Actionable ideas for the busy trader delivered daily right up front
- Thursday uncertain.
- ES pivot 1399.58. Holding above is bullish.
- Friday bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader remaining short at 1396.00.
Well last night I was complaining about Harry Reid tanking the market. Today Emperor Neorbama had his shot on TV and also dropped the market. Then Boehner talked and it went up. And up some more. And all because? Yeah, I don't know either. Today was one of those days that demonstrates the limits of technical analysis. I went over the charts and don't see how I could have come to any other conclusion last night than that we were going lower Wednesday. But all Mr. Market needed to hear was that there was some "hope" that a fiscal cliff would be reached by Christmas (what year?) and we were off to the races. I'm vaguely considering taking December off because of this fiscal cliff nonsense. But, out of force of habit let's look at those charts again tonight, for whatever they're worth.
The technicals (daily)
The Dow: The Dow certainly surprised me by moving up 107 points on Wednesday. This completely retraced Tuesday's losses and then some, but still stopped short of the 200 day MA now at 12,994. And the indicators are now even more overbought than yesterday, though the bearish stochastic crossover just got canceled out. Also, today's gain was not enough to get us back into the last rising RTC so technically today was actually a bearish trigger. But somehow today's pin action just didn't feel bearish. If you discount the tail on today's green candle (which was largely due to Obama's speech) then you get a bullish engulfing pattern. It remains to be seen if the Dow has enough gas in the tank to cross the 200 day MA on Thursday.
The VIX: And more topsy turvey action in the VIX today as it dropped 2.58% but did it on a red candle hanging off the top of yesterday's. This keeps us right around the 15.5 mark for the third day running now with no clear direction. The indicators remain oversold though so I still have to believe the next move is up.
Market index futures: Tonight all three futures are up at 1:15 AM EST with ES higher by a non-trivial 0.34%. Like the Dow, today's green candle wasn't quite enough to get ES back into its rising RTC so technically this is a bearish trigger. But you'd never know it from the overnight follow-through. And we've got highly overbought daily indicators, but the weekly indicators are just coming off oversold, so I'll admit I have no idea where this chart is going.
ES daily pivot: Tonight the pivot dips from 1400.25 to 1399.58 We spent most of the day above the old number and with ES drifting higher in the overnight, we're even higher above the new pivot, so that remains bullish.
Dollar index: The dollar took a small loss, falling 0.09% on Wednesday on a dark cloud cover implying a move lower coming. But the indicators remain oversold, implying a move higher. The dollar has been putting in higher lows for three of the past four days so I'm leaning towards a move higher on Thursday, but it's hardly clear cut.
Euro: The euro's bearish RTC trigger from last night held today as the currency put in a small red hammer, so at least I got this one right. The overnight though is trading higher and forming another doji suggesting possible lower action on Thursday. The indicators remain quite overbought so I still have to think that the euro has more of a chance to move lower than higher from here. This would also agree with my guess for a higher dollar on Thursday.
Transportation: Yesterday's spinning top was canceled as the trans also scored big on Wednesday, gaining 0.74% in a move that ended exactly on their 200 day MA at 5114. This also drove the indicators very overbought with RSI now a heady 96.58. We do remain solidly inside a rising RTC though so it's too soon to call the trans lower just yet.
Accuracy (daily calls):
October 8 5 8 0 .615 208
November 7 5 5 0 .583 135
And the winner is...
Hard to say. I can usually get a feel for where things are headed from the charts. But today's action was unsettling. When the market does not behave the way I'm expecting, I like to take a step back and wait for the dust to settle. Right now Mr. Market is going off in five different directions at once depending on whether Emperor Nerobama waved before saying hi or said hi and then waved. None of this makes any sense.
If our esteemed "leaders" can somehow avert the fiscal cliff before Christmas (something I highly doubt) then look for a monster rally. If New Year's rolls around with no resolution, then look out below. In the meantime, watch for the market to continue to be jerked around every time some fool on the Hill opens his mouth. This is the ultimate news-driven market and as such technicals count for little. Therefore, I'm just going to declare Thursday uncertain, not because I'm expecting a doji day but because I honestly have no idea where we're going. Personally, I'm net long but holding onto my SPXS position.
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'll take some heat on this one for a while. If it doesn't pan out by Friday though I'm seriously going to have to consider pulling the plug.