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- Thursday lower, medium confidence. Bull-bear ratio is 0:5.
- ES pivot 1240.83. Holding under is bearish..
- Friday bias lower.
- Monthly outlook: bias down, regardless of Fed action in September
- ES Fantasy Trader holding long.
Well there go those pesky Europeans again. Mama mia, this time it's Italy. It's like we're right back to last summer playing financial Whack-a-Mole. Just as the Greek mole disappears into his hole, the Italian one pops up, only here it's the market that got whacked. All of my carefully wrought technical analysis from last night went pfft, right out the window. I don't know if it's even still worth playing the game since today's seismic moves everywhere threw all the charts into disarray. But let's give it a shot anyway and see what happens.
The technicals
The Dow: Got crushed for a 389 point loss because the Italians are lousy money managers. Thanks a lot - for nothing. The 12K support and 200 day MA support meant zip and the stochastic turned a bearish crossover. Technically, I'm not liking this chart at all, so +1 bears.
The VIX: Took a big gap up to put in a tall green candle for a whopping 32% increase that went almost exactly to the upper BB and back into Psycholand, the upper 30's. I've said it before and I'll say it again: the VIX rarely spends more than one day at the upper BB without retreating. The stochastic formed a bullish crossover today but that may be an artifact of today's big jump rather than a true predictor. So while there may not be much upside left to the VIX here, it would be premature to say it's coming down Thursday, so no points.
VIX futures: The futures actually went over the upper BB today but further gains are not out of the question. Another one that's too hard to call, so no points.
Market index futures: Once again, all three are in the red, with ES down 0.27% at 1:35 AM EST. Today's monster decline stopped at a support line of 1226 but in the overnight we're resuming lower, currently to 1222. Next support is 1213, then 1193, then 1165 and 1120. You'd think after such a big drop we might get a dead cat bounce but lately this year whenever we have a big down day, we get another one, so +1 bears.
ES daily pivot: Now 1240.83. Even after coming down since today, ES is still below this level and falling again. This looks bad, so +1 bears.
Dollar index: Made the obvious move, shooting right up to its upper BB Big jumps like this tend to be followed by small dojis so that's what I'd look for on Thursday, but its too uncertain to give any points.
Oil: About the only chart with some semblance of sanity today, oddly enough, oil hit its 200 day MA and retreated on something of a bearish engulfing pattern. I'd look for lower oil Thursday, so that would be +1 bears.
Copper: Took a big fall today in sync with the rest of the market. The resulting pattern with that doji star from yesterday looks bearish and now we have a bearish stochastic crossover, so this one goes +1 bears.
Morningstar Market Fair Value Index: Today the index was unchanged again at 0.90, so still no points here.
History: History seems to count for zip right now, so no points.
And the winner is...
The bears, with a bull-bear ratio of 0:5. On this basis I will call for a lower close Thursday technically, with the explicit caveat that none of this analysis amounts to a hill of beans in the face of whatever the next rumor/innuendo/scrap of news might come wafting out of Europe tomorrow. This market is now not merely irrational, it is irrationally irrational. As a consequence, I am completely standing aside until some semblance of sanity returns. Pull up a chair.
ES Fantasy Trader
Today we are simply holding the long position entered last night. I think today's decline was really overdone and am expecting a bounce eventually.
Portfolio stats: the account remains $173,500 after 35 trades (26 wins, 9 losses) since inception on 8/18 with $100K.
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