Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday lower, low confidence.
• ES pivot 1406.58.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader remaining short at 1396.00.

Recap

I'm glad I called Wednesday uncertain because watching the market get jerked around as the day went on was an astonishing experience.  First we were down, then the Dow went on a rampage and we were up over 100 before finally fading into the close but still up 0.64% on the day.  Which way will the fiscal cliff jitters take us on Thursday.  Let's run the charts up the flag pole and see who salutes.

The technicals (daily)

The Dow: I think the big thing about the Dow's 83 point move today is not the size of the gain but rather the fact that it once again failed to top the 13,050 area for the fourth time in five days.  But it's worth nothing that this move was enough to just barely bring us back into the rising RTC, thus canceling yesterday's bearish setup, and we reclaimed the 13K psychological support level, and we busted right back through the 200 day MA, now at 12,897.  So that's all bullish.

But then again one thing I'm just seeing now - it looks to me like the Dow is forming a descending broadening right triangle.  This pattern isn't seen too often, but I believe that what you generally get are three shots at the horizontal line and then a breakdown when confirmed by indicators.  And right now the indicators remain more overbought than oversold.  So unless the Dow can post some meaningful gains on Thursday, I'd be more expecting it to go lower by the end of the week.

The VIX:  I missed this one last night.  The VIX moved lower by 3.86% today.  This was enough to cause the indicators to peak, though they remain overbought and we remain well inside the rising RTC, so it's too early to call the VIX lower just yet.

Market index futures: Tonight all three futures are down at 1:48 AM EST with ES lower by 0.20%.  Today's move was a wide-ranging green spinning top complementing yesterday's doji.   But the upside move was just not quite enough to get us back into the rising RTC.  So with yesterday's doji as the bearish setup, today's gain was actually the bearish trigger, meaning there is a 95% chance the rising trend that began on 11/16 is over, Jack.  I consider the lack of further upside in the overnight thus far to support the bear case.

ES daily pivot: Tonight the pivot barely nudges up from 1406.25 to 1406.58.  We broke under the old number this evening and remain below the new pivot though not by much.  Still that lends at least some support to the bear side.

Dollar index: The dollar's been bobbing around like a cork in a hurricane lately.  Today marked its third gap move in three days, something I noted as a possibility last night when I wrote "this could indicate a rise is on the way via a gap-filling impulse".  And today's 0.16% gain mostly filled yesterday's gap down, but with a red spinning top nearly identical to Tuesday's.  And we're still oversold.  So once again, this chart is just too tough to call.  I'll just note that today's move brought us out of the latest descending RTC for a bullish setup.  My guess is that we could see a move higher here soon.

Euro: The euro chart's a lot more clear.  Today the euro lost some ground with a bearish inside harami move that traded completely outside the rising RTC, so that's a bearish trigger.  And the overnight is confirming that as the euro continues lower, now at 1.3057.  Indicators remain quite overbought so it's logical to expect some more downside here on Thursday.  This lends support to my guess for a higher dollar.

Transportation: Today the trans posted a 0.91% jump that was enough to break through the 200 day MA at 5110 and cause the indicators to bottom well before getting to oversold.  This also gives us a bullish setup on an admittedly small (three day) rising RTC.  Keep in mind though resistance is nearby at 5145, just above today's close of 5120.  To me, that suggests a possible topping day for the trans on Thursday.


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     135
December   2      0      1           0       1.000      74

     And the winner is...

Despite today's nice little rally, I'm not seeing a trend.  If anything, the charts are looking fairly weak and this Thursday is historically bearish anyway.  I don't know, I'm just not feeling the love, so I'm going to go out on the limb and call Thursday lower.

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.    I know, there's a fine line between patience and stubbornness, but I'm still not quite ready to give up on this trade.