Friday, December 14, 2012

Friday higher only if ES pivot holds

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher if ES stays above its pivot, else lower, low confidence.
  • ES pivot 1421.75Holding above is bullish.
  • Next week bias lower technically.
  • Monthly outlook: bias uncertain.
  • ES Fantasy Trader standing aside.

As expected, we moved lower today with the Dow shedding 75 points in a fairly low volume session amid renewed bickering out of Washington over the fiscal cliff.  So far, nothing has changed my view that Congress will wait until 11:59:59 PM on New Year's Eve before reaching some sort of agreement, and that will probably consist of doing nothing more than some traditional can kicking.  In the meantime, the charts stop here so we might as well look them over.

The technicals (daily)

The Dow: Today's red candle confirmed yesterday's doji and took us entirely out of the rising RTC for a bearish trigger.  RSI has now peaked at highly overbought and our bearish stochastic crossover is complete.  This chart looks ready for more downside.

The VIXToday's 3.82% gain in the VIX pretty much was a mirror image of the Dow technically: a big gain that took it out of its descending RTC for a bullish trigger and a bullish stochastic crossover.  Those point to a higher VIX on Friday.

Market index futures:The pin action here is a big gutter ball as all three futures are actually up at 1:15 AM EST with ES higher by a non-trivial 0.30%, most likely on strong Chinese manufacturing data.  That said, today's red candle took us out of the rising RTC for a bearish trigger and left us with declining indicators and a completed bearish stochastic crossover.  Modulo the overnight, this chart looks pretty bearish.

ES daily pivot: Tonight the pivot falls from 1430.58 to 1421.75.  After some real roller coaster action into the close and this evening, ES is now wandering about the new pivot, having broken below and then back over even as I write this.  Whenever this happens at this hour of the night, often the next day is a key pivot day.  Watch this number Friday morning.

Dollar index: The dollar surprised me today by gaining 0.13% on Thursday on a bullish harami.  This was enough to take it out of its descending RTC for a bullish setup.  However, the indicators are kind of all over the place here, so we need confirmation before calling the dollar higher.  Perhaps there's a clue in the euro.

Euro: Last night I noted resistance at 1.3000 for the euro.  Well today the euro struggled with that level, giving us a doji, though still remaining inside its rising RTC.   But there's no confirmation from the overnight so far as  the E continues to rise, now up to 1.3095.  And even at that, we're still not yet overbought so I'd say we could see more gains here on Friday.

Transportation: Tonight I announce the discovery of a new candlestick pattern: I call it the devil's pitchfork.  It consists of three inverted hammers in a row after an uptrend and it's a bearish warning.  And that's what the trans gave us today, even though they managed a 0.14% gain.  The close at 5182 was just outside the rising RTC for a bearish setup, RSI is now quite overbought at 86.49, and the stochastic just formed a bearish crossover.  That all spells lower in my book.

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   7      5      5           0        .583
December   4      1      1           3        .875     284

     And the winner is...

Tonight the daily charts are all looking pretty bearish.  The only question now is how much attention this Chinese data will get come morning.  From the overnight action in both the futures and the currencies, I'm hesitant to make the straight bearish call I would otherwise do in the face of these technicals.  But sometimes the overnight enthusiasm dissipates by morning and the trend reasserts itself.  There's just no way of knowing that so I'm going to resort to a conditional call.  Hey, if the Fed can tie interest rates to jobs numbers, I can claim that if ES manages to stay above its pivot by mid morning, we're going higher Friday, else lower.

ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside again in view of the conditional call.

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