Thursday, October 11, 2012

Thursday higher if ES pivot cracked

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher if ES pivot broken over.
  • ES pivot 1429.67Holding below is bearish.
  • Friday bias higher technically.
  • Monthly outlook: bias uncertain.
  • ES Fantasy Trader standing aside.

Today the Dow took a dump to the tune of 129 points.  Surfing the daily wave of network nattering, I'm discerning a whiff of panic in the air, the being October, of course.  So is this the Big One?  Is the sky falling and the world about to end?  Or is this just another pullback like we've seen nine times already this year?  The answer is in the charts, which we will now grill until they spill their secrets. 

The technicals (daily)

The Dow: Let's start by giving the third degree to the Dow.  Bad Dow - no profits!  In fact, today's big dive broke support at 13,320 and then marched straight down through the lower BB at 13,383.  The only thing that stopped the free fall was the closing bell, at 13,345.  This big red marubozu also gave us a bearish RTC trigger.

And even after today's losses, we're still not quite down to oversold on the indicators.  The only positive note here is that we remain in a wider rising RTC going back to June 12th.  If the Dow falls under 13,261 tomorrow, we'll fall out of that one too and that would be bad indeed.  For my money, that's the Dow's last stand.  Nothing really cheery on this chart.

The VIX:  On the other hand, here's something interesting.  While the market  plummeted, the VIX also fell today.  While the drop from yesterday's close was small, the candle formed a decent spinning top that just nearly touched the upper BB at 16.83.  And RSI turned lower today too.  That makes three reversal signals.  I'd say a lower VIX appears to be in the offing here.

Market index futures: Tonight all three futures are mixed again at 1:37 AM EDT in a narrow range with ES lower by 0.04%, YM down 0.05% but NQ up 0.06%.  The past three days of losses have moved ES very nearly to oversold while the stochastic is already quite oversold and getting into position to start a bullish crossover.  ES also touched its lower BB at 1423 earlier this evening before bouncing off.  But we saw this sort of doji action at this point last night and it did not end well.

ES daily pivot: Tonight the pivot tumbles from 1441.92 to 1429.67.  With ES virtually flat in the overnight, so far at least, that now puts us less than four points below the new pivot, within striking distance.  We'll need to see ES break above this number to have any hope of closing higher on Thursday.  Until then, it's bearish.

Dollar index: Despite the market's fall today, the dollar was essentially flat on a perfect doji near the top of yesterday's run-up.  This could signal a move lower but requires confirmation.

Euro: In further unusual action, the euro actually moved a little higher today forming a hammer.  The new candle is forming another hammer that successfully tested the 200 day MA at 1.2831 before rebounding to 1.2872.  With support at the 200 MA and more support from last month around 1.2850, it's possible the recent euro sell-off is nearing an end.  The stochastic is moving into a position to begin a bullish crossover, possibly on Friday.

Transportation: Today the trans actually gained 0.13% on a wide-ranging doji.  This could signal a reversal coming, but with the stochastic just completing a bearish crossover and RSI still overbought, we'd need some confirmation before declaring the trans going higher.

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    3      3      2           0        .500     -99

     And the winner is...

After three big down days, I think the pendulum is at least slowing down and getting ready to swing back the other way.  From the looks of it, I'd expect a move up by Friday.  But that leaves Thursday.  There's still no immediate sign of a reversal on any charts tonight so I'm going to make a conditional call: if ES breaks above its pivot of 1429.67 by 10 AM, we'll close higher, else lower on Thursday.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we stand aside again.  I completely missed this current downward move and I'd hesitate to jump on board this late in the game.  By now, the risk/reward already favors a move higher rather than continued lower.

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. Just one question...

    Why 10:00 AM?



    1. 10 AM just more or less represents the point where the initial chaos of the opening has settled out. I feel that if ES is going to make a move, it's going to have to make it by then. I'll admit I've not done any statistical checking on this theory.

      The important part is that sometime fairly early in the day, you want ES to break above the pivot and stay there.


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