More gains possible Wednesday

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

• Wednesday higher, medium confidence
• ES pivot 1255.33.  Holding above is bullish.
• Rest of week bias higher unless bad EU news..
• Monthly outlook: bias up, on politics and technicals.
• ES Fantasy Trader went long at 1261.75.

Recap

Last night I said "the market" was going lower today.  It ended up being one of those mixed days you don't see all that often.  The SPX was essentially flat, the Naz did in fact fall just a tad, and the Dow actually gained 0.43%.  So I guess I was wrong, since I base my calls on the Dow.  We'll take a look at how this happened and see if it provides any clues for Wednesday.

Quote of the Day

“the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them... To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment.”

           - Leon Cooperman, Omega Advisers, in an open letter to President Obama

The technicals

The Dow: Today's candle was almost a carbon copy of Monday's.  The Dow made some good progress in its third attack on that pesky 12,165 resistance line, sending out a scouting party to a high of 12,216 and finally closing at 12,150.  The fact that we didn't go down today in the face of three candles that looked like reversal indicators is a positive.  It's also a good lesson of why you wait for confirmation after an inverted hammer, especially when it's not a classical example of that pattern.

Right now, the Dow looks like it's in "climb the wall of worry" mode and that's not a bad thing.   The last three times it took on the 12,165 level  This time we seem to be better positioned to actually break out.

The VIX: The VIX, finally below the 30 level, which I define as the brink of insanity, put in a small hanging man today.  Coming as it does after two strong green candles makes me wonder if the VIX has a lot of gas in the tank to motor any higher Wednesday.

Market index futures: Tonight we're seeing all three futures solidly in the green by over half a percent.  ES is up a decent 0.58% at 1:40 AM EST.  And most significantly, ES is now trading entirely above its 200 day MA at 1254.33.  Watch that number  now for support.  And watch 1265 for some minor resistance.  Then 1275, then 1285.  With yesterday's doji apparently resolving to the upside, it's looking promising here for Wednesday.

ES daily pivot: Dropped a bit today to 1255.33.  ES broke above the pivot just after the close today and has been drifting higher all evening.  With a seven point spread right now, it's looking good.  As long as we can hold above this, I'm encouraged.

     And the winner is...

Tonight it looks like the bulls.  The indicators are all overbought now but they're broken and have lost their predictive power for the time being.  My guess is that they're going to run 'em up guardedly into Friday's EU meetings.  If that works well, then we're going higher, possibly revisiting the July highs.  And if not, then we're going down, simple as that.  So I'm going to say that all things considered it looks like Wednesday's going higher.

ES Fantasy Trader

Today we took disappointing 11.5 point loss on last night's short.  Portfolio stats: the account is now $161,375 after 39 trades (28 wins, 11 losses) since inception on 8/18 with $100K.  Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier.  Tonight we go long at 1261.75..