Thursday, October 25, 2012

Thursday uncertain, bias higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday uncertain, bias higher
  • ES pivot 1407.33.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

I think "uncertain" was a pretty good call for today as first the Dow was up a bit and then it was down a bit, finally closing off just 25 points, a move an order of magnitude smaller than yesterday.  Anyway, things are starting to get interesting here, so let's get right to the charts.

The technicals (daily)

The Dow:Last night I said this chart was looking scary.  Unfortunately, today's smaller loss than yesterday didn't do much to unscare me.  We're still well inside a steep descending RTC and while the indicators have now finally gone oversold, the stochastic looks like it's still a couple of days away from a bullish crossover.  Meanwhile, the 200 day MA looms ever closer, now just 108 point below today's close.  We're also fallen out of a long-running rising RTC and I just don't see a bottom here yet.

The VIX:  It looks like the VIX tradition is beginning to kick in.  After gapping up huge yesterday way above the upper BB and the 200 day MA to boot, today the VIX fell back 2.66% on a small doji.  The indicators are also now overbought ad the stochastic is about to execute a bearish crossover.  Last night I wrote "this chart looks really ready to move lower on Wednesday" and I think I can say the same for Thursday.

Market index futures: Tonight all three futures are up at 1: 44 AM EDT with ES higher by 0.34%.  After yesterday's big drop, today ES gave us a small doji suggesting a reversal.  The overnight seems to be confirming that so far.  Even better, the developing candle is now trading outside the latest descending RTC and unless ES drops below 1403 tomorrow, that will be a bullish setup.  Note also that the 1403 area is right where support has kicked in the last two days.  The indicators are also all now finally oversold and the stochastic is flattening out for a bullish crossover, maybe as soon as Friday.

ES daily pivot: Tonight the pivot drops from 1414.00  to 1407.33.  Because of this drop and the overnight gains in ES, we're now back above the pivot, a bullish sign.  I note also that ES successfully tested the pivot at 12:50 AM, also encouraging.

Dollar index: I called the dollar lower last night and got that right at least as the $USDUPX gave up 0.08% today on a small red spinning top.  Unable to make any headway today, this pattern suggests more downside to come.

Euro: Meanwhile the euro gave us a decent hammer today, albeit one that remained inside the descending RTC,  The indicators are also still not down to oversold levels.However, the euro has been drifting higher in the overnight, so this amounts to a suggestion that it might close higher Thursday, but we need confirmation before calling this downtrend over.

Transportation: The trans seem to be really decoupling from the market here.  Yesterday the Dow tanked but the trans were actually up.  Today, the Dow was off just a bit but the trans simply dove off a cliff, losing 2.01%.  This completely canceled any bullish signs in effect on Tuesday but it also brought us right down to some decent monthly support at 5000.  But the indicators are not yet oversold so this chart is too hard to call.  We need to see if the trans are going to respect 5K on Thursday or not.  I'll add that the weekly chart is looking worse than the daily.

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      6           0        .667     219

     And the winner is...

Tonight we're starting to see some better reversal signs than last night.  In a different environment, I'd go ahead and call Thursday higher, but given the rotten seasonality of October and the trouble this market has been having in finding any traction at all for a week now, I'm going to play it conservatively and call Thursday uncertain once again, but with a bullish bias.  I'd not be shorting at these levels but I think one might be better served waiting a day before going long again.

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.  But I think I'm getting very close to putting my long hat on, like tomorrow night.

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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