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- Friday uncertain.
- ES pivot 1364.75. Breaking above is bullish.
- Next week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
We got the downside continuation I was expecting today with the Dow shedding another 92 points. Friday could be tricky, with more employments numbers coming out. We can't know what they're going to be, but we can look at the charts and see if we can figure out how to serve an ace on Friday.
The technicals (daily)
The Dow: Today's candle looks almost, but not quite like a hammer. While it is tempting to read positive signs into this, I'd be careful. The stochastic, which has been turning in a gold medal performance since June 20th, continues its move from overbought to oversold, implying that the selling here isn't over yet.
The VIX: Last night I wrote "I'd favor continued upside here on Thursday" and the VIX gave us just that, down 7.33% on a long red candle. This short-circuited the stochastic bullish crossover and the stochastic in fact now looks poised to execute a bearish crossover from a low level. This really bears watching because it often presages strong moves. For example, on May 14th, we got a bullish crossover form a high level and the VIX went on to go from 21.87 to just over 25 in the next four days. The idea here is that we could conceivably see more downside to the VIX over the next few days which would be positive for stocks.
Market index futures: Tonight we have another mixed market. NQ and YM are actually up a bit but ES is down one tick at 1:08 AM EDT. Today's candle was a broad spinning top that continued the now three day downtrend. Interestingly, I was not able to fit a good RTC to this decline and ES actually staged a rally from 2 PM right into the close. And it's only been wandering around the flat line since then, almost like the bears have suddenly gone into hibernation. Ad as I write this, ES has now turned positive - by one tick.
And while RSI remains quite overbought and the stochastic continues lower, momentum, and OBV have actually turned higher. With the overnight candle developing as a doji, there does seem to be some indecision in the air - more than one would expect from looking at the past three days alone.
ES daily pivot: Tonight the pivot drops from 1373.25 to 1364.75. With ES having posted some afternoon gains, this drop now leaves us just a couple of points below the new number - definitely within striking distance. Whenever we're this close to the pivot, it pays to pay attention. Breaking above it before the open would be bullish.
Dollar index: Wow - we have another megaphone (diverging triangle) pattern developing in the dollar, which put in a 0.33% gain today on a tall green candle. These triangles usually resolve in the same direction they were entered form, so in this case we should be due for further gains in the dollar, which would be bad for stocks. The stochastic, which just finished a bullish crossover, supports this idea.
Euro: Meanwhile, the euro ended the day lower on a crazy red candle with a tall upper shadow. It has now clearly broken down from its support at 1.2250and is continuing to drift lower in the overnight. The indicators are all only about halfway down from overbought, so more downside could be possible here on Friday.
Transportation: An interesting development in the trans today - while the Dow dropped 0.71% the trans fell just 0.05% and formed a tall dragonfly doji that nearly touched the lower BB, co-located with support at 4935. There's at least a hint of a turn-around on this chart.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
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 2 0 0 0 1.000 125
And the winner is...
So tonight we have some pretty strong technical reasons to go higher and some good reasons to go lower. There seems to be considerable indecision in the air. The TLT formed a doji and its stochastic is all knotted up. I'm afraid this one is too hard for me. Logic would dictate we're going lower again on Friday, but something doesn't feel right here. I'm afraid I'm just going to have to call Friday uncertain. The best I can say is to watch the ES pivot Friday morning. If we can break above that, we might actually go higher.
ES Fantasy Trader
It was looking a bit iffy this morning for this trade, but patience paid off once again for a 15.5 point gain. I pulled the trigger just before lunch when it looked like ES was breaking out of its descending RTC. With so much uncertainty surrounding recent developments in Europe, I decided that there was no point in being an oinker about it I left a little on the table, but not much. Although I still think there's more downside ahead, it never hurts to lock in gains. Tonight, with our earlier momentum seemingly gone and some real mixed signals, I'm just going to stand aside and watch the Olympics instead.
Portfolio stats: the account the account now rises to $180,375 after 55 trades (43 wins, 12 losses) starting from $100,000 on 1/1/12.
BOT 10 ES false SEP12 Futures 1358.00 USD GLOBEX 11:26:58SLD 10 ES false SEP12 Futures 1373.50 USD GLOBEX AUG 1 01:18:10
CUA (Commonly Used Acronyms)
BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date
Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction. All trades listed here are presented only as examples of the author's personal trading style. Investing entails significant risk and trading entails even greater risks. Act accordingly.