Wednesday lower again

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Wednesday lower, low confidence.
• ES pivot 1451.75.  Breaking below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

I called the Dow lower today and was rewarded with a morning-long decline into negative territory.  But the bears must have had one martini too many at lunch because we recovered a bit in later trading to end down just 55 points.  Still, last week's uptrend is now clearly over, so what's next?  You may not need a weatherman to tell which way the wind is blowing, but do you need a Night Owl to tell which way the market's heading.  Read on!

The technicals (daily)

The Dow: We can dispatch this one quickly.  With two nearly identical red candles in a row, the Dow is now totally out of its rising RTC for a bearish trigger and has just completed a bearish stochastic crossover.   And while the indicators are not entirely overbought, they do look to have peaked.  So in general, there's no signs of a move higher here.

The VIX:  In an interesting bit of divergence, the VIX moved lower on Tuesday as well as the major averages, dropping another 1.23%.  At 13.62, it's now at the bottom of its support range and quite oversold.  I actually had to go to the monthly chart to find the last time the VIX was this low.  Know when it was?  Try June of 2007!  Ad although we traded outside the last descending RTC today for a bullish trigger, it sure doesn't feel like it.  I'd say there's some evidence for a move higher from here but it's not particularly compelling, not when the lower BB has fallen to 12.30.

Market index futures:Tonight all three futures are just a tad higher at 1:04 AM EST with ES up by 0.05%.  Call it basically flat. Today's candle traded entirely outside the rising RTC for a bearish setup and gives us now four bearish warnings in a row: two spinning tops followed by two hanging men.  With an inverted hammer in the overnight so far  and the indicators remaining very overbought, I'm not feeling the love.

ES daily pivot: Tonight the pivot inches down from 1455.75  to 1451.75. This drop combined with tonight's slight gains were just enough to send us above the new pivot for a bullish indication.  It's just a bit more than one point mind you, so we'll need to watch for any attempts to break under before morning.

Dollar index:The dollar put in a little red harami today (sounds like sushi, doesn't it?) but that was good for a 0.09% rise.  Still, we remain overbought and with a just-completed bearish stochastic crossover, there could be further downside here.

Euro: The euro's two day rally was abruptly cut off on Tuesday with a close at 1.3091 basically wiping out yesterday's gains.  But we're basically flat in the overnight suggesting that there may be some support around this level.  While it did not go higher today as I had expected, I still think the upside is looking more promising that any move lower.

Transportation:On Tuesday the trans dropped 0.38% putting in a second hanging man suggesting that the bulls have not quite given up this fight yet.  However the indicators remain quite overbought and the stochastic is dead-even on forming a bearish crossover (the %K and %D lines are virtually equal).  And we traded entirely outside the rising RTC so that's a bearish trigger.  I don't see any suggestion here of a gain on Wednesday.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    2      1      1           1       0.750     62

     And the winner is...

I know some people are calling for a rally from here and bandying about number like SPX 1475.  That may yet happen in a month or two, but it's not happening tomorrow.  One might think that the failure of the bears to drag the market down in one quick swoop is a sign of weakness on their part, but one would be wrong. There is the death by a thousand cuts too.  I'm really only seeing one bullish sign tonight, the ES pivot.  But that's pretty weak, just one point over.  So I'm going to officially call Wednesday lower, though I'll admit I'm keeping an eye on the pivot.  I'd really want to see more bullish signs though to turn my call to bullish.

ES Fantasy Trader

Well we made our goal of having the first trade of the year be a profitable one as last night's short yielded a respectable 7.5 points.  Not bad for eleven hours worth of work (most of which I spent sleeping). 
Portfolio stats:  tonight the account rises to $103,750 after one trade (1 for 1 total, zero for zero longs, 1 for 1 short).  Tonight we stand aside.  Although I believe the market has lower to go, I'm not seeing any good momentum in that direction in the overnight so far so I'd rather just watch and wait.  Getting on a bus that's standing still with its motor off and the driver on coffee break usually isn't the best tactic for going somewhere fast.

BOT    10    false    ES    MAR13 Futures     1447.25    USD    GLOBEX    11:29:38   
SLD    10    false    ES    MAR13 Futures     1454.75    USD    GLOBEX    00:36:14