Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, low confidence.
- ES pivot 1430.17. Holding below is bearish.
- Friday bias lower technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader standing aside.
"They might as well have tied it to the orbit of Venus."- Rick Santelli, CNBC, commenting on why the Fed linked future interest rates to employment levels.
Recap
I called for today to be uncertain and it was about as uncertain as it gets. The Dow popped 40 right out the gate, then gave it all back as everyone waited for Uncle Ben to speak. When he was done, Mr. Market decided he liked what he had heard and the Dow went back up over 80 points. Then Mr. M. had buyer's remorse and right back down we went, finally closing down all of three points. A good day for the day traders, not so good for swing trading. Anyway, now we ca finally get back to worrying about the Fiscal Cliff again. Let's give the charts the Third Degree and see who confesses.
The technicals (daily)
The Dow: Hmm, so I'm wondering how much faith to put into this tall gravestone doji-ish thing we got today. It's possible the candle was distorted by Uncle Ben's speech. On the face of it, it's a fairly bearish pattern, however we did remain inside the rising RTC, just barely. On the other hand, RSI is now a very high 94.63 and we just got a completed bearish stochastic crossover. I think I'd like to see some confirmation before calling this chart lower, just because it seems that nothing can pull this market lower going all the way back to November 16th.
The VIX: Today the VIX completely retraced all its losses from Tuesday, plus a bit more for a net gain of 2.44%. This took it almost to the edge of its descending RTC. And its stochastic is starting to flatten out at oversold. So no bullish call here yet, but it could happen by Friday.
Market index futures: Tonight, all three futures are higher with ES up 0.05% at 1:13 AM EST. Last night I said ES was due for a pullback and we got one today, snapping a five day winning streak with an inverted hammer that failed to take out yesterday's highs, and I don't mean dinner and a movie. But this is where it gets tricky. Today's ES close at 1427.25 was still good enough to keep it in its rising RTC. However, because this RTC is so steep, we're now trading outside it in the overnight, so even though ES is up a tad, it's still a bearish setup. And its indicators remain quite overbought, and the stochastic just squeaked out a bearish crossover. So I'd say there's a fairly good chance we'll see ES lower if not Thursday then on Friday.
ES daily pivot: Tonight the pivot moves from 1426.92 to 1430.17. Combined with ES in just a shallow rise this evening, we're now below the new pivot, a bearish sign.
Dollar index: The dollar gapped down again today, for the fourth time in four days, this time losing 0.30%. There's now a clear downtrend going here, no support until 54.83 on the $USDUPX, and a lower BB all the way down at 54.70. So with the bearish stochastic crossover completed, it looks like the dollar could continue lower on Thursday.
Euro: And while the dollar sank, the euro continued higher on Wednesday to give us a bullish three white soldiers pattern. In fact it has been posting increasing gains every day for three days. The problem there is that its now taking on the flavor of an exponential run-up and we all know how those end. The euro now faces nearby resistance at 1.3100 and is not showing much enthusiasm for testing that level right now, having peaked at 1.3091 earlier tonight. But we remain in a rising RTC and have rising indicators including a recently completed bullish stochastic crossover, so it's premature to call the euro lower yet.
Let me add here that I took a look at the yen chart at the suggestion of alert reader Daniel. The question being, what's up with the yen. One look at this kamikaze chart and the answer is obviously, nothing's up - it's been all downhill since the middle of September. Why? I haven't a clue. The best I've been able to come up with is speculation about a possible intervention by the BOJ.
Transportation: Probably the weakest chart of the night, the trans today lost 0.29% on a long red bearish inverted hammer. This represents a complete failure to take out resistance at 5200 and leaves the stochastic just about to form a bearish crossover. Combined with yesterday's doji at these levels, we now have two reversal signs in a row and those often signal a top. If I had to guess, I'd say the trans are ready to move lower 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 3 1 1 3 .833 209
And the winner is...
The technical position of the charts continues to deteriorate, but on the whole they still not not yet look outright bearish. In addition, there's some news out of Europe tonight about some ECB agreement which will no doubt be positive for the markets. Nevertheless, the general impression I'm getting the general impression that this market is feeling a bit toppy. And there's some bearish RTC action on the hourly charts too. I'm more than a little worried to be standing in front of this particular bus, but I will go out on one of the limbs of my tree that I reserve specially for this purpose and declare Thursday lower. We'll see.
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, this time because while I'm guessing Thursday's going lower, I'm not putting on a trade until I see the evidence.
Posts
"They might as well have tied it to the orbit of Venus." - Rick Santelli, CNBC
ReplyDelete-Glad to see Mr. Santelli was alertly picking up on my Velikovsky reference from the other night; for it was indeed Venus that Velikovsky had in mind as the electromagnetically disruptive ‘planet X’ which came wandering into the solar system (in the classic work of alternative astronomy called ‘Worlds In Collision’).
And Michele, there is no “possible intervention by the BOJ” going on, there is absolute ruthless war on the Yen being openly conducted by them, shades of the invasion of Manchuria. Look at the Nikkei 225, up yet another 1.7% on Japanese Thursday. It’s just loving this determined yen-weakening. An export driven economy like Japan’s just revels in currency depreciation, as a boost to competitiveness of products.
There’s an important Japanese election this Sunday, so this frantic economic stimulation may have a political reason for occurring these past weeks, as opposed to some other time.
That sure was a strong late swoon by the transports and the small caps into the close yesterday. And the last two days of this week are historically among the weakest performers during this largely bullish month of December. And we are in the skittish zone of the monthly Opex cycle... I agree that even December seasonal bulls should be cautious here.
Well yes, you put it much more succinctly than I. I try not to do a lot of commenting on world politics but it's becoming apparent that we're engaged in a global race to the bottom as everybody hops on the competitive currency devaluation band wagon.
DeleteAnd not only is this week weak, but next week's not so hot historically either. And indeed, the trans continue to look poor, with yet another gravestone doji in progress. So far at least, today's provding some nice topping confirmation.
Thank you for the daily article. Well appreciated.
ReplyDeleteThanks for the compliments! Always glad to get them :-)
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