises to 87% YTD.

Interestingly, the spread between bullish and bearish narrowed considerably this week.  I'm not sure why, since I still voted bearish and remain with the majority here.  My look at the monthly SPX chart shows considerable downside remains and it could easily be a month or two before we reach the end of this decline - maybe even until September.  And as alert reader Daniel commented today, the world economic situation is looking pretty discouraging at the moment.

Accuracy:

Month right  wrong  no call  conditional

April   7      9      2
May     5      3      1           1
I'm adding a new column called "Conditional" to my "Accuracy" section.  This will be used to count the days when I give a conditional call like "we'll go higher if ES crosses the pivot, else lower".  That gets a point when the condition is met, either way.  If say ES does not cross the pivot but we close lower anyway, then that would go into the "Wrong" column.


     And the winner is...

I really hate to sound like some sort of inverse Chicken Little here, but once again I'm going to say that I see more upside potential than downside risk just because we're so oversold on every chart.  And that view is at least finally being supported by the futures.  But I will once again have to go to the ES pivot as the final arbiter here.  If we can break above 1339.42 on Tuesday morning, then it's likely we'll see a higher close.  If we bounce off and fail to go above that level, we're in for another down day.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.

Monday maybe higher

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

• Monday higher - low confidence..
• ES pivot 1352.42.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

That's what I get for committing hubris.  I was feeling pretty smug around noon last Friday for calling the market higher in the face of a big whoopise from JPM.  After a big dump right out the gate, the Dow had recovered all of its losses and I was looking good.  But how quickly one can go from hero to zero in this game.  It was all downhill from there and the Dow ended the day down 34 points.  So that one goes in the loss column.  But we do not dwell on the past here, we only look to the future.  So that's what the rest of this post is about.

The technicals

The Dow: Ah, the Dow.  As Mick Jagger once sang, "Heartbreaker, with your thirty four", the Dow broke my heart on Friday, giving up all its early gains and putting my account negative for the day.  (OK, and I know it's 44, not 34, but the Dow lost 34).  Uh, so anyway, we got this spinning top following a long decline and highly oversold indicators.  RSI hit 4 on Friday and the stochastic has been lying on the floor for three days now.  But we are still stubbornly stuck in a descending RTC so until I see that breakout, I can only assume we're in for more of the same.

The VIX:  On Friday the VIX rose 5.63% on a tall dragonfly doji.  But since we're not really in a trend either way, I'm not sure this signals a reversal.  The VIX of the VIX seems to be climbing.  Lately we've had three days of gap up and down days.  The futures gave us a hanging man though and are sufficiently overbought as to suggest a move lower Monday, and therefore a lower VIX too.

Market index futures: At 1:26 AM EDT Sunday night (actually early Monday morning), all three futures are in the red.  ES is down 0.22% putting us at the lower end of what is now becoming a fourth day of consolidation.  Given how oversold we are here, the conventional wisdom is that the next move will be up.  I just don't see a sign right now that that will happen on Monday.

ES daily pivot: Tonight the pivot steps down from 1355.67 to 1352.42.  With some aimless trading in the overnight, we remain below this level and that's bad on the face of it.  I need to see ES break above this on Monday morning to have a meaningful shot at a higher close.

Dollar index:The dollar continued its ascent on Friday, hitting its upper BB.  And its indicators are as overbought as they get.  RSI has been pegged on 100 for four days straight now.  Technically, this chart favors a move lower, but what with the Chicoms meddling with the euro and who knows what other monkey business going on behind the scenes, anything's possible.  In any case, a move lower looks likely in the next few days and that would be good for stocks.

Transportation: On Friday, the trans gave us a tall spinning top that along with highly oversold indicators suggest the next move is higher.  So that would be good for stocks in general.


History: According to The Stock Traders Almanac, Monday is historically slightly bullish, but it is up 14 of the last 17.

Accuracy: 

Month right  wrong  no call

April   7      9      2
May     5      3      1

     And the winner is...

Very strange.  Tonight I'm not really seeing any signs that we're going higher on Monday.  And yet, if I had just returned from an extended journey to Mars and looked at these charts, would I be shorting anything here?  No I would not.  Buy low, sell high, right?  Well, things are looking lower than higher right now so I'm going to call for a higher close Monday simply because I see more upside potential than downside risk at these levels.  But I don't feel really good about saying that.  Watch the ES pivot closely Monday morning.  If we can break above 1352.42, we have a good shot at a higher close.  If not, then we're going lower.  So says I.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're once again still holding on to this long at 1365.00.

Friday weakly higher

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

• Friday higher - very low confidence..
• ES pivot 1355.67.  Holding below is bearish.
• Next week bias higher technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

It was touch and go for a while there coming into the close, but ultimately the Dow managed to finish up a modest 20 points and save me from having to eat my hat.  Whew!  So does this mean we're out of the woods?  Not so fast - read on...

The technicals

The Dow: You don't see the combination of a hammer followed by an inverted hammer very often, but we got one today.  You'd think that if a hammer is a bullish reversal candle, then the inverted hammer should be bearish, but it isn't.  They're both bullish reversal signs.  Taken together, they're even more bullish.  I found two instances of a hammer/inverted hammer after a decline in the last five years.  In both cases, the next day was higher.

The indicators, which by now are about as oversold as they get, support this.  However, for the time being, we're still stuck in a seven day declining RTC.  But it would take just one day of sideways action to get a bullish RTC setup, so this bears watching.  It's worth noting in passing that the descending RTC on the hourly chart was exited at 11 AM today.

The VIX:  Last night I was so convinced the VIX would go lower today I offered to eat my hat if it didn't.  Fortunately the VIX obliged me with a nice 6.23% decline that started the indicators on a trip down from overbought, taking the VIX back below 20 in the process.  This leaves us just teetering on the edge of the latest rising RTC.  It all looks ready for more downside, though I'm not quite as certain about it tonight, particularly in view of the JPM news that came out late today.

Market index futures: The strangeness just continues here.  At 1:34 AM EDT all three futures are running lower with ES down a disturbing 0.68%.  But if you look at the daily chart, we're not seeing a continuation of last week's declines.  Instead we're getting some sideways consolidation.  And that took us entirely outside the descending RTC today.  And the overnight action, despite being down pretty substantially, is actually a bullish trigger.  Go figure.

ES daily pivot: Tonight the pivot actually rises from 1350.33 to 1355.67.  Where we were just about even with the pivot this evening, we're now well below it and showing no signs of mounting an attack on this level - not a good sign.

Dollar index: The dollar did not go lower today as I expected it might, gaining instead 0.03%.  However, the body of the candle was entirely below yesterday's star and off the upper BB suggesting lower to come which would be good for stocks.  The indicators are also massively overbought here.  RSI remained at 100 for the third day running.  The dollar tends to respect its upper BB about the same as the VIX, so I'd say a lower dollar is more likely from here.

Transportation: Last night I called this chart weak and kicked some sand in its face.  Well today the trans dropped another 0.49%.  But they did it on an inverted hammer here too that dribbled down the lower BB and left the indicators finally entering oversold territory.  It's a reversal warning, but one that requires confirmation.


History: According to The Stock Traders Almanac, Thursday is historically basically neutral.

Accuracy: 

Month right  wrong  no call

April   7      9      2
May     5      2      1
 
     And the winner is...

This one's a real puzzler.  The charts all look fairly bullish to me tonight - even ES.  But the actual direction of ES in the overnight is down, and down significantly, and going lower as I write.  On the other hand, we bounced off a strong 1344 support level earlier this evening.  It bothers me greatly that the futures are running so poorly right now, but we've seen reversals happen in the wee hours before.  In the final analysis, I'm going to go waaaay out on the limb and vote with the charts, and with some misgivings call for a higher close Friday.  Maybe.  We'll see.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're still holding on to this long at 1365.00, as I hum along to "Some Day My Prince Will Come".

Thursday may reverse higher

[For some reason, this post, which was completed at 2 AM Thursday morning, never appeared.  My apologies to my readers.]

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

• Thursday higher, low confidence.
• ES pivot 1350.33.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Well last night I said we'd go higher today if ES could manage to break above its pivot this morning.  It couldn't and so we didn't, with the Dow dropping an additional 97 points to extend the losing streak to six now  There's been some rather strange market action this week so far.  Let's see if we can make some sense of it.

The technicals

The Dow:Another day, another hanging man.  We now have a  whole army of three hanging men marching steadily downward.  I've never seen anything like this.  I just scanned back 10 years of Dow daily candles and there's nothing similar.  All I can say is that everything in place yesterday in still in place today only more so.  The only difference is that we've now finally reached the lower BB.  A reversal has to be coming Real Soon Now.

The VIX:  Closed just over 20 today on a gap-up spinning top right to the upper BB.  As I often mention, the VIX tends to bounce off the upper BB fairly quickly, rarely spending more than a day there.  And we have a complete bearish stochastic crossover now.  And highly overbought indicators.  If this one doesn't go lower Thursday, I'll eat my Hatlo hat.

Market index futures: At 1:52 AM EDT we've got NQ just about flat, YM up a hair, and ES up a respectable 0.24%.  This is looking to me like we're nearing the end of the downtrend.

ES daily pivot: Tonight the pivot drops from 1356.75 to 1350.33.  With this drop and ES rising since the close, we're now above the pivot for the first time in a while.  This is a positive sign.

Dollar index: Big gap-up here today, for a spinning top right at the upper BB.  If this one doesn't go lower on Thursday, I'll buy another hat and eat that too.  Of course, there was news today that the Chicoms are manipulating xxxxxxxx supporting the euro, so I suppose anything's possible now in currency-land.

Transportation: Big dump here today, right to the lower BB.  But that's not a reversal guarantee.  Overall, this chart's looking weak.


History: According to The Stock Traders Almanac, Thursday is historically fairly bullish for the Dow.

Accuracy:

Month right  wrong  no call

April   7      9      2
May     4      2      1
     And the winner is...

It's tempting to throw in the towel after so many days of negativity, but this downtrend is getting long in the tooth.  You really don't want to sell at these levels.  From here I believe there is clearly more short term upside potential than downside risk.  With the futures (finally) up in the overnight, and the VIX looking ready to go lower, I'm going to go way out on the limb and cautiously call Thursday higher.  We'll see.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're still holding on to this long at 1365.00.  I briefly considered dumping this one but looking at the chart, if I was out of the market right now, I'd be buying this level, not selling it.  It's buy low, sell high, not the other way around.

Wednesday higher if pivot passed

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

• Wednesday higher, low confidence.
• ES pivot 1356.75.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Huh - well I sure didn't see that one coming.  I thought the latest Greek drama, version 258,243, was already priced in.  I guess I was wrong as the Dow dumped another 76 points on Tuesday.  Those freakin' Greeks!  Tonight we review the smoking wreckage to see if I was a day early or just plain off my rocker.

The technicals

The Dow: Yesterday's little hammer that fooled me into thinking we'd go higher today was replaced instead with a much bigger hammer, one that very nearly hit the lower BB.  And even though things are looking pretty miserable right now, two hammers in a row like this are quite often a good reversal indicator.  Aside from that, the indicators all got only more oversold today than Monday.

The VIX:  Despite spiking to an intraday high just over 20 this morning, the VIX regained some sanity to actually close higher by just 0.58% on a giant red spinning top.  The failure of the VIX to either open or close above yesterday's open confirms, for me anyway, yesterday's dark cloud cover.   And the bearish stochastic crossover is >< that close to completing.  I still have to believe the VIX goes lower Wednesday, which would be bullish for stocks.

Market index futures: Tonight, all three futures are running in the red with ES down a third of a percent at 1:52 AM EDT.  The chart is somewhat unclear, with a big hammer today following yesterday's fat spinning top.  The overnight follow through so far is negative enough to keep us inside what is anow a six day descending RTC.

On the other hand, the indicators are all quite oversold now and we have touched the lower BB three days running.  And support seems to continue coming in at the 1340-1350 area.  This is now reminding me a lot of the early April nastiness we saw.  If that history repeats itself, this downtrend should be just about exhausted.

ES daily pivot: Tonight the pivot drops from 1359.50 to 1356.75.  Even at that, we're still beneath, which is bearish.

Dollar index: After gapping up yesterday, not only did the dollar not move lower to form an evening star as I expected - it moved higher, and in confusing fashion with a second red candle in a row.  And it is even more overbought now than last night.  Today its RSI hit 100.  It doesn't go any higher than that.  Technically, it's really looking ready to go lower.  Realistically, it's now being controlled by the antics in Europe.

Transportation: A big hammer in the $TRAN today, raising at least the possibility of a reversal in a day or two.


History: According to The Stock Traders Almanac, Thursday is historically just slightly bullish.

Accuracy:

 

Month right  wrong  no call

April   7      9      2
May     3      2      1
     And the winner is...

Sigh - it's starting to look a lot like 2011 all over again, right down to the April peak.  Maybe the sell-in-May'ers were right after all.  That said, everything I sadi last night about overbought and oversold is still true tonight, only now even more so.  The question now, is who will be in the driver's seat on Wednesday?  The technicals, or the news stories from Europe that jerked us around so badly last summer?

I'm giving my bounce thesis one more shot at redemption on Wednesday, with the understanding that it could easily be sidetracked by some news item in the FT about how the Greek leftists can't agree on how many olives should go in a martini.  News or no news, the markets do not stay this oversold forever.  I will take advantage of the reversal higher, when and if it comes, to do my sell-in-May-ing.

As is often the case, I think the ES pivot will be key tonight.  Watch to see when you get up Wednesday morning if ES has managed to go above 1356.75.  That will greatly strengthen the case for a higher close.  If we hit that level and just bounce off, it's a lower close.

ES Fantasy Trader

Portfolio stats:  the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're holding on to this long at 1365.00.  I think I was a day early with this trade, so we're going to exercise some patience with it.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

Tuesday possibly higher

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

• Tuesday higher, medium confidence.
• ES pivot 1359.50.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1365.00.

 Quote of the Day

"The first quality that is needed is audacity."

                    - Winston Churchill

Recap

It was a funny day on Monday.  All the overnight brou-ha over the French and Greek elections ended up amounting to less than a hill of brie - rien du tout.  The SPX and Naz were both up just a tad and the Dow did close down 30 points, confirming my call.  Tonight we stir the tea leaves for our nightly look at the charts to figure out where Tuesday might go.

The technicals

The Dow: The best that can be said for today's action is that the 13K support level held despite the bears' early effort to drive the Dow lower.  The net result was a slightly misshapen red hammer.  Not quite classic, but close enough for me.  Especially given how the past four days of losses have driven the indicators all the way from overbought to oversold.  Still this is not yet a rousing reversal warning.  We'd want to see one day higher before declaring this downtrend over.

The VIX:  Ah, more funny candles.  The VIX actually lost 1.15% on a red candle lying largely above Friday's.  But that's  the classic dark cloud cover position, a powerful reversal indicator.  The futures have an even more dramatic version of this.  Add in overbought VIX indicators and you've got the stage set for a lower VIX Tuesday, implying higher stocks.

Market index futures: The market continues its mixed ways in the overnight, with NQ up a bit while ES and YM are down a bit at 1:27 AM EDT, ES being just a point lower.  ES today put in a hammerish green candle, not quite meeting the classical definition, but the family resemblance is there.  The tail pierced the lower BB before pulling back up.  The last few days have driven all the indicators down to oversold levels and the stochastic is gearing up for a bullish crossover in the next day or two.  All of these are positive signs.

ES daily pivot: Tonight the pivot actually drops from 1371.00 to 1359.50.  Even without ES drifting ever so slightly higher in the wee hours, this puts us once again above the pivot, a bullish sign.  Pivot power - a tip of the Hatlo hat the the legendary Dr. Brett Steenbarger for opening my eyes to this invaluable market tell.

Dollar index: Last night I wrote "A long bet on the dollar Monday would seem like a reasonable idea".  And so it was, with the buck gaining 0.16% today and forming 2/3 of a bearish evening star in the process on a gap up doji.  This, combined with indicators all well into overbought territory would seem to signal a lower dollar on Tuesday, good for stocks.  The euro chart supports this, with the euro having put in a big hammer today.

Transportation: Last night this chart looked ready to provide further downside.  Instead, the trans actually gained 0.34% on a spinning top that held the 5225 support line I mentioned.  I view this as a positive sign.  Also, three of my Fave Five indicators have now turned upward, another good sign.  And the stochastic is gearing up to start a bullish crossover in a day or two.


History: According to The Stock Traders Almanac, Tuesday is historically as bullish as Monday was bearish\, so that's nice.

Sentiment: Once again it's time for the latest weekly TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

 16  4/16       26         48        -     1370
 17  4/23       30         48        -     1379   

 18  4/30       44         32        +     1403

 19  5/7        23         50        -     1350

Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, after the first four weeks we're able to see how well we did.  This week we see that my bearish call on 4/9 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 12 for 15.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So the poll's accuracy rises to 80% YTD.

This week I'm switching my vote back to bearish on the 30 day outlook.  And I apparently have plenty of company as half of the other poll particpants seem to agree with me now.  It's the sharpest reversal in sentiment of the year so far, with bullish sentiment being chopped in half in just one week.

And why?  I can't speak for everyone else but here's what I'm looking at.  April put in a classic hanging man that failed to exceed the highs of March.  And May so far is trading largely below the body of the hanging man, providing bearish confirmation.  Add to that a stochastic just forming a bearish crossover.  The stochastic is very good on the monthly charts and not to be ignored.  these are all bad signs.

Accuracy:

Month right  wrong  no call

April   7      9      2
May     3      1      1
     And the winner is...

Whereas last night was looking lower, tonight I feel better about calling for a higher close Tuesday.  The charts and indicators are showing some classic direction changing patterns that suggest at least a day or two of higher prices.  In any event, I don't think Tuesday is the day to sell in May.

ES Fantasy Trader

Last night's long trade was admittedly some pretty risky business but sometimes audacity is its own reward.  And so we were rewarded this morning with a nice 15 point profit on a day when the market ended down.  I ended up leaving a bit on the table, but hey, it never pays to be an oinker.

Portfolio stats:  the account rises to $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1  Tonight we're going long again at 1365.00.  If this trade isn't profitable Tuesday, I believe it will be by Wednesday.

Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.  And let me note that I always buy on the ask and sell on the bid to make things more fair.  This way there's no question that the trade would have executed for real.  But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post.  Also keep in mind that these trades run with no stops and no preset targets.

SLD    10    ES    false    JUN12 Futures     1364.50    USD    GLOBEX    11:15:19
BOT    10    ES    false    JUN12 Futures     1349.50    USD    GLOBEX    00:47:52