Thursday maybe a bit higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday higher, low confidence
• ES pivot 1363.42.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

Last night I made one of my infrequent conditional calls, claiming that the pivot would be the key to today's close.  If anyone still doubts the Power of the Pivot, check out this chart of 5 minute ES candles in the early Tuesday morning overnight.

ES, 5 minutes

The vertical red line is when I was writing last night's post around 1:30 AM  Notice how ES got really close to the pivot but bounced off and then rose until 4:30 AM.  Then like a moth to a  flame, it was attracted again and exactly touched the pivot at 6 AM - before bouncing off again.  Then again at 7 AM..  And finally one last concerted attack with the bears growling and clawing for all their worth when between 8:40 AM and 9:15 AM, the pivot was touched on six of eight 5 minute candles - but never breached.  After that, the bears were simply exhausted and it was up, up and away!  The pivot held and we closed higher.  QED.

The technicals

The Dow: With two impressive green candles in a row, today's gains brought us very close to resistance at 12,950 and then the upper BB at 12,991.  The indicators are also all very close to overbought levels now.  This isn't a reversal sign yet, but we need to see if the Dow can break 12,950 on Thursday.

The VIX:  Last night I wrote "this chart might still have a bit more downside left to it" and I guess it did, dropping another 1.94% and coming very close intraday to the lower BB.  Today's close now leaves us just three quarters of a point from the BB and the stochastic should be making its bullish crossover on Thursday, so I'd say there's now very little downside left here.  If the VIX does manage to go lower on Thursday, look for it to bounce Friday.

Market index futures: All three futures are in the green at 1:12 AM EDT with ES up 0.29%.  Its latest two green candles keep it solidly inside its rising RTC but have also propelled the indicators to highly overbought levels.  This isn't a reversal indicator yet, but the stochastic is now primed to begin forming a bearish crossover, my guess by Friday or next Monday.

ES daily pivot: Tonight the pivot rises again from 1352.75 to 1363.42.  This leaves us in a similar situation to last night, although this time we've got a bit more distance from the new pivot, an encouraging sign.

Dollar index: The dollar actually gained a bit, up 0.03%, though on a red candle.  But it does seem to have found some support around 57.40, just below today's close.  Interestingly though, the euro right now is forming a classic ascending triangle at the end of its recent downtrend suggesting a continued move higher.  And it is indeed running up in the overnight.  So euro up -> dollar down -> stocks up.

Transportation: Last night's flashing yellow light was abruptly extinguished today when the trans scored a 0.55% gain on increasing volume.  Or was it?  I note that the stochastic just executed a bearish crossover today.  And today's open and close were both lower than yesterday's.

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    7      0      4           1       1.000     581
 
     And the winner is...

Well tonight it looks like there's still a bit of gas in the tank, but we may be nearing at least a short-term top.  I note that the TLT, while down on the day today did not fall as much as I expected it would last night.  In fact, today's close was higher than yesterday's.  That's not a good sign.  I also note that on Thursday we're getting Philly Fed and some unemployment and housing numbers.  These tend to drive the market, so if they're not BTE, they could derail things.  And the technicals are sort of a mixed bag tonight, with the Dow, ES, and the dollar looking good, the VIX not indicating a reversal quite yet, but the trans pointing lower.  So I guess I'm going to go out on a limb and call Thursday higher, though I'm not expecting a really big up day.

ES Fantasy Trader

Portfolio stats: with no trade again last night the account remains at $160,625 after 51 trades (40 wins, 11 losses) starting from $100,000 on 1/1/12.

Tonight, the Night Owl is going to be a Night Chicken and refrain from going long.  One piece of insurance I like to have when I put on a trade is the knowledge or at least the expectation that if the trade doesn't work out the first day, at least the trend favors turning a profit the next day or two.  Right now, my guess is that while there's a good chance of making a small profit on Thursday, if I'm wrong then there's an even better chance of going into the hole on Friday or Monday.  I don't like those kinds of odds so I'm standing aside.  With the ESFT up 60% YTD, I can afford to be choosy.  You just don't put on long trades when all the indicators are so overbought.

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.