Actionable ideas for the busy trader delivered daily right up front
- Friday lower, low confidence.
- ES pivot 1364.50. Holding below is bearish..
- Next week bias lower technically.
- Monthly outlook: bias down.
- ES Fantasy Trader remains short at 1363.50.
It was a kind of jittery day on the Street today as the Dow was down, then up and finally down again to lose 47 points on a fat spinning top representative of this whole holiday-shortened week. With mixed economic numbers today, we turn to the charts for some guidance as to how Friday might play out.
The Dow: Today's basically aimless wandering was pretty typical of a holiday week low-participation day. I'm trying hard not to read too much into it. Still, the lower close coming at a point where the Dow is highly overbought is enough to give one pause. And the stochastic is just above to execute a bearish crossover. Finally, we closed just barely outside the rising RTC and that's a bearish setup. This chart definitely looks like it's got more downside risk than upside potential at this point.
The VIX: And here's another example of the nervous state of Mr. Market. On Tuesday the VIX gave us a doji suggesting a possible bullish reversal. Well today the VIX did gain 5%, but did it with, yes, another doji. What is unequivocal here is the stochastic which just executed a bullish crossover. With RSI now oversold and rising momentum, I'd say the VIX is looking ready to move higher on Friday, and that's bad for stocks. The futures confirm this idea.
Market index futures: Tonight all three futures are in the red with ES down 0.24% at 1:17 AM EDT. The red candle developing so far in the overnight confirms today's spinning top reversal warning. Also, all of the indicators except for momentum have now peaked at overbought levels, further sign that the top is in. And the stochastic finally completed its bearish crossover.
ES daily pivot: Tonight the pivot ticks up from 1364.25 to 1364.50. With ES continuing its evening-long sag, we just continue to sink further under the pivot - not good.
Dollar index: Today the dollar took a monster gap up, the biggest since January 2009, gaining 1.31% to stop just short of its peak on June 28th and just shy of the upper BB at 57.48. I was calling for a higher dollar today based on the euro last night but holy moly, what a pop. Normally, this sort of gap would make you think it's just begging to be retraced, but in the case of the dollar, that doesn't always necessarily happen, at least not right away.
Tonight the euro still has some room to move lower to its support at 1.235 even after its big dump today, so beware. Like I said last night, lower euro -> higher dollar -> lower stocks.
Transportation: The trans gained another 0.22% today to form a tomahawk. RSI is an impressively overbought 99.11 (it only goes up to 100) and the stochastic is flattening out to begin a bearish crossover. And yet, none of that is an actual reversal yet. With the upper BB at 5294, it's still possible we might see a bit more upside here on Friday, but overall this chart looks like it's getting ready to move lower. Let me note is passing a bearish evening star in copper too.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
average points trade
April 7 9 2 .438
May 10 7 3 2 .632
June 8 6 6 1 .600 632 +$330
July 2 0 1 0 1.000 56
And the winner is...
Tonight, technically things seem to be lining up for the bears, and we're also entering the historically weakest part of the year for the Dow so I'm going to call for a lower close Friday. The only thing that could derail this idea is if all the employment numbers come in significantly BTE. I've been hearing some buzz that this is what's expected. I'm not so sure. So technically, it looks lower, but one always has to keep one eye on the news.
ES Fantasy Trader
Portfolio stats: the account remains at $140,375 after 48 trades (37 wins, 11 losses) starting from $100,000 on 1/1 Tonight, in a case of holding 'em rather than folding 'em, we're holding on to last night's short. So far, so good. Or just lucky - you decide. This (ES daily) chart just looks ready to roll over. Reminder: you can track these trades live on Twitter @nightowltrader.
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.