Wednesday, December 12, 2012

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1426.92Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias uncertain.
  • ES Fantasy Trader standing aside.

Once again, ES flirted with its pivot in the wee hours, then took off around 3:30 AM and never looked back.  The result was a decent day with the Dow gaining 79 points.  And remember the cup & handle I pointed out on the SPX chart last night?  We got the breakout today as that index finally managed to close above the dreaded 1420.  So what's next?  Let's run the charts up the flagpole and see who salutes.

The technicals (daily)

The Dow: I've been expecting the Dow to make a run for its upper BB and today it took a stab at it, getting very close (just seven points shy) before retreating for a still respectable 0.60% gain.  However, this left us with a looming upper shadow on the candle that's close to an inverted hammer and that would be bearish.  Nevertheless, we remain inside the latest rising RTC and while the stochastic is trying to set up a bearish crossover, it hasn't done so yet.  So there's still really no turn-around evident on this chart.

The VIXLast night I wrote "I'd not be surprised at all to see the VIX move lower again on Tuesday".  And so I was in fact not surprised, as the VIX dropped another 2.99% on a move that keeps it in its descending RTC and keeps the indicators moving towards (but not yet in) oversold territory.  With no support til 15.1, I'd say we could see more downside here again.

Market index futures: Tonight all three futures are higher, sort of, at 1:44 AM EST with ES dead flat, NQ up 0.06% and YM up just 0.03%.  This is different from what we've been seeing at this hour the past few days.  With a big nearly 0.9% up move today that drove RSI to 94.54 and the SPX Hi-Lo indicator to 100 for the third day in a row, ES is starting to look tired here.  And although we finally broke 1420, the current level at 1431.75 is the next resistance line.  We've also had five straight days of decent gains, so this streak is starting to get a bit long in the tooth.  It might not be Wednesday, but I'd say ES is due for a pullback before the end of this week.

ES daily pivot: Tonight the pivot jumps from 1417.33 to 1426.92.  Despite the meandering of ES in the overnight, we remain above the new number, but by a lot less, now only four points.  While still bullish, this is close enough to bear watching.

Dollar index: The dollar continued its herky jerky motions with a 0.34% gap down on Tuesday.  That was enough to peak the indicators and just cause a bearish stochastic crossover.  This leaves the dollar at an interesting juncture, having now retraced 50% of its last move up and with a big gap wanting filling, but also with indicators suggesting more downside.  So I'm not going to touch this one tonight.  We'll get some resolution here on Wednesday.

Euro: I called the euro right again today as it posted some good gains to close at 1.3004, a move that gave us a bullish RTC trigger and a bonus bullish stochastic crossover..  However, it's drifting lower in the overnight and I'll note that the euro seems particularly susceptible to BMS (Big Move Syndrome), where a big up day is often followed by a day of retrenchment.  So I'm a bit wary about calling it higher on Wednesday here - just too risky, IMHO.

Transportation: On Tuesday the trans gained 0.13% and here's where the divergence from the Dow shows up.  Today's candle here did in fact hit its upper BB and then fell back to form a good inverted hammer, almost a gravestone doji.  Either way, it's a decent bearish warning.  And with resistance at the 5215 level tested unsuccessfully today, I'm thinking we could see the trans move lower now, possibly as soon as Wednesday.

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           2        .833     209

     And the winner is...

Pretty much everything I said last night is still true tonight, but not quite as much.  However, with a Fed announcement coming on Wednesday, that's pretty much what's going to determine the outcome, not the technicals.  Accordingly, although I do still see a positive, though diminishing bias here, as I generally do ahead of the Fed, I declare Wednesday uncertain.  One thought that comes to mind is that we could get a topping day.

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 ahead of the Fed.  No point taking unnecessary risks in the face of the unknown.


  1. I seem to recall a month or so back when NightOwl had brought up an interesting point about market rolling over during/at the time that ES contracts roll over. I would be curious to know the logic behind this (just that it gets confusing for many and hence easier to pull the rug?)

    Could today be such a case? The market is as overbought as it could ever be and we have a contract rollover happening.

    Would be curious what NightOwl thinks. Gracias.

    1. Hmm, well if I remember correctly, at that time it was pretty much a coincidence that I thought a top was coming and that it was right around the time of futures expiration.

      But that's a really interesting idea. I'm going to have to check out what happens to the market on op-ex Fridays in general. There might be something there.

      As for right now, I haven't done my full analysis for today yet but it's sure looking like we're overdue for a pullback of some sort. Stay tuned...


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