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- Wednesday uncertain..
- ES pivot 1410.75. Holding below is bearish.
- Rest of week bias uncertain, technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
My call last night for a slightly higher close was exactly right - until 3:10 PM when the market fell off a cliff. OK, a little cliff, but still a modest 44 point loss. Does this foreshadow a bigger retracement or will the uptrend reassert itself. Maybe the charts can help answer that question.
The technicals
The Dow: Today's action was fairly typical after a big run up. The fact that it was a red candle should not be taken as a reversal warning. The indicators are actually mixed right now: momentum and OBV are decreasing, but money flow is increasing and the stochastic just finished executing a bullish crossover. I tend to place more weight on the latter.
The VIX: The VIX gave us its first green candle in four sessions today. This took us to near the top of an eleven session trading range from 14.25 to 16. Its rising indicators suggest at least a bit more room to run higher here. However, I note that the futures put in a solid green candle today for the first time in eight sessions and that does look like a reversal warning.
Market index futures: After giving up the ghost in the last hour of trading, the futures have stabilized somewhat and are now all up marginally. ES has gained 0.07% at 1:25 AM EDT. And interestingly, the low we hit this evening, 1404.75 was almost exactly the 50% Fibonacci retracement of yesterday's big gain, at 1404.63.
ES daily pivot: Tonight the pivot rises from 1407.67 to 1410.75. This now puts us below the pivot, not because ES is fading, but because the pivot has moved above the price. Either way, it's not what we'd like to see.
Dollar index: Today the dollar put in a small doji centered within yesterday's gap down candle. With highly oversold indicators, this is looking like a chart ready to reverse, and a higher dollar would be bad for stocks.
Morningstar Market Fair Value Index: Morningstar is having its usual web difficulties. How hard is it to post one number? It's either 0.96 oir 0.98. I can't tell.
History: According to The Stock Traders Almanac, Wednesday is historically basically neutral.
And the winner is...
I find the lack of further downward follow-through in the overnight futures to be encouraging, particularly having hit the 50% Fib retracement in ES. Also, the daily Dow chart looks encouraging. But the VIX does not. I know some people are clamoring for an immediate pullback, but I'm just not seeing the sort of toppy charts that would support that. On the other hand, I'm also not seeing a lot of gas in the tank to motor higher. I think for the next few days we're going to consolidate around the 13,100-13,300 area in the Dow. That makes picking an exact close for Wednesday too hard. The best I can guess right now is that we're not in for any major moves on Wednesday.
ES Fantasy Trader
Portfolio stats::the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1. With the lack of an identifiable edge either way tonight, once again we are not trading.
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