Wednesday, October 31, 2012

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, low confidence.
  • ES pivot 1404.25.  Holding above is bullish.
  • Rest of week bias higher technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

The recap?  Heck, I can't even remember that far back.  With a highly unusual two day closing followed by reopening on the last day of a month, everything is sort of up in the air right now.  We'll do what we can tonight, but I've already got a feeling that it's going to be sort of a shot in the dark.

The technicals (daily)

The Dow: Anyway, way back last Friday the Dow gave us a perfect doji, the third reversal candle in a row.  It also traded outside the descending RTC for a bullish setup.  We'd need to close below 12,946 on Wednesday to not get a bullish trigger.  And the indicators are all extremely oversold now with the stochastic having just barely completed a bullish crossover.  I'd say this chart looks due for a bounce.

The VIX:  Also on Friday, the VIX dropped 1.71% stopping exactly on its 200 day MA of 17.81.  Will the MA provide support on Wednesday?  I don't know, but it didn't the last seven times in a row that we were in a similar situation.  We also remain in a descending RTC, the indicators have now all topped at overbought and the stochastic just completed a bearish crossover.  Those signs all point to a lower VIX which would be good for the market.

Market index futures: Tonight the futures are mixed at 1:42 AM EDT with ES higher by 0.07%, YM down 0.12% and NQ down 0.28%.  ES has been giving us reversal candles for the past five sessions, though I'm taking the last two days of trading with more than a grain of salt given the sporadic nature of trading.  In any event though, we're now clearly out of that nasty descending RTC for a bullish trigger and we have a nicely completed bullish stochastic crossover to boot.  With support at 1400 seeming to hold and the futures quite oversold, I'd say we're now ready for a bounce.

ES daily pivot: Tonight the pivot ticks up from 1404.00 to 1404.25  Because of the technical disruptions induced by two days of market closures, I'm not reading too much into this tonight, although ordinarily, this is bullish.

Dollar index: On Friday the dollar index gained just 0.05% but did it on a red spinning top that bounced off its upper BB and drove its RSI to its most overbought level since May at 94.12.  This chart also gave us a bearish stochastic crossover.  All these signs point to a lower dollar Wednesday.

Euro: The euro is one chart that continued to trade when everything else was closed so it gives us a bit more perspective.  And I'm liking it.  On Tuesday, the euro put in a tall green candle to close at 1.2969, right at the edge of its descending RTC.  The overnight is now trading just outside it for a bullish setup.  And the stochastic just gave us a bullish crossover.  Complementing the dollar chart, this one looks ready to move higher.

Transportation: Contrary to last week's sagging broader market, the trans finished off the week with two consecutive strong up days taking us close though not yet out of the descending RTC.  The indicators are now almost oversold and the stochastic just completed a bullish crossover.  I'd say more upside is not out of the question here.

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      8           0        .667     219
 And the winner is...

It's pretty clear - technically the market looks ready to deliver a treat tomorrow and not a trick.  But given all of the hurricane-induced dyspepsia Mr. Market is suffering, honestly, anything could happen on Wednesday.  Nevertheless, I'm going to go with what the charts dictate and call Wednesday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  With the unusual events of recent days combined with tomorrow being the last day of the month, we're going to take the conservative route and simply watch the action from the sidelines.  If I like what I see, I'll consider getting in tomorrow.


  1. Trick-or-Treat? I say Treat, too!
    Once again, you deliver a good analysis that is easy to follow. One question. Ever since I have been following your page, you have a confidence level that has been low. What makes it a high or low confidence?

    thanks again,

  2. Hi Russ, thanks for reading! The "confidence" is purely subjective, the one place in the post where I permit myself to inject my feelings about the market.

    Last night I put in "low" because although the charts seemed bullish enough, there was enough uncertainty around the market reopening and the end of the month that I wasn't all that sure about today's direction.


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