Bounce Wednesday if pivot passed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Wednesday higher, low confidence.
• ES pivot 1363.42.  Breaking above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains trapped long.

Recap

Sigh - wrong again.  I did mention yesterday that we had "a market that wants to reverse but isn't totally committed to the idea."  Turns out it actually hated the idea, with the Dow plunging another 214 points to close on session lows.  Looks like we're right back to last year's Euro-mania, with Spain now apparently taking on the Greece role in the 2012 edition.  We'll give the charts another shot tonihgt in the hopes that we can be a bit more accurate on Wednesday.

The technicals

The Dow: There is absolutely no candlestick reversal pattern at all on the Dow daily chart.  On the other hand, the indicators, which were all oversold yesterday only got even more oversold today.  The thing is, is that once the market gets into these selling snits, it can go on for quite a while with oversold indicators as we saw last July when it took 10 straight sessions to get a reversal after the stochastic made a bullish crossover.

So having broken support at 13K and support at the lower BB (12,881) and monthly support at 12,756, we're kind of in free-fall at the moment.  From here there is no further support until 12,625, then 12,470, then 12,250.

There are just two positive signs here.  First, the Dow has now fallen off the left edge of the steep descending RTC.  Second, this sell-off is going exponential to the downside.  Parabolic moves are always a great top indicator and they work the other direction too.  Still, at this point we need confirmation before calling a bottom and I don't see any right now.

The VIX: Hah - after putting in a clear reversal indicator yesterday, today the VIX didn't.  Indeed, closing at 20.39, up another 8.4% today, it just left its upper BB in the dust at 18.6.  Although I did expect a turnaround today, the fact that we moved even further above the upper BB only strengthens the case for a move lower on Wednesday.  It would be highly unusual indeed for the VIX to spend three days above the upper BB.  And I note that the VIX has gone just completely exponential - always a sign on any chart that a blow-off top is near.

Market index futures: Tonight we're finally seeing some concrete signs of an end to the slump with all three futures in the green by meaningful amounts.  ES is up 0.44% at 1:31 AM EDT.  Also OBV today hooked up for the first time since this slide began seven sessions ago.  Momentum also seems to have bottomed.  However, what looked like a bullish stochastic crossover unwound itself today, so there is not total agreement here.

ES daily pivot: Tonight the pivot takes a big drop from 1376.50 to 1363.42.  This is good news indeed because with ES trending higher since around 3 PM today, we're now only about a point under this.  Breaking through this level will be bullish.  If we bounce off and head south again, that's bad news.

Dollar index: Well the evening star failed to come out today.  Instead of going lower, the dollar gained 0.22%.  But it left us with a quandary.  The candle is a bullish piercing pattern, suggesting more upside.  But the stochastic just completed a bearish crossover suggesting some downside.  My best guess is that the dollar has no idea which way to go and we're back to simply reacting to news from Europe, just like last year.  Ugh.

Transportation: The story of the trannies is a bit better than the Dow.  While they took a dive today along with the rest of the market, they stopped just short of some support at 5044.  Still there's nothing on this chart to suggest a reversal yet.


History: According to The Stock Traders Almanac, Thursday is historically slightly on the bearish side.

Accuracy:

Month right  wrong

April   2      3

     And the winner is...

Yesterday we were oversold.  Today we're even more oversold and the reversal signs are a bit more convincing tonight than last night.  So I'm going out on a limb and once again call for a higher close Wednesday.  If we do move higher, I'm going to use the opportunity to raise cash and do some hedging.  The monthly SPX chart is beginning to look pretty ominous.  And I do want to point out that this call is predicated on ES moving above its daily pivot.  If that doesn't happen by mid-morning, then all bets are off.

ES Fantasy Trader

Portfolio stats:  The account remains, for the time being, $137,750, after 28 trades (22 wins, 6 losses) starting from $100,000 on 1/1  Tonight we continue to remain long from last Wednesday's trade.  Patience may pay off in the end.