Wednesday, July 11, 2012

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1340.83.  Holding below is bearish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.
Recap

That big pop right out the gate this morning kind of took me by surprise, party because it was the exact opposite of what we've been seeing lately, a big drop at the open.  But the gains were all over in 120 seconds (don't blink!) and it was all downhill from there to finish the day with an 83 point loss.

The technicals

The Dow:Tuesday's 0.65% loss kept the Dow squarely inside its descending RTC and left the indicators still falling but even now still just short of halfway from overbought to oversold.  With increased volume and a long red candle, there's sure no reversal signs on this chart.  The only positive sign, if you can call it that, is that the 12,650 support level I talked about last night was tested today and it held.

The VIX:  Last night I said "the VIX may go higher again on Tuesday" and it did, gaining another 4.12% on a tall green candle.  With a close at 18.72, the VIX has now retraced exactly 50% of the big gap down from June 29th.  We're now in a gradual rising trend and the indicators are just coming out of oversold territory.  With the futures still rising and still more oversold than the VIX, it's looking like we could be in for further upside here on Wednesday.

Market index futures: The only bright spot (if you can call it that) in the charts tonight is here, with all three futures running higher for a change in the overnight at 1:25 AM EDT with ES actually up an admittedly modest 0.07%.  Of interest here is that after four days of fairly substantial declines, we're now approaching oversold territory.  RSI, at 25.13 is already oversold.  We're now waiting for the stochastic to start flattening to form a bullish crossover.  My best guess is that we've got two more days to wait.  The next support for ES is at 1327, but the drift higher right now makes me a bit cautious about whether we're going to test that level on Wednesday.

ES daily pivot: Tonight the pivot takes a big drop from 1346.83 to 1340.83  After spending most of the morning above the pivot for the first time in a while, we dipped back below at 10:35 AM.  It was all downhill from there into the close, but then a gradual upward drift began.  This, combined with the drop in the pivot, puts it within striking distance.  We'll want to watch closely Wednesday morning to see if ES mounts an attack on this level.

Dollar index: After gapping up big time last Thursday, one would have imagined that the gap would be filled pretty soon.  But instead we just got up, up, and away.  After a small decline on Monday, the dollar today resumed its upward march playing tag with the upper BB to gain 0.25%.  And there's still a bit more room to run higher before the resistance set on June 1, the high of the year so far.  And the indicators are still not particularly overbought here.  I see no imminent turn-around on this chart.

Transportation: This , unfortunately, is perhaps the weakest of the charts tonight.   The trans accelerated their losses on Tuesday ending down 1.29%, double the loss of the Dow.  And also we dropped through first support at 5143.  Next support is at 5067.  And the indicators are all only now exiting overbought territory.  There's nothing on this chart to suggest a move higher on Wednesday.

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    5      0      1           0       1.000     299


     And the winner is...

Hmmm, this is actually a tough one.  Although the charts are generally still looking fairly negative, a lot of steam has already come out of the market the past few days.  While I don't think we're quite done with the current sell-off, I'm not sure we're going to see a lot more immediate downside on Wednesday.  My best guess is that we may see a doji day.  And given that I'm not expecting a big move, I can only call Wednesday uncertain.

ES Fantasy Trader

Last night's short worked out well with a 7.5 point gain that didn't leave too much on the table.

Portfolio stats: the account remains at $153,375 after 50 trades (39 wins, 11 losses) starting from $100,000 on 1/1/12. Tonight we stand aside given what I perceive to be a lack of an edge for Wednesday.  There's no real need to put on a trade every night anyway.  Follow these trades live on Twitter @nightowltrader.

BOT    10    ES    false    SEP12 Futures     1336.00    USD    GLOBEX    14:29:26   
SLD    10    ES    false    SEP12 Futures     1343.50    USD    GLOBEX    01:14:19   


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.

 

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