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- Thursday higher, very low confidence..
- ES pivot 1410.25. Holding above is bullish.
- Friday bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
What an odd day. It began decidedly negative as befits all the bearish indicators on the charts. But the traders must have enjoyed their lunches because at 1 PM we started moving back up and while the Dow did finish down 31, the SPX managed to eke out the barest of gains while the Nasdaq ended a decent 0.21% in the green. Now it's time to head back to the charts to see just what the heck's going on here.
The technicals (daily)
The Dow: I did call the Dow lower today but I'll admit this isn't the way I figured. What was looking quite bearish last night now has a distinctly different cast to it. Today's action left us with a hammer that closed right in the middle of last week's consolidation range. It also curiously flattened out the indicators. Looking at the hourly bars, we have a bullish RTC breakout that occurred at 2 PM. The conventional wisdom says there's still lower to go here, but I'm not so sure now.
The VIX: Last night I wrote "we could see more upside to the VIX on Wednesday" but while the VIX did end up 0.6%, it was on an anemic small gap-up spinning top. Not the sort of thing that inspires confidence in further upside. In fact, the indicators are now very close to being overbought. At this point, I'd say it's not out of the question that the VIX could actually move lower on Thursday.
Market index futures: Tonight all three futures are up at 1: 07AM EDT with ES higher by 0.28%. After putting in a tall doji today, the fourth reversal candle in a row, the developing candle seems to be confirming the end of a downtrend that was just getting rolling. This is not the overnight behavior of a market that wants to continue lower.
ES daily pivot: Tonight the pivot drops from 1415.08 to 1410.25. We broke above the old number at 9 PM and this now puts us even higher above the new value, so that's a positive sign.
Dollar index: We got another disconnect in the dollar today. With the Dow dropping 0.23%, the dollar also fell, by 0.52%, blowing right through the lower BB and reaching very close to the 200 day MA on the $USDUPX. This leaves us just oversold but without a bullish stochastic crossover just yet. So it's premature to say that the dollar might rally on Thursday.
Euro: Oddly enough, the dollar's drop wasn't exactly mirrored in the euro, which did post a gain but now seems to be reaching a top, being highly overbought on its indicator and having hit and broken through its upper BB today. On this basis alone, I'm not sure how much more upside the euro has left here, not exactly encouraging for our market.
Transportation: I called the trans lower last night and they obliged with a respectable 0.49% drop. This took us out of the rising RTC for a bearish setup and also completed a bearish RTC crossover. I'm betting on more downside to come here on Thursday.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
average points
April 7 9 2 .438
May 10 7 3 2 .632
June 8 6 6 1 .600 632
July 11 2 6 1 .857 917
August 7 4 4 1 .667 48
And the winner is...
The ebb and flow of the market has changed. From the middle of June to the end of July, we were making very nice symmetrical waves up and down. That pattern broke down at the start of August. Our last advance after a multi-day decline was on August 3rd. That followed a hammer, just as we have now. It happened when the indicators were still all overbought, just as they are now. And it caught a lot of people, me included, by surprise. And right now a lot of people are calling for more downside. But something just doesn't feel right about the current decline. I'll note too that there's going to be some news coming out on Greece on Thursday and while I think that Greece in general is a lost cause, it seems that lately the smallest shred of positive news or rumor around Greece is met with a positive reaction from the market.
So tonight I'm going to go out on a limb - no, way out on a limb - no, make that waaaaaaaaay out on a limb and gingerly call Thursday higher.
ES Fantasy Trader
As I watched last night's trade progress late this morning I became concerned that ES didn't seem to be really trending down. Not willing to stand in the way of the uncertainty of the FOMC minutes, I decided to pull the trigger over lunch for a 3.75 point profit. I left a bit on the table but was glad I did after seeing ES reverse later in the day and finish higher. And it sure beats watching a winner turn into a loser.
Portfolio stats: the account now rises to $168,500 after 58 trades (44 wins, 14 losses) starting from $100,000 on 1/1/12. Tonight we're just going to stand aside. I know I'm calling the market higher tomorrow but that's a high risk call - too risky for my tastes to put big money down on ES. Reminder: you can follow these trades live on Twitter @nightowltrader.
BOT 10 ES false SEP12 Futures 1407.00 USD GLOBEX 12:28:58
SLD 10 ES false SEP12 Futures 1410.75 USD GLOBEX AUG 21 19:35:29CUA (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. Act accordingly.
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