Actionable ideas for the busy trader delivered daily right up front
- Wednesday uncertain.
- ES pivot 1312.25. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias down.
- ES Fantasy Trader standing aside.
Sort of a funny sine-wave shaped day today: down right out the gate, then rising back up later on, followed by a late afternoon sell-off. When all was said and done though we were still left with a little 32 point gain for the Dow.
The technicals
The Dow: The daily candle here was a spinning top sitting at the low of yesterday's big dump. This is at least a potential sign of a reversal, though it regquires confirmation. One possible source of that is the stochasitic which is now flattening out in preparation for a bullish crossover, probably in a day or two, absent any new disasters in Europe.
The VIX: As I suspected, the VIX dropped today, partly filling yesterday's gap with a 3.24% loss and forming a pattern that's close to a bearish tri-star. With the VIX back under 20, more gap-filling to go, and basically no support from the futures, I see no reason why we can't go lower again on Wednesday.
Market index futures: All three futures just barely crossed into the green at 1 AM EDT, with ES now up by all of a single tick. The net result so far is a small dragonfly doji, though the candle is clearly still young. But just as the failure of ES to push lower in the overnight last night after a big down day was encouraging, the failure to push higher in the overnight after an up day is slightly concerning. It seems to have made up the early evening sag but gotten stuck at the point of the regular close on Tuesday.
I'll note too that the stochastic, which seemed to be getting ready to form a bullish crossover, has now simply flattened out, which pretty much cancels the signal. The only remaining cause for hope is that we're now trading outside the descending RTC which would be a bullish setup unless we close under 1307 on Wednesday, which isn't too hard to imagine.
ES daily pivot: Tonight the pivot nudges up from 1311.83 to 1312.25. The late evening bounce in ES off the old pivot means we're now three points above. That's bullish on the face of it, but close enough to keep the pivot in play. We don't want to see ES break below it.
Dollar index: Last night I was looking for an evening star here. We got something pretty close today as the dollar dropped 0.15%. And the two day pattern is bearish engulfing, one of the stronger patterns. Also, the stochastic is just now making a bearish crossover, so everything seems to be lined up for more dollar downside Wednesday, which should help stocks.
Transportation: Last night I was betting that a turn-around in trans was near. It happened about a day earlier than I expected, but I was right that the break under the 200 day MA yesterday wasn't going to be a big deal. In fact we eked out a slight gain to close at 5003.33, just above the 200 MA at 5002.55. This move is encouraging for Wednesday as the indicators continue to approach oversold levels and the stochastic is flattening out in preparation for a bullish crossover, maybe later this week.
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 7 5 5 1 .615 379 +$182
And the winner is...
Hmm, the charts seem to be suggesting a rally sometime soon. I'm just not convinced it's going to be on Wednesday. The market seems to be looking for motivation at the moment. By the same token, we seem to have found some support around Dow 12,500. This means that I'm not looking for much action Wednesday. I don't think we'll have a big move either way. And therefore it's also not clear to me if the close will be higher or lower, so much as I hate to do it I just have to call Wednesday uncertain. If I absolutely had to guess, I'd say the bias is slightly to the upside.
ES Fantasy Trader
Yesterday evening's long was a, uh well, long shot, but it paid off well enough in the end for a two point lunch-time profit.
Portfolio stats: the account now rises to $135,000 after 47 trades (36 wins, 11 losses) starting from $100,000 on 1/1 Tonight without any clear edge either way, we're simply going to stand aside. Reminder: you can track these trades live on Twitter @nightowltrader.
SLD 10 ES false SEP12 Futures 1312.00 USD GLOBEX 12:32:21
BOT 10 ES false SEP12 Futures 1310.00 USD GLOBEX JUN 25 20:43:10 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.
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Thanks.
ReplyDeleteWhen you perform analysis do you consider the economic outlook (or news for the day) for instance the European Union Summit? Or just pure technical analysis? Just asking.
Thanks,
Yes, I do factor in economic outlook and watch the expectations every day for all the big data like home sales and unemployment. I just don't talk about it much because first of all, the blog is already pretty long and already takes me over an hour to write every night. And secondly, there are plenty of other sites that discuss the news. Generally, the less clear the charts are, the more weight I'll give to upcoming news and rumors.
DeleteAnd of course, it must be noted that often you will find that rumors and expectations are reflected in the charts, so there's no real easy way to separate the two.