Tuesday higher

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

• Tuesday higher, low confidence
• ES pivot 1311.83.  Breaking over is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going long at 1310.00.

Recap

After yesterday's bounce, the downward momentum resumed today handing us a 138 point loss, the second triple digit down day in the last three.  Although technically we're not in a downtrend as I define it (three consecutive days in a row), it's close enough to define a new descending RTC, so I'm setting up the red arrow.

The technicals

The Dow: Today's close at 12,503 brings the 200 day MA back into play at 12,356.  That's easily within a one-day reach given the recent action.  In addition, the lower BB is still a long way away at 12,088 and the indicators are still not even oversold yet.  The one bright spot is that today's down volume, while above average, was still less than Friday's up volume.  But this chart still seems to suggest more downside ahead.

The VIX:  Today the VIX gapped up a big 12.53% to give us a doji star and a potential evening star developing.  We're also outside the last descending RTC so that's a bullish trigger, and the indicators are all just coming off oversold.  So we have something of a mixed message.  My idea is that the evening star may drive the VIX lower Tuesday, but watch for a rebound later in the week.

Market index futures: In something of a rerun of last Thursday evening's action after a big down day, all three futures are currently in the green at 1:50 AM EDT with ES up 0.17%.  And once again, the lack of continued downward follow-through in the overnight is encouraging.  It is particularly interesting that the stochastic is gearing up to form a bullish crossover, and the other indicators are very close to oversold.  I'd say a move higher from here is not out of the question for Tuesday.

ES daily pivot: Tonight the pivot takes a big step down from 1325.58 to 1311.83.  Combined with ES's slow drift higher, and we're really close to the new pivot - less than three points.  While holding under is bearish, we are at least within reasonable striking distance here, and a break above would definitely be bullish.

Dollar index: In a sort of mini-version of the VIX, the dollar gave us a small doji and a potential evening star.  This is already looking ripe for a move lower on Tuesday which would be good for stocks.

$TRAN daily

Transportation: This one is worth a chart.  Here we see how the trans have now been down, pretty steadily four days in a row.  Note how today we dipped below the 200 day MA (the dotted orange line) but recouped to close just barely under it.  We also fell off the left edge of the descending RTC, which can sometimes be bullish.  However note also that the indicators are all still continuing their fall from overbought and have not yet reached oversold.  Therefore, one must conclude that a turnaround is near but perhaps not quite at hand.  Nevertheless, this must make one at least hesitant to put on any new shorts here.  I'd at least consider getting out some long pants instead.

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

 24  6/11       28         40        -     1326

 25  6/18       39         26        -     1343  

 26  6/25       38         46        -     1335

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 5/29 was wrong (again), the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 16 for 22 .  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 half the year gone now the poll's accuracy drops to 73% YTD, still pretty good.

What's interesting this week is that while the bullish sentiment barely budged, the bearish sentiment nearly doubled.  In fact, bearish sentiment is now at the second highest level of the year so far.  You might expect that to be contrarian bullish, but don't forget that with the year half over already, the poll has been right nearly three quarters of the time.  And for the record, I voted bearish once again for the eighth straight week.  Although the monthly SPX chart is currently showing a doji on a candle that's almost fully cooked, that is not a guaranteed reversal indicator and the stochastic, which works very well in these long time frames, is still less than halfway on its trip from overbought to oversold.  Given its current position, I'd say it should hit bottom around the end of July.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    6      5      5           1            .583        346   +$177
     And the winner is...

While the overall picture doesn't look particularly bright, I'm thinking that the sell-off today was overdone.  With the VIX and the dollar both suggesting the possibility of a reversal on Tuesday, I am going back out onto my limb and calling Tuesday higher.

ES Fantasy Trader

Last night's short worked out well for 14.5 points that left almost nothing on the table.  Portfolio stats: the account now rises to $134,000 after 46 trades (35 wins, 11 losses) starting from $100,000 on 1/1  Tonight we go long at 1310.00 with another early evening entry.  Reminder: you can track these trades live on Twitter @nightowltrader..

BOT    10    ES    false    SEP12 Futures     1305.75    USD    GLOBEX    12:25:20   

SLD    10    ES    false    SEP12 Futures     1320.25    USD    GLOBEX    01:40:04

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.  Deal with it.

Monday maybe lower

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

• Monday lower, low confidence
• ES pivot 1325.58.  Holding under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1320.25..

Recap

Friday was an interesting day.  I thought it would depend on the ES pivot.  However, in the end, the Dow gained 67 points even though ES never managed to break above its daily pivot.  That's fairly unusual.  Still my overall expectation of either a doji or a DCB was pretty much met, with the latter.  The big question now is what happens two days after a big drop.  To quote those noted market technicians Led Zeppelin, "Ooh, really makes me wonder".  Let's see if we can build a stairway to heaven this week.

The technicals

The Dow: It's easy to dismiss Friday's 0.53% gain as a DCB.  But I look at the above average volume (and in fact rising for three straight days) and I wonder if the bears really have what it takes to drive this market lower.  Notably, OBV has been rising slowly but steadily since June 4th - not the sort of action you'd expect in a market decline.  On the other hand, the stochastic is pretty much in declining mode.

The VIX:  Friday the VIX put in a bullish harami reversal pattern.  This pattern requires confirmation but we also note that the VIX closed exactly on the edge of the descending RTC, just barely missing a bullish trigger.  The weekly chart though is a giant bearish engulfing pattern, suggesting a lower VIX to come this week.

Market index futures: Tonight all three futures are running the the red at 1:32 AM EDT with ES lower by0.49%.  The developing candle is forming a bearish harami (though technically this pattern should be preceded by a move upward).  Still, the fact that there does not seem to be anything in the way of follow-through developing in the overnight so far suggests something of a lack of enthusiasm for Monday.

ES daily pivot: And tonight the pivot drops from 1329.67 to 1325.58.  After running under the old number all evening, we're still below the new level, just not by quite as much.  Still, with ES basically just meandering, this isn't a particularly encouraging sign.

Dollar index: Dark days for the dollar.  Dark cloud cover to be precise.  Which is the candle the dollar put in on Friday.  Always a good sign of lower to come.  And a lower dollar would be good for stocks, assuming the long-standing but recently tested inverse correlation holds.

Transportation: In a telling bit of divergence, on Friday while the Dow was busy adding on 0.53%, the trans actually fell 0.83%.  Hoot, hoot!! Dow Theory alert!  And to amplify a bit, I'll note that the indicators are all now clearly marching down the slope from overbought.  As pilots stuck in icing like to tell ATC, "looking for lower".

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    5      5      5           1            .455        207   +$167

     And the winner is... 


Once again we have a somewhat murky technical situation.  The Dow is sort of confused right now and the VIX is giving at least hints of going higher Monday.  On the other hand, the dollar looks ready to go lower (for higher stocks).  But there's a warning from the trans suggesting lower stocks.  It's not a slam dunk by any means, but I'm going way out on a limb and  leaning to a lower close on Monday.  The balance seems to come down on the minus side - just.

ES Fantasy Trader

Portfolio stats: With no trade last Friday, the account remains at $126,750 after 45 trades (34 wins, 11 losses) starting from $100,000 on 1/1  Tonight we go short at 1320.25.

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.  Deal with it.

Friday higher only if pivot passed

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

• Friday higher if ES pivot passed.
• ES pivot 1329.67.  Holding under is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

I love it when a plan comes together.  Every chart I looked at last night behaved exactly as I expected today.  And we finally got the decline that seemed to be brewing for a while with the Dow shedding 251 points in its second worst day of the year.

The technicals

The Dow: Last night I said about the Dow, "something's going to break here soon.".  And today it sure did, with a relentless day-long decline down nearly 2% to close at 12,574 at session lows.  The bearish RTC trigger went off today, though a new downtrend is not yet in effect.  Even with today's big drop, the indicators are still all just starting to come off overbought.  Further downside would not be out of the question.  The only problem is that today's close stopped right on a big support line, so continued losses on Friday is not a given.

The VIX:  Just as the Dow tanked today, the VIX jumped, up almost 16.5% to close just over 20 again.  This move took it just past the right edge of its descending RTC for a bullish setup.  One more day higher would be the bullish trigger.  And note that the stochastic made a bullish crossover today.  And we still have a long way to go before reaching the upper BB.

Market index futures: While the Dow and VIX may be suggesting more downside on Friday, the futures, perhaps surprisingly (in view of this afternoon's bank downgrades) are actually all in the green at 1:29 AM EDT with ES up 0.23%.  Today's long red candle was a bearish setup and trigger all rolled into one as ES crashed out of its rising RTC.  But even that wasn't enough to send the indicators to oversold, implying that there's still some downside potential here.

ES daily pivot: Tonight the pivot takes a dive from 1348.33 to 1329.67.  So that still leaves us under the pivot but a lot closer than before midnight.  An eight point spread is within striking distance, though ES is showing no inclination to strike just yet.

Dollar index: Last night I wrote "I'd say the dollar's going higher Thursday".  Right again, as the dollar jumped almost a full percent trading outside its descending RTC for a bullish trigger, implying more upside to come.  Its indicators are also all just coming off oversold, leaving plenty of room to run higher.

Transportation: And finally, recall that last night I wrote "This chart too is looking ready to roll over.".  And so it did, dropping almost 2% today.  And that took us right out the rising RTC for a convincing bearish setup.  One more down day here and we have a bearish trigger.  Supporting this are indicators that have all peaked at overbought now.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    5      4      5           1            .600        207   +$167

Reminder: "points" is the number of Dow points gained on days I was right, less points lost on days I was wrong about the direction of the close.  "Trade" is the results from trading 100 shares of DIA from the open to the close on days I call the close higher, or DOG on days I call the close lower.

    And the winner is...

The net bias tonight seems to favor the bears once again.  All except the futures which are up a bit.  But the typical market reaction following a big down day like today is either a small DCB or some form of small doji.  So because I don't think we'll see a significant move either way on Friday, I'm pretty much sitting on the fence.  But this may be a key pivot day.  So let's do a conditional and say that if ES manages to break above 1329.67 Friday morning, we'll close higher, else lower.

ES Fantasy Trader

Well last night's trade was profitable for 5.25 points, even though I got out way too early and left a pile of cash on the table.  But I'd always rather have that than watch a profit turn into a loss.

Portfolio stats: the account rises to $126,750 after 45 trades (34 wins, 11 losses) starting from $100,000 on 1/1  Tonight we stand aside absent any good bias one way or the other.

BOT    10    ES    false    SEP12 Futures     1338.75    USD    GLOBEX    11:24:10    

SLD    10    ES    false    SEP12 Futures     1344.00    USD    GLOBEX    01:02:53   

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.  Deal with it.

Thursday lower

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

• Thursday lower, low confidence.
• ES pivot 1348.33.  Holding under is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1344.00.

Recap

Yup, yesterday they bought the Fed rumor.  Then today they sold the news.  Then they bought the news.  And then they sold it some more.  And finally bought it again.  And when this tale told by an idiot was finally over at 4 PM, nothing was signified as the Dow had moved all of 13 points to the downside.  Can you blame me for not trying to call today's action?  It was one of those days where the scalpers had a field day, the day traders got whipsawed good and the swing traders were left going, huh?  Never a dull moment on Wall St.

The technicals

The Dow: While the Dow remains in its rising RTC, today's roller coaster took it just over the right edge for a bearish setup.  And the candle was a tall tomahawk (a hanging man with a little upper shadow).  We saw another similar setup two days ago, but this time the overall gestalt is weaker and the indicators are even more overbought.  Like storm clouds gathering on a hot and hazy summer afternoon, I'm thinking something's going to break here soon.

The VIX:  This VIX put in its third day bumping down the lower BB today on a tall inverted hammer.  That's not a great reversal candle but three days is a long time for the VIX to go down the lower BB without reversing.  Thing is though, the futures are quite oversold now but I see no reversal signs there at all yet, so a big VIX pop isn't necessarily imminent.

Market index futures: No mixed markets tonight - all three futures are running in the red at 1:39 AM EDT with ES down by 0.48%.  Today's tall doji bearish warning seems to be getting confirmed in the overnight, so far at least.  And the indicators have now all peaked at overbought levels, a good sign of a top.  I also note that this is now the third day that ES has faced resistnace at 1350 and been unable (so far anyway) to break above.

ES daily pivot: Tonight the pivot ticks up from 1348.00 to 1348.33.  But with ES in a downtrend since 6 PM, we actually broke under at 9:55 PM and haven't been able to come back since then - not a good sign.

Dollar index: The dollar today closed outside its long descending RTC for a bullish setup with a 0.18% gain.  And its indicators have all hooked up off oversold levels.  And with a euro chart at its upper BB for four days now, I'd say the dollar's going higher Thursday

Transportation: Like the Dow, the trans today gave us a hanging man right off their upper BB.  And the stochastic just formed a bearish crossover.  And RSI at 85 is even higher than it was just before the nasty May downturn.  This chart too is looking ready to roll over.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      4      5           1            .500        -44   +$89
     And the winner is...

I'm feeling kind of shell-shocked right now.  Sunday night I said the market would go higher, so it went lower.  Monday I said it would go lower Tuesday, so it went (a lot) higher.  Arrrgh!  So tonight I'm going to call Thursday lower and head for my foxhole.  I know this feels like, what's the opposite of catching the falling knife - grabbing the helium balloon?

But with Chinese PMI numbers down (and if the Chicoms say something is bad, it must really be bad), a bunch of overbought and oversold extremes on the charts, Dr. Copper putting in a dark cloud cover today, and Uncle Ben offering nothing more encouraging than Let's Twist Again (like we did last year), "down" simply seems the more logical direction right now.  And I'm nervous about saying it, but sometimes that's a good thing.  It seems like my worst calls come when I'm the most confident.  We'll see how this one plays out.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $124,125 after 44 trades (33 wins, 11 losses) starting from $100,000 on 1/1  Tonight we go short at 1344.00.

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.  Deal with it.

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1348.00.  Breaking under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Well I'm sure glad I only said that Tuesday was a "maybe lower" last night because it ended up being clearly higher to the tune of 96 Dow points.  I'm now putting in the "trend up" arrow although technically we're still not quite there yet because the Dow has not put in three consecutive up days yet.  But the overall trend of the past six sessions is clearly up.  Now we're at an important junction.  We'll run down the charts because that's what I do, but I'm already thinking that tomorrow's close will be determined more by what Uncle Ben has to say than what the technicals look like.

The technicals

The Dow: Yesterday the Dow gave us a hanging man.  Today proved why this candle always requires confirmation to be a reversal sign.  We didn't get it of course and in fact got a bullish engulfing pattern instead and that keeps us solidly inside the rising RTC and points the way higher, overbought indicators notwithstanding.  And as an alert reader commented yesterday, just hitting the upper BB is no guarantee of a reversal either.  And in fact there were two instances last year where the Dow went six and then seven sessions in a row crawling up the upper BB before finally peeling away.  We might be starting one of these "wall of worry" rallies here.

The VIX:  And on the other end of the BB's, the VIX bumped down its lower BB for the second day in a row, ending the session up 0.33% but still comfortably below 20 at 18.38.  However, the VIX is pretty good about bouncing off its lower BB.  That would indicate a higher VIX, I'd like to say tomorrow, but let's be cautious and just say later this week.

Market index futures: Like the Dow, yesterday's ES hanging man was invalidated by today's big gain, and the bullish engulfing pattern predicts more upside possible Wednesday.  The indicators are not reliable at the moment.  And at 1:27 AM EDT, we have another mixed session, with NQ up a bit but both ES and YM lower.  ES is down 0.07% - nothing of great significance here.

ES daily pivot: tonight the ES pivot vaults from 1338.58 to 1348.00.  With ES wandering lower from its earlier highs this evening, this now puts it right on the pivot.  We could go either way from here.

Dollar index: The inverse dollar/stock correlation is back on with the dollar taking a big 0.77% dump today to remain solidly inside a descending RTC.  No sign of a reversal here either so we have to assume continued lower on Wednesday.

Transportation: The big gain in the trans yesterday was the real clue to today's action - too bad I saw it but didn't grasp it.  Anyway, with another green candle and another 1.13% up today, the trans have just been on a tear the past four days, closing at 5251.  There's no resistance until 5340 and we didn't bounce off this upper BB either, so there might just be more upside left here.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      4      4           1            .500        -44   +$89
     And the winner is...

Well the charts have mostly taken a turn for the positive today, with the exception of the VIX which looks ready to move higher, which would mean lower stocks.  But it's really all moot because I think tomorrow's outcome will be determined by whatever the Fed has to say.  And that could go either way.  With the recent run-up apparently pricing in good news, we might very well get a classic "buy the rumor, sell the news" day.  But if Uncle Ben makes an unexpected move the market likes, we could get further gains.  The charts are not quite at any important resistance levels yet.  So against that background, I hope you'll forgive me if I take a pass on this one and simply call Wednesday uncertain.

If I had to take a wild guess, I'd vote for a higher close simply on the basis of the TLT, which today  turned decidedly lower, breaking a four day winning streak.

ES Fantasy Trader

Ugh - I'm throwing in the towel and covering this short at 1349 for a disappointing 10.25 loss.  There's just too much risk of an upside surprise on Wednesday to hold onto this one any longer.  If we do close lower, I'll just go out in the back yard and bang my head against a tree.

Portfolio stats: the account drops to $124,125 after 44 trades (33 wins, 11 losses) starting from $100,000 on 1/1  Tonight we stand aside ahead of Fed news.

BOT    10    ES    false    SEP12 Futures     1349.00    USD    GLOBEX    01:06:13    

SLD    10    ES    false    SEP12 Futures     1338.75    USD    GLOBEX    JUN 19 01:12:30   


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.  Deal with it.

Tuesday maybe lower

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

• Tuesday lower, low confidence.
• ES pivot 1338.50.  Breaking under is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader goes short at 1338.75..

Recap

The market was mixed today with the Nasdaq up nicely, the SPX up a bit and the Dow down a bit.  But since my call was for the Dow, that's a miss.  Oddly enough, my DIA trade for the day (buy the open, sell the close) was a winner anyway.  Go figure.  Anyway, it was all pretty much a re-run of exactly a week ago when the Dow ended lower after a news-inspired rally in ES the night before.  I guess it was a case of "buy the news, sell the news".  We now resume the search for clues as to whether they'll be buying or selling on Tuesday.

The technicals

The Dow: Today's 0.2% drop formed a little hanging man at the top of Friday's big green candle and peeled away from the upper BB.  Also, RSI and momentum have peaked at overbought levels.  Last night I expected some Greece-fueled limited upside today adding "At some point, the recently overbought nature of the market will reassert itself and we'll go lower.".  That moment may now be at hand.

The VIX:  The VIX took a huge 13.22% plunge today which I found somewhat surprising given the limited moves in the market as a whole.  Normally, I'd have expected more market upside to accompany this sort of VIX action.  In any event, we now have a classic bearish three black crows pattern here.  Unfortunately, that last crow today flew right through the lower BB.  And the VIX usually spends no more than one or two days around its lower BB before heading higher again and that would be bad for stocks.  Now that I think of it, this drop in the VIX may simply reflect a lot of people sitting on their hands in advance of the Fed this week.

Market index futures: Today ES put in a pretty clear hanging man that just touched the upper BB.  And the indicators are all overbought.  In fact RSI and momentum have already started coming back down, portending lower on Tuesday.  At 1:20 AM EDT, we still have a mixed market with NQ up a bit and both ES and YM down.  ES is lower by 0.15% and has been trending down since 10:40 PM.  today's ES candle formed a gap-up hanging man right on the upper BB suggesting at least the chance of a continued move lower Tuesday.

ES daily pivot: Tonight the pivot moves up from 1333.50 to 1338.50.  This gain leaves ES precariously close to the pivot., just a point and a half above.  While remaining above is bullish, we need to watch this level for signs of breaking under in the morning.

Dollar index: Today the dollar exited a descending RTC from the first of this month for a bullish setup.  Its indicators are also all quite oversold and its stochastic just formed a bullish crossover.  Everything seems to be lining up here for a move higher on Tuesday, potentially bad for stocks.

Transportation:Here's another interesting divergence.  While the Dow actually lost 0.2% today, the trans jumped nearly 2%, advancing clear to their upper BB.  While this tall green candle is not a reversal indicator, the upper BB can be nominal resistance.  With overbought indicators now, I have to wonder how much short term upside is left here.

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

 23  6/4        32         48        -     1278

 24  6/11       28         40        -     1326

 25  6/18       39         26        -     1343 

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 5/21 was wrong, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 16 for21 .  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 almost half the year gone the poll's accuracy drops back to 76% YTD, still pretty good.

This week we finally got a reversal in sentiment with the bulls outnumbering the bears for the first time since April 30, and by a non-trivial 13 points.  This also marked the first time all year that I voted against the majority with a continued bearish call.  I'm afraid I just don't see the enthusiams for the 30 day market at this point.  The monthyl SPX has just exited a rising RTC, its indicators are all still jsut coming off overbought, and the stochastic just finis  I guess we'll see who was right in a month.hed a bearish crossover in April.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      3      4           1            .625        +52   +$98



     And the winner is...

It may be a bit early, but I'm seeing some signs that we've run into some resistance here in the form of several different BB's all at the same time as well as reversal candlestick patterns.  The Dow in particular acted especially weak today making me think that we could be in for at least one day of lower prices, so I'll go out on a limb and call for a lower close Tuesday.  I'll be buying DOG on the open.

ES Fantasy Trader

Portfolio stats: the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  Tonight we finally enter a new trade, going short at 1338.75.

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.  Deal with it.

Monday higher

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

• Monday higher, low confidence.
• ES pivot 1333.50.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

I'm not too proud to admit that I really could not figure out which way the market was going to go last Friday.  Turns out it was up, in decisive fashion with the Dow adding on another 115 points.  One more day like this and we'll be able to put in the "up-arrow" for the swing trend.  So apparently those who bet on a positive (for the market) outcome to the Greek elections were proven correct.  But will this carry over into Monday?  After all, it was just a week ago that we had the World's Shortest Rally on Spanish bank bailout news.  Let's run the charts.

The technicals

The Dow: On Friday the Dow put in the second of two consecutive strong candles.  It's always better to see a 150 and 100 point up day in a row than a 200 followed by a 50.  But particularly interesting is that the volume on Friday was huge - the greatest since March 16th.  Of course back then, the Dow had just hit its upper BB, just like this past session.  Hmmm...  Unfortunately, the indicators are all pegged at overbought now and so have lost their predictive power.  OTOH, the weekly chart actually looks quite positive, showing two consecutive solid green candles on increasing volume with a stochastic that just formed a bullish crossover last week.

The VIX:  On Friday the VIX dropped another 2.63% to complete a three candlestick pattern known as the three outside down, generally a good bearish reversal indicator.  And of course more VIX downside is good for stocks.

Market index futures: Wait - we've seen this movie before.  Wasn't it exactly one week ago that the futures spiked on Sunday evening on news of a Spanish bank bailout?  Well only this time it's not quite the same.  While all three futures are indeed up at 1:20 AM EDT, this time ES is up only 0.36%, not the giant 1%+ pop we saw this time last week.  ES was higher earlier this evening though, up to 1347.50 initially, which was right up to its upper BB.  I actually prefer to see this than the sort of irrational exuberance we got last time around.  There may be less buyer's remorse come Monday.

ES daily pivot: Tonight the pivot jumps from 1319.75 to 1333.50.  But after the big pop on the open Sunday evening, we're still comfortably above the pivot, but not too far above (which would be a negative sign).

Dollar index: My dollar chart ($USDUPX) is only available during regular trading hours, so instead I'll comment on the euro, (6E#F in eSignal) which is trading Sunday night.  Here obviously we've got the Greek pop that took the euro clear to its upper BB at 1.2765 for a huge 0.6% gain.  This will surely drive the dollar lower on Monday and that's generally good for stocks.

Transportation: This chart is similar to the Dow although Friday's gain was noticeably weaker than Thursday's, striking a note of caution.  Add to this the fact that RSI peaked on Thursday and the rest of the indicators are overbought, and I would not be surprised to see the trans move lower on Monday, which could bode ill for stocks later this week.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      4           1            .667        +77   +$66
     And the winner is...

Another tough call with the charts once again being distorted by an exceptional news event.  True, the futures are all up right now, but they were up a week ago too and last Monday turned out badly.  Fool me once, etc.  With the Dow already at its upper BB, I think there might still be some Greek-driven upside on Monday but will be limited.  At some point, the recently overbought nature of the market will reassert itself and we'll go lower.  The only question is if it will be Tuesday or mid-day Monday.  But the market does seem to have some momentum behind it at the moment, so I'll go for a higher close Monday.  I'll be buying DIA at the open.

ES Fantasy Trader

Portfolio stats: the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  Once again there's no trade tonight, this time because, as like a week ago, I feel that the train left the station before we got there.  And one of my rules is to never chase.  I look at this instead as an opportunity to exercise my patience.

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.  Deal with it.

Friday uncertain

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

• Friday uncertain.
• ES pivot 1319.75.  Holding above is bullish..
• Next week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Because of a lack of clarity last night, I appealed to the ES pivot, figuring that we'd go higher if we could stay above it in the morning.  Well we did and the Dow delivered a handy 156 point gain.  Now we have to face Friday with the prospect of upcoming elections in Greece over the weekend.  Will today's rally inspire follow-through or profit-taking?  Let's figure it out.

The technicals

The Dow: Today the Dow continued its alternating up/down pattern for the fifth straight day.  However, its 1.24% gain did finally break the consolidation to the upside.  In fact the Dow nearly hit its upper BB before retreating a bit to close at 12,652.  So resistance is now at 12,727 which leaves a bit more room to run higher, but the up/down pattern would suggest that tomorrow goes lower.  There's been some talk of today's action as a breakout, but the Dow has had so much trouble getting a multi-day rally going lately, it's just going to have to show me before I believe that.

The VIX:  The VIX bounced off its 200 day MA resistance and took a big 10.67% drop today.  This was enough to turn the indicators back down again.  But I'd be cautious about that because they were just coming off oversold and large one day moves tend to induce distortions in the patterns.  Although technically, this is basically a bearish engulfing candle, I'm a bit cautious about it.  However, the futures do support a move lower on Friday, and that would be good for stocks.

Market index futures: All three futures are just barely hanging on to gains at 1:33 AM EDT with ES up a scant 0.04%.  Apparently, the enthusiasm of recent nights has slowed somewhat.  ES has this same yo-yo pattern going as the Dow, but if we back off to the weekly chart, we see that candle (which is almost completely baked now) is forming a distinct hanging man, a bearish sign for next week.

ES daily pivot: Tonight the pivot rises from 1311.17 to 1319.75.  This still leaves ES above the new number but the spread has been cut in half.  Even so, a seven point gap is pretty positive - if it can be maintained.  Wit no real trend since 11 PM, it's hard to say where it may go next or what those pesky Europeans will do to it when they start trading around 2 AM our time.

Dollar index: The dollar continued lower today, losing another 0.12% and restoring its inverse relationship to stocks.  This moved it into oversold territory but without a reversal candle or support line nearby, it could go lower again on Friday.

Transportation: Last night the trans were really not looking so hot, but they delivered an upside surprise (to me anyway) in the form of a 1% gain on the day.  Unfortunately, they remain range-bound, with support at the 200 day MA and resistance at 5060.  But now they're at the upper end and with indicators that are even more overbought than yesterday it is put up or shut up time for the trans.  If they can't break the 5060 resistance line (and they're 0 for 6 here), they're going lower on Friday.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      3           1            .667        +77   +$66
   And the winner is...  
 
A very tricky situation tonight.  Friday is a triple-witching with all the volatility that implies.  But also it's the last trading day before the weekend Greek elections.  A leftist win there would hurt the markets.  However, the banks have signaled an intention to put out any resulting Greece fire with big gobs of cash.  So what to do?  Personally, I believe the Greeks will not choose to exit the euro.  But I'm not sure enough about that to be putting on any big bets right now and I'm definitely not going to be wanting to hold any futures positions going into the weekend.  In addition, the TLT appears to have put in a short-term bottom suggesting more money flowing into bonds.

Tonight I'm feeling cautious.  I see more downside risk than upside potential from here.  And hey, every move up for the last six days has been followed by another one down, so on that basis alone, we're going lower on Friday.  But with so much riding on news from Europe, I am once again just going to declare that Friday is uncertain and take the day off.  Not that I'm not trading - today I sold some OMEX and ZTR, and bought NCZ and NCV.  But ES trades - no thanks.

One other note of caution - today my account hit a new high for the year - always an ominous sign :-)  And a final note that supports the indecision in the market I'm seeing - J-Trader is reporting that one of his systems is going long and the other is short.  Go figure.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  With no obvious edge once again, there's still no trade tonight.

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.  Deal with it.

Thursday higher unless pivot broken

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

• Thursday higher unless ES breaks under pivot, low confidence.
• ES pivot 1311.17.  Holding above is bullish.
• Friday bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Last night's call was "uncertain with a bias lower" and I think that's a pretty good description of what happened today, as the Dow crossed the unchanged line eight times before finally moving decisively lower just before 2 PM - and then making a valiant rally attempt in the closing minutes that took us off the lows of the day but still left a 77 point loss.  So we remain in consolidation mode.  What will it take to get a break?  Let's peruse the charts for an answer.

The technicals

The Dow: The Dow meandered about today until some ratings agency decided that Spanish bonds weren't just plain junk, they were really junk.  That should have come as a total surprise to absolutely no one, but it nonetheless tanked the index and that was that.  So we continue stuck in a trading range with now four alternating up/down days and no real way to gain any meaningful insights from each succeeding candle.  However, we did trade outside the rising RTC today and that's a bearish trigger.  These are usually pretty reliable.  Add to that the indicators which are all overbought, and a stochastic that seems to be trying to form a bearish crossover but is for the moment basically just tangled up in itself.  Overall though, this chart seems to have more downside risk than upside potential.

The VIX:  Meanwhile the VIX does seem to have established an uptrend, gaining nearly 10% today to close just above 24, an advance that was basically stymied by the 200 day MA at 24.55.  Last night I mentioned the bullish RTC trigger here, and whadaya know, today we got the pay-off.  But with indicators still just coming off oversold, I would not be surprised to see the VIX move higher again on Thursday, bad for stocks.

Market index futures: All three futures are up at 1:12 AM EDT, with ES gaining 0.42%.  There's still no clear trend in sight on this chart and the indicators are just as confused.  Money flow is way down and just took an upward hook but RSI is just coming off overbought - I never saw that combination before.  Then we have the stochastic which is just executing a bullish crossover but doing it form a level where normally a bearish crossover would occur.

Backing out to the weekly chart again, the current candle, though only half-cooked, is starting to look like a dark cloud cover, which is a strong bearish sign for next week.  However, I think what's really going to drive the market early next week is the Greek elections this weekend.

ES daily pivot: Tonight the pivot ticks down from 1312.50 to 1311.17.  With the overnight gains in ES, we actually broke above the old number at 11:05 PM and are now a bit higher above the new pivot, a positive development.

Dollar index: The dollar today continued its wayward ways, falling 0.47% (contrary to my expectations) even as the Dow lost 0.62%.  The long-standing inverse dollar/stock correlation seems to be breaking down here reducing the utility of this chart as a predictor.  I think it's basically all about the euro here.

Transportation:The trans continued to be supported by their 200 day MA at 4976 but nonetheless posted a 0.57% loss today on a spinning top.  This candle also adds to a developing symmetrical triangle.  Since these usually exit in the direction from which they were entered, in this case from below, this portends poorly for this chart.  Supporting this idea are the indicators, now quite oversold, along with a stochastic that just completed a bearish crossover.  I'm not liking this one.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      3           0            .667        +77   +$66




     And the winner is...

This market just keeps getting more and more opaque.  I'm seeing a whole bunch of bearish signs in the charts, including the TLT which is starting to come off oversold, and yet the futures are all rising in the overnight.  This makes no sense to me.  So I'm going to make a conditional call for Thursday.  If ES stays above its daily pivot, 1311.17, then we're going to close higher on Thursday.  But if ES breaks below the pivot convincingly in the morning, then we're going lower.  That's about the only way I can reconcile the divergence between the futures and the charts.  We've already seen one night this week where the futures were up big time in the overnight but the following day closed lower.  I'm open to alternative interpretations.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  With no obvious edge once again, there's still no trade tonight.

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.  Deal with it.

Wednesday uncertain but bias lower

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

• Wednesday uncertain, bias lower.
• ES pivot 1312.50.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Quote of the Day

 "Once you sell an asset (or 4% of an asset), what you sold is gone."

                  - David van Knapp, on dividend growth investing at Seeking Alpha

Recap

Last night I didn't really know what to make of the market today so we just reviewed the weekly charts.  With a strong triple digit gain today that erased yesterday's triple digit loss, it's still not clear which way this market wants to go.  But we're back to the daily charts hunting for clues.

The technicals

The Dow: The Dow's 163 point gain today established a trading range bounded by 12,550 on top and 12,410 below.  After three days of alternating big gains and losses, you'd expect Wednesday to go lower on that basis alone.  The indicators support this, to the extent they can be trusted, being as they're all at overbought levels now.  Other than that, there's no real pattern here.

The VIX:  Hmm - here's a clue.  While the Dow regained all of yesterday's losses today, the VIX dropped by less than half of its gains on Monday.  It is also now officially oversold.  And yesterday's pop took it outside its descending RTC for a bullish setup.  Today's action was entirely outside the RTC, so there's the bullish trigger.  This pattern is usually very good so that would imply a higher VIX for Wednesday which would be bad for stocks.

Market index futures: At 1:35 AM EDT all three futures are in the red with ES leading the way lower, down 0.19%.  Of more concern is that we seem to have some strong resistance at 1323, just above the current price of 1317.75.  And the indicators are all overbought, with the stochastic finishing a bearish crossover.

ES daily pivot: Tonight the pivot drops from 1314.00 to 1312.50.  With ES drifting aimlessly in the overnight so far, we were above the old number and are still above the new pivot, and by a bit more now so that's a positive sign.

Dollar index: The dollar traded outside its descending RTC today for a 0.12% loss and a bullish setup.  Its stochastic also finished a bullish crossover and the other indicators are very nearly oversold.  I'd say a move higher is not out of the question here on Wednesday.  If the inverse correlation holds, that would be bad for stocks.

Transportation: The trans almost hit their 200 day MA today before recovering nicely for a 0.86% gain.  But that's still just half of Monday's loss.  With the alternating up/down pattern in force here too, there's no clear trend - just more consolidation.

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  16/19

 21  5/21       30         52        -     1295

 22  5/29       35         42        -     1318

 23  6/4        32         48        -     1278

 24  6/11       28         40        -     1326

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 5/14 was right, the S&P now being lower than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 16 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 closing in on half the year gone the poll's accuracy edges up to 84 % YTD.  Not bad.

This week we note that both bullish and bearish sentiment declined from last week.  I believe this reflects the overall uncertainty and instability in the market that I've mentioned a few times recently.  But these are still not contrarian extreme readings.  And for the record, this week I voted bearish again which keeps me in step with the majority of the poll.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      2           0            .667        +77   +$66
     And the winner is...

Technically, I'd call this market lower Wednesday.  But with the current instability in the system, every little jitter gets magnified and can send stocks on a tear one way or the other on a whim.  And on top of that it's a triple witching week which is often jittery by itself.  So let's just say I see a bias lower Wednesday, but there's no official call once again tonight.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  With no obvious edge, there's no trade again tonight.

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.  Deal with it.

Tuesday uncertain

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

• Tuesday uncertain.
• ES pivot (switching to the "U" contract)  1314.00.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Well that had to be the World's Shortest Rally.  If you blinked, you missed it.  After some overnight gains last night in the futures suggesting a big move up today we got just that - once again for all of 90 seconds.  This open was pretty much a carbon copy of last Thursday.  Only this time all the gains evaporated and then turned very ugly to end with a 143 point loss.  All because, um, well, who really knows why.  Just as last night's big jump up was overdone, I think so was today's dive.

What's strange is that the VIX is still in the low 20's, but the market is behaving more like it's in the low 40's.  With all this herky-jerky action motivated mainly by random news items and rumors from Europe, technical analysis pretty much falls by the wayside.  So as alert reader Daniel suggested in a comment this evening, tonight we're going to move out to the weekly charts to see if we can filter out some of this random noise and nonsense.  Even that may not be much help, but since I don't happen to have Angela Merkel's unlisted cell phone number it's going to have to do.

The technicals

The Dow: It really is pointless to look at the daily charts tonight.  Today's oddball move completely confused the indicators and they're temporarily unreliable.  So instead we look at the weekly chart, including only up to last week (the last fully formed candle).  And here we see, somewhat surprisingly, a nice bullish engulfing pattern.  In addition, last week's close was just outside the descending weekly RTC for a bullish setup.  If this week can close above 12,358, we'll have a bullish trigger.

The VIX:  Part of the market confusion is evident in the weekly VIX.  After a doji the week of 5/7, we got four consecutive weeks of big up-down-up-down moves that left us exactly where we started on 5/14.  Of particular interest though is that all four weeks played through the upper BB.  Just as it is unusual for the VIX to spend more than a day or two at its upper daily BB, it's very unusual to find it spending more than two weeks at the upper weekly BB.  The last time we saw this was last summer during the same old European soap opera.  Then we spent five weeks at the upper BB from July through August before moving lower.

And today's VIX action seems to play into this because even with today's 11% pop, we're now well below the weekly BB and only to the middle of the range of the past month.

ES weekly

Market index futures: Before looking at the weekly chart here, I'll just note that right now at 1:25 AM EDT, all three futures are higher by identical 0.35% margins.  OK, now look at the weekly chart.  I see, holy moly, another megaphone!  Such an unusual pattern and this is now the second one in two weeks?  I mentioned the first one in this post on May 31st.  It was in the Dow and if you look at that chart it looks an awful lot like this one.  And we all know how that one ended - badly, with the Dow tanking on June 1st.

Anyway, this pattern is so rare, I don't have a lot of experience with it.  It is possible that this is a bullish megaphone.  There was a situation like this with the weekly VIX in the second half of 2009 and it resolved lower.  Or this one could be bearish like the Dow at the end of May.  One thing's for sure - there is a lot of instability in the market and it's increasing.  This pattern suggests a big break is coming soon.  Best I can tell, if ES ends the week around 1258, look for a big break lower next week.  If we can move above today's open at 1337, look for a move higher.  I guess it all depends on what kind of news comes out of Europe this week.  Perhaps the Greek elections will provide the catalyst?

And now that I look at it, there's another megaphone developing in the daily VIX too!

ES daily pivot: Tonight the pivot ticks down from 1314.58 to 1314.00 (reminder - tonight we're switching to the "U" contract).  Despite ES's overnight gains so far, we're still below this, a negative sign.

Dollar index: The dollar finally traded out of its rising weekly RTC from 4./30 last week for a bearish setup.  The action so far today suggests the bearish trigger is coming.  However, with the dollar decoupling its relationship to stocks lately, I'm not sure one can read too much into a lower dollar.  The dollar/euro relationship is probably the most politically influenced of all the charts anyway.

Transportation: The last four weeks of trans looks just like the VIX in reverse - down-up-down-up.  The interesting thing here is that the trans have been putting in higher lows.  With a resistance line around 5080, this give us an ascending triangle which would be a bullish reversal to the downturn that began the week of 4/30.  Today's action fits into this pattern.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      2      1           0            .667        +77   +$66
     And the winner is...

Well that's the weekly chart analysis.  And what did we learn, class?  Um, not a whole heck of a lot, I'm afraid.  A hint of positive signs and a big warning sign.  These periods of increasing instability tend not to end well and my personal feeling right now is that we may be in for a lot lower in a week or so, but officially, the current environment is far too difficult to make a daily call on a technical basis, so we'll just leave it at that - Tuesday uncertain.  But I'd be paying close attention and be ready for a big move coming sometime this week.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  No trade again tonight.

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.  Deal with it.

Monday higher

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

• Monday higher, high confidence.
• ES pivot 1321.25.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Last Friday was quite interesting for me because some fool with a backhoe dug up the local fiber cable and knocked out Internet service in our entire neighborhood.  Service wasn't restored until about 5 PM, so I basically had the day off.  I used the time to rethink the idea of installing a dual WAN router and subscribing to a wireless ISP like Clearwire.  That would prevent these sorts of problems.

Anyway, by watching CNBC I was able to see my call for a lower close go down the drain as the market relentlessly trended up the entire day for an impressive 93 point gain to close out its best week  this year so far (and my best week also).  But with some new wrinkles over the weekend from Spain and China, where are we likely to go this coming week?  We turn to the charts for the answer.

The technicals

The Dow: Thursday's shooting star reversal warning was shot down by Friday's strong green candle.  With indicators still not yet at overbought levels, the only thing in our way now is a small resistance shelf at 12,580, give or take.  After that, there's another line at 12,700 and then the psychological 13K again.  Right now, there's nothing on this chart to suggest anything but continued higher on Monday - and that was before the weekend news.

The VIX:  And on Friday the VIX formed a classic dark cloud cover, one of the most powerful bearish reversal patterns around.  With its indicators still not oversold yet, there's no reason to believe the VIX can't go lower still on Monday.

Nobody expects the Spanish Inquisition!

Market index futures: Tonight all three futures are up sharply, of course on the news from Spain.  I sure wasn't expecting that.  ES is up a monster 1.22% at 1:10 AM EDT - the biggest gain at this time of night I've ever seen.  This big gap up handily cleared resistance at 1332 and brought us right to the upper BB at 1350 which coincidentally is another resistance line.  So I'd say futures-wise, we've probably already seen most of the gains, but the markets as a whole should follow suit on the open Monday morning.

ES daily pivot: Tonight the pivot ticks up from 1319.42 to 1321.25.  We moved above the old number on Friday and of course now we're way above the pivot, always a good sign (initially at least - getting too extended from the pivot eventually starts to bring a reversionary pull into play).

Dollar index: The dollar on Friday completed sort of a morning doji star, except for the fact that Friday's candle was red instead of green.  But its stochastic just barely squeaked out a bullish stochastic crossover and the candle itself landed right on the edge of the descending RTC for a bullish setup.  This seems to suggest a move higher by the dollar on Monday.  But - and this a a big but, the euro gapped up big time in Sunday night trading on the news from Spain, so I wouldn't be surprised to see the dollar move lower on Monday.  Canonically, that should be good for stocks.

Transportation: Dow theorists take note - the trans gave us a 1.06% gain on Friday, better once again than any of the major averages.  And this move negated Thursday's gravestone doji so here too we have a chart that looks like it still has more upside potential.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632
June    4      1      1           0            .800        +220  +$211
     And the winner is...

Well tonight is pretty clear I'd say.  While the charts already looked mildly bullish at the end of last week, right now the futures are pointing to a higher close Monday.  I'll be a buyer of DIA at the open.

ES Fantasy Trader

Earlier this evening we covered last Thursday night's trade at 1343.50 for an ugly 29.75 point loss, a victim of the (unexpected) news from Spain and last Friday's network outage that kept me from closing the position when I wanted to in the face of steadily rising prices. Tonight we are regrettably standing aside.  I'm pretty sure most of tomorrow's gains have already occurred.  This one was simply not tradeable.

Portfolio stats:  the account falls back to $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1

BOT    10    ES    false    JUN12 Futures     1343.50    USD    GLOBEX    19:53:26   

SLD    10    ES    false    JUN12 Futures     1313.75    USD    GLOBEX    JUN 7 20:21:18 

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.  Deal with it.