Actionable ideas for the busy trader delivered daily right up front
- Wednesday possibly lower, low confidence.
- ES pivot 1398.92. Holding above is bullish..
- Rest of week bias lower technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
It seemed to me last night like we had a chance to go lower today and so we did, with the Dow shedding 69 points, just its second losing session in 10 straight. Since 2012 began, the Dow has only had one instance of a two day losing streak, one of three days, and one of four days. Which path is Wednesday on? Follow the Night Owl and get the hoot.
The technicals
The Dow: Today's drop was expected and I took a profit in my DXD trade from yesterday. The indicators are all now coming off overbought, suggesting lower to come after today's long red candle.
The VIX: Last night I wrote "there's more upside to come" and the VIX delivered today in the form of a 3.59% gap up. But it was a red hanging man. So this leaves us wondering if Wednesday will follow lower or if the rising indicators will prevail. Falling VIX futures today would suggest the former, which would be good for stocks.
Market index futures: Unlike last night at this time, tonight all three futures are in the green at 1:24 AM EDT with ES leading the way, up 0.18%. Nevertheless, we are now trading outside the rising RTC and that is a bearish setup. Coupled to highly overbought indicators, and today's candle in the shape of a hanging man, this has the feel of a market ready to go lower.
ES daily pivot: Tonight the pivot falls from 1401.83 to 1398.92. We had a pop in ES earlier this evening that broke through the old pivot and despite a gradual drift lower after 10:30 PM, we're still four points over the new number, a good sign - while it lasts.
Dollar index: Today the dollar actually gained 0.14% on a funny homing pigeon pattern you don't see very often. This is a bullish reversal pattern and with indicators approaching oversold, we might see a higher dollar in the next few days, if not Wednesday.
Morningstar Market Fair Value Index: Yesterday the index remained at 0.98, the highest level of the year. I'll take the fact that the index managed to break the 0.96 level last week as a positive sign.
History: According to The Stock Traders Almanac, Wednesday is historically very bearish.
And the winner is...
More mixed messages tonight. The Dow and ES charts look ready to go lower but the VIX and ES trend suggest higher. What to do, what to do... OK, what this feels like to me is a market that still wants to go higher but needs one more day of lower prices before resuming the uptrend. We are also entering the weakest three days of the month. So tonight is one of those times that I'm going to disagree with the futures, possibly at my own peril, and claim that Wednesday goes lower again.
ES Fantasy Trader
Last night's short paid off, not spectacularly, but I'll take a 4.75 point profit any day. Tonight, we're standing aside again. While I do think the market's going lower Wednesday, the edge right now isn't compelling enough for me to jump in here. With the account up 19% YTD, I think I can afford to take a pass on days like this.
So our balance now rises to $119,000 even, after 23 trades (17 wins, 6 losses) starting from $100,000 on 1/1.
BOT 10 ES false JUN12 Futures 1397.25 USD GLOBEX 10:51:59
SLD 10 ES false JUN12 Futures 1402.00 USD GLOBEX 00:58:28 
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