Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, low confidence.
- ES pivot 1373.25. Holding above is bullish.
- Rest of week bias lower technically.
- Monthly outlook: bias up.
- ES Fantasy Trader holding short at 1373.50.
I'll admit I was a bit surprised at the big pop out the gate this morning, though now I'm wondering if this had anything to do with the, ahem, "trading irregularities" I read about in an alert from my broker. In any case, those issues were soon resolved and the Dow ended going lower as I had originally expected, closing down 38 points and establishing a new downtrend. I guess Mr. Market didn't really like what the Fed had to say. Question now is whether this will carry through to Thursday. There has to be a clue in here somewhere.
The technicals (daily)
The Dow: The Dow's solid red candle was bearish on the face of it, particularly when coupled to the stochastic which has now completed its bearish crossover. Nothing here to suggests anything but further downside.
The VIX: Meanwhile, the VIX did go higher today, also as I expected, but put in a tall doji. However, with a bullish stochastic crossover now complete, I'd favor continued upside here on Thursday.
Market index futures: Tonight all three futures are running higher with ES up 0.24% at 1:09 AM EDT. Today's ES candle was also a doji and the overnight action seems to be suggesting a reversal. However, the indicators are all quite overbought and that suggests more downside to come.
ES daily pivot: Tonight the pivot drops from 1377.33 to 1373.25. We just broke above the new level at 12:30 AM. If this holds into the morning, it would be bullish.
Dollar index: The dollar took off after the Fed announcement today to gain 0.57%, breaking out of its recent consolidation to the up side. With its indicators all depressed, there's no reason it couldn't go higher again Thursday, and that's bad for stocks.
Euro: Meanwhile, the euro moved lower again today, though doing it on a green candle.
Transportation: After hitting their 200 day MA on Tuesday, the trans followed through on their recent pattern by moving lower again today. And while the Dow dropped just 0.29%, the trans fell a solid 2% on a tall red candle that was also good for completing a bearish stochastic crossover. With the lower BB down to 4933, there's still more downside possible here.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
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 1 0 0 0 1.000 33
Here are my performance stats for the first seven months of 2012. The first two columns are for my trading account. The next, "ESFT", is the ES Fantasy Trader. Following that I've now added the results for my IRA. The last is the Dow, my reference benchmark that I try to match or beat.
Date Trading, Month Tr. YTD ESFT YTD IRA YTD Dow YTD
1/31/12 7.41% 7.41% -0.50% 6.18% 3.41%
2/29/12 3.67% 11.35% 7.88% 9.02% 6.02%3/31/12 1.76% 13.31% 29.88% 10.05% 8.16%
4/30/12 2.35% 15.97% 41.75% 10.90% 8.17%
5/31/12 -1.92% 14.23% 26.63% 4.91% 1.45%
6/30/12 4.33% 19.17% 40.38% 2.80% 5.44%
7/31/12 2.96% 22.69% 76.00% 10.98% 6.49%
And for those who might be interested, here's a daily graph of my trading account balance so far this year (I tried, but failed to get Excel to draw vertical lines on month boundaries). This corresponds to a Sharpe ratio of 0.32.
And the winner is...
Tonight I'm seeing some confusion in the charts, probably reflecting uncertainty over whatever the heck the ECB is planning on saying Thursday. But just as the chatter was right about the Fed today, the chatter I'm hearing now is that the ECB is going to disappoint the market. And since there are also enough technical signs to warrant lower stocks, I'm going to call Thursday lower.
ES Fantasy Trader
Portfolio stats: with no trade last night the account the account remains at $172,625 after 54 trades (42 wins, 12 losses) starting from $100,000 on 1/1/12. Tonight we remain short at 1373.50. I'm still a bit nervous about doing this in the face of upcoming ECB news, but we'll see. I contemplated getting out of this trade Wednesday afternoon, but I'm going to gamble that there's more downside in store on Thursday. I'll admit that this strategy is riskier than I usually play.
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. Act accordingly.