Thursday too tough to call, bias lower

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

• Thursday uncertain, bias lower..
• ES pivot 1171.50.  Current price is far below that.
• Weekly bias higher, rebound possible by Friday.
• Monthly outlook: bias down on response toFed.
• ES Fantasy Trader opened new long position at 1156.75..

Recap

Last night I called for the market to go lower today on technicals.  I was somewhat surprised by the viciousness of the downslide, with the Dow dropping 284 points on the Fed announcement.  So Uncle Ben, is tanking my 401-K your idea of saving the economy?  Thanks a lot - for nothing.  One big hoot of derision for today's announcement.

The technicals 

Today's ugly loss  left the Dow near its strong support at 11K.The VIX and VIX futures both shot higher today, suggesting lower stocks tomorrow  However, I'm feeling uneasy suggesting this.  The VIX is now back to the levels it started at back on August 8th when we had those four days of violent up and down swings.  Of course, when the VIX was in the upper 30's on September 9th (the last big Dow dive) the next day produced a small gain.

And the Dow is now back down to near the lower end of its recent trading range.  TNA, in fact is right at the bottom of its recent range.  That chart looks to me to be due for bounce either tomorrow or Friday.  For tomorrow, I see two possibilities:

1. we continue lower on continued jitters, but by a much smaller amount, or
2. we shoot back up again in a volatility rally...

Which will it be?  Who knows.  With the VIX this high, it's really tough to come up with a convincing forecast either way.  I continue to stand aside.  I know J-Trader is doing the same right now, so I'm in good company.  This market is too tough for me.


ES Fantasy Trader


So then  why is the ESFT going long tonight if I think the market is going down on Thursday?  Because I believe today's negative action was due entirely to the Fed statement and that is was overdone.  We could see a turnaround later in the day, or even more likely by Friday.  I think the risk/reward on a swing basis favors the long side right now.