Actionable ideas for the busy trader delivered daily right up front
- Thursday uncertain but bias higher.
- ES pivot 1403.00. Holding above is bullish.
- Friday bias uncertain technically.
- Monthly outlook: bias down.
- ES Fantasy Trader holding long at 1407.75.
Last night I called today as "uncertain" out of inability to pick a clear winner. I'd say a paltry 11.5 point gain in the Dow qualifies, as the market continues to equivocate ahead of the ECB on Thursday. Looks like the Dog Days of summer just keep on barking. Let's see if we can teach this market to sit, stay.
The technicals (daily)
The Dow: Arroooh! Woof woof. After a less than impressive 50 point loss yesterday, today the Dow managed all of 0.09% up today. Uncertain indeed. What we have here, is not a failure to communicate, but rather a developing symmetrical triangle as the daily range just keeps getting squeezed tighter and tighter on a daily basis. Look for the spring to pop when we get the word from the ECB on Thursday. And since this triangle was entered from above, look for the break to be higher. Interestingly, we're also now right at the lower support line of a wide rising RTC from June 5th. This line was tested once, back on July 24th, and it held - so we do have some support right here.
The VIX: As expected, the VIX fell again today on a small gap-down green candle for a 1.33% loss. It drove RSI higher into overbought territory and continued the bearish stochastic crossover. It also traded entirely outside the latest rising RTC for a bearish trigger. Despite the green candle, I think the VIX still has lower to go.
Market index futures: Tonight all three futures are up at 12:47 AM EDT with ES higher by 0.2%. ES gave us a small hanging man today to follow yesterday's doji - the uncertainty continues. There does, however, seem to be some upside momentum developing in the overnight as the indicators are now clearly rising off oversold levels. We've also got a symmetrical triangle in progress as the ES range has been narrowing for three days now. Being as it was entered from below, the odds favor a break to the upside when the pattern completes. Technically, this should be on Thursday, which oddly enough, is the day we hear from the ECB.
ES daily pivot: Tonight the pivot ticks down from 1403.33 to 1403.00. After a nice run-up earlier this evening, we're now a good three points above the new level. That's certainly not out of the woods, but is bullish on the face of it.
Dollar index: The dollar continued flirting with the 200 day MA today, this time closing just under it at 56.06 on the $USDUPX. The long doji star is almost a carbon copy of yesterday's candle, reflecting the ongoing uncertainty about Europe. Of note is that the stochastic executed a bearish crossover today, suggesting the next move for the dollar is lower.
Euro: I was wrong about the euro moving lower today. Instead it moved higher, breaking the 1.2600 level this evening. The overnight canlde is forming as a star, but there's really no telling where this one is going on Thursday. It's going to be news-driven.
Transportation: In a striking bit of divergence, the trans had a bad day, dropping 1.14% on a red closing marubozu candle. Not only did this not exit the descending RTC, it took us clear over to the left edge, as well as the lower BB. However, the stochastic has completed its bullish crossover from a very oversold level and we're very close to support at 4935. So although the candles don't show it, I'd be wary of going short here just yet.
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 8 6 8 1 .600 -78
September 0 1 1 0 .000 -55
And the winner is...
The charts tonight generally seem to be pointing towards higher stocks, with the one worrisome exception of the trans. That said, I believe that tomorrow's close will turn on whatever the ECB has to say rather than tonight's technicals. Of course it could very well be that the bullish signs we're seeing are simply anticipating some good news from Europe. So bottom line, because of the event risk involved I'm not willing to commit either way and I'm going to simply call Thursday uncertain. However, my wild guess is that we will see this market close higher if the ECB has anything good at all to say about the train wreck that is Europe. Personally, I've yet to put on a single trade this week.
ES Fantasy Trader
Portfolio stats: the account remains, for the time being at $166,250 after 60 trades (45 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we remain long at 1407.75. My bet last night for more sideways action on Wednesday paid off. Now I'm going to bet that the ECB will provide a pop on Thursday that will save this trade, which is already looking a lot healthier than at this time last night and is almost back to break-even.
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.