Tuesday higher

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

• Tuesday higher, medium confidence.
• ES pivot 1272.17.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes long at 1276.50..

Recap

It was looking pretty gloomy until a post-lunch rally brought the Dow briefly into positive territory for the day, but they knocked 'em back down into the close thus saving my bearish call.  The S&P admittedly did squeeze out a tiny gain, but my calls are based on the Dow, so that's what counts.

The technicals

The Dow: Although the Dow lost 17 points today, the action wasn't all that bad.  That late afternoon fade fizzled and was unable to move us below the earlier lows.  The net result was a tomahawk pattern.  Don't bother looking it up, it's my own invention.  A tomahawk is simply a hammer with a short upper wick sticking out.  It is a bullish reversal indicator and a sign the bulls may be getting ready to go on the warpath.  I am encouraged too by the fact that there was essentially no follow-through lower after piercing the 200 day MA on Friday.

The pattern in the S&P is similar, but with a doji star.  Recall that last night I said that 5 out of the last 6 times when the S&P broke under the 200 day MA, the next day was lower.  The fact that that did not happen today is noteworthy.

The VIX:  Way back last Saturday I wrote "the VIX rarely spends more than a day or two above its upper BB before retreating".  Well there you have it - after popping to nearly 28 intraday today, the VIX retreated and closed down 2.03% on a Franken-candle that was part doji, part harami, part spinning top.  Add in a stochastic that just made a bearish crossover and that spells lower VIX on Tuesday, good for stocks.

Market index futures: Tonight all three futures are solidly in the green for a change, with ES up 0.41% at 1:13 AM EDT.  Of particular interest is that ES did not tank following Friday's break under the 200 day MA, giving us instead a long doji on the day.  And the overnight action is quite bullish, having taken us right back over the 200 MA at 1276.82.  Clearly the futures traders are liking the news out of Europe today.  I'm not sure that the announcement that you're going to have a conference call is worth a half percent move in the futures but what the heck, I'll take it.

ES daily pivot: Tonight the pivot takes another big step down from 1285.00 to 1272.17.  But that combined with a rising ES in the overnight broke us cleanly above the new number right at midnight.  And ES has continued to drift higher to this point, so that's a positive sign.

Dollar index: And also last Saturday I wrote "the dollar has more downside coming".  And indeed, today the dollar dropped 0.38% on the dark cloud cover payoff.  And significantly, it traded entirely outside the rising RTC for a bearish trigger.  This portends lower again and is also good for stocks on Tuesday.

Transportation: Today the trans extended their losses from Friday , closing down another 1.31% following the 200 MA break.  But this served to reach the lower BB, and enter oversold territory on a hammer.  It's not a great reversal indicator, but the odds are definitely starting to lean that way.  On 5/18, the trans also broke under the 200 day MA from a similar position, and the next day was up big time.

TLT: Today, the TLT had its first losing day in four sessions, dropping 0.79% to form a bearish harami cross.  Not only that, but the indicators started coming off highly overbought levels and the stochastic just formed a bearish crossover.  Remember what I said on Saturday about the TLT going exponential?  This chart is just begging to go lower and that would be good for stocks.

History: According to The Stock Traders Almanac, Tuesday is historically slightly 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  13/16
 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

 21  5/21       30         52        -     1295

 22  5/29       35         42        -     1318

 23  6/4        32         48        -     1278

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 4/30 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 15 for 19.  And of course that means that since I voted with the majority back then, the poll as a whole was also wrong that week.  So with over one third of the year gone the poll's accuracy edges up to 79% YTD. Still pretty good.

This week we see a small drop in bullish sentiment combined with a corresponding increase in bearish sentiment causing the spread to increase to 16 points. So there are still no extreme readings here that might cause us to be contrarian bullish.  For my part, I voted bearish for the fifth week in a row.  However, I am now beginning to see at least a glimmer of light at the end of the tunnel (and hopefully it isn't the headlight of an oncoming train).  I'm thinking the monthly SPX chart may start giving a bullish indication in a month or so.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average
April   7      9      2                       .438
May    10      7      3           2           .632
June    2      0      0           0          1.000
     And the winner is...

Tonight the stars seem to be aligning in favor of the bulls.  With some good bullish signs in the charts plus positive news from Europe today, I'm ready to call Tuesday's close higher.

ES Fantasy Trader

Portfolio stats: the account remains at $134,000 after 40 trades (31 wins, 9 losses) starting from $100,000 on 1/1.  Tonight we go long at 1276.50.

CUA (Commonly Used Acronyms)

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

Monday lower

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

• Monday lower, medium confidence.
• ES pivot 1285.00.  Holding under is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

This weekend we have a split edition of the Night Owl.  See yesterday's post for the main chart analysis.  This post contains only the updates since then.  Monday night we'll resume the usual daily format.

The technicals

Market index futures: Tonight all three futures are, once again, significantly in the red.  ES is down 0.67% at 12:50 AM, although all of that drop happened in the opening hour Sunday evening.  Since then ES has found some support around 1265.  What's really bad though is that while Friday's trading stopped right on the 200 day MA at 1275.92, this evening pretty much just continued lower from there.

Since 2010, the SPX has broken below the 200 day MA from above six times.  Five of those times, there was continued movement lower in the following days.  And although ES is now at oversold levels, there's no sign of a reversal yet.  Its stochastic seems to be trying to set up a bullish crossover, but that's looking still a few days away.

But I would be remiss if I didn't add that on the hourly chart, ES has just exited its descending RTC and that's a bullish setup.  It might be that we've got a bottom around 1265.

ES daily pivot: Tonight the pivot takes a big drop from 1308.50 to 1285.00.  This has the effect of cutting the distance to the new pivot in half, even though ES has moved lower some more.  Of course, that still leaves us 20 points under, which is pretty awful.

     And the winner is...

I was waiting all weekend for some European byg wyg to make a grand announcement about how they'd seen the light over there and had a plan to solve their mess, but I guess I waited in vain.  The silence from that direction was matched only by the lack of leadership from Washington, where Emperor Nerobama seems to be more interested in getting re-elected than in saving the global financial system.  I guess somehow I had expected more.  Oh well - everybody back on the elevator.  Going down!  Next stop, the bargain basement.  Monday's going lower again.

ES Fantasy Trader

Portfolio stats: the account remains at $134,000 after 40 trades (31 wins, 9 losses) starting from $100,000 on 1/1.

Because I believe the recent short-term selling has been somewhat overdone, and because the Greeks aren't going to pack up their euro-tents and steal away on a weekday, and everything's looking so oversold, I am hesitant to go short tonight.  On the other hand, there's still no real indication of a turnaround yet so that pretty much leaves me just sitting on the sidelines.

Reminder - you can follow the entries and exits for 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

Special Weekend Edition

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

• Thursday slightly lower, low confidence.
• ES pivot 1316.00.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short.

Recap

Well for once it wasn't Europe that tanked our markets.  On Friday the enemy was us, in the form of some truly ugly jobs numbers that were bad enough to send the markets down big time.  The Dow's awful 2.22% loss was enough to drive it negative for the year so far and handed me my worst day of the year too - and that's despite being (partially) hedged.  Anyway, today's action caused some dramatic changes on the charts that are well worth aq look-see. In fact, these charts are so unusual, I just couldn't wait til Sunday night to trot them out, so here's an early preview of the Night Owl.  Be sure to check back again Sunday night for our usual late-nite market forecast.

And speaking of the weird, here's a very strange story from Friday about how the obsolete Greek drachma has somehow mysteriously reappeared on Bloomberg terminals, here.  According to Bloomberg, it's an "internal test".  I guess just in case it might happen to be needed again at some point.  In the future.  Hypothetically, of course.  Nudge nudge, wink wink, know what I mean?  Can you say "Grexit"?

The technicals

Dow daily

The Dow: All hail the Mighty Megaphone which spoke loud and clear on Friday!  I first mentioned this unusual pattern on Wednesday night when I said "this is quite a bearish pattern.".  And take a look at how it turned out.  Bearish indeed!  I find this pattern fascinating.  It reminds me of the infamous 1940 Tacoma Narrows Bridge collapse, where oscillations induced by external forces became self-reinforcing and amplified until eventually the entire system collapsed.  This is just what we witnessed happening in the Dow for the past six sessions until it fell down in a heap on Friday.

Unfortunately, the collapse of the megaphone isn't necessarily an all-clear, because it also blasted right through the dreaded 200 day MA, and that's never a good thing.  The only positive signs are that we never tested support at 12K, we hit the lower BB, and the indicators reached oversold levels.  But those are pretty weak reversal signs.

VIX daily

The VIX:  The VIX chart is interesting because it shows a divergence form the Dow.  While the Dow was nothing but a long red candle, the VIX on Friday gave us a classic hanging man.  And not just that but it also nudged above its upper BB.  And as I always say, the VIX rarely spends more than a day or two above its upper BB before retreating.  Notice also from this chart how well the RTC method works.  On Wednesday, the VIX popped out of its descending RTC - bullish setup.  On Thursday it traded entirely outside - bullish trigger.  And on Friday, pop goes the weasel - payoff.

Market index futures: The futures are of course closed over the weekend, so check back Sunday night for this critical section.

ES daily pivot: ES ended the week with a pivot at 1308.50.  Check back Sunday night for my usual pivot analysis.

$USDUPX daily

Dollar index: So many interesting charts today!  Check out this one of the dollar, in the form of the $USDUPX.  The dollar, as you can plainly see has been on an almost non-stop ride higher since the first of May.  But look what happened on Friday.  On a day where stocks got pounded, the dollar moved lower.  And in fact it gave us a good dark cloud cover, one of the strongest bearish patterns there is.  It also closed outside the long rising RTC - a bearish setup.  The dollar now appears poised to move lower (finally).  And despite the recent decoupling of the dollar/stock correlation I've noted a few times here already, I think this one is going to hold.  This chart looks to me like the dollar has more downside coming, and that should be good for stocks.

I note also a corresponding bullish pattern to the euro, which after dipping into the 1.22's on Friday, finally caught a bounce rallying hard to 1.2413.

Transportation: The major charts were ugly enough on Friday, but they looked positively like Miss America compared to the trans which dropped an impressive 3.21% on a long solid red candle.  And the indicators still aren't close to being oversold.  This chart is just ugh and uglier.  If you believe the trans are a market predictor, we're in for some more bad times this coming week.

TLT, daily

To the moon, Alice!

TLT: On the other hand, today we have a special guest appearance by the TLT, the iShares 20+ year bond ETF.  Bonds and stocks generally move in inverse directions.  When people want stocks, they don't want bonds.  And when they want bonds, they don't want stocks.  And boy do they want bonds right now.  Just look at the price of the TLT since the beginning of May.  Pow, zoom, to the moon, Alice!  This rocket ship has gone exponential.  And not just exponential - we're talking gap-up exponential on increasing moves and increasing volume.

And what always happens when a chart goes exponential?  That's right, class, it comes right back down.  If you're looking for a sign of an end to the current market downtrend, I can't find a better one than this.  Maybe not Monday, but Real Soon Now.


Hi-Lo: The $RHSPX, the SPX Hi-Lo Ratio index, hit 8.57 on Friday, a level not seen since last November.  Recall that last November was as ugly as the May we just ended.  And it was followed by a big move up in December.  When the Hi-Lo gets this overextended, it's usually a good reversal indicator.  (It's not quite as good when it hits high levels, as it can remain pegged at 100 for a while before an uptrend ends).

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

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average
April   7      9      2                       .438
May    10      7      3           2           .632
June    1      0      0           0          1.000

     And the winner is...

There's no call until Sunday night when I can see what the futures are doing.  From what I can see at this point on Saturday evening though, I'd say Emperor Nerobama and his PPT had better pull a whole bunch of rabbits out of their hats between now and Monday morning to put an end to this ongoing destruction of wealth.  And there do seem to be signals in the charts that this is exactly what the markets are expecting.  Failing that though, look out below.

Be sure to check back Sunday night for the exciting conclusion to Market Mania 2012!

ES Fantasy Trader

On Friday we took a nice 14.75 point profit on Thursday night's short.  I'll admit the exit was a bit premature, but I wasn't really expecting such a vicious downturn.  In any case, no one ever lost money by leaving money on the table.

Portfolio stats: the account now rises to $134,000 after 40 trades (31 wins, 9 losses) starting from $100,000 on 1/1.

Reminder - you can follow the entries and exits for these trades live on Twitter @NightOwlTrader.

BOT    10    ES    false    JUN12 Futures     1288.00    USD    GLOBEX    09:27:23
SLD    10    ES    false    JUN12 Futures     1302.75    USD    GLOBEX    00:54:34
 

CUA (Commonly Used Acronyms)

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

Friday likely lower

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

• Friday lower, medium confidence.
  
• ES pivot 1308.50. Holding under is bearish..
• Next week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1302.75.

Recap

It was close for a while as the Dow spent much of the day climbing back from early losses, but a sharp sell-off in the closing 20 minutes saved my call for a lower close.  With a disappointing May now in the books, let's see how June might start off.

The technicals

The Dow: Today's dip and recovery gave us a tall spinning top that ended perched right on the lower arm of the megaphone I wrote about last night.  Add in today's high volume and that is a bearish sign.  Also, the bearish stochastic crossover is complete and the indicators continue to move down from overbought.  And the 200 day MA remains in striking distance at 12,251.

The VIX:  Like the Dow, the VIX gave us a spinning top today but actually declined 0.33%.  Still, that's a confirmation of the RTC exit and constitutes a bullish trigger.  Absent any overbought indicators, there's no reason the VIX can't run higher on Friday.  And the VIX actually tested its 200 day MA at 25.19 intraday before retreating to close at 24.06.

Market index futures: Tonight, once again all three futures are trading lower with ES down 0.48% at 1:12 AM EDT.  The daily ES chart mirrors the Dow, with a doji, a bearish RTC trigger, and falling indicators all guiding the way lower.

ES daily pivot: Tonight the pivot falls from 1316.92 to 1308.50.  Just like last night, we were below the old number and with ES continuing down, we're under the new number, again a negative sign.

Dollar index: The dollar continued its seemingly unstoppable march higher today in an RTC that has now gone the entire month of May.  And today's close at 57.64 just cracked the 200 week MA at 57.63.  Meanwhile the euro continued its descant, closing at 1.2364.  Unless there is some real positive news from Europe soon, we are definitely headed for 1.20.

Transportation: Today the trans gave us a 0.9% gain.  They've been switching direction every day for the last five sessions.  But the important point here is that despite today's gain, the trade was entirely outside the rising RTC, so that's a bearish trigger.


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

Performance:

Here are my performance stats for the first five months of 2012.  The first two columns are for my trading account.  The next, "ESFT", is the ES Fantasy Trader.  Following that I've now added the results for my IRA.  The last is the Dow, my reference benchmark that I try to match or beat.

 Date    Trading, Month  Tr. YTD  ESFT YTD   IRA YTD   Dow YTD

1/31/12       7.41%        7.41%   -0.50%     6.18%     3.41%

2/29/12       3.67%       11.35%    7.88%     9.02%     6.02%

3/31/12       1.76%       13.31%   29.88%    10.05%     8.16%
4/30/12       2.35%       15.97%   41.75%    10.90%     8.17%

5/31/12      -1.92%       14.23%   26.63%     4.91%     1.45%

While it is disappointing to have my first losing month of the year, at least the damage was limited and I'm still outperforming the Dow.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average
April   7      9      2                       .438
May    10      7      3           2           .632

     And the winner is...

With crummy PMI numbers from the Chicoms and charts that if anything look even worse than last night, I'm afraid I have to be bearish once again and call for a lower close Friday.  The only thing that might save the day is that it's the first of a new month and that's historically quite bullish.  But it remains to be seen if history can trump the one-two combo of the technicals and the Europeans.

ES Fantasy Trader

Despite some misgivings last night, today's short trade worked out well enough and we covered for a 6.25 point profit.

Portfolio stats: the account now rises to $126,625 after 39 trades (30 wins, 9 losses) starting from $100,000 on 1/1. Tonight we're going short once again, at 1302.75.

Reminder - you can follow the entries and exits for these trades live on Twitter @NightOwlTrader.

BOT    10    ES    false    JUN12 Futures     1304.25    USD    GLOBEX  11:37:00

SLD    10    ES    false    JUN12 Futures     1310.50    USD    GLOBEX  02:16:49    

CUA (Commonly Used Acronyms)

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

Thursday lower unless pivot passed

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

• Thursday lower if pivot not passed, else higher.
  
• ES pivot 1316.92. Holding under is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1310.50.

Recap

I had this sneaking suspicion that yesterday's rally was fake, and that suspicion was confirmed today in the form of a nasty 161 point dive in the Dow in a broad-based decline where losers outnumbered winners five to one.  Since Europe seems to be running the show now it may seem like just an academic exercise to run the charts, but we might as well - you never know what you might find...

The technicals

Dow daily

The Dow: There's something strange going on here.  For six days now the Dow has been making higher highs and lower lows.  This is a quite unusual pattern that goes by several names such as the inverted symmetrical triangle, broadening triangle, or the name I like - megaphone top, because, well it looks like a megaphone.  Check it out.  This one is striking in its symmetry and indicates not just growing indecision but growing instability in the market.  I'm calling this a top because it follows the  bottom put in on the 18th and the following big up day.  In any event, this is quite a bearish pattern.  And the candlesticks remind me of a three outside down pattern which is also bearish.  And to add to the gloom, the indicators all topped yesterday and the stochastic is a hair away from making a bearish crossover.

The only bright spot here is that the Dow has some good support at 12,370, just 50 points below today's close.  If we break that, then the 200 day MA at 12,246 is back in play, then the 12K round support level.  Overall, I'm really not liking this chart tonight.

The VIX:  Last night I mentioned the possibility of a higher VIX by the end of the week and it delivered in a big way today with a whopping 14.8% pop right out of its descending RTC for a bullish setup.  And that also caused a bullish stochastic crossover and caused all the other indicators to hook up from oversold levels.  This all suggests even more upside to come.  With no resistance until 25 (and then the 200 day MA at 25.22), the VIX certainly still has some room to run.

Market index futures: So with all the gloomy charts, why are all three futures in the green at 1:54 AM EDT?  ES is leading the way, up a non-trivial 0.23% in a move that began, oddly enough on the stroke of midnight.  There's certainly no cause for joy in the daily ES chart.  A big red candle that stopped right on the edge of the rising RTC , indicators that have now clearly topped at overbought, and a stochastic that made a bearish crossover today.  In fact, this action is causing the new candle to look like a hammer.  With no immediately obvious news from you-know-where, all that comes to mind is "dead cat bounce".

ES daily pivot: Tonight the pivot takes a big step down from 1328.42 to 1316.92.  ES was below before, and now it's still below, just not quite as much.  But it's still a negative sign.

Dollar index: The dollar is like a broken record here, advancing yet again for the sixth straight day, this time up 0.61% to remain solidly in its rising RTC on a solid green candle.  I had to move out to the weekly chart to find any resistance - it's at 58 in the first week of January this year.  Of bigger interest is that today the USDUPX closed exactly on its 200 week MA: 57.61.  Thursday is make or break day for the dollar.  Pushing higher again will break above the MA and provide even more steam to go still higher.

How likely is that?  Well just look at the poor euro.  I've been saying here for several days now that the euro is trudging downstairs to pay a visit to 1.20.  It dropped again today to 1.2369 at the close, before recovering slightly in the overnight.  At the current rate of descent, the euro should hit 1.20 somewhere around 6/11 to 6/18.  This isn't good for stocks either.

Transportation: Adding to the feeling of impending doom, today the trans got clobbered.  Where the Dow lost 1.28%, the trans were down 2.12%.  Worse, this took them out of the rising RTC for a bearish setup.  And the indicators here have all peaked at overbought levels.  And the stochastic just formed a bearish crossover today.  That's four strikes - you're really out.  This isn't pretty at all.


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

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May    10      7      3           1
     And the winner is...

Absolutely everything is just screaming "lower" right now - except the futures which continue to rise as I write this.  Modulo that, the call for Thursday would be easy - down.  But it is never wise to ignore the overnight movement of ES.  I always assume someone knows something I don't (generally an easy assumption to make).  And right now, ES is in a clear uptrend that will intersect the pivot at 3:25 AM.  It could be a DCB, or it could be another fake-out.  No way to tell right now.  So here's my call: if ES hits the pivot Thursday morning and bounces off, we'll close lower.  If it breaks through decisively (by which I mean goes above and stays there), we'll close higher.

2:15 AM Update:  Here's the break (finally)  in that ES uptrend.  This really increases the odds of a lower close Thursday.

ES Fantasy Trader

Today's short trade worked out nicely and we took a 12 point profit just before lunch - yum!

Portfolio stats: the account now rises to $123,500 after 38 trades (29 wins, 9 losses) starting from $100,000 on 1/1. Tonight we're going short again, with some misgivings, at 1310.50.

Reminder - you can follow the entries and exits for these trades live on Twitter @NightOwlTrader.

BOT    10    ES    false    JUN12 Futures     1315.00    USD    GLOBEX    11:35:23   

SLD    10    ES    false    JUN12 Futures     1327.00    USD    GLOBEX    00:50:14   


CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel

Wednesday lower

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

• Wednesday lower, low confidence
  
• ES pivot 1328.42.  Holding under is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1327.00.

Recap

Today, traders refreshed from a three-day weekend that gave them an opportunity to mull over some ostensibly good news out of Greece, drove the Dow up 126 points.  But this leaves us with a whole silverware drawer-ful of forks in the road, as Europe continues to perk along and the charts deliver mixed messages.  I'm going to see if I can't figure something out here...

The technicals

The Dow: Remember what I said last night?  "We're going to need a close above 12,610, or 155 points from here, to avoid a bearish trigger.".  Well today's high was 12,611.61.  Unfortunately, the close was 12,581.  Close, but as they say, no cigar.  Today's close at 12,580 did break us out of that four day consolidation, but whether this move has legs remains to be seen.

The VIX:  The VIX dropped another 3.35% Tuesday to remain within its descending RTC.  However, the indicators are now showing oversold.  This isn't an immediate reversal indicator, but it does point to an increased likelihood of a higher VIX by the end of the week.

Market index futures: Tonight all three futures are down with ES leading the way lower by 0.51% at 1:08 AM EDT.  Tuesday's gains took us actually off the left edge of the rising RTC.  This type of action is often followed by a move lower, and so far it seems like that's what's happening.  ES is also overbought now and although we're still in a rising RTC, a one day move lower is not out of the question.  We saw something similar last Thursday (higher) and Friday (lower).

ES daily pivot: Tonight the pivot jumps from 1318.92 to 1328.42.  This move, combined with a declining ES in the overnight means we're now below the pivot, though not by much.  Nevertheless, it's a bearish sign.

Dollar index: And remember what I said about this last night?  "it seems that we might be starting to see some decoupling between stocks and the dollar"  Usually, a higher dollar means lower stocks.  But once again, today we saw the dollar gain 0.07% while all the major averages were up too.  At the same time, today's close left us right on the edge of the month-long rising RTC and the pace of the advance has definitely slowed over the past three days.

Still too soon to call this a top, particularly while the euro continues its march down to 1.20, but I'm guessing we might see at least a small retreat in the dollar on Wednesday.  Now if the dollar is becoming positively correlated with stocks, does this mean that a lower dollar will mean lower stocks?  Ya got me, but I will be watching this one closely.

Transportation: The trans turned in an impressive performance today rising 1.16% and breaking decisively above their resistance at 5110.  However, this move also just brought them into overbought territory.  The last few times this has happened, the break has come fairly quickly - none of this spending weeks at a time overbought before moving lower.  Last night I called for lower trans this week (though I didn't say it would be Tuesday).  That's my story and I'm sticking to it.


History: According to The Stock Traders Almanac, Wednesday is historically quite 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  13/16
 17  4/23       30         48        -     1379  14/17

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350

 20  5/14       32         44        -     1353

 21  5/21       30         52        -     1295

 22  5/29       35         42        -     1318

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 4/30 was wrong, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 14 for 18.  And of course that means that since I voted with the majority back then, the poll as a whole was also wrong that week.  So with one third of the year gone the poll's accuracy drops to 78% YTD. Still pretty good.

This week I voted bearish again, keeping me in step with the majority although bearish sentiment declined 10 points since a week ago.  Interestingly, bullish sentiment advanced only half that much, indicating more people now sitting on the sidelines.  This results in the smallest bearish spread of the year - just 7 points.  Still, I'm seeing lower to come on the monthly SPX chart.  Even with recent gains, it si just forming a bearish crossover.and its indicators have now peaked at overbought.

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     9      7      3           1
     And the winner is...

I think Tuesday's big move up was largely the result of European news over the long weekend.  In the absence of any further positive developments today, I don't see the catalyst that will drive us higher on Wednesday.  In fact, there's a bit of bad news tonight concerning the ECB and Spanish banks.  With many charts now in overbought territory, I don't think it will take much to send us lower, so I'm going to go out on the limb and call for a lower close Wednesday.

ES Fantasy Trader

Portfolio stats: the account now remains at $117,500 after 37 trades (28 wins, 9 losses) starting from $100,000 on 1/1. Tonight we're going short at 1327.00.

Reminder - you can follow the entries and exits for these trades live on Twitter @NightOwlTrader.

CUA (Commonly Used Acronyms)

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

Tuesday higher

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

• Tuesday higher, medium confidence
  
• ES pivot 1323.25.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

It was a strange end to a strange week with the Dow tumbling 75 points on a pre-holiday weekend Friday over more worries about Greece - or was it Spain.  With renewed fears about Europe in what is becoming an annual tradition, are some halfway decent US economic indicators enough to move this market higher?  The charts may hold the answer so let's take a peek to see what's up - and down

The technicals

The Dow: After a big gain last Monday, the Dow spent the rest of the week in a state of confused (and confusing) consolidation.  Friday's failure to build on Thursday's gains and move above the 12,500 level is somewhat concerning.  It also cut short the trip the indicators had started to make up from oversold levels.  And more bad news - Friday traded outside the new rising RTC, a bearish setup.  We're going to need a close above 12,610, or 155 points from here, to avoid a bearish trigger.  It's certainly doable, but I don't think it's likely.

The VIX:  The VIX  closed up a percent on Friday and respected its support at 22, though on a red candle.  I'm more concerned about the indicators that appear to be bottoming before even reaching oversold levels.  The stochastic in particular looks to be gearing up for a bullish crossover, either Monday or Tuesday, and a rising VIX is bad for stocks.

Market index futures: Tonight, all three futures are up significantly, with ES trading higher by 0.82% at 1:14 AM EDT, likely on - don't laugh - news of Greek political polls.  Um, okey dokey - whatever.  The good news is that this keeps us inside the rising RTC from 5/21 with a decent-looking green candle.  The bad news is that the idicators just entered overbought territory.  That doesn't mean an immediate drop, but bears watching.

ES daily pivot: Tonight the pivot rises from 1318.92 to 1323.25.  After bouncing off the old pivot at 8 PM Monday evening (a good sign), ES got on an uptrend that continues as I write and is good enough to keep us above the new pivot - another good sign.

Dollar index: Meanwhile, the dollar continued its march higher on Friday climbing right back into its month-long rising RTC with a 0.04% gain in the form of a doji.  But we've seen four such reversal warnings in the current trend and none of them have played out.  But the dollar has been overbought for 15 straight sessions now.  I searched back though all the daily data eSignal provides for $USDUPX and was unable to find any streak longer than this, back to 2007.

But none of this amounts to a hill of beans because the dollar's not coming down until the euro stops going down.  And I don't think that's going to happen until it hits 1.20, its June 2010 support.  I'm sure we're going to see that level within two months.  In the meantime, the euro's daily lower BB is at 1.2392 and we're at 1.2537 right now, so there's even short-term room to run lower.  Bad for stocks?  Probably, although it seems that we might be starting to see some decoupling between stocks and the dollar.  This will bear close watching.

Transportation: The trans appear to have run into some strong resistance at 5110, established as support back on 5/14-16.  And although they remain in a rising RTC, the indicators are getting tired after coming off oversold on 5/21.  Add in Friday's 0.56% decline and I'm not feeling the love from this chart.  I'd say some lower trans are in the offing this coming week.


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

Accuracy (daily calls):

Month right  wrong  no call  conditional
April   7      9      2
May     8      7      3           1
     And the winner is...

I'm starting to see some warning lights flashing on the charts, but they're mostly for later this week.  I think the positive action in the overnight futures plus the lack on an immediate confirmed downtrend, plus some recent positive news on stimulus for the Chinese economy will be enough to merit a higher close Tuesday.

ES Fantasy Trader

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 are, regrettably, standing aside.  I wish I had gone long earlier this evening and I'm afraid I've missed most of this particular bus.  Oh well - there'll always be another bus along soon.

CUA (Commonly Used Acronyms)

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

Memorial Day

Happy Memorial Day

 

Today is Memorial Day, the day we honor all the brave men and women, past and present, who have selflessly given of themselves in service to their country.  To all these gallent heroes who help defend our freedom, we take a day off from our charts and numbers, we thank you and we salute you.

 "The price of freedom is eternal vigilance."

President Thomas Jefferson

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.