Friday lower

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

• Friday uncertain, top possible
• ES pivot 1453.00.  Holding below is bearish.
• Next week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going short at 1451.25.

Recap

I think my call for Thursday worked out pretty well, considering it was for "uncertain".  The Dow lost all of eight points and did nothing to change my opinion that we might be seeing a short-term top.  Let's see now if there's any confirmation in the charts for tomorrow.  Friday being op-ex, things should be interesting.

The technicals (daily)

The Dow: Today the Dow gave us a classic star doji.  That makes two dojis in a row, counting yesterday's hanging man.  It sure seems like the Dow is trying to tell us something here.  But consider that the indicators have still not reached overbought levels and that the Dow remains well within its latest rising RTC.  So for the second night in a row, I have to say that we need to see confirmation of these reversal warnings before calling the Dow lower.  That's the conservative play.  The aggressive play is: two reversal signs, go for it.

The VIX:  Today was one of those unusual times when the market went down and the VIX did too, dropping 0.27% and bearing out what I wrote last night, namely "there's a possibility of a lower VIX on Thursday".  But this drop also drove the indicators into oversold territory and the candle was a spinning top.  The futures are quite oversold and hit their lower BB for the third day running.  So I'd say the VIX is due for a bounce if not Friday then early next week.

Market index futures: Tonight all three futures are down, just barely, at 1:49 AM EDT with ES lower by one tick.  The important point is that today's red candle was something of a dark cloud cover and the overnight is trading at the bottom end of that.  Also RSI is now overbought, money flow and OBV have topped and the stochastic is about to form a bearish crossover.  This chart is now looking fairly toppy to me.

ES daily pivot: Tonight the pivot ticks down from 1453.67 to 1453.00 even.After breaking below at 1 PM today we remain under the new number, so that's bearish.

Dollar index: Here's an interesting divergence.  While the Dow and SPX moved very little today, the dollar took a big jump, up 0.46% on a green marubozu that neatly filled yesterday's gap down and left the $USDUPX oversold with a stochastic moving into position for a bullish crossover. It also traded outside the latest descending RTC for a bullish trigger.  I'd say the $ is ready to continue higher on Friday, and that's bad for stocks.

Euro: And we got confirmation here from the euro which moved lower today, bouncing right off its upper BB to close at 1.3070.  The overnight is drifting lower still and the stochastic is right on the cusp of a bearish crossover.  So I'd give the euro more chance of moving lower than higher on Friday.

Transportation:While the Dow was basically flat today, the trans managed a fifth straight advance, this time to the tune of 0.15%, handily keeping above the 200 day MA.  But the candle was a tall spinning top, RSI hit a very overbought 96.65, and the stochastic flattened out for a bearish crossover.  Can the trans go for six up on Friday?  To quote noted Scottish stock sage Angus MacTavish, "Ee ha' me doots".


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    6      4      4           0        .600      12

     And the winner is...

The failure of the Dow to make any headway above 13,555 for three days running concerns me.  The SPX is similarly stuck at 1463.  And with everything now officially short-term overbought, I'm not sure where the gas is coming from to power us higher tomorrow.  Also worth noting is that the Dow is down six straight and seven of the last eight on October op-ex Friday according to The Stock Trader's Almanac.  And my good pal J-Trader is now all-in short, and he's been doing pretty well for some time now.  The charts in general now look toppy to me so all things considered, I'm going to call Friday lower.  I also took out some SPXU this afternoon at 36.85 as a hedge.

ES Fantasy Trader

Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1451.25.  I think the risk/reward finally favors the short side, so we might as well give it a shot.  Reminder - you can follow these trades live on Twitter @nightowltrader.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Thursday uncertain, top possible

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

• Thursday uncertain, top possible
• ES pivot 1453.67.  Breaking below is bearish.
• Friday bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Yesterday I raised the possibility of a doji day today.  I'd say today's five point gain in the Dow certainly qualifies.  Of course that was helped out by some dismal numbers from IBM and Intel, and the SPX performed much better.  So what to make of this divergence?   The charts will tell us if there's more upside left for Thursday or not.

The technicals (daily)

The Dow: After two nice days of gains, the Dow gave us a classic hanging man, so that's at least a warning of a coming reversal, but one that requires confirmation.   And for the time being, there's no confirmation from the indicators which simply continue their climb from oversold to overbought.  So this is a yellow caution light, but not a clear reversal yet.

The VIX:  Today the VIX continued a haphazard decline, this time down nearly a full percent on a dark cloud cover.  This particular pattern is usually pretty good, so I'd say there's a possibility of a lower VIX on Thursday, particularly since the indicators are nowhere near oversold yet and we're a long way from the lower BB.

Market index futures: Tonight all three futures are mixed once again at 1:37 AM EDT with ES lower by just 0.03%, YM flat, and NQ down 0.08%.  ES has now handed us a classic three white soldiers pattern and that's quite bullish.  However, today' soldier stopped right at 1456, a strong resistance line that has defied all attempts to cross it for over a month now.  The difference this time is that we're not quite as overbought yet so there's more gas in the tank for launching an assault and the upper BB is at 1463.68.  With no reversal sign from the stochastic or the RTC right now, that means ES still has a bit more room to run.but Thursday could be the turn-around day.

ES daily pivot: Tonight the pivot rises again from 1445.08 to 1453.67. The situation is quite similar to last night - the rise in the pivot leaves us once again still above, but by much less.  So the same principle applies - stay above the pivot - good, fall below - bad.

Dollar index: Yesterday the dollar gapped down big with a spinning top and today it did it again.  Today's 0.51% plunge took us just below the lower BB and drove the indicators closer to, but not quite into oversold.  I was premature to think the dollar might rise today, and with an identical candle tonight, I'm going to wait for the confirmation of a move higher on Thursday.

Euro: As the dollar cracked its lower BB today, the euro blasted through its upper BB, closing at 1.3132, exactly at resistance from last month's highs.  And it's now drifting lower in the overnight.  With indicators becoming highly overbought, this suggests the possibility of a move lower on Thursday.

Transportation: The trans continue to do very well, putting in a fourth day of solid gains made all the more impressive by the ease with which they motored through the two resistance levels I mentioned last night - the 200 day MA and the upper BB.  With that now in the rear view mirror and no further resistance until 5200, I think we could make it five in a row on Thursday.


Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    6      4      3           0        .600      12

     And the winner is...

I know some people are going short right now.  At this point I don't think that's an unreasonable stance, but I'm a bit more conservative than that.  I'd like to see some confirmation of a top first and I'm not seeing it just yet.  In fact the charts seem to suggest that there's still a little room left to run higher before hitting some strong resistance points.  My general feeling is that Thursday may be a turn-around day.  The market doesn't look really toppy quite yet, but it's starting to show some signs of it.  So given all that, once again I'm going to have to punt and call Thursday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight with another uncertain forecast, we stand aside once again.  But I'm anticipating going short tomorrow.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1445.08.  Breaking below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

We got a second very nice run up for the Dow today with all of the technicals working out nicely.  Let's see if the charts will continue to deliver the goods for Wednesday.

The technicals (daily)

The Dow: Today's big 128 point run was very helpful in moving us back into the long term rising RTC that we very nearly hit last Friday.  The indicators are all rising smoothly now off oversold.  And today's big green marubozu gives us a bullish RTC trigger.  So everything's looking up on this chart for Wednesday.

The VIX:  Moved lower today as expected, but just barely on a green hammer.  This is a potential reversal sign, but the stochastic is sitll in descending mode and the VIX is in no-man's land halfway between the BB's, so this chart's too tough to call right now.

Market index futures: Tonight all three futures are down at 1:40 AM EDT with ES lower by 0.14% on what I assume is a Presidential debate induced drop off.  The insta-pundits are claiming Obama won this one, which would be about right since ES jumped after the first debate which Romney won.  I'll take their word for it.  The Night Owl has better things to do than watch two politicians lie to each other for 90 minutes.  In any event, this move is sort of putting the kabosh on what was a nicely developing rally since the indicators are still only about halfway to overbought and the upper BB is at 1462.  After two big days of gains, it's possible ES may take a break on Wednesday.

ES daily pivot: Tonight the pivot jumps from 1429.50 to 1445.08.  This gain combined with the overnight drop in ES now leaves us just two points above the new pivot.  That's barely bullish and we need to watch for any attempts to break under - that would be basically bearish.

Dollar index: The dollar took a big gap down today right back to its recent support around 54.75 on the $USDUPX.  This alone suggests a chance at a move higher on Wednesday.  The stochastic has declined enough that this would not be out of the question.

Euro: After a big gain today that took the euro right up to its upper BB, it blew right through with a gap up in the after hours but the developing candle is looking like a gravestone doji.  The stochastic is not yet in bearish reversal mode but with a candle pattern like this, I'd be looking for a lower euro, possibly as soon as Wednesday.

Transportation: The trans soared 1.05% today all the way to their upper BB and and stopped just short of the 200 day MA at 5139.  With the indicators about to enter overbought territory and two resistance lines now dead ahead, the trans may have some trouble advancing further on Wednesday.


Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    5      4      3           0        .556      12

     And the winner is...

We had some nice momentum going, but it's looking like Emperor Nerobama may have poured cold water on it with whatever he said in his debate tonight - I can basically summarize it as "blah blah blah".  Unfortunately, this injects just enough caution into the mix that the market may use it as an excuse to take a break after rallying hard for two days.  Since this suggests the possibility of a doji day tomorrow, the only choice I have is to call Wednesday uncertain.

ES Fantasy Trader

Portfolio stats: the account remains at $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  We left a lot on the table today by not going long last night, but oh well - no one ever went broke by not trading.  Tonight with an uncertain forecast, we stand aside.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Tuesday higher

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

• Tuesday higher, low confidence.
• ES pivot 1429.50.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Last night I played it conservatively.  The most I was willing to commit to was "uncertain" but with a positive bias.  Turns out we were positive alright - a positive 95 points to snap the Dow's five day losing streak.  So was this a one-off or is there more upside to come?  Let us now round up the charts to give them the full treatment and get the answers we're looking for, whether they like it or not.

The technicals (daily)

The Dow: Today's 0.72% advance decisively broke us out of the descending RTC for a bullish setup and a 95% chance that the downtrend is over.  The bullish stochastic crossover is also now complete.  Money flow and OBV have also now hooked upwards.  All of this suggests continued upside on Tuesday.

The VIX:  Yesterday the VIX has posted two consecutive gains, but I pointed out that the bearish stochastic crossover was usually a pretty good indicator.  And if paid off today as the VIX dropped 5.39%.  We also have a bearish RTC trigger now and declining futures, so more downside is possible for the VIX on Tuesday.

Market index futures: Tonight all three futures are up at 1: 40 AM EDT with ES higher by 0.17%.  Today's big gains in ES gave us a decisive bullish RTC trigger marking the end of the recent downtrend.  In addition, the bullish stochastic crossover is now nicely complete and we're seeing encouraging follow-through in the overnight.  I see more upside left in this chart for Tuesday.

ES daily pivot: Tonight the pivot rises from 1425.33 to 1429.50.  We were above before and remain above the new number, so this continues to be bullish.

Dollar index: I'm going to punt on this chart tonight.  The dollar just looks like it's being jerked around by politics of some sort.  Regrettably, I see no technicals clues here as to where we may be going next.

Euro: Like the dollar, the euro is sort of rattling around right now looking for a direction.  It moved lower today in regular trading but is now back above the day's highs in the overnight at 1.2980.  The best clue here comes from the indicators which are now rising off oversold and seem to suggest continued higher on Tuesday.

Transportation:Last night I wrote of the bullish stochastic crossover from a high level that "these are good indicators of higher to come".  And so we were in fact transported higher today, by 0.41%.  Our close at 5065 also broke through resistance at 5055.  I think there's still at least a little gas left in this particular tank to continue higher on Tuesday.

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  13/16
 17  4/23       30         48        -     1379  14/17

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466  23/38

 39  9/24       52         30        +     1460 

 40  10/1       39         39        -     1441 

 41  10/8       52         34        +     1461

 42  10/15      41         32        -     1429

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 bullish call on 9/17 was wrong after a string of rights, the S&P now being lower than then. I'm using the column "Accuracy" to track my calls.  So now with 10 weeks to go in 2012, I'm 23 for 38  or 61%.

This week I switched my vote back to bearish.  This is mainly because the monthly SPX candle for October has now turned into a perfect star doji.  I have the feeling that these candlestick reversal patterns work better on longer time frames, like the monthlies, so I'm willing to give more credence to a half-baked candle like this one.  And even more telling, at 1440 the SPX has now fallen out of a rising monthly RTC going back to June and that is a bearish setup.  If the SPX can manage to end October above 1470, then this setup is canceled.  If not, then I do think we're going lower.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    4      4      3           0        .500    -116

     And the winner is...

After two days of indecision, Monday delivered the bullish confirmation I've been waiting for.  So with no real negative signs in the charts tonight the logical course is to declare Tuesday higher.

ES Fantasy Trader

 Last night I wrote that "I still have confidence that [this trade] will turn profitable tomorrow."  And so it did.  Patience paid off and we turned a loser into a five point winner.  Although I still think ES has more room to run higher, I decided to book this profit now rather than let it ride simply due to the strange way the market's been behaving lately and the general riskiness associated with October.  We can always get in again later.  Oh, and Tuesday is historically weak

Portfolio stats: the account rises to $185,000 after 67 trades (52 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside.  While I do believe that we're going higher on Tuesday, I think the move will be smaller than we saw today and there's always the possibility that by the time I'm up, ES will have reversed course.  Ordinarily I'd take this trade, but not in October.  .

SLD    10    false    ES    DEC12 Futures     1436.25    USD    GLOBEX    15:57:57   
BOT    10    false    ES    DEC12 Futures     1431.25    USD    GLOBEX    OCT 12 01:24:05


CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Monday uncertain, bias higher

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

• Monday uncertain, bias higher.
• ES pivot 1425.33.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader remains long at 1431.25..

Recap

Last Friday the Dow provided us with a classic doji that finally stopped four ugly days of decline.  Does this mean that a turn-round is at hand?  Time for the daily chart run-down as we seek out answers.

The technicals (daily)

The Dow: Friday's monster two point gain pretty much summed up the indecision in the market at the moment.  On the plus side, RSI has now gone oversold and the stochastic is flattening out for a bullish crossover from a very oversold level.    On the minus side, we remain inside a declining RTC.  So while this chart is now looking more bullish than bearish, we need confirmation on Monday before calling the current downtrend over.

The VIX:  Last Thursday night I really wasn't sure about this chart.  Turns out the VIX gained 3.53% on Friday, but this bounce was enough to cause a bearish stochastic crossover and those are usually pretty good reversal indicators.  On that basis alone, I'd be looking for a lower VIX early this week.

Market index futures: As has happened a few times in the last week, tonight all three futures are mixed at 12:47 AM EDT with ES flat, NQ up by 0.1% and YM down by 0.02%, reflecting the continued uncertainty and dare I say it general confusion about direction among market participants.  Friday's red candle kept ES inside its now six day declining RTC, but the action so far this evening has moved us out the right hand edge.  If ES can stay above 1416 on Monday, that will cause a bullish setup.  The indicators are now supporting this idea, with RSI extremely oversold at 5.73 and the stochastic just about to execute a bullish crossover - I had to look at the actual numbers to see that it hasn't quite happened yet.

ES daily pivot: Tonight the pivot drops from 1429.67 to 1425.33.  This still leaves us below the new number but only by half as much.  Nevertheless, until and unless we see ES break above this level, it's a negative sign.

Dollar index:Last Thursday's dollar doji was confirmed on Friday with the dollar shedding another 0.15%, enough to form a bearish crossover on this chart.  With no support until 54.69 on the $USDUPX, I'd say the dollar still has lower to go on Monday.

Euro: After posting some small gains on Friday that resulted in a bullish RTC trigger, the euro turned back downward again this evening.  Although the euro seems poised to move higher this week, it's not clear right now that this will happen on Monday.

Transportation: Here's a positive sign: after two days of dojis, the trans on Friday gave us a disproportionate 0.88% jump that was enough to cause a bullish stochastic crossover from a high level.  Typically these are good indicators of higher to come.  If higher trans bode higher markets, then this is a positive development.


Accuracy (daily calls): 
Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    4      4      2           0        .500    -116
     And the winner is...

The factors that began coming together on Friday for a bullish turnaround remain in play and are even more pronounced now.  This market is looking technically ready for at least a short-term bounce.  Unfortunately, we don't have enough confirming signs, as opposed to reversal suggestions, for me to make the call for a higher close Monday, so I'll just have to settle for calling Monday uncertain but with a bullish bias.  I definitely would not be going short at these levels.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. In a classic case of "you snooze you lose", this trade was actually profitable early Friday morning but I was sleeping.  Hey, ya gotta sleep sometime.  In any case, like I said last week, I still have confidence that it will turn profitable tomorrow.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Friday higher

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

• Friday higher, low confidence.
• ES pivot 1429.67.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader going long at 1431.25..

Recap

Well things were looking good early on in Marketland today.  ES broke above its pivot at 4:15 AM and the Dow opened up nicely.  Unfortunately, it didn't last and all those gains evaporated in the afternoon to finish down 18.6 points, so my call was wrong, even though the SPX did finish higher, just barely.  But I think today's session gave us some more clarity and we will investigate that right now in the nightly chart run-down.

The technicals (daily)

The Dow: After two ugly triple digit down days, today's 19 point drop almost seemed like a victory for the bulls.  It was also a giant inverted hammer which while not the most reliable indicator is at least a reversal candle, unlike what we've been seeing the past three days.  I also note that the stochastic is now quite oversold, with the %K line at 8.59, lower than it's been since May.  I'd say we now have at least the makings of a reversal for the Dow but I'd still like to see some confirmation on Friday.  In any case, this chart now looks considerably brighter than it did 24 hours ago.

The VIX:  At least my VIX call last night was correct when I said "a lower VIX appears to be in the offing here".  The upper BB is like an electric fence to the VIX - one touch and boom, a 4.3% gap down today.  Unfortunately, this left us pretty much in no-man's land between BB's and in the middle of last month's congestion zone.  So while the stochastic is now jockeying to get into position for a bearish crossover, it's not there yet and this chart is not clear enough to call for Friday.

Market index futures: Tonight all three futures are up at 1:19 AM EDT with ES higher by 0.18%.  After giving us a spindly spinning top today, the new candle is forming on top of that and trading outside the declining RTC for the first time all week.  The stochastic is now just about to form a bullish crossover and more importantly at the moment, money flow and OBV have both turned higher

ES daily pivot: For the second time in a week, tonight the pivot is absolutely unchanged, remaining at 1429.67.  There's some positive news here because after a quick dip below right at the close, ES regained the pivot and then made no fewer than four attempts to test its support, all of which succeeded.  I view this as a positive sign.

Dollar index: Today the dollar gave us a near identical star to yesterday's candle on a 0.2% gap down.  That was enough to break out of a four day rising RTC for a bearish setup.    If the doji is confirmed on Friday, the dollar is likely to move lower next week.

Euro: After exactly touching its 200 day MA at 1.2832 today, the euro recovered to form a big bullish engulfing patter, big enough in fact to give us a bullish RTC setup.  And as a bonus, we just got a bullish stochastic crossover.  Although the euro is sort of wandering in the overnight, I'd say it's ready to make a move higher on Friday.  I'm just surprised that today's big move up was not reflected in our market today, though that may kick in tomorrow.

Transportation: After giving us a doji yesterday, today the trans delivered another potential reversal in the form of an inverted hammer, just like the Dow.  Today's small 0.11% loss clearly shows we now have a modicum of support right at 5000.  However, the RSI remains stubbornly overbought and the stochastic is still traveling lower, so no bullish signs there.  Another chart with little guidance.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    3      4      2           0        .429    -118


     And the winner is...

Last night I wrote here, " I think the pendulum is at least slowing down and getting ready to swing back the other way.  From the looks of it, I'd expect a move up by Friday.".  Tonight, I'm seeing nothing to change that opinion.  Whereas last week at this time the market was feeling toppy, tonight it's feeling bottomy (is that a word?)  Although it's not a perfect setup by any means, I'm willing to climb out on the limb and call Friday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we're going long at 1431.25 on a trade than is not completely speculative but also less conservative than I've been lately.  I think that if it's not profitable tomorrow, it will be early next week.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Thursday higher if ES pivot cracked

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

• Thursday higher if ES pivot broken over.
• ES pivot 1429.67.  Holding below is bearish.
• Friday bias higher technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Today the Dow took a dump to the tune of 129 points.  Surfing the daily wave of network nattering, I'm discerning a whiff of panic in the air, the being October, of course.  So is this the Big One?  Is the sky falling and the world about to end?  Or is this just another pullback like we've seen nine times already this year?  The answer is in the charts, which we will now grill until they spill their secrets. 

The technicals (daily)

The Dow: Let's start by giving the third degree to the Dow.  Bad Dow - no profits!  In fact, today's big dive broke support at 13,320 and then marched straight down through the lower BB at 13,383.  The only thing that stopped the free fall was the closing bell, at 13,345.  This big red marubozu also gave us a bearish RTC trigger.

And even after today's losses, we're still not quite down to oversold on the indicators.  The only positive note here is that we remain in a wider rising RTC going back to June 12th.  If the Dow falls under 13,261 tomorrow, we'll fall out of that one too and that would be bad indeed.  For my money, that's the Dow's last stand.  Nothing really cheery on this chart.

The VIX:  On the other hand, here's something interesting.  While the market  plummeted, the VIX also fell today.  While the drop from yesterday's close was small, the candle formed a decent spinning top that just nearly touched the upper BB at 16.83.  And RSI turned lower today too.  That makes three reversal signals.  I'd say a lower VIX appears to be in the offing here.

Market index futures: Tonight all three futures are mixed again at 1:37 AM EDT in a narrow range with ES lower by 0.04%, YM down 0.05% but NQ up 0.06%.  The past three days of losses have moved ES very nearly to oversold while the stochastic is already quite oversold and getting into position to start a bullish crossover.  ES also touched its lower BB at 1423 earlier this evening before bouncing off.  But we saw this sort of doji action at this point last night and it did not end well.

ES daily pivot: Tonight the pivot tumbles from 1441.92 to 1429.67.  With ES virtually flat in the overnight, so far at least, that now puts us less than four points below the new pivot, within striking distance.  We'll need to see ES break above this number to have any hope of closing higher on Thursday.  Until then, it's bearish.

Dollar index: Despite the market's fall today, the dollar was essentially flat on a perfect doji near the top of yesterday's run-up.  This could signal a move lower but requires confirmation.

Euro: In further unusual action, the euro actually moved a little higher today forming a hammer.  The new candle is forming another hammer that successfully tested the 200 day MA at 1.2831 before rebounding to 1.2872.  With support at the 200 MA and more support from last month around 1.2850, it's possible the recent euro sell-off is nearing an end.  The stochastic is moving into a position to begin a bullish crossover, possibly on Friday.

Transportation: Today the trans actually gained 0.13% on a wide-ranging doji.  This could signal a reversal coming, but with the stochastic just completing a bearish crossover and RSI still overbought, we'd need some confirmation before declaring the trans going higher.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    3      3      2           0        .500     -99

     And the winner is...

After three big down days, I think the pendulum is at least slowing down and getting ready to swing back the other way.  From the looks of it, I'd expect a move up by Friday.  But that leaves Thursday.  There's still no immediate sign of a reversal on any charts tonight so I'm going to make a conditional call: if ES breaks above its pivot of 1429.67 by 10 AM, we'll close higher, else lower on Thursday.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we stand aside again.  I completely missed this current downward move and I'd hesitate to jump on board this late in the game.  By now, the risk/reward already favors a move higher rather than continued lower.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Wednesday uncertain, bias lower

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

• Wednesday uncertain, bias lower.
• ES pivot 1441.92.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Well it sure looks like in trying to outsmart the market I only ended up outsmarting myself.  The Dow did not go up today, instead it plunged 110 points to end on the lows of the day.  Ugh.  Time now to regroup and see if we can do better for tomorrow.

The technicals (daily)

The Dow: I always hate to use the phrase "should have" here but tonight it fits.  I should have paid more attention to the indicators last night and less to chart patterns that really required confirmation.  Confirmation which we did not get today.  In fact, the Dow dropped out of its rising RTC for a bearish setup and completed a bearish stochastic crossover.  With no support now until 13,400 this chart is looking decidedly negative.

The VIX:  Yesterday's gap-up doji was obliterated today as the VIX gained a hefty 8.34% on a green marubozu that took it just about to its recent resistance at 16.44.  It also completed a bullish stochastic crossover.  That said, the VIX is now just below its upper BB at 16.75.  .As I usually note, the VIX rarely spends more than a day or two at that level before retreating.  It will occasionally climb the upper BB for a number of days, but that mostly happens when the BB is rising.  And right now it's falling.  My best guess here is that we'll hit 16.75 on Wednesday and then move lower.

Market index futures: Tonight all three futures are mixed at 1:27 AM EDT with ES lower by 0.03%, YM down 0.13% but NQ up 0.05%.  Today's big drop in ES brought us about halfway to oversold on the indicators and also gave us a bearish RTC trigger.  However, the developing candle looks like a hammer which could be a reversal indicator, although I recognize that it is dangerous to read too much into half-cooked candles.

ES daily pivot: Tonight the pivot takes a big drop from 1451.50  to 1441.92.  This still leaves ES below the pivot, but by a lot less now than before.  We'll want to see ES break above the new number by morning, otherwise we remain bearish.

Dollar index: Today the dollar gained 0.56% rising right up to its recent resistance at 55.16 on the $USDUPX.  This move also gave us a bullish crossover suggesting continued upside if the $ can break resistance on Wednesday.

Euro: The blinkin' euro really faked me out by rising strongly last evening and then tanking right at 3 AM, shortly after I had gone to bed.  One hour earlier and I wouldn't have made a bullish call for this currency.In any case, today's loss brings us close to the euro's 200 day MA at 1.2832.  But there is also a support line just above that at 1.2850.  That was tested successfully earlier this evening.  If this pattern holds up, then there's a good chance the euro could find a bottom here and move higher on Wednesday.  But that's a really difficult call.

Transportation: The trans was at a crossroads yesterday.  Recall I pointed out the 50% Fib retracement.  That line proved too hard to beat and today the trans dropped like a rock, losing 1.14% and falling right out of a six day rising RTC.  This move also gave us a bearish stochastic crossover and caused a top in RSI at overbought.  The trans are clearly looking lower again on Wednesday.

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  13/16
 17  4/23       30         48        -     1379  14/17

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466

 39  9/24       52         30        +     1460 

 40  10/1       39         39        -     1441 

 41  10/8       52         34        +     1461

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 bullish call on 9/10 was right again, the S&P now being higher than then. I'm using the column "Accuracy" to track my calls.  So now I'm 23 for 37  or 62%.

For the record, I switched my vote back to bullish this, based on my reading of the SPX monthly and weekly charts.  And it appears I had company, as the bullish reading jumped 13 points while the bearish reading sank five.  This puts us pretty much back in the same position we were in last month.  This particular forecast should be interesting, since one month from now we will (finally) have the elections behind us.  It will be interesting to see how the markets react.  If last week's debate is any guide, a Romney victory will be good for stocks, while a win by Emperor Nerobama will send the market lower.



Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    3      3      1           0        .500     -99


     And the winner is...

I'll admit that after being badly wrong today I'm a little gun-shy tonight.  But we're at a crossroads here right now anyway.  While the charts are all looking bearish right now, a lot of them are also right up against or very close to support or resistance lines that they could bounce off of.  That makes it likely that Wednesday could be a turn-around day.  Given that, I'm simply going to call Wednesday uncertain, but with a bias lower.

However, if ES manages to break above 1441.92 in the morning, that greatly  increases the odds of a higher close.  Sorry to be so wishy-washy but that's the best I can do tonight.  Maybe tomorrow I'll go get some Windex for my crystal ball..


ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we stand aside given the general uncertainty of things.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.
 

Tuesday higher

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

• Tuesday higher, low confidence.
• ES pivot 1451.50.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap
After a sharp dump out the gate Monday morning, the Dow retraced in a pretty boring day, due no doubt to the fact that the bond market was closed due to the holiday.  (I still don't understand why bonds close for Columbus Day but stocks do not).  Anyway, with that out of the way, we can get back to business and check the charts for our next move.

The technicals (daily)

The Dow: Today's lackluster action in the Dow is nonetheless significant since today is historically quite bullish.  But I'm still hesitant to read too much into today's small hanging man due to the distortions induced by the holiday.  Suffice it to say that despite today's small loss and an overbought RSI, we remain inside the rising RTC, so this does not yet constitute a top.

The VIX:  I nailed this one last night.  The exponential move is always a very high reliability reversal warning.  And so today the VIX jumped 5.44% on a big gap-up.  But the candle was a small shooting star.  And sitting all alone up there, it seems to be begging to fill the gap.  And the futures are showing the same thing so tonight I'm thinking that the VIX could now move lower on Tuesday.

Market index futures: Tonight all three futures are up at 1:38 AM EDT with ES higher by 0.21%.  Today's drop in ES took us right to the edge of the rising RTC for a bearish setup, but that is not being confirmed in the developing candle.  In fact at 1453, we're right back to the RTC support line.  And although we have a quite overbought RSI and a now-completed bearish stochastic crossover, the chart is not behaving like it wants to go lower, so I'm wary about going short here.

ES daily pivot: Tonight the pivot drops from 1457.58 to 1451.50.  With ES trending higher this evening, we crossed above the new pivot right at midnight - and then sank right back down to it.  But then we bounced off.  This is happening as I write.  Holding above the pivot is always bullish, and successful tests of its support even more so.

Dollar index: Yesterday's dollar doji was confirmed today as the buck gapped up 0.24% to form a bearish evening star.  And a red one at that.  It requires confirmation, but I would not at all be surprised to see the dollar move lower on Tuesday.

Euro: The euro moved lower today as I expected but remained inside its rising RTC.  And it's now reversing again, having taken two sharp steps higher at 7:30 PM and again just after 1 AM.I think this has something to do with news coming out about Chinese banks easing, but in any event, I think the euro may continue higher on Tuesday, which would be good for stocks.

Transportation: An interesting divergence here - while all three major averages were down today, the trans posted their sixth consecutive gain, remaining firmly inside their rising RTC.  And Fibonacci fans take note - today's close of 5057 was almost exactly the 50% Fib retracement of last month's big dump.  I drew the lines and got 5056.16.   Amazing.  So without a candle reversal or RTC reversal in sight, I'd say the next stop for the trans is the 0.618 Fib, or 5095.


Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    3      2      1           0        .600      11
     And the winner is...

The situation is a bit conflicted tonight.  The indicators seem to be pointing lower but the chart patterns look like they could be setting up for a move higher, maybe not as a trend, but at least for one day.  So tonight I think I'm going to go with the candlesticks, bolstered by the news, the overnight futures and currencies, and call Tuesday higher.

ES Fantasy Trader

Portfolio stats: with a 3.25 point win today the account now rises to $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we stand aside.  I do think we have a good shot at a higher close Tuesday but it's by no means a sure thing.so I'm just going to take a pass on this trade.

Reminder, you can follow my ES trades live on Twitter @nightowltrader.  Since I was recently asked about this, let me repeat that these trades are all market orders, not limit orders.  This makes the execution process more fair since there is no question that they would have gone through.  Also note that I make the trade first, then post the tweet.  In the few seconds between those two events, the price of ES can (and often does) change.

BOT    10    false    ES    DEC12 Futures     1449.25    USD    GLOBEX    11:25:08   
SLD    10    false    ES    DEC12 Futures     1452.50    USD    GLOBEX    01:09:24   


CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.