Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, medium confidence.
- ES pivot 1440.17. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader Going short 10 ES at 1432.50 at 1:45:28 AM. NOTE: Twitter refused to accept my post for this entry - I don't know what's wrong with their service.
Oops. So much for logic. It worked the day before, but on Wednesday we went down anyway. Perhaps because Emperor Nerobama got on the tube - that's always good for a 100 point drop. And that's just about what we got, with the Dow dropping 99 in a decline as the market started pricing back out all the fiscal cliff warm fuzzies it spent two days pricing in. But that's all just part of the game. We just get back up and soldier on. So let's send out a recon patrol tonight to see where Thursday may lead us.
The technicals (daily)
The Dow: Today's dump nearly retraced all of yesterday's gains, leaving us with a big harami. That's not a very reliable pattern though. Indicator-wise, our bullish stochastic crossover is looking somewhat stunted at the moment and the indicators are still just barely overbought. And today's close left us right at a support line so it's hard to get a good read on where this one may be headed on Thursday.
The VIX: I missed this chart badly also last night. The VIX did not go down, it gained a whopping 11.50% on Wednesday in a move stopped only by its 200 day MA at 17.45. The VIX is not real reliable here. Of the last five times we approached this MA from below, it failed to break over it three times and succeeded twice. With no guidance from the indicators, this chart is also fairly opaque.
Market index futures: All three futures are lower tonight at 1:41 AM EST with ES down by 0.31%. What a difference a day makes. Whereas last night this chart wasn't looking too bad, on Wednesday ES gave us a red harami that caused a bearish stochastic crossover and moved the indicators lower, now just off overbought. The follow-through lower in the overnight seems to confirm the harami so this chart is now looking lower for Thursday.
ES daily pivot: Tonight the pivot ticks down from 1441.50 to 1440.17. This still leaves us a good ways below the new pivot so that's a negative sign, Jack.
Dollar index: The dollar put in its first green candle in eight straight days today, but because of the gap down opening, it still lost 0.09% on the day and remains in its descending RTC and sitting on its lower BB. Is this a reversal sign/ Not necessarily. I need confirmation on this chart before declaring the dollar downtrend over. Too soon to say.
Euro: The euro on Wednesday gave us a tall inverted hammer lying almost entirely above its upper BB. That alone is usually a fairly good reversal sign. And it's down 0.22% in the overnight. This, along with indicators now peaking at overbought seems to confirm that a top is in and the next move is lower.
Transportation: In a bit of divergence, while the Dow dropped, the trans continued higher on Wednesday to remain inside their rising RTC. But their 0.19% gain put in a classic bearish inverted hammer sitting on their upper BB with some highly overbought indicators (RSI now 90.93). So there's a definite sign here of a move lower on Thursday.
Accuracy (daily calls):
October 8 5 8 0 .615 208
November 7 5 5 0 .583 135
December 5 2 1 5 .833 437
And the winner is...
Thursday is historically the second weakest day of this op-ex week, and equally as bearish as Wednesday (statement corrected from the original version). And whereas last night I wasn't seeing much in the way of bearish technicals, tonight I am. The charts are all either ambiguous or fairly bearish. Accordingly, I am going to call Thursday 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 go short 10 ES at 1432.50.