Actionable ideas for the busy trader delivered daily right up front
- Wednesday lower, medium confidence. Bull-bear ratio is 1:7.
- ES pivot 1212.75. Falling below is bearish.
- Rest of week bias lower.
- Monthly outlook: bias bias up, on technicals.
- ES Fantasy Trader remains short at 1193.50.
Well another day, another miss. I really thought we were going lower today, but once again was proven wrong. Today's 180 point jump in the Dow made a mockery of my call for a lower close. Or was I yet again, just one day too early? The technicals look for all the world like they want to drive prices lower, but this market is having none of it. If the 0:8 bull-bear ratio we had last night won't do it, what will?
The technicals
The Dow: The most I can say for the recent pattern in the Dow is that it looks like congestion with a slight negative bias. The daily chart still looks overbought and even after today's pop, we were unable to take out the August highs. And the weekly chart is forming a hanging man. I just have to give this one to the bears.
The VIX: Dropped 5.5% today but remained above its support at 31, closing at 31.56. Having hit its lower Bollinger band two days ago and bounced right back off, it seems more likely to continue higher from here, so +1 bears.
VIX futures: Traded entirely outside its latest descending regression trend channel and that's a bullish trigger. With its bullish stochastic crossover complete, I'd say the futures look to go higher despite their drop today. So that's +1 bears.
Market index futures: All three are down at 1:40 AM EDT with ES dropping 0.37% and NQ down 0.86%, Like the Dow, ES is having trouble cracking resistance at 1221 and has been dealing with overbought indicators for seven straight sessions now. They can't stay overbought forever without going lower. +1 bears.
ES daily pivot: Is now 1212.75. ES is just 6 points above that right now in rather directionless overnight trading. If we break under the pivot, that would be bearish, but since we're holding above, for now at least, that's +1 bulls.
Dollar index: Formed a doji today indicating indecision. With a bottom in from two days ago and still quite oversold indicators, I'd say the dollar has a better shot at going higher tomorrow and that would be +1 bears.
Oil: Oil bubbled up to its upper Bollinger band today before retreating slightly to 88.34. It's virtually even in the overnight and that along with still overbought indicators suggests that oil will sink on Wednesday. And that's +1 bears.
Morningstar Market Fair Value Index: Today the index made quite a move from 0.87 to 0.84. That's definitely +1 bears.
History: Not much in the was of history for Wednesday according to The Stock Traders Almanac, so no points here.
And the winner is...
The bears once again, with a bull-bear ratio of 1:7. I know, I know, I said the same thing last night and the market went up today. But what else can I do? I'm not going to say, well things look bad so therefore I'm going to say the market will be up. The story I'm sticking with is that the market is going lower Wednesday. To do otherwise would be to invite the whipsaw. I guess we'll see.
ES Fantasy Trader
Today we remain short from yesterday - no new trade.
Portfolio stats: the account remains $130,500 after 24 trades (17 wins, 7 losses) since inception on 8/18 with $100K.
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Posts
“..what else can I do?”
ReplyDeleteExactly. Michele, a careful reasoned method of analysis cannot be altered just because a jumping-bean Market, jerked around by RISK ON/OFF hedge funds, jumps around in near-random fashion, in a long, wide trading range.
In fact, an excellent “meta” strategy is to always continue to USE classic sound methods, and at times when they seem to be out of sync with short term market movements, use that variance as additional information.
Is there perhaps a “sea change” occurring..? Is some sort of major trend shift underway, so that all kinds of reversionary methods need to be set aside for a while..? Are there, perhaps, some nearterm Calendar-based events triggering, whose effects are soon to wear off..? An example of this is that on Monday a LongTerm Seasonality entry signal, for October entry, signalled for all who follow Sy Harding’s particular version. That triggered much forced buying (to be held for the next 6 months), over the past couple days. Part of my own Portfolio entered for just that reason.
In July and into August we saw such a period, and the so-called “short term failure” of classic reversionary strategies. It did not indicate that they had suddenly become faulty methodology, but that something unusual was underway.
My friend Jeff Pietsch at ETF Prophet attempts to maintain an indicator which measures a concept of ‘normalcy’; Woodshedder has a concept of a different parameter-set that ought be used when the market becomes ‘abnormal’; J-Trader has a similar alternate set of rules for when the market is ‘Healthy’ or not. It’s tough to quantify. But a good seat of pants rule of thumb is that when classic methods of analysis, or well-established systems, are zigging when the market is zagging, sometimes it’s just random noise and variance, but at other times it becomes like a kind of ‘meta-signal’ which might indicate a Big Move ahead, in one direction or the other...
The only thing your devoted and loyal readers can do at times like this is to rigorously insist that you be nice to Michele, and do not saddle her with any harsh or unjust criticisms.
:) - Daniel
Love to read your comments, Daniel. Same goes for you, Michele. Keep up the great work here!
ReplyDeleteAnd let's go bears!
-J
Dittos to what Daniel & J-Trader stated. It appears the games are afoot!
ReplyDeleteMany thanks to Daniel, J-T and Dr. Evil for their kind words of support during what is obviously a rough patch for me.
ReplyDeleteDaniel's insights are spot-on and laser-keen as usual. I'm also getting the feeling now that something is different about the market. I'm going to spend some time thinking about this. I'll have more to say tonight. If anything, it's a good learning opportunity.