Actionable ideas for the busy trader delivered daily right up front
- Wednesday higher, medium confidence.
- ES pivot 1279.75. Holding above is bullish..
- Rest of week bias uncertain technically.
- Monthly outlook: bias down.
- ES Fantasy Trader goes long at 1288.50..
Yesterday's turnaround clues paid off today as all three major averages moved higher. I've given up trying to understand if this move was somehow related to Europe or not. I'd rather just look at the charts, so let's do it again tonight.
One note of a new feature here. I've been asked more than once what good my daily calls are and how they could be monetized. So beginning today, I'm now trading the Dow ETF's based on these calls and posting the results in my "Accuracy" section. See the details below.
The Dow: Today's 26 point gain was good for a fat little doji, the second in two days. This does indicate support of sorts around 12,100. And it carried us very nearly to the edge of the latest steep descending RTC. More action like this on Wednesday will give us a bullish setup, reinforced by a stochastic that's closing in on a bullish crossover. Even better, today's candle formed a bullish engulfing pattern, which is high reliability. I'm liking this chart.
The VIX: There was more encouraging news from the VIX today which not only dropped 5.5% but did it on a solid red candle that cut right back down through the 200 day MA, negating any support it might have provided. With indicators that remain quite overbought, I'd say there's still room to run lower here which would be good for stocks.
Market index futures: At 1:36 AM EDT, all three futures are in the green with ES up 0.58%. Today's green candle brought ES right back up over its 200 day MA, canceling the threat everyone was so worried about on Friday. And the follow-through in the overnight so far is quite encouraging. And finally, the stochastic has now completed a nice-looking bullish crossover along with the rest of the indicators just coming off oversold. Technically, this chart looks a lot healthier than just two days ago.
ES daily pivot: Tonight the pivot rises from 1272.17 to 1279.75. We remain comfortably above the new level, so that's a positive sign.
Dollar index: The dollar continued its decoupling today, gaining 0.3% on a day when the major averages were also up. This is the third time I've noticed this recently, so I'm going to decrease the importance I attach to this chart in forming my market opinions until I either see the dollar resume its inverse correlation to stocks or establish a solid positive correlation.
Transportation: After two nasty down days, the trans today finally managed to score a decent 0.43% gain on a spinning top. But that's not a particularly good reversal indicator and they're still stuck in the descending RTC. At least the recent pullback has brought us to oversold levels, so a turnaround may be coming in the next few days here.
History: According to The Stock Traders Almanac, Thursday is historically bearish.
Accuracy (daily calls):
Month right wrong no call conditional batting average points trade
April 7 9 2 .438
May 10 7 3 2 .632
June 3 0 0 0 1.000 +26 +$47
Starting today, there are two new columns in this section. "Points" means how many Dow points I captured with my call. If the Dow is up 10 points and I called for a higher close, this column would get a +10, and the "right" column would get a +1. The "trade" column represents how the call would play out in actual trading. Every day, I take on a 100 share long position with a MOO (Market On Open) order for DIA, the Dow long ETF, if I'm calling for a higher close.
If I'm calling for a lower close, I open a long position in DOG, the Dow short ETF. All positions are closed when the market closes at 4 PM with a MOC (Market On Close) order. The resulting P/L is added to the "trade" column. If I don't make a call for a given day, then obviously I make no trade here. I think this is the fairest way to do it (actually it was the only way I could think of doing it).
And the winner is...
Last night I called for a higher market based on the possibility of a reversal. Tonight, we have more evidence favoring a continuation of the action that started today so I'm going to call for a higher close Wednesday.
ES Fantasy Trader
Today we didn't get quite the move I was expecting, but it's always nice to take a profit even if it's only 1.75 points.
Portfolio stats: the account goes to $134,875 after 41 trades (32 wins, 9 losses) starting from $100,000 on 1/1. Tonight we go long at 1288.50 on another early evening entry. One of the things about trading is that when markets change or patterns change, you have to be ready react and change with them.
SLD 10 ES false JUN12 Futures 1278.25 USD GLOBEX 11:01:14
BOT 10 ES false JUN12 Futures 1276.50 USD GLOBEX JUN 4 20:05:19
CUA (Commonly Used Acronyms)
BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date
Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction. All trades listed here are presented only as examples of the author's personal trading style. Investing entails significant risk and trading entails even greater risks. Deal with it.