Wednesday uncertain, watch Fed

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

• Wednesday uncertain, pending Fed..
• ES pivot 1311.42.  Holding above is bullish..
• Rest of week bias lower technically.
• Monthly outlook: bias up.
• ES Fantasy Trader remains short.

Recap

Today we got pretty much what I was expecting - a small decline, with the Dow dropping just 33 points.  After a 75 point dump out the gate, we retraced half that and just wandered aimlessly the rest of the day.  Clearly the market  was anticipating the Fed on Wednesday, and to a lesser extent, the Empty Suit's speech tonight.  We'll run down some technicals tonight, although I don't think they'll be the primary  market driver on Wednesday.

The technicals

The Dow: Today's action formed a classic hanging man.  Coupled to yesterday's doji, this is quite a bearish looking pattern.  Also, the bearish stochastic crossover is now complete.

The VIX:  Last night I noted the odd action of the VIX, which closed higher yesterday on a red candle.  Well, today it did it again, gaining 1.29% this time on another, longer red candle.  A pair of rising red candles off a bottom like this is a fairly good bullish sign, suggesting a higher VIX on Wednesday which would be bad for stocks.

Market index futures: By contrast, tonight all three futures are in the green, with ES up a non-trivial 0.34%.  NQ is actually up just over a percent at 1:45 AM EST, no doubt a reflection of today's Apple news.  But today's action formed a dragonfly doji, a bearish reversal candle.

On the other hand, since the current rally began on December 20th, the path upward has been littered with various dojis and hanging men, without any reversals following.  In short, the candlesticks don't seem to be working too well here right now.  One thing that usually works great though is the regression trend channel and we remain solidly inside the rising RTC bounding this rally.

ES daily pivot: Moved down again tonight from 1311.42 to 1308.25.  Since ES broke over the pivot at today's close and has been pretty much just meandering ever since, this puts us even higher above the pivot now and that's a good sign.

Morningstar Market Fair Value Index: Yesterday the index held at 0.93, consistent with its recent upward trend.  Still a positive sign.

History: According to The Stock Traders Almanac, the last three days of this week are historically actually positive.

     And the winner is...

Much too hard to call.  We've got some serious mixed messages in the charts tonight, with the Dow looking toppy and the VIX guiding lower but the futures marching higher.  But in the end, it's all moot because tomorrow's going to be news driven, partly in reaction to tonight's State of the Union address and partly in reaction to whatever pronouncements the Fed has to make.  So no official call tonight.  We'll just have to see how this one plays out.  Wednesday's going to be a good day to stay on your toes and watch the news.

ES Fantasy Trader

Tonight we're hanging onto our short from two nights ago.  I'm going to hang on to this one a while longer. Portfolio stats: the account remains $99,250 after 5 trades (3 wins, 2 losses)