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- Wednesday lower, medium confidence.
- ES pivot 1309.33. Holding under is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader remains long at 1311.75..
Well I think I got a little ahead of myself last night in thinking we might go higher today, though I did mention that it wasn't a sure thing. Serves me right for trying to call a bottom. Will Wednesday do what Tuesday couldn't? Let's take a look.
The technicals
The Dow: After a dragonfly doji yesterday, the Dow simply gave us more indecision today in the form of a simple star. Today's candle landed right on the lower edge of the rising RTC from December 28th. That's a bit of a concern. If we don't go higher on Wednesday, then it's likely we'll see further declines. On the other hand, today's action brought the indicators closer to oversold, and to be honest, we're not seeing bearish candles, just indecision. So unfortunately, we need to wait one more day again in the hope of getting some confirmation.
The VIX: The VIX continues to perplex. After rising for two days on red candles, today it sank on a green candle - go figure. The good part is that it was unable to get past the 20 level I mentioned last night, and its indicators are starting to look overbought. The bad part is that the futures seem to be suggesting that the VIX may be due to rise some more over the next few days - bad for stocks. Hard to really pin this one down.
Market index futures: Tonight, all three futures are running in the red, with ES down 0.17% at 1:20 AM EST. Yesterday's hammer was followed by a doji - not exactly the sort of bullish confirmation we'd be looking for. And the overnight isn't providing much to cheer about either. The only good things I see here are that ES has now exited its descending RTC, a bullish setup, and its stochastic seems to be linging up for a bullish crossover. But we're not there quite yet.
ES daily pivot: Bumped from 1306.50 to 1309.33 tonight. Unfortunately, combined with an ES that's been wandering lwoer since about 8 PM, that puts us three points below the pivot, a place we don't want to be.
Dollar index: I thought the dollar would go lower today and it did indeed ghap down at the open, but then proceeded to recapture those losses and actually end higher. The dollar is now consolidating but remains in a descending trend. That could end tomorrow though as it's still looking oversold and getting ready to move higher. That's supported by the euro chart which more clearly looks poised to go lower. None of this is good for stocks.
Morningstar Market Fair Value Index: The index hasn't been updated since last Thursday (hey Morningstar... wake up!) so no news here.
History: According to The Stock Traders Almanac, although February on the whole is actually pretty weak, the first day of the month is historically quite bullish.
And the winner is...
Another tough call. I'd really like to say we're going higher on Wednesday, particularly since February 1st is so strong historically, and I'm aware of the "turnaround Tuesday" phenomenon, but I'm afraid right now I'm just not feeling the love. So I'm going to have to say Wednesday's going lower. Not by a great deal I think, but lower nonetheless.
ES Fantasy Trader
Portfolio stats: the account remains $99,500 after 6 trades (4 wins, 2 losses) Tonight we remain long at 1311.75. Like I said last night, I figure if this trade doesn't make money on Tuesday (it didn't), it more than likely will on Wednesday.
Posts
Quick question, what indicator do you use for your overbought/oversold calls?
ReplyDeleteGood question. I use my "Fave Five" indicators. These are the five rows at the bottom of every chart I put up. They are, top to bottom: RSI, momentum, money flow, stochastic, and OBV.
ReplyDeleteA chart is oversold when RSI goes below 30, momentum below -200, MF below 30, and stochastic below 30. You can see these values at the right side of the chart. Esignal automatically paints RSI red for overbought and green for oversold.
I don't have a fixed number for OBV because it varies so much. Suffice it to say, high OBV, bad, low OBV, good.
Thanks, I was just curious. :)
DeleteIt sometimes pays to wait. Kudos on your call last night!
ReplyDeleteYeah well it was one of those days where the news trumps the technicals. At least I was correct in holding on to my ES long position from two days ago. I closed that out earlier today for a tidy little profit.
ReplyDeleteEverybody, including my neighbor's dog, is expecting a pullback at any time. I know that you called the market lower today, but you kept your long position. That takes moxy! I think that closing it out today might turn out to be a smart move. The only wild card here is the Facebook ipo - might fire the market higher - but, we'll have to wait and see.
ReplyDeleteHey - I thought that you were only awake between 1:00 am and 3:00 am - and slept the rest of the time. Surprised by your post during the day! LOL
Huh? I posted during the day?? How'd that happen? I must be slipping... :-)
ReplyDelete