Actionable ideas for the busy trader delivered daily right up front
- Friday lower, low confidence.
- ES pivot 1411.75. Breaking below is bearish.
- Next week bias lower technically.
- Monthly outlook: bias up.
- ES Fantasy Trader remaining short at 1396.00.
Well I guess you don't need charts to predict the markets anymore. Just watch TV. Every time a politician comes on and says the word "agreement", buy. When they say "however", sell. I'll be really glad when this fiscal cliff finally goes away, one way or another. But while we're waiting, we might as well look at some charts, just to pass the time. (And the Blogspot spell checker is on the fritz again so I apologize in advance for any typos I might miss).
The technicals (daily)
The Dow: On Thursday, the Dow defied the regression trend channel exit by adding on another 37 points to yesterday's gains. On the plus side, we reclaimed the 13K level. On the minus side, each of the last three days gains have been getting progressively smaller indicating we may be running out of gas here. And today's candle was a perfect spinning top, at least warning of a reversal. The indicators all remain highly overbought, so I still think that technically this chart is due to move lower. But in this news-driven market, who knows.
The VIX: I though the VIX would move higher today but instead it dropped another 2.90%, gapping down to form a small inverted hammer. This too is a reversal candle. And 15 has been a good recent support level for the VIX. And there was a doji in the futures too so I'm going to stick to my guns and call for a higher VIX on Friday.
Market index futures: Tonight all three futures are down at 1:00 AM EST with ES lower by 0.16% following a second day of solid gains. ES, like the Dow is refusing to fall after exiting its rising RTCm somethign that doesn't happen very often. However, it does sometimes happen that the drop is delayed by two or three days and that may be the case here, particularly since I believe the recent rally was motivated more on hope for a fiscal cliff resolution than any underlying fundamentals or even technicals. And as we all know, hope is not an investment strategy.
ES daily pivot: Tonight the pivot jumps from 1399.58 to 1411.75. Because of the big rise in the pivot and the overnight fall of ES, it is now sitting right on the new number and as I write this it looks like it's making a stab at moving below. If this in fact happens by morning, that would be a bearish sign.
Dollar index: The dollar gapped down today, losing 0.18% on a green spinning top that just tocuhed the lower BB. Yet another chart with a reversal warning. And here too the indicators are at extreme levels, in this case oversold. Technically, this one looks ready to move higher.
Euro: On Thursday the euro moved higher, confirming Wednesday's hammer. And it's continuing higher in the overnight, no right at the 1.3000 resistance line and very close to its upper BB at 1.3024. This one looks ready to move lower, meshing well with the dollar chart looking higher.
Transportation: The trans are on a real tear, tacking on another 0.60% today with a green marubozu that broke right through the 200 day MA to stay firmly inside a two week rising RTC. However, the indicators are all now highly overbought and the stochastic just barely completed a bearish crossover today. So I'd say there's a good chance of the trans moving lower on Friday.
Accuracy (daily calls):
October 8 5 8 0 .615 208November 7 5 6 0 .583 135
And the winner is...
I'm feeling a bit gun shy here, having been badly wrong two days ago and then totally clueless on Thursday. And yet tonight I'm seeing the same sorts of features that led me to call Wednesday lower - indicators at extreme levels and a whole assortment of dojis sitting near various S/R lines. That's got to spell reversal sooner or later. And tonight I'm thinking sooner. The SPX, according to The Stock Trader's Almanac, is down 9 of the last 13 on this Friday. So unless some politician comes on TV on Friday to announce that he or she is "hoping" for "a deal" Real Soon Now, I think we're going lower Friday. That's all, she wrote.
ES Fantasy Trader
Portfolio stats: the account remains, for the time being, at $198,000 after 72 trades (57 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we remain short at 1396.00. We continue to take the heat on this trade. Patience may pay off in the end.