Actionable ideas for the busy trader delivered daily right up front
- Wednesday higher, high confidence. Bull-bear ratio is 6:2.
- ES pivot 1100.42. Current price is above that.
- Rest of week bias uncertain, resumption lower possible by Friday.
- Monthly outlook: bias down, on technicals.
- ES Fantasy Trader opened new long position at 1110.25..
Another nutty day on the Street, courtesy of the VIX and continuing noise from Europe. We were down big, then up, then down, until the Dow finally took off like a rocket at 3:10 PM on YAR (Yet Another Rumor) in the FT. I don't even remember what - something about J.C. "Zut Alors" Trichet approving of the new Beaujolais vintage, I think. Whatever, it was good enough to propel the Dow to a 153 point gain.
The technicals
The Dow: While the intraday chart looked like a map of Space Mountain at Disneyland, the daily formed a nice looking hammer, right at support and with indicators finally starting to look oversold. We also broke back over 10,730 resistance with a close at 10,809 and no face no further resistance until the 11K level again. That's good enough right there for +1 bulls.
The VIX: Last night I wrote "the VIX is looking toppy here", and today the bottom fell out with the VIX taking a 10% dump on a long solid red candle. Never discount a VIX hanging man that's hanging off the upper BB. That one is a slam dunk. With indicators still quite overbought and the stochastic executing a high reliability bearish crossover, it looks like more downside for the VIX Wednesday, implying higher stocks. +1 bulls.
VIX futures: This daily chart looked just like the VIX, so the same analysis goes, meaning another +1 bulls.
Market index futures: ES, NQ, and YM are all running slightly in the red with ES down 0.2% at 1:15 AM EDT in rather directionless evening trading. But the day's candle, a nice hammer/bullish piercing pattern was encouraging. With the ES daily stochastic just executing a bullish crossover and OBV setting up for only the fourth hook upward since the Z contract began trading, this all adds up to +1 bulls.
ES daily pivot: Virtually unchanged today at 1100.42 and trading above since 3:40 this afternoon. Holding higher is bullish, so +1 bulls.
Dollar index: Once again I called for a lower dollar today and once again I was proven wrong. Not so much because the dollar is so wonderful, but simply because the euro is so rotten. But today the dollar finally showed a reversal sign, in the form of a an evening star doji. This one is high reliability. Coupled with even more oversold indicators, I will (sigh) once again call the dollar lower Wednesday. Hey, I've got to be right sooner or later. That's +1 bulls.
Oil: Last night it looked to me like oil was slipping again and indeed it did go lower today. It has now broken all support. However, its indicators are now quite oversold. Oil's weekly chart is showing a developing hammer and it looks to have more upside than downside from here. On the other hand, oil went down and the market went up today indicating a possible reversal in the relationship between the two. Because of this confusion at the moment, no oil points awarded tonight.
Morningstar Market Fair Value Index: Today the index actually declined to 0.77 from 0.79. That's the lowest level since April 1st, 2009. But since it's still going down, it's +1 bears.
History: According to The Stock Traders Almanac, the first Wednesday rates a little bear head, so that's good enough for +1 bears.
And the winner is...
The bulls, with a bull-bear ratio of 6:2. That's good enough to call the market higher Wednesday on technicals. But as always, and I hate sounding like a broken record but it remains true, with the VIX still in Psycholand, any kind of news, or even rumor, good or bad, from Europe will trump any technical call. Caveat trader.
ES Fantasy Trader
Closed today's trade at 1094.50. With the VIX still in outer space, I thought discretion was the better part of valor and at these levels one takes profits where one finds them. I found 5.75 points during lunch time.
Portfolio stats: the account is now $139,625 after 21 trades (15 wins, 6 losses) since inception on 8/18 with $100K.
SLD 10 ES false DEC11 Futures 1094.50 USD GLOBEX OCT 4 12:21:25
Tonight we go long again at 1110.25.
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