Thursday uncertain

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

• Thursday uncertain.
• ES pivot 1408.17.  Holding below is bearish.
• Friday bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well can you blame me for making a call of "uncertain" for Wednesday?  A day when the Dow ends by gaining all of four and a half points?  When the SPX is up 1.19?  I was right about one thing though - the market continues to tread water as we approach the end of the week, the month, and the summit on Mt. Holympus.

The technicals (daily)

The Dow: I feel a lot like I'm analyzing noise here with the Dow putting in a sliver of a doji star today as the market continues waiting for Friday's news from the Hole.  The indicators are oversold but the technicals count for very little right now.

The VIX:  I was definitely wrong about the VIX moving lower today, as it actually gained 3.46% to remain firmly inside its rising RTC.  However, its indicators have now reached overbought territory and today's close at 17.06 leaves us very close to the upper BB at 17.42.  As I've often mentioned, the VIX doesn't like to spend more than a day or two around its upper BB before backing off.  So I'm guessing we're in for a reversal if not Thursday, then even more likely on Friday.

Market index futures: Tonight all three futures are down by non-trivial amounts at 1:27 AM EDT with ES lower by 0.32%.  ES continues to put in dojis but each one is a bit lower than the previous one.  I note also that ES right now is trading lower outside my rising wedge support line that I mentioned yesterday.  Unless we can make it back to 1408 on Thursday, that would be a bearish sign.

ES daily pivot: Tonight the pivot notches up from 1407.67 to 1408.17.We moved below the pivot at the close and remain under the new value, which is a negative sign.

Dollar index: At least I did get the dollar right today, as it gained 0.22%  But the daily chart just looks like popcorn, bouncing around just above the 200 day MA like a moth around the back porch light.  There's no telling where this may go next - probably more of the same.

Euro: And the euro is also pretty jittery, moving mostly sideways in a small range for six straight sessions now.  It's looking overbought and what goes up does come down eventually, but probably not just yet.

Transportation: Finally, the trans continued their downward march today even as the major averages are trading sideways - an interesting divergence.  We remain solidly in a descending RTC that began on the 21st.  We're also three days below the 200 day MA now and the indicators have become quite oversold with RSI hitting just 4.57 today.  The stochastic is also leveling out in preparation for a bullish crossover.  I'd say the trans are setting up for a reversal higher by Friday.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  8      6      6           1        .600     -78

     And the winner is...

This market is beyond tough.  I've looked at the charts and scratched my head.  The best I can come up with is that the TLT looks toppy right now, and lower bonds generally mean higher stocks.  But once again, we're simply on hold until after Friday so there's little point in calling anything here other than Thursday uncertain again.

In closing though I do want to note that while the daily charts are pretty foggy right now, the weekly charts are all looking  rather bearish.  Unless there's some real good news from Jackson Hole, next week could be ugly.  And recall that next week starts the ugly month of September.  Add in the ES rising wedge and I'm starting to get concerned for next month.

ES Fantasy Trader

I always preach patience in my trading and today I failed to exercise it.  The result was not just a 6 point loss, but one that could have been a profit had I only waited a few hours longer.  This is the sort of mistake I used to make but don't very much anymore.  But I did it again today.  My original instincts for this trade were correct - serves me right for trying to second-guess myself.

 Portfolio stats: the account remains for the time being at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we're standing aside and will continue to do so until I see some sign of this market coming off top-dead-center.

BOT    10    ES    false    SEP12 Futures     1411.75    USD    GLOBEX    AUG 29 14:24:17   

SLD    10    ES    false    SEP12 Futures     1405.75    USD    GLOBEX    AUG 28 01:08:33 

CUA (Commonly Used Acronyms)

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

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

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1410.42.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short at 1405.75.

Recap

Waiting for the Gods...

It's not quite the doldrums - in some ways it's worse.  Instead of just going nowhere, various parts of the market are going off in a bunch of different directions.  My call for a lower close today was right as the Dow and SPX both closed slightly lower, but the Nasdaq actually gained 0.13%.  And the charts are full of similar contradictions as we await the pronouncements of Emperor Bernanke from Mt. Jackson Holympus on Friday.  It's mostly a futile exercise in tea leaf reading, but I haven't got anything better to read right now so here we go...

The technicals (daily)

The Dow: Here's a perfect example of what I mean.  Looking at the daily Dow chart, we now have two small down candles.  That's bearish.  But the indicators are all oversold and today the stochastic finally finished its bullish crossover.  Last night this chart looked bearish, tonight I'm not so sure.  Two days ago we exited the descending RTC for a bullish setup.  Today's action traded entirely outside, but lower.  Bullish trigger?  Honestly, I don't know.

The VIX:  Of all the charts I watch, tonight the VIX offers the most clarity.  It did gain 0.86% today, but did it on a green spinning top that followed yesterday's hanging man.  That's two reversal warnings in a row.  This also brought us right to the edge of the rising RTC.  Add in highly overbought indicators and a hanging man in the futures and I'd say we have a good shot at a lower VIX on Wednesday, which would be good for stocks.

Market index futures: Tonight all three futures are up at 1:18 AM EDT with ES higher by 0.09%.  Today's action produced yet another of many dojis lately.  While the action in the overnight is mildly bullish, the overall general trend since the peak on August 20th is down.  The indicators, which you can see in the daily ES chart here, aren't of much use right now as they've kind of flattened out as the market continues its late August meandering.

ES daily

But I'm printing this chart because I really want to bring up a very interesting point I just noticed - an ascending wedge.  The upper blue resistance line passes perfectly through every peak but two since May 29th while the lower blue support line passes through every bottom except for the one one July 26th which pokes out a bit.  Anyway, I moved the chart over a bit to show where these two lines intersect.  Turns out it's on September 23rd.

Now that's a Sunday, and in fact the last trading day before that is Friday the 21st and that is options expiration and the last trading day of the "U" contract.  And the price point is 1465.  Now I don't expect ES to continue squeezing until the bitter end and I don't believe we're going to hit 1465, but the point is that rising wedges are generally quite bearish.  We now want to watch closely for a break down through the lower support line.  When and if it comes, it could be ugly.  Note also that the wedge closes up in September - the worst month of the year for market.  Just sayin...

Oh, and you can also see on this chart the last rising RTC I drew here beginning on August 6th (the three parallel red, black, and blue lines).  Noe how as soon as we exited the RTC, ES moved lower - that's the beauty of the RTC.  And the red horizontal line is the entry price for the short position I'm currently running.

ES daily pivot: Tonight the pivot drops from 1410.42 to 1407.67.  With ES wandering vaguely higher since the close, this broke us above the new level right at the switching point at midnight, so tht now becomes a positive sign.

Dollar index: Today the dollar gave us a misshapen gap-down spinning top for a 0.36% loss that took us back to the same level we found support three days ago.  The indicators are also now quite oversold so I'd say there's a good chance of the dollar moving higher on Wednesday - bad for stocks.

Euro: Meanwhile, the euro gained today on a green candle that took it right to recent resistance at 1.2569.  After three failed attempts at moving higher than this in the last four days, I'd say it's more likely that the euro moves lower on Wednesday than higher, especially given the highly overbought indicators.  And that would be bad for stocks.

Transportation: Last night I wrote "no sign of a turn-around" for the trans and indeed they went lower today, down another 0.23%.  We're even more below the 200 day MA, we're still in a descending RTC, and the indicators that were oversold are now even more oversold.  In fact, RSI hit 4.8 today,  At this stage, I'm guessing that there might still be one more day lower, but the trans will be turning around before the end of the week.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  8      6      5           1        .600     -78
 

     And the winner is... 

This is a hard one.  When you're flying a plane, you always want to land into the wind but it's hard to choose a runway for landing when the winds are light and variable.  And right now the market winds are very light and quite variable.  I'm seeing the slightest of biases to the downside tonight, but not enough to have enough confidence to make any call but Wednesday uncertain.  I think we're going to remain in this holding pattern until next week.  And let me add that tonight's "uncertain" isn't because I'm expecting a doji - it's because I really don't have a good handle on the market right now.  The signal is just lost in the noise.


Postscript:

SPX (candlesticks) vs. EEM (line), daily, 2012

Alert reader Daniel posted an interesting comment today regarding the connection between SPX and EEM based on an observation by the great Dr. Brett Steenbarger.  The interested reader is invited to read it in my previous post.  Since I can't insert images in comments, here is a chart, courtesy of Stockcharts.com, of what we're talking about.  (Click the chart to enlarge).

The interesting thing here is that EEM has started diverging considerably from SPX beginning over a week ago.  I'm not quite sure what to make of this.  The last time we had a similar situation (at the end of May), SPX went on to post a dramatic three day drop.  If we're setting up for that again, it kind of lends support to my rising wedge theory for ES (see above).

ES Fantasy Trader

Portfolio stats: the account remains for the time being at $169,250 after 59 trades (45 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we remain short at 1405.75.  I think I'm going to hold onto this trade because I don't see a lot of upside risk and there's at least as much chance that we could move down into a profit position on Wednesday.  If not, I'll consider taking the loss.

CUA (Commonly Used Acronyms)

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

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

Tuesday lower

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

• Tuesday lower, low confidence.
• ES pivot 1410.42.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going short at 1405.75.

Recap

Things were looking up, literally this morning for my bullish call on the day until lunch time when a slow downward grind took over to send the Dow off by 33 points.  I think today will be pretty much a template for the rest of the week.  Unless Israel drops an atomic bomb on Tehran or Martians land on Wall St., look for more of this aimless wandering about until after Labor Day.

The technicals (daily)

The Dow: Well despite today's 0.25% loss, the Dow traded entirely outside its latest descending RTC today, so that's a bullish trigger.  And while the RSI, momentum, and money flow are not yet oversold, the stochastic did just barely complete a bullish crossover today.  So the overall picture here is a bit murky, but I'd still not be short right now.

The VIX:  I was surprised here too today as the VIX didn't just retrace yesterday's losses but gapped up 7.71%.  The candle is a hanging man that remains inside the rising RTC, so one should await confirmation before declaring a lower VIX.  Of note though is that the stochastic, which looked ready to execute a bearish crossover last night, did not do so today and is getting threaded out.  So overall, it's just more murk on this chart.

Market index futures: Tonight all three futures are down at 12:56 AM EDT with ES lower by 0.20%.  Today's red candle contradicts the indicators which are starting to rise from oversold.  The stochastic, which appeared to be starting a bullish crossover is now simply threaded out.  Right now the candles look more convincing, and the signs there are for more downside.

ES daily pivot: Tonight the pivot rises from 1405.67 to 1410.42.  Since ES has been stepping lower since mid-afternoon, it crossed under the pivot at 10:20 PM and is now even further under the new number, a bearish sign.

Dollar index: I did get this one right today, as the dollar gained 0.11% on a green closing marubozu.  With the bullish stochastic crossover now complete and the other indicators having bottomed at oversold, the way looks clear for further upside in the dollar on Tuesday.

Euro: Meanwhile, the euro continues to meander lower, putting in a small doji today.  But it's not being confirmed in the overnight and the indicators are all just turning down from highly overbought levels, so it looks like a lower euro is in the cards for Tuesday, which squares with my expectation for a move higher in the dollar.

Transportation: This one definitely caught me by surprise today.  I had expected the 200 day MA to act as support here.  It turned out to be as much support as a pair of lead water wings as the trans dropped 0.88%.  While there's nothing bullish in the candles here, the indicators have now been driven to oversold levels, though there's no sign of a turn-around there yet either.

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

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

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

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  

 33  8/13       43         21        +     1406 

 34  8/20       46         31        +     1418

 35  8/27       39         29        +     1411 

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 7/30 was right (finally), the S&P now being higher than then. I'm using the column "Accuracy" to track my calls.  So now I'm 17 for 31.  For the record, I voted bullish again this week based on my reading of the SPX monthly and weekly charts.


This week we note that there was a two point decline in bearish sentiment but a 10 point drop in bullish sentiment, narrowing the gap between the two considerably and clearly reflecting the overall uncertainty in the market as August draws to a close.  Net net though, the bias remains positive.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  7      6      5           1        .571    -100
     And the winner is...

Hmm - I'm starting to wonder if maybe Friday's big gains were not a trend change but just a one-off in response to Uncle Ben's remarks on the economy.  I'm also concerned by the continued move lower by the futures in the overnight that's taken us below the pivot.  Tonight we're also looking at a rising TLT and declining copper.  Also, gold seems to have topped and the chatter I'm reading is that the expectations are that Uncle Ben is not going to announce QE3 on Friday.  There's also some bad economic news out of Japan and China tonight.  All in all, it's adding up to a picture biased to the downside.  And finally I note that the weekly charts are looking decidedly more negative than the dailies.  So while I'm not expecting a big decline, I do think we stand a good chance of closing lower Tuesday.

ES Fantasy Trader

Today  I settled for a puny 1.5 point gain on last night's long trade, and was glad I got that much.  Given the choppy, indecisive nature of the market, I decided not to push my luck - and was glad of it since 1413 ended up being about all that ES had in the tank today.

Portfolio stats: the account now rises to $169,250 after 59 trades (45 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we're going short at 1405.75.

SLD    10    ES    false    SEP12 Futures     1413.00    USD    GLOBEX    11:53:24

BOT    10    ES    false    SEP12 Futures     1411.50    USD    GLOBEX    00:44:59


CUA (Commonly Used Acronyms)

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

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

Monday possibly higher

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

• Monday higher, low confidence.
• ES pivot 1405.67.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going long at 1411.50.

Recap

After four straight losing days, the Dow redeemed itself on Friday with a 100 point pop, thanks in part to Uncle Ben's comments on the economy.  We now move on to what promises to be a nervous week as traders await new pronouncements from on high - high being tony ski resort Jackson Hole, of course.  It's also the last week of the month and next week starts with a holiday.  Should be interesting.

The technicals (daily)

The Dow: The Dow's 0.77% gain was just enough to take us out of last week's descending RTC for a bullish setup.  It also bottomed out the RSI and set up the stochastic to start forming a bullish crossover.  And the candle itself is a bullish piercing pattern.  So on this chart at least, things are looking good.

The VIX:  As the Dow moved up, the VIX moved down, by 4.89%.  It's close Friday at 15.18 was just shy of exiting its rising RTC and its stochastic is ever so close to executing a bearish crossover.  RSI has peaked here too and the futures were down 4% on a big bearish engulfing pattern.  This all suggests a lower VIX again on Monday which would be good for stocks.

Market index futures: Tonight we have a mixed market at 1: 09 AM EDT with ES up by 0.07%, YM down 0.02% and NQ up 0.33%.  ES holding on here to the top of Friday's tall green candle is a good sign, and its stochastic is looking very close to executing a bullish crossover.  Although this chart doesn't look strongly bullish, I'd not be wanting to go short right here.

ES daily pivot: Tonight the pivot barely ticks up from 1405.33 to 1405.67. With ES little changed in the overnight, we remain above the pivot, which is bullish.

Dollar index: After putting in a doji last Thursday just above its 200 day MA on the $USDUPX, the dollar on Friday gave us, yes, another doji, only this one a bit higher for a 0.3% gain.  So not much resolution here.  However, the stochastic just managed to squeak in a bullish crossover, pointing to further gains on Monday.  However, with the dollar becoming somewhat decoupled from the market lately, this isn't necessarily bad for stocks.

Euro: Meanwhile, the dollar's gain on Friday was the euro's loss on a chart that had a bit more clarity, with the euro dropping out of its rising RTC for a bearish setup.  Its indicators all declined for the second day in a row off highly overbought levels and it stochastic completed a bearish crossover.  This all points to continued downside on Monday and the euro is indeed running lower in the Sunday overnight, giving support to this theory.

Transportation: Finally, the trans on Friday poked under the 200 day MA again, and for the second day in a row rallied back to close just above it at 5119 with a doji.  The indicators continue to decline and while not yet oversold, are getting close.  With the 200 MA seemingly acting as support here, the doji indicates at last a possibility of moving higher on Monday.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  7      5      5           1        .615     -67
 
     And the winner is...

I'm seeing enough bullish signs to believe that last week's slide is over and that we could conceivably see some follow-through to last Friday's gains, though I'm not expecting another 100 point day.  But I am just barely confident enough to call Monday higher.  But this whole week is going to be tough to call.  The wisest course might actually be to just take an early Labor Day vacation.  I don't plan on doing much trading myself this week.

ES Fantasy Trader

Portfolio stats: the account now remains at $168,500 after 58 trades (44 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we go long at 1411.50.

CUA (Commonly Used Acronyms)

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

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

Friday uncertain

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

• Friday uncertain..
• ES pivot 1405.33.  Holding below is bearish.
• Next week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Ouch.  That's what I get for trying to second-guess the market.  Instead of a gain, we got the biggest drop in the Dow since July 20th, cratering 115 points as worsening unemployment numbers trumped housing news and anything out of Europe.  Doh!  Chalk this one up to the What Was I Thinking department.  Oh well, let's just move on and see if I can do any better for Friday.

The technicals (daily)

The Dow: Today's big dump took the Dow outside the left edge of the descending RTC, which is fairly unusual and can sometimes signal that a trend reversal is on the way.  It also brought the indicators very near to oversold and put the stochastic into a perfect position from which to start forming a bullish crossover, probably in a day or two.

The VIX:  I blew this one too.  Yesterday's spinning top was canceled in resolute fashion today as the VIX piled on 5.63% to clearly establish a new rising RTC. Indicators are now near, but not quite to overbought levels, so at least a bit of upside might remain here on Friday.

Market index futures: Like last night, tonight all three futures are up a bit at 1:24 AM EDT with ES higher by 0.07%.  It looks like I ignored the RTC at my own peril last night.  After yesterday's candle gave us a bearish trigger, today was the bearish payoff with a tall red candle for ES that took it right back to the consolidation area from two weeks ago.  But in so doing, it also pulled the indicators a lot closer to oversold, though we're probably still a day or two away from that.

ES daily pivot: Tonight the pivot drops from 1410.25 to 1405.33.  After breaking under the old level just before the open today, we remain below the new umber, but by only half the distance.  Once again, I'd keep an eye on the pivot.  Had I been up at 8:30 this morning, that would have canceled my bullish call for Wednesday.

Dollar index: Today the dollar gave up another 0.17% on a morning star doji that just touched its 200 day MA.  With indicators now well into oversold territory and a stochastic lower than it's been since last April, I'd say we have a chance of moving higher on Friday.

Euro: Meanwhile, the euro continued to rise, although the gains have been narrowing for three days now. And in fact the newly forming overnight candle is now down by 0.06%.  And importantly, the stochastic is forming a bearish crossover, implying the likelihood of a lower euro Friday.

Transportation: At least I got this part right when I said "I'm betting on more downside to come here on Thursday".  as the trans delivered a 1.03% drop on a long red candle that stopped dead on the 200 day MA.  But even this drop was just the bearish trigger and with indicators only now coming off overbought, I'd say we're likely to see lower here again on Friday.  It has been the pattern this year that once the trans touch the third rail of the 200 MA, they go lower the next day.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  7      5      4           1        .615     -67
     And the winner is...

I think today's declines kind of cleared the air a bit.  The indicators are now right around the levels from which the last five short term bottoms occurred, and there are a few technical signs of a reversal out there too.  For example, the NH/NL index hit 43 today.  The last time this happened was August 2nd - and the next day was up big.

Mostly because of this, and even though the candlesticks don't show it yet, I am going to guess that Friday will be a turnaround day, putting in some sort of hammer or doji, to be followed by some actual gains in the early part of next week.  Because of this, I can only call Friday uncertain.  I will add that if ES manages to break above its pivot before noon, that greatly increases the odds of a positive close.  I am still holding my SDS, but if we don't continue lower on Friday, I will be getting out.


ES Fantasy Trader

Last night I was toying with the idea of taking a speculative long out on ES.  Tonight I'm very glad I didn't.
Portfolio stats: the account now remains at $168,500 after 58 trades (44 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we're standing aside again, mainly because I think we're too close to a bottom to make the risk/reward worthwhile, but I'm not yet seeing the reversal and I don't want to catch this particular falling knife.

CUA (Commonly Used Acronyms)

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

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

Thursday just maybe higher

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

• Thursday higher, very low confidence..
• ES pivot 1410.25.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

What an odd day.  It began decidedly negative as befits all the bearish indicators on the charts.  But the traders must have enjoyed their lunches because at 1 PM we started moving back up and while the Dow did finish down 31, the SPX managed to eke out the barest of gains while the Nasdaq ended a decent 0.21% in the green. Now it's time to head back to the charts to see just what the heck's going on here.

The technicals (daily)

The Dow: I did call the Dow lower today but I'll admit this isn't the way I figured.  What was looking quite bearish last night now has a distinctly different cast to it.  Today's action left us with a hammer that closed right in the middle of last week's consolidation range.  It also curiously flattened out the indicators.  Looking at the hourly bars, we have a bullish RTC breakout that occurred at 2 PM.  The conventional wisdom says there's still lower to go here, but I'm not so sure now.

The VIX:  Last night I wrote "we could see more upside to the VIX on Wednesday" but while the VIX did end up 0.6%, it was on an anemic small gap-up spinning top.  Not the sort of thing that inspires confidence in further upside.  In fact, the indicators are now very close to being overbought.  At this point, I'd say it's not out of the question that the VIX could actually move lower on Thursday.

Market index futures: Tonight all three futures are up at 1: 07AM EDT with ES higher by 0.28%.  After putting in a tall doji today, the fourth reversal candle in a row, the developing candle seems to be confirming the end of a downtrend that was just getting rolling.  This is not the overnight behavior of a market that wants to continue lower.

ES daily pivot: Tonight the pivot drops from 1415.08 to 1410.25.  We broke above the old number at 9 PM and this now puts us even higher above the new value, so that's a positive sign.

Dollar index: We got another disconnect in the dollar today.  With the Dow dropping 0.23%, the dollar also fell, by 0.52%, blowing right through the lower BB and reaching very close to the 200 day MA on the $USDUPX.  This leaves us just oversold but without a bullish stochastic crossover just yet.  So it's premature to say that the dollar might rally on Thursday.

Euro: Oddly enough, the dollar's drop wasn't exactly mirrored in the euro, which did post a gain but now seems to be reaching a top, being highly overbought on its indicator and having hit and broken through its upper BB today.  On this basis alone, I'm not sure how much more upside the euro has left here, not exactly encouraging for our market.

Transportation: I called the trans lower last night and they obliged with a respectable 0.49% drop.  This took us out of the rising RTC for a bearish setup and also completed a bearish RTC crossover.  I'm betting on more downside to come here on Thursday.


Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  7      4      4           1        .667      48


     And the winner is...

The ebb and flow of the market has changed.  From the middle of June to the end of July, we were making very nice symmetrical waves up and down.  That pattern broke down at the start of August.  Our last advance after a multi-day decline was on August 3rd.  That followed a hammer, just as we have now.  It happened when the indicators were still all overbought, just as they are now.  And it caught a lot of people, me included, by surprise.  And right now a lot of people are calling for more downside.  But something just doesn't feel right about the current decline.  I'll note too that there's going to be some news coming out on Greece on Thursday and while I think that Greece in general is a lost cause, it seems that lately the smallest shred of positive news or rumor around Greece is met with a positive reaction from the market.

So tonight I'm going to go out on a limb - no, way out on a limb - no, make that waaaaaaaaay out on a limb and gingerly call Thursday higher.

ES Fantasy Trader

As I watched last night's trade progress late this morning I became concerned that ES didn't seem to be really trending down.  Not willing to stand in the way of the uncertainty of the FOMC minutes, I decided to pull the trigger over lunch for a 3.75 point profit.  I left a bit on the table but was glad I did after seeing ES reverse later in the day and finish higher.  And it sure beats watching a winner turn into a loser.

Portfolio stats: the account now rises to $168,500 after 58 trades (44 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we're just going to stand aside.  I know I'm calling the market higher tomorrow but that's a high risk call - too risky for my tastes to put big money down on ES.  Reminder: you can follow these trades live on Twitter @nightowltrader.

BOT    10    ES    false    SEP12 Futures     1407.00    USD    GLOBEX    12:28:58

SLD    10    ES    false    SEP12 Futures     1410.75    USD    GLOBEX    AUG 21 19:35:29

CUA (Commonly Used Acronyms)

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

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

Wednesday lower

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

• Wednesday lower, medium confidence..
• ES pivot 1415.08.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going short at 1410.75.

Column of the Day

What Ayn Rand Taught Paul Ryan , by Michael Kinsley on Bloomberg.com today.  A very funny Ayn Rand send-up.  The Night Owl gives it four hoots.

Recap

Last night I thought we'd be in for another doji day today but that was not to be as instead we got a red candle that confirmed yesterday's dragonfly doji and took us right back down to the 13,200 area that has served as resistance last week but is now support.  At least this wasn't more of this sideways noodling around.  No we have something to work with, so let's get to it.

The technicals (daily)

The Dow: Well unlike last time around the Dow did not keep us waiting for over a week to decide which way to go.  Today it clearly chose lower, shedding 68 points to kill a developing trading range.  More importantly, this decline sent the indicators off top-dead-center and down the slope from overbought, as well as completing the bearish stochastic crossover I mentioned last night.  Right now this chart is definitely looking toppy.

The VIX:  I guess I was wrong about the VIX too.  Instead of going lower, it gained a significant 7.13% today to bring us just above our recent resistance.  With this tall green candle, indicators just coming off oversold and rising futures, it now looks like we could see more upside to the VIX on Wednesday.

Market index futures: Tonight all three futures are down at 1:20 AM EDT with ES lower by 0.28%.  Today's ES candle was a big spinning top with an extended upper shadow, making three dojis in a row.  Now the overnight seems to be confirming that.  Last night I made a big mention of the 1415.50 level as being the make or break for ES.  We gave that up early this afternoon and it's been downhill ever since.  This now give us the bearish RTC trigger, one of the best technicals I've got.  This chart is looking nothing but lower.

ES daily pivot: Tonight the pivot bumps up from 1414.08 to 1415.08.  With ES running under since mid-afternoon, this only leaves us a bit more under the new level, a bearish sign.

Dollar index: Here's an interesting divergence.  While the Dow dropped half a percent today, the dollar also fell and impressive fashion, dumping 0.70% on a gap-down red candle that blew right through recent support and took it clear to its lower BB.  This is the sort of action that would lead me to expect some sort of gap-filling or DCB on Wednesday.

Euro: And today the euro put in a tall green candle for its biggest gains since August 3rd.  And as the dollar moved to it slower BB, the euro moved to its upper BB.That leaves it quite overbought and suggests the possibility of moving lower on Wednesday.

Transportation: The trans, seemingly not having gotten the message yet, rose 0.07% today but did it on a wide-ranging doji, the second in a row.  With indicators that are now way overbought, a flattening out of the recent uptrend and a stochastic gearing up for a bearish crossover, my bet's for the short side on Wednesday.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  6      4      4           1        .636      17
     And the winner is...

I am concerned that the market dropped today at the same time as the dollar.  Usually, they move in opposition.  This failure to move higher in the face of a lower currency raises some red flags.  We're also startig to see some more clearly defined bearish signs in the charts.  Tonight I am definitely not feeling the love and took out some SDS as a hedge at 14.15 earlier today.  Today's drop did not feel like sideways trending and I think we now have the clarity I was looking for last night.  Therefore I'm calling Wednesday lower.

ES Fantasy Trader

Portfolio stats: the account remains at $166,625 after 57 trades (43 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we're going short at 1410.75 on an unusual early evening entry.  I believe we're now seeing an edge that is tradeable.  Reminder: you can follow these trades live on Twitter @nightowltrader.

CUA (Commonly Used Acronyms)

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

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

Tuesday uncertain

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

• Tuesday uncertain.
• ES pivot 1414.08.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

Well last night I wrote "Monday is going to be another one of these doji days like we saw last week" and sure enough the Dow delivered a nice dragonfly doji, ending the day down just 3.5 points.  While the bears made a valiant effort early on to knock 'em down, the bulls battled back - but were unable to move past the resistance that marks the highs for the year.  So is this a top or are we back to last week's sideways motion?  Let's check out the charts.

The technicals (daily)

The Dow: The dragonfly doji is certainly a reversal indicator, though not the greatest, particularly in the current environment when we've seen so many reversal warnings come to naught.  After crying wolf so often, this market will have to show me the downturn before I believe it.  And with a bullish stochastic crossover just completed, I don't see any real indications of a big drop on the way here.

The VIX:  Like the Dow, the VIX gave us a doji, this one a spinning top that gained 4.24%.  Coming inside yesterday's red candle, this is pure indecision.  I though we were going lower today, but that option still isn't off the table for Tuesday.

Market index futures: Tonight all three futures are up just a bit at 1:12 AM EDT with ES higher by 0.05%.  Here's another daily chart with a doji on it.  Of interest here though is that while the overnight is slightly positive so far, the new candle has taken us right to the very edge of the rising RTC.  Moving below 1415.50 on Tuesday will cause a bearish setup while moving above this number will keep us inside the RTC.  Along the same lines, the stochastic is trying to form a bearish crossover.  A move lower in ES will complete it, while a move higher will cancel (or at least delay) it.  Tomorrow will tell this tale.

ES daily pivot: Tonight the pivot ticks down from 1414.25 to 1414.08.  With such a small change and continued sideways action in the overnight, we remain in bullish mode here but need to continue watching for signs of a break below the pivot.

Dollar index: The dollar remains mired in a range on the $USDUPX between 56.83 and 57.20.  Down 0.2% today, it's sort of just bouncing around those two levels like a ping pong ball in a paint mixer.  We did get a bearish engulfing pattern and a bearish stochastic crossover, for what they're worth.  So more dollar declines are possible, but far from certain.

Euro: Meanwhile, the euro seems to be forming an ascending triangle.It looks nearly complete which means that an upside breakout could happen Tuesday.  After nice gains earlier on Monday, it continues to rise in the overnight.  This would be good for stocks.

Transportation: And to cap it all off, one last doji in the trans - a spinning top that lost just 0.08% on Monday.  But we do have a stochastic that looks like it's just about to execute a bearish crossover and a very elevated RSI at 96.39.  So it looks like the downside is favored here, but whether that will happen on Tuesday is impossible to say.

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

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

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

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386 

 32  8/6        52         28        +     1391  

 33  8/13       43         21        +     1406 

 34  8/20       46         31        +     1418

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 7/23 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 for 30.  After an impressive start this year, my monthly calls have now been wrong for 11 weeks running.   For the record, I voted bullish again this week based on my reading of the SPX monthly and weekly charts.

This week both bullish and bearish sentiment increased, as some people got off the fence.  But the big change was that bearish sentiment increased 10 full points, but we remain bullish on the whole.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  6      3      4           1        .700      85


     And the winner is...

After one big pop last week, the market seems to have gone right back into its waiting game.  All the factors that were in play then are in play again.  We've still got the same resistance we had last night and the same lack of immediate downside warnings.  We're seeing dojis all over the place but they're not counting for much, not tonight at least.  However, we are on the edge of a few important RTC's, so I think Tuesday should provide some more clarity here.  There are certainly some bearish indicators out there, but not enough for me to commit to the down side just yet.

So in the absence of a definitive indication one way or the other, I'm once again going to guess that we're in for another doji day and therefore that makes Tuesday uncertain.  The wild card of course is the FOMC minutes.  There's never any telling how the market is going to react to that but my personal wild guess is that they're not going to have a big effect this time.

ES Fantasy Trader

Portfolio stats: the account remains at $166,625 after 57 trades (43 wins, 14 losses) starting from $100,000 on 1/1/12.   Since like last night I don't really see an edge either way tonight, we're just going to stand aside again.  Patience is still a virtue.

CUA (Commonly Used Acronyms)

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

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

Monday uncertain - small positive bias

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

• Monday uncertain - small positive bias.
• ES pivot 1414.00.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

As I was thinking, Friday did in fact move higher after Thursday's breakout, with the Dow adding another 25 points and keeping us above that narrow sideways motion that plagued us for over a week.  The question now is how much gas is left in the tank to continue higher on Monday.  Let's run the charts up the flagpole and see who salutes.


The technicals (daily)

The Dow: While a 25 point move might not seem like much, it was important in two ways: first because the Dow did not slip back into its trading range capped for so long at 13,200, and second because it leaves us precisely at the highs of the year, a resistance line that's already been tested and rejected four times in a row.  Is the fifth time the charm?  If we compare the technical environment of those tests to the current one, we see that we're in better shape now than back then, particularly with respect to OBV as I mentioned last week.  Money flow is also a lot lower now than then.  We also have that funny bullish crossover on the stochastic from a high level, now completed.


That said, the weekly chart shows some weakness in its indicators.  They're all quite overbought now and RSI and momentum have actually already turned down.  The weekly candle is also a hanging man, though that hasn't been particularly reliable.  All in all, we're entering a critical juncture for the Dow.  Unfortunately, with everyone waiting on Jackson Hole, it's not clear that we're going to get the answers we're looking for before then.


The VIX:  It wasn't completely clear, but last Thursday night I claimed that "the VIX might go lower Friday.".  And that's what it did, dropping another 5.88% to close at 13.45, even lower than the 13.7 we saw earlier last week and again a level not matched since June 2007. With the bullish RTC breakout canceled, the lower BB falling away, and a bearish stochastic crossover in the futures, there's no reason I can see why we can't move still lower in the VIX, even from these levels.


Market index futures: Tonight all three futures are essentially flat at 1:38 AM EDT with ES lower by 0.04%., YM exactly unchanged, and NQ up 0.02%.  Friday's ES candle was a stubby hanging man that doesn't count for much.  The important thing is that we remain in a rising RTC and have a completed bullish stochastic crossover.  With no real follow-through in the overnight so far, I suppose ES could go either way, but I'm not expecting a major fall on Monday.


ES daily pivot: Tonight the pivot rises again from 1410.08 to 1414.00 even. With ES flat in the overnight so far, this leaves us barely above the new level.  In fact ES just tested it, touching the pivot at 1:10 AM and bouncing off.  Assuming that holds, this is a bullish sign, but when you're this close, you have to watch the pivot closely for signs of a breakdown.


Dollar index: On Friday, the dollar surprisingly gained 0.30% on a bullish harami.  But this chart remains disjointed and I can't make much sense of it technically, so we move right along to...


Euro: the euro, which also gave us a bullish harami on Friday, but seems more inclined to move higher on Monday, and is indeed already up 0.09% in the overnight.

Transportation: Where the Dow gained 0.19% on Friday, the trans gained 0.52% on a solid green marubozu giving us a three white soldiers pattern, generally a pretty good bullish sign.  And although we're now overbought, the stochastic here has yet to even begin flattening out for a bearish crossover.  More gains possible here.



Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  5      3      4           1        .667      85
     And the winner is...

This is a tough one.  I'm not really seeing a lot of bearish indications on any of the charts.  However, we are now right up against some significant resistance in the form of the 2012 highs: 13,276 for the Dow and 1420 for the SPX.  The previous attempts to break these levels were rejected.  We're in better shape, technically to mount an assault now than back then.  However, the market seems to be in a holding pattern waiting on more nuggets of wisdom from the Fed.  There's also some signs that the TLT may be bottoming, which would be bad for stocks.

My guess is that Monday is going to be another one of these doji days like we saw last week, possibly with a slight positive bias, so I'm going to have to make the official call as uncertain.

My general feeling is that there is in fact not enough gas in the tank right now to successfully break through this resistance on Monday and that the market is going to have to back off before taking another shot at it - but that's getting ahead of ourselves.


ES Fantasy Trader

Portfolio stats: the account remains at $166,625 after 57 trades (43 wins, 14 losses) starting from $100,000 on 1/1/12.   Since I don't really see an edge either way tonight, we're just going to stand aside again.  Patience is a virtue.


CUA (Commonly Used Acronyms)

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

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