Leaning bearish Wednesday, ES pivot is key

Last night's post was titled "Larger rally likely Tuesday" and that's exactly what we got today, a broad-based market advance that featured a big 322 point jump in the Dow with all 30 components up.  It was good to see but I'm afraid it was also too much of a good thing.  We have now retraced half of the latest big drop from the August 16th high and although the indicators are still oversold, volume has been lagging the past two days, indicating a lack of conviction to this buying.

However, the VIX, as I expected did drop an impressive 14.5% today on a solid red candle and the VIX futures have now peaked, also as I predicted.  But will the VIX continue to fall tomorrow?  I'm not so sure.  I think today's rally was based more on pre-Bernanke Jackson Hole enthusiasm that may or may not pan out on Friday.  When people wake up Wednesday morning and say to themselves, "I bought what yesterday?" they may have a change of heart.

Unfortunately, the Dow just barely exited its descending regression trend channel today and that is a bullish trigger.   So we sort of have a tie between bulls and bears tonight.  There is no clear direction here.

The bottom line

Therefore the deciding vote goes to the market futures, though there's mixed signals here too.  At 2:10 AM, they're voting thumbs down, being all in the red.  ES is now down three quarters of a percent.  However, the new ES daily pivot is 1145.92 and ES just bounced off that.  That's bullish.  So tonight I'm just going to punt and claim that if ES stays above its pivot between now and the open, we'll go higher on Wednesday.  If we fall through it, we'll close lower.  Watch the pivot - it is the key to Wednesday.

ES Fantasy Trader

I exited today's trade at 1143.25 after buying last night at 1123.00.

BOT    10    ES    false    SEP11 Futures     1123.00    USD    GLOBEX    AUG 22 20:32:13

SLD    10    ES    false    SEP11 Futures     1143.25    USD    GLOBEX    11:47:23

That's  20.25 points x $50 x 10 contracts = $10,125.  After four trades, the fasntasy account now stands at $123,125 with three wins and one loss.

Tonight (Tuesday night) I'm going short ES at 1148, but not feeling all that confident about it.

SLD    10    ES    false    SEP11 Futures     1148.00    USD    GLOBEX    01:56:37