Thursday, January 17, 2013

Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday lower, low confidence.
  • ES pivot 1464.83.  Holding below is bearish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader remaining short at 1461.25.

Huh - today looked a lot like a rerun of yesterday with the Dow once again taking a dump out the gate and the clawing its way back up as the day went on.  Only this time it didn't quite make it back to breakeven, snapping a five session winning streak with a 24 point loss.  Is this the top or just a one-off?  The charts know the answer and ve haf vays of making them talk.

The technicals (daily)

The Dow: Very odd - call it the March of the Dojis as the Dow put in its fourth hanging man in a row.  But Wednesday's was different being the first to turn red and also the first to close outside the rising RTC for a bearish setup.  With the indicators still not coming down off overbought, the next logical move here is lower.

The VIXAfter a valiant attempt to rally on Tuesday, the VIX sank back into its recent consolidation range on Wednesday.  And although we have a bullish RTC trigger, this is clearly the chart that's fallen and can't get up.  And don't look to the futures for any help either - they've been falling all month.  It's hard to believe that with VXX now sitting at 25.49, it was at a split-adjusted $1904 (!) back in May 2009.  I'm not looking for any big spikes in the VIX any time soon.

Market index futures:Tonight all three futures are lower at 1:00 AM EST with ES down by 0.17%.  ES continued its recent nervous trading patterns on Wednesday putting in a red spinning top sitting just above Tuesday's doji.  The overnight action is forming yet another spinning top, this one lower.  This leaves us inside a descending RTC with still overbought indicators.  The logical direction for this chart is continued lower.

ES daily pivot: Tonight the pivot inches up from 1463.33  to 1464.83.  After spending most of Wednesday above the pivot we dipped below the old number at 10:20 PM and remain below the new one, a bearish sign.

Dollar index:The dollar did move higher as I expected on Wednesday, but did it with a small red spinning top, giving us a reversal warning.  However, with the indicators having only recently bottomed at oversold and the stochastic just finishing a bullish crossover, it's premature to call the dollar lower on Thursday.  If anything, more upside seems more likely. .

Euro: And the euro seems to support that idea.  It put in a red spinning top of its own on Wednesday for a bearish RTC trigger.  This is being confirmed in the overnight as the E continues lower, now down to 1.3207.    With the indicators still on overbought and a bearish stochastic crossover now complete, more downside is likely here on Thursday.

Transportation:The trans just continue motoring higher, but may be running out of gas, adding just 0.07% today and forming a hanging man.  With highly overbought indicators, this is at least a reversal warning though in the absence of an RTC breakdown, I'm not ready to call the trans lower just yet.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    3      3      4           1       0.571     -4

     And the winner is...

One day seems pretty much like another lately, as a veritable army of dojis soldiers across our charts.  The basics from last night remain in place - mildly bearish but no real push in either direction.  The one exception is Dr. Copper, who has been moving decidedly lower for five days now.  And the SPX Hi-Lo index has been stuck at 100 for an amazingly long nine days now.  Add it all up and I have to believe we're closing lower Thursday.

ES Fantasy Trader

Portfolio stats: the account remains at $103,750 after one trade (1 for 1 total, zero for zero longs, 1 for 1 short).  Tonight we remain short at 1461.25.  Once again, early this morning, we briefly dipped into profit territory, but that can't be helped.  I still believe this one is going to work out OK.


  1. Hi Michele,
    I am in agreement that todays close should end up lower. I have a quick question and hopefully it has a quick answer....

    You mentioned that "With the indicators still not coming down off overbought, the next logical move here is lower."

    Can you please explain this? I agree that the 14 day stocastic indicators are all overbought and have been for a week or so now, but if we are in a bull market, why wouldn;t the indicators show overbought and stay there for a while?

    Thanks for all your insight. Sometimes I sense a little frustration on your part when the market is being moved by external sources such as politics, but isn't that all part of the game? I mean, no one really believes that the market is based on company performance. Do they?


    1. I just meant that the indicators can't stay overbought forever and that whatever goes up must come down. But you're absolutely right - there's no telling when that might be. I probably would have been better off just saying that the indicators are now broken, having maxed out and therefore have lost their predictive power. In any case, it looks like my call for a lower close today isn't going to work out so well, but such is the nature of op-ex weeks.

      I'm frustrated not so much by politics controlling the market as politics in general. I'm a scientist. I like to deal in facts and certainties. I can't stand windbags, hypocrites, megalomaniacs, and fools. And unfortunately, Washington DC is loaded with them, on both sides of the aisle I might add.

      The market is definitely not based on company performance. It's based on fear and greed. Performance is obviously a factor, but it's not the base.


Due to some people who just won't honor my request not to post spam on my blog, I have had to re-enable comment moderation. Comments may take up to 24 hour to appear, depending on when they're made. Sorry about that.