Wednesday, November 7, 2012

Wednesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, low confidence.
  • ES pivot 1421.42Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.
Quote of the Day
"Meet the new boss, same as the old boss".
                                        - The Who

...we just got fooled again.  After all these long months of hoopla, of mind-numbing blather, of two billion dollars just flushed down the toilet on ads that I hit the mute button on the instant they appeared on TV, of trying the decide between the Demicans and the Republicrats, nothing has changed.  Nothing.  The Empty Suit has proven remarkably resliient to attempts to dislodge him from the White House, the Democrats still control the Senate and the Republicans still control the House.  And America remains on the road to socialism.  All I can say is thank heavens for term limits.

But back to the market - talk about uncertain.  The Dow up 133 points today?  What the heck was that all about?  The only explanation I heard was that it was relief that the uncertainty was coming to an end - even though at the time, no one knew the outcome and even if one had, there's still no clarity of what the eventual winner was going to do to handle all of our looming problems.  So what now?  Let's take a look at how the charts voted and what that may mean for Wednesday.

(And Blogspot's spell checker seems to have gone on strike, so I apologize in advance for any typos).

The technicals (daily)

The Dow: The Dow's bizarre move up today brought it right back up to the upper end of its recent range areound 13,240 with a candle that looked just like the one three days ago.  Only now we're closer to overbought.  So I guess the logical next step is back down to 13,100, almost like there was no election at all.  I certainly don't see the Dow posting any further gains after tonight's disappointing news.

The VIX:  The VIX gave us a reversal doji yesterday and that was confirmed with a full bearish evening star pattern today that took us back under the 200 day MA .But we also got a bullish stochastic crossover, along with another one in the futures, so it's not a given that the VIX will continue lower from here.

Market index futures: Tonight all three futures are down at 1:05 AM EST with ES lower by 0.37%.  ES was apparently tracking the Electoral College numbers, declining as Romney moved ahead, gaining when Obama began the catch up, and then going into ventricular fibrillation when the winner was announced.  That brief episode seems to have resolved to the upside though and the trend has been higher since 10 PM.  However, like the Dow, this now leaves us at the upper end of our recent range, around 1425, a level ES has assaulted three time in the last four sessions, and failed each time.  With indicators more overbought than oversold right now, there's no reason to believe ES can run any higher on Wednesday.

ES daily pivot: Tonight the pivot jumps from 1410.00 to 1421.42.  With ES trending lower all evening, we broke under the pivot right at midnight, although it made a brief failed attack on the new level a few minutes ago, just before 1 AM.  That makes two bearish factors here.

Dollar index: As I expected last night, the dollar moved lower today, dropping 0.16% with an interestin gap-down spinning top that neatly retraced half of yesterday's gap up.  With this pattern and overbought indicators, it would seem that the dollar has lower to go from here.

Euro: And the euro gave us a bullish harami pattern today, closing at 1.2821.  But it really took off around 9:30 this evening and now stands at 1.2864.  I'm hard-pressed to find a reason since our news wires are flooded with nothing but election news tonight and this move came before the winner was announced.  It might have something to do with Greek elections - who knows.  In any case, the move was enough to boost the euro right back through its 200 day MA and on out of its descending RTC for a bullish setup.  Any trade closing above 1.2827 on Wednesday will be a bullish trigger.

Transportation: Today the trans took off with a 1.56% jump that broke through resistance at 5163, continued through the upper BB at 5198 and ended only at the next resistance level of 5212.  But it also brought the indicators into overbought territory and gave us a bearish stochastic crossover.  I'd say the trans may be out of gas here and headed lower.

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      5      8           0        .615     208 

November   1      1      2           0        .500    -120

     And the winner is...

...the looting class.  As for the market though, modulo the election, if we assume that we remain stuck in yet another trading range, then the next move will be down.  In fact, the overall impression I'm getting from the charts tonightis that you'd hardly know anything big had happened.  And as I said up top, nothing really has changed.  I just don't see the market rocketing higher on these results and the "uncertainty removal" factor was already baked in today.  And there are enough bearish technical signs to give one pause about going long here.  So I'm just going to go with that and call Wednesday lower.

ES Fantasy Trader

Portfolio stats:  the account remains at $194,250 after 69 trades (54 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again.  Although I do think the market's going lower on Wednesdya, I'm not willing to commit any money to a trade, not when I'm already in a comfortable profit position YTD.  I'd rather wait for a more convincing edge.

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