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- Wednesday uncertain.
- ES pivot 1348.00. Breaking under is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias down.
- ES Fantasy Trader standing aside.
Well I'm sure glad I only said that Tuesday was a "maybe lower" last night because it ended up being clearly higher to the tune of 96 Dow points. I'm now putting in the "trend up" arrow although technically we're still not quite there yet because the Dow has not put in three consecutive up days yet. But the overall trend of the past six sessions is clearly up. Now we're at an important junction. We'll run down the charts because that's what I do, but I'm already thinking that tomorrow's close will be determined more by what Uncle Ben has to say than what the technicals look like.
The Dow: Yesterday the Dow gave us a hanging man. Today proved why this candle always requires confirmation to be a reversal sign. We didn't get it of course and in fact got a bullish engulfing pattern instead and that keeps us solidly inside the rising RTC and points the way higher, overbought indicators notwithstanding. And as an alert reader commented yesterday, just hitting the upper BB is no guarantee of a reversal either. And in fact there were two instances last year where the Dow went six and then seven sessions in a row crawling up the upper BB before finally peeling away. We might be starting one of these "wall of worry" rallies here.
The VIX: And on the other end of the BB's, the VIX bumped down its lower BB for the second day in a row, ending the session up 0.33% but still comfortably below 20 at 18.38. However, the VIX is pretty good about bouncing off its lower BB. That would indicate a higher VIX, I'd like to say tomorrow, but let's be cautious and just say later this week.
Market index futures: Like the Dow, yesterday's ES hanging man was invalidated by today's big gain, and the bullish engulfing pattern predicts more upside possible Wednesday. The indicators are not reliable at the moment. And at 1:27 AM EDT, we have another mixed session, with NQ up a bit but both ES and YM lower. ES is down 0.07% - nothing of great significance here.
ES daily pivot: tonight the ES pivot vaults from 1338.58 to 1348.00. With ES wandering lower from its earlier highs this evening, this now puts it right on the pivot. We could go either way from here.
Dollar index: The inverse dollar/stock correlation is back on with the dollar taking a big 0.77% dump today to remain solidly inside a descending RTC. No sign of a reversal here either so we have to assume continued lower on Wednesday.
Transportation: The big gain in the trans yesterday was the real clue to today's action - too bad I saw it but didn't grasp it. Anyway, with another green candle and another 1.13% up today, the trans have just been on a tear the past four days, closing at 5251. There's no resistance until 5340 and we didn't bounce off this upper BB either, so there might just be more upside left here.
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 4 4 4 1 .500 -44 +$89
And the winner is...
Well the charts have mostly taken a turn for the positive today, with the exception of the VIX which looks ready to move higher, which would mean lower stocks. But it's really all moot because I think tomorrow's outcome will be determined by whatever the Fed has to say. And that could go either way. With the recent run-up apparently pricing in good news, we might very well get a classic "buy the rumor, sell the news" day. But if Uncle Ben makes an unexpected move the market likes, we could get further gains. The charts are not quite at any important resistance levels yet. So against that background, I hope you'll forgive me if I take a pass on this one and simply call Wednesday uncertain.
If I had to take a wild guess, I'd vote for a higher close simply on the basis of the TLT, which today turned decidedly lower, breaking a four day winning streak.
ES Fantasy Trader
Ugh - I'm throwing in the towel and covering this short at 1349 for a disappointing 10.25 loss. There's just too much risk of an upside surprise on Wednesday to hold onto this one any longer. If we do close lower, I'll just go out in the back yard and bang my head against a tree.
Portfolio stats: the account drops to $124,125 after 44 trades (33 wins, 11 losses) starting from $100,000 on 1/1 Tonight we stand aside ahead of Fed news.
BOT 10 ES false SEP12 Futures 1349.00 USD GLOBEX 01:06:13SLD 10 ES false SEP12 Futures 1338.75 USD GLOBEX JUN 19 01:12:30
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.