Wednesday looking lower

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

• Wednesday lower, high confidence.  Bull-bear ratio is 1:8.
• ES pivot 1188.33.  Pivot in play: holding under is bearish.
• Mid-week bias lower, rebound possible by Friday.
• Monthly outlook:  bias up, on technicals
• ES Fantasy Trader going short at 1184.75..

Recap

Last night I said we had a bit more room to run higher today but warned of a peak in process.  Well that's just what we got, with the Dow admittedly losing a scant 17 points but both the Nasdaq and SPX finishing in the green.  Indecision was rampant, with the Dow crossing the zero line about a dozen times during the session.  But this was pretty much to be expected after Monday's big run-up.  Let's see where we go from here on Wednesday as we run down the technicals.

The technicals

Dow daily

The Dow: The Dow today put in a small hanging man, but with indicators now becoming really oversold, I have to give this one +1 bears without any further equivocation.

The VIX: After falling for six sessions, the VIX has now reached very oversold levels.and after today's close of 32.86 is close to its support of 31.28.  Although today's red candle was not a reversal pattern, the VIX clearly has more room to run higher than lower from here, so that's +1 bears.

VIX futures: After falling also for six sessions, the futures indicators have now fallen to levels from which the VXX has reversed in the past. It looks like it's ready to move higher, so that would be +1 bears.

Market index futures: After putting in a doji Tuesday, ES is now down 0.29% at 1:20 AM EDT with NQ and YM also in the red.  ES's indicators are all quite oversold and its high reliability stochastic is just about to execute a bearish crossover.  This chart looks like a good probability of going lower Wednesday, so +1 bears.

ES, 1 minute bars

ES daily pivot: Now 1188.33, so ES at 1186.25 is now below that, but because the pivot moved above the price rather than the other way around.  This puts the pivot in play for Wednesday.  Watch price action around the pivot.

And here's a perfect example of Pivot Power.  Check out this one minute ES chart just after 1:30 AM Wednesday morning.  At 1:24, ES, which had been simply noodling around center ice for two hours, suddenly makes a break-away and skates in for the goal.  But just at the black line (pivot), he shoots, he doesn't score!  Reee-jected!  In your face, slamma-jamma.

Uh, so anyway, breaking over would be bullish.  For now though, it's +1 bears.

Dollar index: After Monday's big dump, the dollar found a floor today with a nice inverted hammer.  Dead cat bounce or reversal indicator?  I vote for the latter.  With oversold technical indicators I would not be at all surprised to see the dollar go higher Wednesday.  That's +1 bears.

Oil: Today oil put in a big tall skinny doji after four days of solid gains.  Coupled with quite oversold indicators, it sure looks like the tide of oil is starting to run out.  Since oil and the markets are in sync now, that's +1 bears.

Morningstar Market Fair Value Index: Today the index actually rose from 0.81 to 0.83, so that's +1 bulls.

History: According to The Stock Traders Almanac,this Wednesday is the weakest day of the week, so +1 bears.

     And the winner is...

The bears, by a convincing bull-bear ratio of 1:8.  Ever watch the waves at the beach?  They roll in quickly from the ocean and lose speed as they climb up the sand.  Eventually they just peter out and the water reverses to rush back out to sea.  That's where we're at today.  The tiny price movements we saw in both the Dow and SPX are like that wave washing out.  I think Wednesday's going lower.

ES Fantasy Trader

After standing aside yesterday, a decision that seems good in light of the small range we had today, the ESFT is going short tonight at.1184.75.

Portfolio stats: the account remains $158,500 after 25 trades (18 wins, 6 losses, 1 wash) since inception on 8/18 with $100K.