Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, low confidence.
- ES pivot 1357.67. Holding below is bearish..
- Rest of week bias lower technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes short at 1353.50.
Aside from the small range, today did not really pan out as I had expected. I'm starting to get a feeling of existential malaise in the markets, and that was only reinforced by some rather sharp observations from alert reader Daniel in a comment to yesterday's post, which I strongly encourage all my readers to check out. Let's see if the technicals support these ideas.
The technicals
The Dow: In dropping 27 points today, the Dow formed something close to a bearish engulfing pattern. Today's red candle can also be viewed as bearish confirmation of yesterday's star. On the indicator side, while RSI is just short of overbought, OBV hit its highest level of the year yesterday and moved lower today.. Money flow also declined today. And the stochastic is right on the cusp of a bearish crossover. This is a chart that's looking ready to go lower.
On top of this, the SPX Hi-Low indicator has now been pegged at 100 for seven straight sessions. That's really looking overdue for a pullback.
Daniel made some comments about $TRAN, the Dow transport index. This has actually been in decline since February 6th. However, the Dow itself has not followed suit. Not yet anyway. Compare this situation to the second half of last November when the Dow and $TRAN both declined in lockstep. Something's up here.
The VIX: After a gap-up open, the VIX then meandered lower to close exactly unchanged, at 18.19 on the dot. The failure of the VIX to advance could be taken as a non-confirmation of yesterday's star, meaning it could go lower on Thursday, which would be good for stocks. At the same time, the VIX has found some good support at 17.75, so it's possible it could bounce off that level and then move higher. Who knows. The stochastic is now in a position from where a reversal (ie. a move higher) usually occurs in about two days.
Market index futures: Very little guidance from the futures tonight. At 1:56 AM EST we've got ES flat, NQ up 0.12% and YM up just 0.05%. However, today's red candle did take us out of the rising RTC for a bearish setup. ES would have to trade up to 1369 Thursday to get back in. A failure to hit that number (and I don't think we're going to see 1369) would be a bearish trigger. In addition, the indicators have now all peaked at overbought levels and are headed lower. The stochastic completed a bearish crossover today. None of this is particualrly good news for stocks.
ES daily pivot: Tonight the pivot dropped from 1361.75 to 1357.67. However, even with that, ES continues to run under the new value, though little changed all evening. In any event, holding under the pivot is bearish and I see no sign, at least not as of this writing of an attack on it.
Dollar index: The dollar is another chart that did not move the way I expected today, finishing up 0.21% rather than continuing down. But it did it on a red candle. We now have two red stars in a row. With this sort of indecision, I can't really draw any conclusions. It's really more reflection of the continuing mess in Europe.
Copper: One item Daniel mentioned a while back but not today is copper. Copper broke out of a declining RTC two days ago, the same day it also climbed back above its 200 day MA. These both seem to suggest higher copper, which would be good for stocks.
Morningstar Market Fair Value Index: Yesterday the index remained at 0.96 for the third day in a row. The failure of the index to continue advancing is of concern.
History: According to The Stock Traders Almanac, Thursday is historically actually slightly bullish, the best day of this week
And the winner is...
There's a fine line between looking at too little data and too much data. The former leaves you open to poor decision making and the latter just drives you mad. Right now, I'm looking over my shoulder for the men in the white coats. Something's up. To quote noted stock market guru Buffalo Springfield, "There's something happening here, what it is ain't exactly clear".
I'm now seeing signs of a reversal lower everywhere, and yet in the time it took me to write this, ES suddenly jumped from 1355 at 1:40 AM to 1357 at 2:06 AM. Five straight solid green five minute candles. And I don't see anything on the news wires to explain it. This is causing the new ES candle to look like a classic hammer
But since I really hate writing all this stuff and in the end coming to no conclusion, I will move waaay out to the very end of the limb and claim that, given the preponderence of evidence from the charts, Thursday's looking lower, not withstanding this disturbing sudden pop in ES (or the fact that J-Trader is going long).
ES Fantasy Trader
After standing aside yesterday, tonight I went short at 1353.50 at 8:57 PM, a decision I'm starting to regret. But you never know, it may work out in the end.
The account remains $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
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