Wednesday lower

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

• Wednesday lower, low confidence.
• ES pivot 1463.33.  Holding below is bearish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remaining short at 1461.25.

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Photo Montage of the week

And looking to the left....

 

 
 
 







Recap

Well it was looking good for my call for a lower close Tuesday with a big dump out the gate, but then the Dow spent the rest of the day staggering back up to finally finish actually up 28 points.  The Dow continues to put in one day of small gains after another, for five straight now.  And interestingly enough, the SPX has basically been just treading water during the same time.  It's hardly a ringing endorsement for the bulls but it is curious that the bears have been unable to gain any traction at all lately.  I blew this one - maybe I can do better for Wednesday.

The technicals (daily)

The Dow: The Dow has been in a strange melt-up mode the past few days, putting in one hanging man after another, each one a bit higher than the one before.  Today's was the biggest yet.  And so we are still in a now six day rising RTC and the indicators are still very nearly overbought and we have a third reversal warning in a row.  And once again, I'm going to have to wait for an actual close lower before declaring a reversal.  In the meantime, with the upper BB at 13,623, it's up, up and away!

The VIX:  And the VIX chart is just as odd as the Dow.  The VIX has been moving higher for three days now, but doing it by taking backwards baby steps, with three red candles in a row, each with a higher top.  We did trade outside the descending RTC today for a bullish trigger though and the indicators now seem to have bottomed at oversold.  So I continue to believe the VIX will be moving higher and that has to be bad for stocks (though today's gain didn't seem to hurt anything - another unusual divergence).

Market index futures:Tonight all three futures are lower at 12:49 AM EST with ES down by 0.19%.  In another interesting bit of divergence, ES, which normally tracks the Dow very closely, has been slowly drifting lower even as the Dow has been drifting higher the past three days.  Today's long-legged doji keeps us inside a developing descending RTC and the developing new candle is a big bearish engulfing pattern.  I have to think this chart looks lower for Wednesday.

ES daily pivot: Tonight the pivot dips from 1465.25  to 1463.33.  ES made three vain attempts to break under this evening before finally succeeding in a dive right after midnight.  This turns the new pivot into resistance and is a bearish sign.

Dollar index:On Tuesday the dollar gained 0.37%, thereby negating yesterday's negation of Friday's star doji.  I know, I don't understand that myself.  At least the indicators appear to be acting a bit more reasonably, having now bottomed at oversold and the stochastic just forming a bullish crossover.  Today's action was also a bullish RTC trigger, so I'm feeling more confident in calling the dollar higher again on Wednesday.

Euro: A look at the euro seems to confirm that.  The euro took a big drop on Tuesday to close regular trading at 1.3304.  This move was enough to drop it out of its rising RTC for a bearish setup and it confirmed yesterday's spinning top doji.  Add in a freshly completed bearish stochastic crossover and further downward pressure  on it in the overnight, and all the signs seem to point to a lower euro on Wednesday.

Transportation:The trans remain on fire, extending their winning ways to five straight now (OK, four plus a doji).  Nothing much has changed here today.  We remain in a rising RTC, the indicators remain overbought.  There is still no indication of a top here.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    2      3      4           1       0.500     -28

     And the winner is...

I don't know - the charts are looking a bit more bearish to me than last night, and all the factors that were in play then remain so now.    Still not a screaming short, but I would really hesitate to pile in long right now.  I have to believe that we're due for at least a one-day pullback, so at the risk of turning from a Night Owl into a Chicken Little, I am once again going to call for Wednesday lower.

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.  In a classic case of "you snooze you lose", the time to exit this one was early Tuesday morning, but of course I was asleep.  However, one never knows -  this one may still pan out yet.