Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, low confidence.
- ES pivot 1399.17. Holding under is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes short at 1396.00.
Last night I was suggesting that the Dow could close lower today and it did, though it dropped just 46 point in a somewhat half-hearted decline. Still, this gradual decay has a different feel than last month's sharp one day dump. It makes one wonder if there's not lower still to come.
The technicals
The Dow: So anyway, today's solid red candle was enough to pull the indicators further down from their recent overbought peak, and to establish a new declining RTC. When will this end? These guys will let us know. And right now, they're not talking.
The VIX: Yesterday's hanging man was confirmed today with a 2.89% decline that brought us right back to the 15 level, although it happened on a funny gap-down green candle. With indicators continuing to rise from oversold and today's drop not doing much to raise the market, I'm looking for a higher VIX again on Thursday, and that's a negative for stocks.
Market index futures: After some profit taking in the final hour of trading, the futures began a slow drift back up, until they got knocked down again at 10:30 PM, evidently on some bad news from China. That leaves all three futures lower at 12:30 AM EDT, with ES down 0.11%. That said, ES is once again retracing this latest drop, or at least trying to. That's giving us a star in the making, following today's star and Monday's hanging man, all indicating uncertainty around a general path lower. The indicators are now clearly on their trip back down and just coming off overbought levels.
ES daily pivot: Tonight the pivot ticks up from 1398.92 to 1399.17. However, we're now back below it, not a good sign.
Dollar index: Today the dollar formed a perfect doji, closing exactly in the middle of its three day range and forming in the process a symmetrical triangle. Since these most often resolve in the direction from which they were entered, that would imply a lower dollar soon, which would be good for stocks. However, one must note that the indicators are only just now coming off oversold levels, suggesting a higher dollar. So we'll just have to see which way this one turns out.
Morningstar Market Fair Value Index: Yesterday the index dropped back to 0.97. The failure to advance any higher than 0.98 is somewhat of a concern at this point.
History: According to The Stock Traders Almanac, Thursday is historically quite bearish, almost as bad as Wednesday.
And the winner is...
Tonight, the majority of the evidence points to a lower close Thursday. However, a lot will depend on the importance the market attaches to this China manufacturing data. As I write this, ES is slowly resuming the uptrend it was in before the news hit. Whether or not it can creep back to the pivot remains to be seen. But the technicals all seem to be pointing lower, so I'll just have to go with that.
ES Fantasy Trader
Tonight we go short at 1396.00.
The account remains at $119,000 even, after 23 trades (17 wins, 6 losses) starting from $100,000 on 1/1.
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