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- 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
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.