Actionable ideas for the busy trader delivered daily right up front
- Tuesday higher, low confidence.
- ES pivot 1451.50. Holding below is bearish.
- Rest of week bias lower technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader standing aside.
After a sharp dump out the gate Monday morning, the Dow retraced in a pretty boring day, due no doubt to the fact that the bond market was closed due to the holiday. (I still don't understand why bonds close for Columbus Day but stocks do not). Anyway, with that out of the way, we can get back to business and check the charts for our next move.
The technicals (daily)
The Dow: Today's lackluster action in the Dow is nonetheless significant since today is historically quite bullish. But I'm still hesitant to read too much into today's small hanging man due to the distortions induced by the holiday. Suffice it to say that despite today's small loss and an overbought RSI, we remain inside the rising RTC, so this does not yet constitute a top.
The VIX: I nailed this one last night. The exponential move is always a very high reliability reversal warning. And so today the VIX jumped 5.44% on a big gap-up. But the candle was a small shooting star. And sitting all alone up there, it seems to be begging to fill the gap. And the futures are showing the same thing so tonight I'm thinking that the VIX could now move lower on Tuesday.
Market index futures: Tonight all three futures are up at 1:38 AM EDT with ES higher by 0.21%. Today's drop in ES took us right to the edge of the rising RTC for a bearish setup, but that is not being confirmed in the developing candle. In fact at 1453, we're right back to the RTC support line. And although we have a quite overbought RSI and a now-completed bearish stochastic crossover, the chart is not behaving like it wants to go lower, so I'm wary about going short here.
ES daily pivot: Tonight the pivot drops from 1457.58 to 1451.50. With ES trending higher this evening, we crossed above the new pivot right at midnight - and then sank right back down to it. But then we bounced off. This is happening as I write. Holding above the pivot is always bullish, and successful tests of its support even more so.
Dollar index: Yesterday's dollar doji was confirmed today as the buck gapped up 0.24% to form a bearish evening star. And a red one at that. It requires confirmation, but I would not at all be surprised to see the dollar move lower on Tuesday.
Euro: The euro moved lower today as I expected but remained inside its rising RTC. And it's now reversing again, having taken two sharp steps higher at 7:30 PM and again just after 1 AM.I think this has something to do with news coming out about Chinese banks easing, but in any event, I think the euro may continue higher on Tuesday, which would be good for stocks.
Transportation: An interesting divergence here - while all three major averages were down today, the trans posted their sixth consecutive gain, remaining firmly inside their rising RTC. And Fibonacci fans take note - today's close of 5057 was almost exactly the 50% Fib retracement of last month's big dump. I drew the lines and got 5056.16. Amazing. So without a candle reversal or RTC reversal in sight, I'd say the next stop for the trans is the 0.618 Fib, or 5095.
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 3 2 1 0 .600 11
And the winner is...
The situation is a bit conflicted tonight. The indicators seem to be pointing lower but the chart patterns look like they could be setting up for a move higher, maybe not as a trend, but at least for one day. So tonight I think I'm going to go with the candlesticks, bolstered by the news, the overnight futures and currencies, and call Tuesday higher.
ES Fantasy Trader
Portfolio stats: with a 3.25 point win today the account now rises to $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we stand aside. I do think we have a good shot at a higher close Tuesday but it's by no means a sure thing.so I'm just going to take a pass on this trade.
Reminder, you can follow my ES trades live on Twitter @nightowltrader. Since I was recently asked about this, let me repeat that these trades are all market orders, not limit orders. This makes the execution process more fair since there is no question that they would have gone through. Also note that I make the trade first, then post the tweet. In the few seconds between those two events, the price of ES can (and often does) change.
BOT 10 false ES DEC12 Futures 1449.25 USD GLOBEX 11:25:08
SLD 10 false ES DEC12 Futures 1452.50 USD GLOBEX 01:09:24
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.