Actionable ideas for the busy trader delivered daily right up front
- Friday uncertain.
- ES pivot 1408.17. Holding below is bearish.
- Next week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
I can't feel too bad about continuing to make "uncertain" calls because yesterday the market was down a bit and today the market was up a bit with the Dow gaining just 26 points. The market seems to be struggling to make a turnaround these past two days. Let's peruse the charts now to see if any of this is going to translate into some real action on Friday.
The technicals (daily)
The Dow: We now have two reversal candles in a row from the Dow - yesterday's inverted hammer and today a spinning top at the same level. While either of these alone is not a great reversal indicator, the two together often signal a bottom. The indicators support this, with RSI now more oversold than any time since May at 6.57. However, today's sideways action still did not move us out of the descending RTC and the stochastic stubbornly refuses to form a bullish crossover. I can't really get behind a higher Dow until I see both of those happen.
The VIX: I called for a lower VIX last night and got it, with a 1.15% loss. But the call feels wrong since the candle was green and closed back up over the 200 day MA. We did however pry ourselves off the upper BB and the indicators remain quite overbought. The futures are looking lower too so I'd say the VIX could continue down again on Friday.
Market index futures: Tonight all three futures are down at 1:12 AM EDT with ES lower by an alarming 0.89%. That's a lot for this time of night and it continues trending lower as I write. Today's small gain provided us with a second doji just like in the Dow and also traded outside the descending RTC for a bullish setup. But the steep decline in the overnight is sending us right back into the RTC even as it sends the indicators deeper into oversold territory.
And the stochastic is now close to forming a bullish crossover but still has not done so. We also gave up the important 1400 support line a few hours ago. Next support is close by at 1393 but it's not that great and there's no telling if it will hold. We're at the lower BB now but we've been dribbling down that for four days now. None of this is a good sign and I'm not liking the turn of this chart tonight.
ES daily pivot: Tonight the pivot blips up from 1407.33 to 1408.17. With ES getting pounded badly in the overnight we're doing nothing but continuing to sink below the new pivot. All in all, this isn't looking good.
Dollar index: The dollar opened lower today but then rallied to finish up 0.13% with a bullish engulfing candle. At 55.17, the $USDUPX is now at the upper end of its recent trading range. It is also now officially overbought and today's close just managed to keep it inside the rising RTC. But with this up/down/up action, I can't really pick a direction for Friday. My guess would be lower simply because today was higher - and that's not a particularly elegant line of reasoning.
Euro: The euro meanwhile continued a march lower than began on the 17th and has now arrived at oversold levels below those from which the past two reversals occurred. But it remains solidly in a descending RTC, there's no reversal candle, no near-term support, and the overnight is simply continuing lower.I'd have to say the euro isn't done declining./
Transportation: After getting hammered yesterday, the trans posted a 0.61% gain today that respected the 5000 support line. This isn't strictly speaking a reversal though and we remain in a descending RTC with indicators near but still not quite at oversold. So I'm hesitant to call the trans higher again on Friday. Whether today's gains are enough to help the market is open to question.
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 8 6 5 0 .571 -19
October 8 4 7 0 .667 219
And the winner is...
There are once again some reversal signs in the charts of a move higher, but they're still not as strong as I'd like to see. And more importantly, they haven't improved much since last night. We're also getting decidedly negative moves from both the futures and currencies in the overnight. So pretty much everything I said last night holds again tonight. We've declined enough lately that I'm reluctant to go short at these levels, and yet I'm not seeing enough signs of a reversal to go long yet. And that only adds up to one thing: Friday uncertain.
ES Fantasy Trader
Portfolio stats: with no trade again last night the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12. With continuing uncertainty, we're going to sit this one out again. Last night I was reaching for my long hat, but I've put it back on the shelf for now.
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.
Posts
It looks like you made the right call with all the market futures in the red this morning (as you sleep). I went in yesterday after close because my method was showing signs of a turn-around. I do think that going long is not a bad idea if you're willing to wait it out until after the election. We'll see.
ReplyDeleteYes, I quite agree. I think that we're nearing a short-term bounce but not quite there yet. Both the Dow and SPX are now quite oversold. I expect my next trade to be long, I'm just waiting for the right time to get in.
DeleteMichele-
ReplyDeleteAs always, any comment has to begin with a thank you for your generous sharing of your complete analysis and thought-process, and not just your conclusions. It makes it esthetically enjoyable as well that you write so well, and with such wit. Whenever I come back to market observation, after a period away, I always "re-introduce" myself to the events of the past days by first reading your prior blogs and recaps.
I have several observations which might help you with your analysis of the USD. I'm paying close attn to the dollar since the materials sector has been weak recently.
Fundamental headwinds are building. Japan has a cousin of our so-called Fiscal Cliff (of calendar-generated, abrupt tax or revenue alteration) coming up, except in Nov. or Dec. Perhaps consequently, the Yen has been weak against the dollar. They are both risk-aversion currencies. So a reasonable reason for $-Yen to be over 80 for the first time in a long while is that our Asian friends get to jump off their cliff first.
This however is adding to dollar strength, ach du lieber, which is already coming in from Latin American economic weakness, and from a new level of shakiness in the Euro, and most importantly from demand-reduction weakness in the key currency-cross, which is $-Oil.
EUR-USD is trying to price in more details, struggles and complexities with Spain and Greece. A break back below 1.28 could mark a broader sentiment shift. However, fresh stimulus as a quick fix by your eurozone pals (see prior admissions by the blogsite proprietress) is always a possibility, since it isnt their money. One currency analyst I follow stated the following, which should always be a constant caution: "Whipped up by money-manufacturing, under the right conditions EUR-USD could clear 1.31 and drive to a short-lived but aggressive rally."
Also note that there was an abrupt spike up in Gold COT, along with the central bank announcements weeks ago-- and then back down recently into deep negative territory, a reading at a low level not seen in quite many moons. This as the Gold price still lingers in the upper third of the recent multi-week trading range. So perhaps a sucker rally in Gold, needed to beget the momo to the downside which will finally crack that long triple bottom, is coming to an end.
The last is what is called in technical analysis 'pure speculation', and if I do much more of that I'll be close to thinking, which isnt my strongest suit. But all else is pure reporting, and these are some pivotal dots to connect. USD partly drives the materials markets, and the SP-Materials sector was low red weak dog of the past week, in contrast to the Semis. So I shall be monitoring both Euro and Gold volatility indexes with renewed closeness in coming weeks.
Key COT Reports are something I pay attn to whenever I come across an update, since they're often one of the better 'smart money' warnings and alerts. If large savvy traders are dumping Gold, I care about that.
Michele, please don't disparage the hoots of 'uncertain uncertain by golly I'm uncertain' you've been giving out of late. If you wanted a nice stuffed mounted spy, bought at market and during regular trading hours, and were willing to fork over 141 dollar American, I could've got you one on Tues, Wed, Thurs, and Friday of this week, not to mention back in early September and--if you threw in another buck--back in March and May as well. We could be nearing the end of the entire upmove from March 2009, and needing some 1/3 to 1/2 retracement thereof. That's not super upside progess in either very short, or in long-intermediate timeframes.
You want IWMs for $81 apiece? I can get them for you much like the above-- except IWM is currently a bit below its late March high.
Like Dr. Elder, I am keeping an eye on longer-term Hi/Lo indicators to check for any underlying market-rot.
Thank you Daniel for a wonderfully informative explanation of the whole currency/gold conundrum. It's always struck me as something of a psychological Antikythera machanism. If I think too much about it, it makes my brain hurt. I understand that my purely technical analysis of the dollar is both short-sighted and inadequate, but there's only 24 hours in a day. That's why I really love to get your views and explanations of topics like this.
DeleteAnd while we're on the topic of SPY, I've been looking at the longer term charts more often lately and I'm not liking what I'm seeing. Although at the moment, I'm thnking we're due for a short-term bounce. We'll see what the futures and the currencies have to say this evening.
ps. You could perhaps add COT = Commitment of Traders Report to your helpful list of std acronyms. (It's a tedious term to type on any device without Quiktype on it, yet some readers might not be familiar with it, and yet it comes up in comments--and even in your observations--at times, since anything savvy large traders do is of interest.)
ReplyDelete{ -btw, if the common acronyms area gets any larger, perhaps you could shrink the font, for them, (if the site allows such line-by-line specificity.) Really, folks shouldnt need to read those courteous aids more than once or twice before they get it, or they wouldnt be one of your readers, so it taint unfair to ask them to squint a bit so their fellow investor can get a squint at a different definition-of-term, which might be new to them.}
Thanks for the great suggestions. You goaded me into action I'd been meaning to take for a while now. I have moved the CUA and the disclaimer from the bottom of each post into the right hand sidebar.
DeleteI added the CUA section because I kept getting questions about what the various acronyms meant. If it's something that will help some readers, then I have no problem doing it.