Actionable ideas for the busy trader delivered daily right up front
- Wednesday higher, low confidence.
- ES pivot 1429.83. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader standing aside.
Ouch. I hate being wrong and I blew this one badly today. The market did not go lower as I had expected last night. Instead the Dow gained a solid 69 points, completely retracing yesterday's losses and then some. As this complex week moves along, I will try to navigate the mine field and see if I can call Wednesday without blowing up.
The technicals (daily)
The Dow: Today's green candle was a pretty close approximation to a bullish engulfing pattern. However, the stochastic is just about to form a bearish crossover and the RSI is now well into oversold territory. With the indicators and the candlesticks at odds with one another, it's difficult to draw any conclusions here.
The VIX: We got an unusual divergence today with both the VIX and the market moving higher, the VIX finishing up by 0.80%. At least I had the part about the VIX moving higher correct. The result was a small hanging man but also a bullish RTC trigger and a completed stochastic bullish crossover. I'd say we're due for further advances here on Wednesday.
Market index futures: Tonight all three futures are higher at 1:18 AM EDT with ES up by 0.24%. I want to bring up the rising wedge again. Last night ES attempted to move lower but the lower support line, then at 1425 held firm and ES traded back inside the wedge today. The developing candle tonight continues the trend. The ES range for Wednesday is now down to 1427.42 (support) and 1441.50 (resistance) as the wedge continues to narrow. I'd expect ES to continue trading within this range and since we're still closer to the support line than resistance right now, the expectation is for a move higher.
ES daily pivot: Tonight the pivot barely ticks lower from 1430.08 to 1429.83. We broke above the old number earlier this evening and remain above now, a bullish sign.
Dollar index: I missed this one too. Yesterday's doji in the dollar was canceled as we sank another 0.63% taking the dollar down to quite oversold levels. While there's no reversal sign on the chart, the stochastic is just about to form a bullish crossover. But the candlesticks look more convincing for now, so tonight I'm thinking that the dollar could still go lower yet.
Euro: Today was big for the euro. After ending the day right on its 200 day MA at 1.2855, the euro broke through in the overnight and is currently at 1.2874. Although the indicators are all overbought, this type of MA crossing is not to be discounted. We could see further euro gains on Wednesday.
Transportation: I thought today we'd see some topping in the trans but bzzzt, wrong again. Instead we've now got a classic three white soldiers pattern that attacked and busted right through the 200 day MA on their first try. We're now is a strong rising RTC and still a long way from the upper BB. That all spells continued higher here.
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| A copper top |
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| Copper daily |
And note the RSI sitting at a very overbought 96.5. And at the bottom we have a stochastic that's just about to form a bearish crossover. Copper is even very close to overbought and near the upper BB on the weekly chart where the current candle is forming a doji. Add it all up and it spells lower copper. Maybe not on Wednesday, but by the end of the week.
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 2 2 2 0 .500 -72
And the winner is...
Very tricky. The charts are mixed and there are some concerning storm clouds on the horizon, particularly from copper and the continuing ascending wedge in ES. However, I think Wednesday is going to hinge on whatever ruling the German Federal court hands down about bailing out the teetering EU. The overnight action in the euro seems to suggest that traders believe this ruling will be favorable. And so far, few people seem to be thinking that Uncle Ben is going to actively throw cold water on the markets on Thursday.
And tonight there's noises out of China about more stimulus there. And we're entering the strongest part of September, historically. And the TLT seems to be having trouble making any headway. So all things considered, I'm going to reverse course again, flip a coin, and hey presto, we're going higher Wednesday. If the Germans equivocate or pull back though, then all bets are off.
ES Fantasy Trader
Portfolio stats: the account now rises to $178,125 after 62 trades (47 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we stand aside because although I think the market will close higher on Wednesday, there's just too much event risk to put money down on it. With a 78% YTD gain and 62 trades already, I don't really need to push things at this point.
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.
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