Thursday lower unless ES pivot regained

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

• Thursday lower unless ES pivot regained.
  
• ES pivot 1517.42.  Holding below is bearish.
• Friday bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

After dribbling lower most of the day, the bulls staged a furious last minute rally but it wasn't quite enough to save my call for a higher Wednesday, with the Dow ending down 36 points.  I did mention the risks of Mr. Market not liking Comrade Stalibama's State of the Soviet address last night and it turns out he got all dyspeptic over El Supremo's call for a big hike in the minimum wage.  That sent Mickey-D's down and we were done.  Now the S&P and the Nasdaq did both finish positive, but my call is for the Dow, so it's a miss.  Still, I think the fundamental thesis held - there was no major breakdown on Wednesday.  Now let's see whither might Thursday go.

The technicals (daily)

The Dow: Today's action marked the second day in a row we were stopped by resistance at the 14,012 level (the top of the ascending triangle).  However, we once again put in a higher low, so the triangle remains intact.  This is still not a bearish-looking chart.

The VIX:  I'll admit I was surprised by the VIX's 2.69% pop today, even if the resulting spinning top is less than convincing.  We're officially oversold and the stochastic seems to be on the verge of setting up a bullish crossover, but we also remain well inside the descending RTC, so it's too early to call this downtrend over.  And the spinning top does admit the possibility of continued lower on Thursday.  This one is too tough  to call - we'll need confirmation.

Market index futures:Tonight all three futures are ever so slightly lower at 1:20 AM EST with ES down by just one tick, or 0.02%.  Wednesday's candle was yet another doji, bur these have been coming regularly all year so far and mostly meant nothing.  So we remain in the rising RTC and the overnight is providing little guidance so far.  True, we're quite overbought, but we've been even more overbought this year and kept going higher.  I'll need to see some confirmation on Thursday before calling ES lower from here.

ES daily pivot: Tonight the pivot rises from 1514.58  to 1517.42.   After spending most of Wednesday comfortably above the pivot, we broke under as I write this, just as the Asian markets closed.  It's only half a point so far, but it's still a bearish sign and will have to be watched Thursday morning.

Dollar index:While the dollar did open lower on Wednesday, as I figured, it eventually recovered all its losses, ending up just 0.01% .on a stubby spinning top.  But it was enough to drive the indicators off  overbought and cause a bearish stochastic crossover.  So despite the green candle on Wednesday, I've got to go with a lower dollar on Thursday.

Euro: On Wednesday the euro put in a spindly long-legged doji sitting just outside its descending RTC for a bullish setup.  However, it's losing ground in the overnight, down 0.10% so far.  This makes me cautious about calling the euro higher Thursday, though that's what I'd expect if the dollar does move lower.

Transportation:The trans on Wednesday provided the most bullish chart, gaining 0.38% in a move that was significant mainly because it negated the two preceding dojis and kept us right in the middle of a rising RTC back to January 31st.  It did drive the indicators to overbought, but the indicators haven't been very useful lately as the trans continue to do nothing but go up.  So in the absence of a bearish candle about all that leaves is more upside.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   2      2      2           3        0.714    140

     And the winner is...

With ES having just fallen below its pivot, but with few bearish signs on the rest of the charts, I think the logical course tonight is another conditional call.  If, by mid-morning Thursday (say 10:30 - 11-ish), ES has not broken back over 1517.42, then we close lower,  If it does, we close higher.  This has been a frustrating rally as every time we get some sort of bearish technical sign, nothing comes of it.  So I'm reluctant to go all-out bearish, particularly in an op-ex week until I see clear evidence of a top, and I haven't seen it yet.

ES Fantasy Trader

Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we just continue to stand aside.  I really want to go long here, but with those nagging overbought indicators, I'm just a bit reluctant.