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- Wednesday lower, medium confidence.
- ES pivot 1407.50. Holding under is bearish.
- Rest of week bias uncertain, technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes short at 1403.00.
Hmm - I wasn't really expecting a big gain today, but I sure wasn't expecting the FOMC minutes to torpedo the market. In fact, I didn't even think it a topic worth mentioning last night. Anyway, that made short work of my call for a higher close. This is just one of those things that TA can't anticipate, like an earthquake in Japan. At least the Dow managed to retrace the worst of it, to end down just 65 points. Still, this development sort of has to make you wonder. So let's hunt for some clues to Wednesday.
The technicals
The Dow: I've been talking about this Dow 13,100-13,250 range for a while now and today's close at 13,199.55 left us stuck inside there once again. Yesterday's close just barely above that proved unsustainable. And today's action gave us a hanging man in a bearish position relative to yesterday's fat star. In addition, although there's no action from the stochastic, I note that OBV has turned south and money flow is continuing a slow but steady decline. Those are all bad signs.
The VIX: Like the Dow, the VIX is stuck in a groove called 15.50. Today marked six straight sessions that we closed very close to that level, this time with a gravestone doji. With action like this, it's very hard to say which way the VIX is going to go, since it doesn't seem to know itself. The action in the futures seems to suggest the VIX may go higher on Wednesday though, so that would be bad for stocks.
Market index futures: Tonight the futures are running in the red by non-trivial amounts, with ES down 0.43% at 1:29 AM EDT. This already gives us an ugly solid red candle longer than the body of today's hanging man. Worse, it takes us outside the rising RTC for a bearish setup and the stochastic is forming a bearish crossover. And meanwhile, ES continues a slow downward drift as I write. Whereas last night this chart didn't look bad at all, tonight it's looking rather concerning.
ES daily pivot: Tonight the pivot steps down from 1409.75 to 1407.50. We were below since 11 AM, and we're still below - not a good sign. But it's now just a four point gap, so the pivot will bear watching Wednesday morning. Failure to break over that number is bearish.
Dollar index: The dollar took a pop today that pushed it out of its descending RTC for a bullish setup. Add in rising indicators and I would not be surprised to see the buck continue to strengthen Wednesday, and that would be bad for stocks.
Transportation: Today the $TRAN pretty much mirrored the Dow, giving us a hanging man that remains inside a rising RTC. The indicators are a bit mixed, with the RTC showing overbought but OBV showing oversold. The stochastic though does not suggest a top here yet.
History: According to The Stock Traders Almanac, this whole week is historically quite bullish. In fact, April is number one ranked month of the entire year for the Dow.
Accuracy: Beginning with this new quarter, by popular reader request, I am going to start tracking the accuracy of my market calls every day. I will count a prediction as correct if the Dow closes in the direction I called, no matter what the point value is. So here we go:
Month right wrong
April 1 1
And the winner is...
Hmm, there's bad news crossing the wires about Australian trade deficits and Chinese growth, and some renewed rumblings about various issues in Europe. I know that this week and whole month are supposed to be quite strong historically, but past results don't guarantee future results, as they say. And right now, the charts seem to be taking a turn for the worse. All of a sudden I'm not feeling the love, so I'm calling Wednesday lower.
ES Fantasy Trader
Portfolio stats: Since we did not trade last night, the account remains at $131,750, after 27 trades (21 wins, 6 losses) starting from $100,000 on 1/1 Tonight we go short at 1403.00 at 1:33 AM EDT.
Posts
Hi Michele,
ReplyDeleteCame to your blog a couple of weeks back and have been amazed how accurate your calls have been every single day!
Your take is very insightful and your reasoning very analytical. Highly appreciate your posts everyday.
However, have you considered tweeting/posting your exits? As a part-time trader trying to learn this art, I am realizing that trading is just as much (or perhaps even more) about when you close a position as it is about when you open a position. Just a humble request.
Again, appreciate all you do.
Thank you.
Thanks for the kind words and for reading my nightly musings. I've considered your idea in the past and haven't done it for several reasons. First, the original purpose of my ES trades was mostly just to show that my calls were right more often than wrong. It would be hard to duplicate this unless you stay up insanely late, since I generally open my positions around 1 to 2 AM Eastern. Second, it's already a lot of work putting together each post every night.
DeleteHowever, since you're not the first person to request this, I'm willing to give it a try. I'll have to set up a Twitter account for the Night Owl. I'll try to get to this tomorrow and we'll see how it works out.
Meanwhile, if you want help learning, I'm going to give you a good tip - go to Dr. Brett Steenbarger's Trader Feed blog and read it from beginning to end. I learned more about the art of trading from that than from a whole shelf full of books and several years worth of trying to become successful.