Actionable ideas for the busy trader delivered daily right up front
- Wednesday lower, medium probability. Bull-bear ratio is 3:6.
- ES pivot 1164.42 Staying below is bearish..
- Rest of week bias uncertain.
- Monthly outlook: bias down, regardless of Fed action in September
- ES Fantasy Trader opened new short position at 1159.25.
Last night I was calling for a higher Tuesday if ES could stay above its daily pivot. Well ES did make one vain attempt to bust under around 4 AM but it was rebuffed and everything then just moved higher from there. The Dow put in a 45 point gain after meandering around in the afternoon, largely on more rumors from Europe.
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| Escher's map of the debt crisis. |
And a tip of the Hatlo hat to M.C. Escher for his brilliant analysis of the interconnections between the various players in the debt crisis. This one is even better than the Lego people. He is right on the money.
The Technicals
The Dow: Monday the Dow exited its descending regression trend channel, which was a bullish setup. Yesterday traded entirely outside which was the trigger. Today was the payoff. Unfortunately, it came in the form of only a 45 point gain in a sort of doji-ish candle that came almost up against resistance at 11,150. And the indicators are mixed. RSI and the stochastic are oversold, but money flow, momentum, and OBV are not. With less than convincing volume today, I'm inclined to give this a +1 bears.
The VIX: Put in another red candle today, as I expected last night, dropping 4.35%. But its indicators are just peaking now at overbought levels. With no near-term resistance in sight, this suggests the VIX has lower to go tomorrow. +1 bulls.
VIX futures: Came down today as expected, though not a lot. While there is still considerable downside from here and the indicators are oversold, the futures have gone up in the recent past from similar levels. And today's drop left the futures right at support at 34.95. I'm not convinced the futures are going lower tomorrow so +1 bears.
Market index futures: At 1:05 AM EDT all three futures are down. ES in particular is down 1.25%. The candle it's forming is a bearish engulfing pattern. OTOH, the indicators are still oversold, although momentum and money flow are decreasing. Overall this adds up to one for the bears here.
ES daily pivot: Now 1164.42. Since ES started drifting lower earlier this evening, we are now below this level. With the overnight trend down, this is bearish.
Dollar index: The other day I noted the exponential run-up in the dollar and said it couldn't go on forever. It didn't. Today the $ put in a big bearish engulfing pattern. This one is high reliability and suggests the $ is going lower on Wednesday. That's good for stocks. +1 bulls.
Oil: Continues to edge higher and that's good for stocks lately (oddly enough). So +1 bulls.
Morningstar Market Fair Value Index: Unchanged today at 0.83, so no points here.
History: Historically, this week is very bad for the Dow, though we sure haven't seen any evidence of that this week. Since Wednesday is the weakest day of the week, I'm giving +1 bears for this.
News: There's bearish news coming out in the overnight around France and China. Given how jumpy the market is over these two actors, this get a big +1 bears.
And the winner is...
The bears. The new bull-bear ratio is 3:6, suggesting a tip of the balance compared to yesterday. I put particular weight on the breaking news and am looking for the market to resume it's downward march Wednesday.
ES Fantasy Trader
Today the ESFT closed out its long at 1168.50 for a small 1.75 point gain. The account is now $129,375 since inception on 8/18 after 13 trades, 9 wins, 4 losses.
BOT 10 ES false SEP11 Futures 1166.75 USD GLOBEX SEP 12 17:22:33
SLD 10 ES false SEP11 Futures 1168.50 USD GLOBEX 13:02:45 Tonight we're going short again at 1159.25.
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