Friday lower

SPECIAL END OF THE WORLD EDITION

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

• Friday lower, medium confidence.
• ES pivot 1441.17.  Holding below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Arrgh - are we back to this again?  Two days ago I said the market would go up, so it went down.  Last night I said it would go down, so naturally it went up.  Well at least I won't have to worry about this much longer, according to the TV weather report this evening.  And I should add that with Monday being a short session due to Christmas falling on Tuesday, I will be taking that day off, so this will be the last post until next Tuesday night (assuming the world is still around then).

Actually, speaking of laughs, I originally added this weather graphic as a joke.  But that was before I checked this evening's charts.  In one minute, at 8:18 PM ES went from 1429.25 to 1393.  Fasten your seatbelts folks, it's going to be a bumpy ride!

ES, five minute

Anyway, tonight in view of the imminent end of the world, we forgo the usual chart by chart run-down since that's all going to be pretty meaningless come Friday morning.  The only chart you need tonight is ES, right here.  I guess this must be the fiscal cliff everyone's been talking about.  ES was actually above its pivot and wandering about 1445 earlier in the evening.  Then Boehner dropped his Plan B bomb and it was look out below!  When the dust settled ES was around 1423 where it has remained in the late night hours as I write this.

Add options expirations into the mix and it's going to be an interesting session.  It's looking like stocks will follow the futures lower on Friday, so that's the call in a nutshell: Friday lower.

And the really perplexing part about all of this is that Thursday night's vote, or lack of one was totally meaningless anyway, since the Senate isn't going to pass anything the Republicans vote on and Emperor Nerobama would veto it even if they did.  And if by some miracle  Mr. Boehbama announces an agreement after all on Friday, watch for stocks to rebound.  We're living the Franz Kafka dream my friends.  What we really need is Plan C: load everyone in Washington into buses and drive them over the fiscal cliff.  As for me, I'll be adding some extra rum to my eggnog and enjoying a crackling fire in the fireplace tomorrow.  Ho ho ho!

 
Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135
December   5      3      1           5        .769     377

ES Fantasy Trader

Patience paid off on this trade, with a little bit of help from the US Congress proving once again that it's better to be lucky than good.  The net result was a losing trade that turned into a 9.5 point winner.

Portfolio stats:  the account now rises to $193,500  after 74 trades (58 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside being that we just exited a trade.  I think the majority of the money to be made on this one has been captured and there's no point staying in this type of nutzoid market any longer than necessary and risking giving up our profits.

BOT    10    false    ES    DEC12 Futures     1423.00    USD    GLOBEX    00:40:50   
SLD    10    false    ES    DEC12 Futures     1432.50    USD    GLOBEX    DEC 20 01:45:28 

Thursday lower

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

• Thursday lower, medium confidence.
• ES pivot 1440.17.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader Going short 10 ES at 1432.50 at 1:45:28 AM.  NOTE: Twitter refused to accept my post for this entry - I don't know what's wrong with their service.

Recap

Oops.  So much for logic.  It worked the day before, but on Wednesday we went down anyway.  Perhaps because Emperor Nerobama got on the tube - that's always good for a 100 point drop.  And that's just about what we got, with the Dow dropping 99 in a decline as the market started pricing back out all the fiscal cliff warm fuzzies it spent two days pricing in.  But that's all just part of the game.  We just get back up and soldier on.  So let's send out a recon patrol tonight to see where Thursday may lead us.

The technicals (daily)

The Dow: Today's dump nearly retraced all of yesterday's gains, leaving us with a big harami.  That's not a very reliable pattern though.  Indicator-wise, our bullish stochastic crossover is looking somewhat stunted at the moment and the indicators are still just barely overbought.  And today's close left us right at a support line so it's hard to get a good read on where this one may be headed on Thursday.

The VIX:  I missed this chart badly also last night.  The VIX did not go down, it gained a whopping 11.50% on Wednesday in a move stopped only by its 200 day MA at 17.45.  The VIX is not real reliable here.  Of the last five times we approached this MA from below, it failed to break over it three times and succeeded twice.  With no guidance from the indicators, this chart is also fairly opaque.

Market index futures: All three futures are lower tonight at 1:41 AM EST with ES down by 0.31%.  What a difference a day makes.  Whereas last night this chart wasn't looking too bad, on Wednesday ES gave us a red harami that caused a bearish stochastic crossover and moved the indicators lower, now just off overbought.  The follow-through lower in the overnight seems to confirm the harami so this chart is now looking lower for Thursday.

ES daily pivot: Tonight the pivot ticks down from 1441.50 to 1440.17.  This still leaves us a good ways below the new pivot so that's a negative sign, Jack.

Dollar index: The dollar put in its first green candle in eight straight days today, but because of the gap down opening, it still lost 0.09% on the day and remains in its descending RTC and sitting on its lower BB.  Is this a reversal sign/  Not necessarily.  I need confirmation on this chart before declaring the dollar downtrend over.  Too soon to say.

Euro: The euro on Wednesday gave us a tall inverted hammer lying almost entirely above its upper BB.  That alone is usually a fairly good reversal sign.  And it's down 0.22% in the overnight.  This, along with indicators now peaking at overbought seems to confirm that a top is in and the next move is lower.

Transportation: In a bit of divergence, while the Dow dropped, the trans continued higher on Wednesday to remain inside their rising RTC.  But their 0.19% gain put in a classic bearish inverted hammer sitting on their upper BB with some highly overbought indicators (RSI now 90.93).  So there's a definite sign here of a move lower on Thursday.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135
December   5      2      1           5        .833     437

     And the winner is...

Thursday is historically the second weakest day of this op-ex week, and equally as bearish as Wednesday (statement corrected from the original version).  And whereas last night I wasn't seeing much in the way of bearish technicals, tonight I am.  The charts are all either ambiguous or fairly bearish.  Accordingly, I am going to call Thursday lower.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight, we go short 10 ES at 1432.50.

Wednesday higher

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

• Wednesday higher, low confidence.
• ES pivot 1441.50.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Logic prevailed on Tuesday (I like it when that happens) and the market gained ground as I expected with the Dow rising another 0.87% as op-ex week grinds on.  So we move on now and trot out the charts as usual to see what Wednesday might hold in store.

The technicals (daily)

The Dow: Last night I wrote "the Dow may be headed for its upper BB at 13,315."  And bada-bing, we got that and more, with a close above the upper BB at 13,351.  Interestingly, this move did little to move the indicators further into overbought territory and the stochastic actually completed a bullish crossover from the center of its usual range - very unusual.  Anyway, this now leaves us at another resistance point but no real bearish indications on this chart.  I'd have to say more upside is still not out of the question here.

The VIX:  Yesterday's bearish engulfing pattern here paid off big on Tuesday with the VIX dumping 4.71% to finish right at its recent support just above 15.50.  And its stochastic was a mirror image of the Dow, forming a bearish crossover from its middle range.  This move is also a bearish RTC trigger, so I have to say more downside action here is likely.

Market index futures: Tonight all three futures are just a bit higher at 1:10 AM EST with ES up 0.03%.  Today's tall green marubozu took ES right through its upper BB at 1441 without forcing the indicators to very overbought levels.  There's no resistance now til 1457.  I'm not sure we're headed there directly, but I see nothing on this chart to suggest an immanent fall either.

ES daily pivot: Tonight the pivot jumps from 1427.25 to 1441.50.  Even with that big gain we're still above the pivot.  As long as that holds true, it remains bullish.

Dollar index: Yesterday's doji was not confirmed today as the dollar stayed in its descending RTC back to December 7th, dropping another 0.29%.  We also touched the lower BB intraday and the indicators are now highly oversold (RSI is 5.78).  The stochastic also appears to be trying to line up for a bullish crossover so while we might still see a bit more downside here, I'd say the odds are beginning to favor the bulls.

Euro: Meanwhile, the euro continues to charge ahead, remaining firmly in its rising RTC and riding its upper BB higher even as its indicators are nearly pegged at overbought (RSI = 98.48).  But with no bearish candle pattern and continued positive follow-though in the overnight, I'd have to wager that the euro's still not done going up.  There isn't even a reversal on the weekly chart where the upper BB is 1.3363, leaving plenty of room to run.

Transportation: I sure wasn't expecting an outsized up move here on Tuesday but the trans delivered a 1.61% pop that began at 5225 resistance and blasted right through their upper BB at 5278 to close at 5311.  The trans have now cleared all resistance all the way back to May and the next stop is 5342.  5225 meanwhile now becomes support and we seem to be totally ignoring the overbought indicators as we're right back into the rising RTC.  No bearish signs 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 (it's getting pretty long):

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

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

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466  23/38

 39  9/24       52         30        +     1460  23/39

 40  10/1       39         39        -     1441  24/40

 41  10/8       52         34        +     1461  24/41

 42  10/15      41         32        -     1429  25/42

 43  10/22      38         41        -     1433  26/43

 44  10/29      36         43        -     1412  27/44

 45  11/5       44         33        -     1414  27/45

 46  11/12      38         46        -     1380  27/46

 47  11/19      52         34        +     1360  28/47

 48  11/26      48         26        +     1409

 49  12/3       57         21        N     1416 

 50  12/10      46         29        N     1418

 51  12/17      52         28        -     1414   

  

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 11/19 was right, the S&P now being  higher than then. I'm using the column "Accuracy" to track my calls.  So now with only one week to go in 2012, I'm 28 for 47 or 60%.

This week we see little change in sentiment, although I split from the crowd and changed my vote to bearish based on my readings of the SPX weekly and monthly charts;


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135
December   5      1      1           5        .909     536

     And the winner is...

Wednesday and Thrusday are historically the second weakest days of this week, both being equally bearish (statement corrected from original publication).  I think the big up moves we've seen the past two days have been mostly on hopes of a fiscal cliff deal.  This would seem to put us in "buy the rumor" mode.  And when that happens, there's always a risk that they'll sell the news.  I still think that won't happen til the last second, though there's an outside chance of some agreement before Christmas, which means nothing til next Monday.  So having done a bunch of pricing-in, I'm beginning to wonder how much more of this the market is willing to do.  Nevertheless, I still see no real bearish patterns in the chart.  The logical move worked last night so I'm going to try it again and call Wednesday higher, but this time I'm not expecting any more triple digit gains.  We'll see.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight, we stand aside again - this time because we're sitting near some resistance and have already moved a bunch..

Tuesday higher

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

• Tuesday higher, low confidence.
• ES pivot 1427.25.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

My conditional call for Monday panned out nicely.  ES wandered about its pivot in the wee hours of the morning, broke above around 8 AM, then made a quick retest that failed at 9:25 AM.  After that, it was just up, up and away as the Dow finished up a solid 100 points.  We now set our sights on Tuesday as the last full week of the year marches on.  (and Blogspot's blinkin' spell checker is on the fritz again, so I apologize in advance for any typos I may have missed).

The technicals (daily)

The Dow: So the Dow's big win today completely retraced the last two days worth of losses and ejected us from a very short descending RTC.  While the indicators remain overbought, the stochastic seems to be flattening out for a bullish crossover.  So this really throws a wrench in the thesis that last Wednesday marked a short-term top.  However, Tuesday will be critical as we're now just below the resistance at 13,250 that stopped us all last week.  If we can close above that, the Dow may be headed for its upper BB at 13,315.

The VIX:  Last night I thought there might be some upside left to the VIX, and there was, at first.  Then it was all downhill as the VIX lost 3.88% on a tall marubozu that also formed a big bearish engulfing candle and kicked us right out of a rising RTC.  Significantly, we also hit the upper BB at 17.19 today and that's always a good sign of a top in the VIX.  So although the indicators are not yet up to overbought, I now think we could see further downside action here on Tuesday.

Market index futures: Tonight all three futures are up at 1:26 AM EST with ES higher by a respectable 0.26%.  Today's strong green marubozu took us right out of a steep descending RTC for a bullish setup and the follow-through in the overnight is suggesting a bullish trigger.  This has also broken through resistance at 1432, however there's more resistance close by in the form of the upper BB at 1438.62.  ES actually touched that earlier this evening and then fell back.  But we now have a completed bullish stochastic crossover along with indicators that have hooked upward before hitting oversold, so the bearish pressure seems to be evaporating here.

ES daily pivot: Tonight the pivot rises from 1417.33 to 1427.25.  We were above before and remain above the new pivot.  Although the span has narrowed, it's still a comfortable 12 points, so that's bullish.

Dollar index: On Monday the dollar lost just 0.04% on a teensy little toy hammer.  That was still enough to bang the dollar into oversold territory and also trade outside the descending RTC for a bullish setup.  There's now at least a hint on this chart of some dollar gains later this week.

Euro: While the US markets rallied hard on Monday, the euro put in a small red spinning top that just touched its upper BB, hinting at an impending reversal.  This is supported by an RSI at a highly overbought 98.12.  So far in the overnight, it appears to be still just thinking about it, although this chart could be getting ready to move lower.  Maybe not Tuesday, but before the end of the week.

Transportation: Hah - so much for the devil's pitchfork.  After four straight days of dojis where the trans kept probing the 5225 region only to fall back to the 5190 area, today they blasted right through that resistance to close at 5227.  However, we're still not out of the woods here because the trans are now highly overbought and sitting close to their upper BB at 5249.  After a big gain like on Monday, the trans may need to rest a 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     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135
December   4      1      1           5        .900     420
     And the winner is...

Hmmm... calling op-ex weeks can be challenging.  And right now I see a bunch of charts that are nearing various levels of support or resistance.  OK, so here's what I think - the market is going to take some time to digest Monday's gains, but since we do have some decent positive momentum coming into Tuesday and also positive seasonality reasserting itself, and some encouraging fiscal cliff noises emanating from Washington, I'm going to call for Tuesday higher - not by much mind you, but I think that in the absence of any real bearish pressure, it's the logical move.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight, we stand aside again - just because.

Monday higher only if ES stays above pivot, else lower

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

• Monday higher if ES stays above its pivot, else lower, low confidence.
• ES pivot 1417.33.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Last Thursday we were thinking that we could go higher but only if ES stayed above its pivot by Friday morning.  Well after dancing around that line like a field sobriety test, ES finally veered off to the downside around 7 AM and that was that.  The Dow lost 36 points and the SPX dropped 6.  So now that Mr. Market has had the weekend to sleep it off, can he manage a turnaround on Monday?  Let's ponder the charts on this midnight dark and dreary.

The technicals (daily)

The Dow: From an RTC point of view, Friday's Dow was a bearish trigger plain and simple.  With indicators still just inside overbought and now headed lower, and a completed bearish stochastic crossover, there's nothing bullish at all on this chart.

The VIX:  The VIX made a corresponding move to the upside on Friday, gaining 2.66% to give us a bulllish RTC trigger and a completed bullish stochastic crossover.  With no resistance until the 200 day MA at 17.47 there still seems to be some upside left here for Monday.

Market index futures: Tonight, all three futures are up at 1:32 AM EST with ES higher by 0.25%.  Friday gave us a red spinning top and the overnight action so far seems to be confirming a reversal with a gap up.  But the gap seems to be filling as the night wears on so the market may be having second thoughts about whatever weekend fiscal cliff rumors propelled it higher here on Sunday evening.  In fact, the current level of 1418.50 brings use right back into the descending RTC.  With indicators continuing to march from overbought to oversold, I really don't see anything bullish on this chart, despite the move higher so far tonight.

ES daily pivot: Tonight the pivot falls from 1421.75 to 1417.33.  We were so far below that even this evening's gap up did not take us above the old level, but the drop at midnight now puts us above the new pivot, though not by much.  It's a positive sign, just, but bears watching for attempts to cross back under.

Dollar index: On Friday the dollar traded entirely outside its descending RTC, so that's a bullish trigger, despite the fact that it lost 0.45%.  It was an interesting move in that both the Dow and the dollar were down on the same day.  But the dollar is now getting fairly oversold and its stochastic is getting ready for a bullish crossover later this week, so I'd say we're due for a move higher here pretty soon, like Monday or Tuesday.

Euro: The euro continued its latest uptrend unabated on Friday on a tall green marubozu that just about hit its upper BB at 1.3185.  The overnight opened with a gap up but has been coming back down ever since, now back to 1.3166.  The indicators are now overbought and the stochastic is getting into position for a bearish crossover, probably in a couple of days.  This, along with the evening star developing candle suggests the euro may be getting ready to move lower.

Transportation: I mentioned the devil's pitchfork on Thursday for this chart - three tall skinny inverted hammers in a row.  Well  Friday gave us, yes, another one.  Now we have a four-tined fork as the trans just can't seem to get past the 5200 level.  This has resulted in indicators now peaking from overbought, a completed bearish stochastic crossover, and a chart that has hit and then backed away from its upper BB, so logic dictates that there's more downside risk than upside potential 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     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135
December   4      1      1           4        .889     320



     And the winner is...

I know the futures are up tonight and my friend buddy pal J-Trader is going all-in long here  We sort of had a similar situation last Thursday night when I wrote "sometimes the overnight enthusiasm dissipates by morning and the trend reasserts itself", and that was just what happened on Friday.  But once again, the charts remain bearish technically so I'm going to make the same conditional call I made last week: if ES can manage to stay above its pivot by mid-morning Monday, we're going higher, but if it breaks below, then we're going lower.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight, in the absence of a clear edge we stand aside again.

Friday higher only if ES pivot holds

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

• Friday higher if ES stays above its pivot, else lower, low confidence.
• ES pivot 1421.75.  Holding above is bullish.
• Next week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

As expected, we moved lower today with the Dow shedding 75 points in a fairly low volume session amid renewed bickering out of Washington over the fiscal cliff.  So far, nothing has changed my view that Congress will wait until 11:59:59 PM on New Year's Eve before reaching some sort of agreement, and that will probably consist of doing nothing more than some traditional can kicking.  In the meantime, the charts stop here so we might as well look them over.

The technicals (daily)

The Dow: Today's red candle confirmed yesterday's doji and took us entirely out of the rising RTC for a bearish trigger.  RSI has now peaked at highly overbought and our bearish stochastic crossover is complete.  This chart looks ready for more downside.

The VIX:  Today's 3.82% gain in the VIX pretty much was a mirror image of the Dow technically: a big gain that took it out of its descending RTC for a bullish trigger and a bullish stochastic crossover.  Those point to a higher VIX on Friday.

Market index futures:The pin action here is a big gutter ball as all three futures are actually up at 1:15 AM EST with ES higher by a non-trivial 0.30%, most likely on strong Chinese manufacturing data.  That said, today's red candle took us out of the rising RTC for a bearish trigger and left us with declining indicators and a completed bearish stochastic crossover.  Modulo the overnight, this chart looks pretty bearish.

ES daily pivot: Tonight the pivot falls from 1430.58 to 1421.75.  After some real roller coaster action into the close and this evening, ES is now wandering about the new pivot, having broken below and then back over even as I write this.  Whenever this happens at this hour of the night, often the next day is a key pivot day.  Watch this number Friday morning.

Dollar index: The dollar surprised me today by gaining 0.13% on Thursday on a bullish harami.  This was enough to take it out of its descending RTC for a bullish setup.  However, the indicators are kind of all over the place here, so we need confirmation before calling the dollar higher.  Perhaps there's a clue in the euro.

Euro: Last night I noted resistance at 1.3000 for the euro.  Well today the euro struggled with that level, giving us a doji, though still remaining inside its rising RTC.   But there's no confirmation from the overnight so far as  the E continues to rise, now up to 1.3095.  And even at that, we're still not yet overbought so I'd say we could see more gains here on Friday.

Transportation: Tonight I announce the discovery of a new candlestick pattern: I call it the devil's pitchfork.  It consists of three inverted hammers in a row after an uptrend and it's a bearish warning.  And that's what the trans gave us today, even though they managed a 0.14% gain.  The close at 5182 was just outside the rising RTC for a bearish setup, RSI is now quite overbought at 86.49, and the stochastic just formed a bearish crossover.  That all spells lower in my book.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632 
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135
December   4      1      1           3        .875     284

     And the winner is...

Tonight the daily charts are all looking pretty bearish.  The only question now is how much attention this Chinese data will get come morning.  From the overnight action in both the futures and the currencies, I'm hesitant to make the straight bearish call I would otherwise do in the face of these technicals.  But sometimes the overnight enthusiasm dissipates by morning and the trend reasserts itself.  There's just no way of knowing that so I'm going to resort to a conditional call.  Hey, if the Fed can tie interest rates to jobs numbers, I can claim that if ES manages to stay above its pivot by mid morning, we're going higher Friday, else lower.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again in view of the conditional call.

Thursday lower

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

• Thursday lower, low confidence.
• ES pivot 1430.17.  Holding below is bearish.
• Friday bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Quote of the Day

"They might as well have tied it to the orbit of Venus."

          - Rick Santelli, CNBC, commenting on why the Fed linked future interest rates to employment levels.


Recap

I called for today to be uncertain and it was about as uncertain as it gets.  The Dow popped 40 right out the gate, then gave it all back as everyone waited for Uncle Ben to speak.  When he was done, Mr. Market decided he liked what he had heard and the Dow went back up over 80 points.  Then Mr. M. had buyer's remorse and right back down we went, finally closing down all of three points.  A good day for the day traders, not so good for swing trading.  Anyway, now we ca finally get back to worrying about the Fiscal Cliff again.  Let's give the charts the Third Degree and see who confesses.

The technicals (daily)

The Dow: Hmm, so I'm wondering how much faith to put into this tall gravestone doji-ish thing we got today.  It's possible the candle was distorted by Uncle Ben's speech.  On the face of it, it's a fairly bearish pattern, however we did remain inside the rising RTC, just barely.  On the other hand, RSI is now a very high 94.63 and we just got a completed bearish stochastic crossover.  I think I'd like to see some confirmation before calling this chart lower, just because it seems that nothing can pull this market lower going all the way back to November 16th.

The VIX:  Today the VIX completely retraced all its losses from Tuesday, plus a bit more for a net gain of 2.44%.  This took it almost to the edge of its descending RTC.  And its stochastic is starting to flatten out at oversold.  So no bullish call here yet, but it could happen by Friday.

Market index futures: Tonight, all three futures are higher with ES up 0.05% at 1:13 AM EST.  Last night I said ES was due for a pullback and we got one today, snapping a five day winning streak with an inverted hammer that failed to take out yesterday's highs, and I don't mean dinner and a movie.  But this is where it gets tricky.  Today's ES close at 1427.25 was still good enough to keep it in its rising RTC.  However, because this RTC is so steep, we're now trading outside it in the overnight, so even though ES is up a tad, it's still a bearish setup.  And its indicators remain quite overbought, and the stochastic just squeaked out a bearish crossover.  So I'd say there's a fairly good chance we'll see ES lower if not Thursday then on Friday.

ES daily pivot: Tonight the pivot moves from 1426.92 to 1430.17.  Combined with ES in just a shallow rise this evening, we're now below the new pivot, a bearish sign.

Dollar index: The dollar gapped down again today, for the fourth time in four days, this time losing  0.30%.  There's now a clear downtrend going here, no support until 54.83 on the $USDUPX, and a lower BB all the way down at 54.70.  So with the bearish stochastic crossover completed, it looks like the dollar could continue lower on Thursday.

Euro: And while the dollar sank, the euro continued higher on Wednesday to give us a bullish three white soldiers pattern.  In fact it has been posting increasing gains every day for three days.  The problem there is that its now taking on the flavor of an exponential run-up and we all know how those end.  The euro now faces nearby resistance at 1.3100 and is not showing much enthusiasm for testing that level right now, having peaked at 1.3091 earlier tonight.  But we remain in a rising RTC and have rising indicators including a recently completed bullish stochastic crossover, so it's premature to call the euro lower yet.

Let me add here that I took a look at the yen chart at the suggestion of alert reader Daniel.  The question being, what's up with the yen.  One look at this kamikaze chart and the answer is obviously, nothing's up - it's been all downhill since the middle of September.  Why?  I haven't a clue. The best I've been able to come up with is speculation about a possible intervention by the BOJ.

Transportation: Probably the weakest chart of the night, the trans today lost 0.29% on a long red bearish inverted hammer.  This represents a complete failure to take out resistance at 5200 and leaves the stochastic just about to form a bearish crossover.  Combined with yesterday's doji at these levels, we now have two reversal signs in a row and those often signal a top.  If I had to guess, I'd say the trans are ready to move lower on Thursday.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135 
December   3      1      1           3        .833     209

     And the winner is...

The technical position of the charts continues to deteriorate, but on the whole they still not not yet look outright bearish.  In addition, there's some news out of Europe tonight about some ECB agreement which will no doubt be positive for the markets.  Nevertheless, the general impression I'm getting the general impression that this market is feeling a bit toppy.  And there's some bearish RTC action on the hourly charts too.  I'm more than a little worried to be standing in front of this particular bus, but I will go out on one of the limbs of my tree that I reserve specially for this purpose and declare Thursday lower. We'll see.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again, this time because while I'm guessing Thursday's going lower, I'm not putting on a trade until I see the evidence.

Wednesday uncertain

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

• Wednesday uncertain.
• ES pivot 1426.92.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Once again, ES flirted with its pivot in the wee hours, then took off around 3:30 AM and never looked back.  The result was a decent day with the Dow gaining 79 points.  And remember the cup & handle I pointed out on the SPX chart last night?  We got the breakout today as that index finally managed to close above the dreaded 1420.  So what's next?  Let's run the charts up the flagpole and see who salutes.

The technicals (daily)

The Dow: I've been expecting the Dow to make a run for its upper BB and today it took a stab at it, getting very close (just seven points shy) before retreating for a still respectable 0.60% gain.  However, this left us with a looming upper shadow on the candle that's close to an inverted hammer and that would be bearish.  Nevertheless, we remain inside the latest rising RTC and while the stochastic is trying to set up a bearish crossover, it hasn't done so yet.  So there's still really no turn-around evident on this chart.

The VIX:  Last night I wrote "I'd not be surprised at all to see the VIX move lower again on Tuesday".  And so I was in fact not surprised, as the VIX dropped another 2.99% on a move that keeps it in its descending RTC and keeps the indicators moving towards (but not yet in) oversold territory.  With no support til 15.1, I'd say we could see more downside here again.

Market index futures: Tonight all three futures are higher, sort of, at 1:44 AM EST with ES dead flat, NQ up 0.06% and YM up just 0.03%.  This is different from what we've been seeing at this hour the past few days.  With a big nearly 0.9% up move today that drove RSI to 94.54 and the SPX Hi-Lo indicator to 100 for the third day in a row, ES is starting to look tired here.  And although we finally broke 1420, the current level at 1431.75 is the next resistance line.  We've also had five straight days of decent gains, so this streak is starting to get a bit long in the tooth.  It might not be Wednesday, but I'd say ES is due for a pullback before the end of this week.

ES daily pivot: Tonight the pivot jumps from 1417.33 to 1426.92.  Despite the meandering of ES in the overnight, we remain above the new number, but by a lot less, now only four points.  While still bullish, this is close enough to bear watching.

Dollar index: The dollar continued its herky jerky motions with a 0.34% gap down on Tuesday.  That was enough to peak the indicators and just cause a bearish stochastic crossover.  This leaves the dollar at an interesting juncture, having now retraced 50% of its last move up and with a big gap wanting filling, but also with indicators suggesting more downside.  So I'm not going to touch this one tonight.  We'll get some resolution here on Wednesday.

Euro: I called the euro right again today as it posted some good gains to close at 1.3004, a move that gave us a bullish RTC trigger and a bonus bullish stochastic crossover..  However, it's drifting lower in the overnight and I'll note that the euro seems particularly susceptible to BMS (Big Move Syndrome), where a big up day is often followed by a day of retrenchment.  So I'm a bit wary about calling it higher on Wednesday here - just too risky, IMHO.

Transportation: On Tuesday the trans gained 0.13% and here's where the divergence from the Dow shows up.  Today's candle here did in fact hit its upper BB and then fell back to form a good inverted hammer, almost a gravestone doji.  Either way, it's a decent bearish warning.  And with resistance at the 5215 level tested unsuccessfully today, I'm thinking we could see the trans move lower now, possibly as soon as Wednesday.


Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135 
December   3      1      1           2        .833     209

     And the winner is...

Pretty much everything I said last night is still true tonight, but not quite as much.  However, with a Fed announcement coming on Wednesday, that's pretty much what's going to determine the outcome, not the technicals.  Accordingly, although I do still see a positive, though diminishing bias here, as I generally do ahead of the Fed, I declare Wednesday uncertain.  One thought that comes to mind is that we could get a topping day.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again ahead of the Fed.  No point taking unnecessary risks in the face of the unknown.

Tuesday higher if pivot holds

[I accidentally deleted this post earlier today.  Fortunately, I did finally manage to finad a copy in my browser's cache.  So here it is again.]

 

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

• Tuesday higher if ES stays above pivot, else lower, low confidence.
• ES pivot 1417.33.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Well after submerging in the pre-dawn hours (but that doesn't count) ES broke above its pivot in convincing fashion exactly at the open Monday morning and that was that.  Despite sagging somewhat later in the day, we still managed to pull out a win, meager as it was, with the Dow gaining 15 points.  Forget pyramid power folks, pivot power is where it's at.  So one day down in Interesting Week and four to go.  Now let's put all the charts on the 5:12 to Glendale and see where they get off.

The technicals (daily)

The Dow: The Dow's slim gain today kept it inside the rising RTC but with a spinning top.  The indicators are beginning to look weak here.  RSI has peaked at overbought, money flow is highly overbought at 79.08, and the stochastic is leveling out to form a bearish crossover.  So although I can't immediately call this chart lower, I'd guess we'll see a drop in a couple of days at the most.  Right now the upper BB at 13,253 is looking out of reach.

The VIX:  Another funny day here - the VIX gained 0.94% but did it on a long red closing marubozu.  So despite the numeric gain, the pattern doesn't look particularly bullish.  In fact we remain inside a surprisingly good descending RTC (Pearson's = 0.941) and the indicators are nowhere near oversold.  So I'd not be surprised at all to see the VIX move lower again on Tuesday.

Market index futures: Tonight all three futures are down at 1:20 AM EST with ES lower by 0.19%.  Today's continued gains were the payoff for yesterday's three white soldiers pattern I mentioned.  They kept us inside the rising RTC.  But - with the RTC rising so steeply, it didn't take much to fall off the right side and that's what's happening now.  We're really just clinging to the edge here.  And the indicators are ambivalent too, with RSI. money flow, and OBV heading lower, but momentum and the stochastic moving higher.  This sort of indecision is typical of a pre-Fed day.

ES daily pivot: Tonight the pivot rises from 1415.58 to 1417.33.  The drop in ES after the close plus the rise in the pivot lands us smack on top of the new number.  Right now as I write, ES is teetering on the edge trying to decide which side to come down on, with an ever so slight edge to the bulls.

Dollar index: The bearish evening star I spoke of last night completed today with a 0.09% gap down for the dollar.  Although the indicators are still not quite overbought, I'd not be wanting to place any long bets on the dollar in the face of a chart like this right now, especially considering the state of the euro (see next).

Euro: Looks like the euro decided to completely ignore what's 'is name's resignation in Italy as it posted strong gains today with continued upside i the overnight, now at 1.2958 following a big pop at 11:20 PM caused by, um, well nothing really jumps out at me on the news wires right now.  That's why I like technical analysis - I don't have to spend a lot of time reading news articles all day long.  The important point is that this move took the euro out of its latest descending RTC for a bullish setup.  Unless the euro closes below 1.2859 on Wednesday (which seems unlikely), further upside will no doubt follow and that should be good for the markets.

Transportation: And on a very positive note, the trans on Monday took a 1.08% pop to bust through resistance at 5150 and come close to their upper BB at 5212.  We now have a clearly defined rising RTC, support at the 200 day MA and 5150, a completed bullish stochastic crossover, and rising indicators that are not yet overbought.  No bearish signs here, folks.


 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 (it's getting pretty long):

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

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

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466  23/38

 39  9/24       52         30        +     1460  23/39

 40  10/1       39         39        -     1441  24/40

 41  10/8       52         34        +     1461  24/41

 42  10/15      41         32        -     1429  25/42

 43  10/22      38         41        -     1433  26/43

 44  10/29      36         43        -     1412  27/44

 45  11/5       44         33        -     1414  27/45

 46  11/12      38         46        -     1380  27/46

 47  11/19      52         34        +     1360

 48  11/26      48         26        +     1409

 49  12/3       57         21        N     1416 

 50  12/10      46         29        N     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 11/12 was wrong, the S&P now being  higher than then. I'm using the column "Accuracy" to track my calls.  So now with just two weeks to go in 2012, I'm 27 for 46 or 59%.

It's interesting to see how in the space of one week, the spread in sentiment narrowed considerably.  Personally I'm sitting on the sidelines again for the second week in a row and it looks like I've got company.  Still waiting for the fiscal cliff to resolve.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19 
October    8      5      8           0        .615     208
November   7      5      5           0        .583     135December   3      1      1           1        .800     130

     And the winner is...

SPX daily

It's looking to me like the market is already pricing in some good news ahead of the Fed on Wednesday, so I think Tuesday's pretty much going to be a wait & see day.  Technically, the charts are still in pretty good shape, so I'm going to make another conditional call.  If ES stays above its pivot by mid-morning Tuesday, we close higher, else lower.  Either way though I'm not expecting any big moves on Tuesday.

Oh yes, and let me add that while the SPX failed to take out 1420 again on Monday, it does have a bullish stochastic crossover going for it and remains in a rising RTC, so all hope is not lost.  And while we're on the subject - am I the only one seeing a developing cup & handle in the daily SPX chart?  That's one of the best bullish patterns out there.  Take a look here and see if you don't agree.



ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside in the face of continuing uncertainty and the expectation of minimal rewards.

2 comments:

DanielDecember 11, 2012 1:50 AM

Thanks for the kind words, Michele, in your prior comment reply. You create a safe and serious space for posting such speculations. Nobody jumps down anyone’s throat, very rarely does anyone get razzed or ‘held accountable’ for daring to guess the nearterm direction of the stock market and maybe guessing wrong. But you also inject humor and lightness into all your writings and that encourages comments to do likewise.

I understand what you mean by the ancient board game of GO being the closest analogue to short term market ‘swing trading’ and/or ‘intraday scalping’. I never learned to play it but a very close friend was a GO master and he and his wife dedicated a small alcove room right off the living room, in their oddly shaped house (partly built into a hill), to be a beautiful GO room, with a japanese silk screen on the wall and soft lighting, with a board and bags of stones always ready on a low table, and two zafu seats for the players and a love seat for any spectators--often their children.

When my friend explained the basics of the game to me, many years ago, it immediately brought to mind analogies to classic Japanese candle analysis, with their common use of Set Theory and territoriality.

I too learned an entire School of cross-market analysis from Dr. Brett Steenbarger and I was glad that you pointed out to a commentor some nights ago how worthwhile the ‘timeless’ articles on his archival site still are, and that it is by no means a defunct site. I loved his core message (as befitted a shrink, as he is and was), that rather than try to “beat” the market we should rather carefully LISTEN to it... but not like some thunderous voice as would come out of a God of Thunder like Thor... but like as a patient on a couch, with lots of conflicted notions and anxieties...

He used (and taught others how to use) psychoanalysis metaphors and techniques to get at symbolic feelings of what the underlying sentiment or ‘skew’ or expectational set of the majority of market participants might be... and then use that to create distance from the perceived consensus and be appropriately guided whether to fade moves, or pyramid positions into them.

Dr. Brett is and was a unique teacher, who gave much wonderful guidance for years and asked little in return and STILL got heckled by yokels if occasionally he guessed the market direction wrong. (But he was also a zen stoic, and practiced samurai discipline, so such gross embarrassments to planet Earth and humanity as a species just made him chuckle. I know I was far more irked by their unappreciative rudeness than he was.)

Keep your eye on the yen. It continues to be the wild card in the pie, to mix metaphors. In the hieroglyphic language of currencies, the Yen usually is the fixed principle of maximum safety. But a 3-year low in manufacturing output or somesuch has sent the Japanese government and central bankers on a crusade to weaken the currency and help exports. So capital is flooding from the Yen crosses and after the dollar the next hiding place is the Euro, making it seem stronger than it probably really is.

The normally stable yen has broken free and is rolling through the currency solar system like a planet X from the cosmo-mythology of the writer Velikovsky. Correlations are getting wiggly and electromagnetic and not normal, and finally WHAT has gotten into the DAX? What could possibly be so wonderful about the German situation that their stock market has needed to go up 15 days in a row? Much is NOT making sense right now, in terms of correlation analysis.

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MicheleDecember 11, 2012 1:56 AM
Hmm, you noticed that too, eh? Maybe it's because the world is ending in a couple of weeks, according to the Mayans. But we've had several odd things lately, like the market, VIX , and dollar all moving together rather than opposite. I'll have to go mull over the DAX and yen, two charts I don't normally look at.

I especially liked reading Dr. Brett's posts because my dad was a psychiatrist and a very savvy investor. I used to ask him how he decided when to buy or sell and all he would tell me was that he would psychoanalyze the market. TraderFeed echos a lot of those themes.

Of course I was still young and foolish at the time and more interested in other, more trivial pursuits. Now that I'm old and foolish I'm sorry I didn't pay more attention, and of course now it's too late. Perhaps I should add a few books on psychoanalysis to my reading list.