Thursday uncertain, ES pivot is key

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

• Thursday uncertain, watch ES pivot.
• ES pivot 1236.08.  Breaking above is bullish.
• Rest of week bias higher
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader going short at 1232.50..

Recap

Last night I wrote"I think we may close a bit higher but overall it should be a small range doji day." .  Well a 4.16 point gain in the Dow qualifies as "a bit" higher, don't you think?

The technicals

The Dow: Today's tall dragonfly doji was a classical reversal warning.  However, it does require confirmation.  Still it has to make you wonder if, after such a great two day run, we may not just be due for a pullback on Thursday.  That said, support at 12K was successfully tested today and we've also got the 200 day MA for support close behind that at 11,936.

The VIX: Is in an interesting position tonight.  It gave up its support at 24.5 two days ago and its indicators are now in oversold-broken mode.  The next support here isn't til 17.8.  And the VIX almost but didn't quite touch its lower BB today.  So there's no immediate sign of a reversal here, implying at least some more potential upside for stocks.

Market index futures: Unlike last night, tonight all three are running lower, with ES down a quarter of a percent at 1 AM EST.  Interestingly, ES sent out a scouting party to recon the 200 day MA but this expedition failed.  The resulting doji warns of a reversal just like on the Dow chart.  We seem to be seeing some follow-through already so that's a bearish sign.

ES daily pivot: Rose from 1224 to 1236.08 tonight.  And since ES has been drifting lower through the evening, we've gone from above to below the pivot, a bearish sign.

Copper: My. we're just full of dojis tonight - another one on the copper chart.  Same meaning as the others.

Morningstar Market Fair Value Index: Yesterday the index jumped from 0.83 to 0.86 as I thought it would.  That's bullish for stocks.

History: According to The Stock Traders Almanac,Thursday outperforms historically and is the strongest day of the week.

     And the winner is...

This is actually a tough call but I'm going to go out on a limb and say it's the bears tonight.  Mr. Market ran too hard too fast not to take a breather for a day or too.  Today's dojis all warn of a possible pullback tomorrow.  Since the futures are guiding lower, I have to go with that and call Thursday lower.  Of course, since the doji requires confirmation, it's still possible that there might be more gas in the tank.

Contributing to the difficulty of the call is the fact that we haven't hit any upper BB's yet and there is no near term resistance in sight.  If ES can manage to break through its pivot, then a higher close isn't out of the question.  But for now anyway though, I don't think so.  We'll just have to see.

1:35 AM update:  I see that the futures now seem to be rising and NQ has actually turned positive.  This is starting to weaken my bearish call, but we still need to break through the ES pivot.  Watch the 1236 level closely in the morning.  Either way, with some good support and teh VIX almost down to 20 again, I'm not expecting a major down day.

2:15 AM update:  ES just broke through the pivot.  This means that we may very well go higher on Thursday, but it's too uncertain for me to actually call it.  However, I am striking my earlier call for a lower close.

ES Fantasy Trader

Today we stood aside in the expectation that there would not be much movement either way, and that's just how it worked out.  Portfolio stats: the account now still stands at $139,250 after 45 trades (30 wins, 15 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     I may regret this in the morning, but tonight we're going short at 1232.50.