Thursday, September 13, 2012

Thursday uncertain pending Fed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday uncertain - waiting on the Fed.
  • ES pivot 1436.08.  Breaking below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias uncertain.
  • ES Fantasy Trader standing aside.

Well I guessed right about the German court decision and we were spared a big market collapse today with the Dow ending higher by just 10 points, a number I think was moderated by the upcoming Fed news on Thursday.  Let's take a look at the charts now to see if there might be any clues as to what Uncle Ben will say there.

The technicals (daily)

The Dow: The Dow touched its upper BB intraday before closing to form a small shooting star.  That's at least a reversal warning but may not mean much as I believe the upper shadow was all simply a reaction to the German news.

The VIX:  I was wrong about the VIX last night.  It moved lower today by 3.72% but did it on a green spinning top.  With no clear trend and lots of news this week, there's little to go by on this chart.

ES daily
Market index futures: Tonight all three futures are down at 1:34 AM EDT with ES lower by 0.17%.  I'm bringing up the daily ES chart again to show you how well the rising wedge is working.  Over the course of the paste week, ES has remained almost entirely within the wedge.

Today we made it almost to the upper resistance line on a tall green candle.  Having gotten that far, the overnight is now running lower again.  The expected range for Thursday thus narrows once again to between 1429.34 (support) and 1443.17 (resistance).  So we remain on track for the wedge to close by the end of next week after which the conventional wisdom projects a big downward break.

ES daily pivot: Tonight the pivot rises from 1429.83 to 1436.08.  With ES beginning to drift lower, we're now very close to the new number, just a point above.  That puts the pivot in play.  A break below would be bearish.

Dollar index: Last night I wrote "the dollar could still go lower yet" and it indeed continued its slide today, down another 0.14% to end at 55.02 on the $USDUPX.  There's now no support until 54.75, so there's still room to run lower despite oversold indicators.

Euro: And as the dollar sank, the euro continued higher, breaking above its 200 day MA for the first time since October 27th, 2011.  And the overnight is continuing higher still, now at 1.2921.

Transportation:Last night I called for "continued higher" here and that's what we got with the trans advancing another 0.79% today and remaining solidly within their rising RTC.  This strong showing also confirmed their breakout above the 200 day MA.  On the other hand, the stochastic is just about to form a bearish crossover.  To me, it looks like we might squeeze one more day of gains out of this chart but the risk is beginning to increase.

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    8      6      8           1        .600     -78
September 3      2      2           0        .600     -62

     And the winner is...

Right now the markets are once again in holding pattern mode, awaiting the pronouncements from the Fed.  If we get QE3 or some approximation thereto, we go higher, else lower.  Simple as that.  Therefore while I hate to do it, I have no choice but to call Thursday uncertain.  My wild guess though is that Uncle Ben will not disappoint and we'll go higher.  But that's just a guess.  I do note that the euro traders seem to be expecting some good news from the Fed and they seem to know what's what.

And to the copper watchers - today's spinning top only strengthens my feeling, as I mentioned last night that copper is due to go lower any day now.

ES Fantasy Trader

Portfolio stats: the account remains at $178,125 after 62 trades (47 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again given the uncertainty around the Fed.  There will probably be some good day trades on Thursday, but that's not my style.

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.


  1. I agree with your assesment that most of todays action will hinge on the Fed outcome. However, I am seeing that there is a clear lower trend starting. The 5 day acceleration of the NASDAQ has pushed past its 12 day moving average and the DOW is right behind. The 6 day % sum slopes are approaching zero.

    My charts tell me that we have begun a negative trend. Which does not mean that it is all downhill, but does indicate that it's a good time to stay out.


    1. Hi RUss - good point. I think you're right. In addition to what you mention, there's the developing top in copper that I brought up two days ago as wellas the continuing rising wedge in ES. We are now overbought on many fronts and overdue for a pullback. When exactly that happens still isn't entirely clear. My best guess right now is not more than a week.

  2. Hi Michele.

    Thank you for including my blog on your great blog.

    That is very nice of you.

    If you ever have a question you know to find me.

    Have a great day and all the best.

    1. You're welcome. I think you have some good insights and hope you continue your work.

      And by way of disclaimer for anyone else reading - this addition to my blog list was unsolicited and I receive nothing in exchange for it.


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