Thursday, January 31, 2013

Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday  lower, low confidence.
  • ES pivot 1498.25.  Holding below is bearish....
  • Friday bias uncertain  technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader going short at 1494.50..

It wasn't looking too bad early on but I guess Mr. Market eventually didn't like what Uncle Ben had to say on Wednesday afternoon despite the fact that it was the same old thing he's said countless times before.  Go figure.  In any event it was good (or bad) for a 44 point drop in the Dow and another miss for me.  Tonight we release the chart-hounds and let them follow the scent of Thursday's market direction.  Arrooooh!

The technicals (daily)

The Dow0.32% is hardly a major decline, but it's the biggest the Dow has seen since January 8th.  Unfortunately, the resulting candle isn't quite either dark cloud cover or bearish harami and we remain inside the rising RTC.  It was enough to bring the indicators down off oversold-broken, but I need confirmation on Thursday to call a pullback.

The VIX:  Still, the on again-off again VIX does now seem to be in a new uptrend, gaining 7.59% on Wednesday, the most in over a month.  The frustrating part is that we've gone from oversold to overbought in just four days and we're now already quite near the upper BB at 14.72.  And as I've often pointed out, the VIX generally respects its upper BB very well.  So while there might be more upside left here, it's looking like it's limited.

Market index futures:Tonight all three futures are barely lower at 1:00 AM EST with ES down by just one tick, or 0.02%.  However, today's regular session drop moved ES exactly to the edge of its rising RTC for a bearish setup.  The new candle is currently outside the RTC, so unless ES can close back above 1500 on Thursday, that will be a bearish trigger.

ES daily pivot: Tonight the pivot dips  from 1500.58  to 1498.25.   For the first time in a while, this leaves us below the new pivot, a bearish sign.  However, ES seems to be interested in revisiting the new level, so it will bear watching before morning.

Dollar index: The dollar broke support at 54.71 on Wednesday and gapped down to touch its lower BB before.bouncing a bit and closing at 54.56.  This caused a bullish hammer and left the indicators highly oversold.  I'd say the dollar is likely to move higher from here.

Euro: And the euro seems to support that idea.  After putting in another tall green candle today to close at 1.3570, it's moving higher again in the overnight, up another 0.13% and remaining firmly in its rising RTC.  With the upper BB now at 1.3634, there's still some room to run here.

Transportation: Well it looks like the trans recent run is finally over with a 1.54% drop on Wednesday.  This took them way out of their long rising RTC for a bearish setup and finally brought the indicators down from their maxed out overbought levels where they'd been for two weeks now.  I'll say that now more downside is likely.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      7      6           3       0.500

     And the winner is...

I know the last two days of January are historically strong, but the charts tonight seem to be suggesting that the momentum is turning, and after the monster run-up of the past few weeks, it's hardly unexpected.  This market has been more overbought than I've ever seen and yet has stubbornly refused to pull back.  Now that we're finally seeing some charts falling out of their regression channels, I'm feeling a bit more confident in calling the trend over.  Thursday will tell for sure.  In the meantime I may be jumping the gun a bit but I'm going to go out on a limb and call Thursday lower anyway.  I'll be happy to be proven wrong as I'm still long and I've not taken out any SPXS hedges yet.

ES Fantasy Trader

Portfolio stats: the account remains at $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Tonight we're going to try hitting the short side once again now that it finally looks like the uptrend is over.  It may be a bit premature, but I think that we may see a day or two of selling coming up.  I know it's risky given the seasonality, so if this one doesn't turn profitable quickly, we're just going to give it up.

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