Actionable ideas for the busy trader delivered daily right up front
- Friday higher, low confidence.
- ES pivot 1410.08. Holding above is bullish.
- Next week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside..
Finally today we got the breakout everyone's been waiting for for over a week now. To my considerable surprise though, it was not to the downside, as the Dow gained a solid 85 points that finally took us out of five days of sideways action.I'm going to have to study this one more closely to see if there were any clues I missed. In the meantime, at last we now have something to work with, as we see what Friday may have in store.
The technicals (daily)
The Dow: After a seemingly endless string of dojis, the Dow finally broke out to the upside today. I'm not really sure what's with the overbought indicators but you can't argue with a big green candle that effectively cleared our resistance at 13,200. We are now very close to the 2012 highs from back in March and April. The big difference here is in OBV. It was running close to 3.8B back then but has come all the way down to 2.1B now. Now that the Dow has decided to move higher, this should provide some gas for the tank.
The VIX: This one caught me by surprise too. After expecting the VIX to move higher, it went lower, dropping 2.32% today on a bearish engulfing pattern. While the indicators are still oversold, they haven't been too reliably lately so I'm more inclined to go with the candlesticks and guess that the VIX might go lower Friday. Today's drop in the futures after yesterday's doji supports this idea.
Market index futures: After today's breakout, tonight the futures are mixed at 1:44 AM EDT with ES lower by 0.05%, YM down just two ticks, but NQ up 0.05%. Last night I wrote that the new daily candle "will become a bearish setup unless ES can hang onto the1406.25 level on Thursday.". Well ES clearly not only hung on but blasted up to 1413, keeping us inside the rising RTC and canceling the bearish setup. We're also getting one of these odd bullish stochastic crossovers from a high level. Usually this sort of action happens at deeply oversold levels. It's unusual to see this crossover with the %K and %D lines above 75. So although ES isn't adding anything on in the overnight, there isn't really a reversal warning here anymore.
ES daily pivot: Tonight the pivot jumps from 1402.08 to 1410.08. We were comfortably above the old number but with ES essentially flat in the overnight so far, we're now a lot closer. It's still bullish but bears watching.
Dollar index: After an indeterminate chart last night, today the dollar dropped 0.36% and made a bearish stochastic crossover. I'm thinking we have more downside left here on Friday.
Euro: Meanwhile, the euro moved pretty much in mirror image to the dollar, with a bullish engulfing green candle and a bullish stochastic crossover However, we're not seeing any follow-through in the overnight and we're now at the top of a six day consolidation range that makes me cautious about the euro's ability to rise further on Friday. I need confirmation on this one.
Transportation: At least I was right about this one when I wrote "we could still get some more upside here on Thursday." as the trans gained half a percent today. The bullish stochastic crossover from a high level is complete and we're now in a new rising RTC. We're also close to the upper BB but there's nothing on this chart suggesting lower on Friday.
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 4 3 4 1 .625 60
And the winner is...
Tomorrow is options expiration which is always tricky, but of note is that this particular one is historically quite bullish. I'll note too that copper turned up today, the trans turned up, and the TLT dropped for the fifth day in a row following a fake out breakout on August 9th. We're even now getting a bullish crossover on the monthly SPX stochastic. Although I'd prefer to see the futures moving higher at this point in the night, I'm also no longer seeing any downward warnings so I'm going to go out on a limb and call Friday higher.
ES Fantasy Trader
Today I saw the handwriting on the wall and gave up on last week's short, taking a 16.5 point loss in the process. I guessed we'd see the recent stalemate resolve lower and I guessed wrong.
Portfolio stats: the account now falls to $166,625 after 57 trades (43 wins, 14 losses) starting from $100,000 on 1/1/12. Tonight I'm standing aside, mostly while I regroup and re-evaluate.
BOT 10 ES false SEP12 Futures 1411.50 USD GLOBEX AUG 16 12:24:22
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.