- Thursday uncertain.
- ES pivot 1514.50. Holding below is bearish..
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
It sure seemed to me like the technicals were pointing higher for Wednesday, but the Fed minutes torpedoed that idea right quick and the Dow sank a nasty 108 points, the instant the news came out. Oh well - such are the perils of technical analysis. I did mention that as a possibility last night. So let's just get back up, dust ourselves off and see what Thursday might have in store - technically that is.
The technicals (daily)
The Dow: On Wednesday the Dow of course tanked 0.77% after the Fed minutes came out and announced that, gosh I really don't know, Madonna had a love child with Tiger Woods or something. For whatever reason, Mr. Market sold 'em hard and that was that. We ended at session lows but oddly enough that still keeps us inside a congestion channel that now runs back 10 days. It also drove the indicators from overbought very nearly to oversold in one day. So despite this triple digit dump, there's still no trend in sight.
The VIX: Well if I didn't see the Dow losing 100+ points on Wednesday I sure didn't see a 19.25% skyrocket in the VIX! We went from nearly the lower BB all the way clear to the upper BB in one day. And from oversold straight to overbought. I don't think I've ever seen anything like this before. One thing though - whenever the VIX has really big up moves that hit the upper BB, usually the next day is lower, and that's what I'm now expecting.
Market index futures: Tonight all three futures are lower at 1: 07 AM EST with ES down by 0.08%. Wednesday's move in ES dumped us right back out of both rising RTC channels I'm following, so we're right back to a bearish setup. But the overnight pin action seems to be suggesting more of a DCB in the works than continued lower. Still, that's not a given and there's no way (at least none I can see) of calling this chart higher just from what we have now.
ES daily pivot: Tonight the pivot dives from 1524.08 to 1514.50..We broke below the old number at 11 AM Wednesday and remain underwater by a fair amount - a pretty bearish sign.
Dollar index:Like all the other charts tonight, the dollar put in a big move, this one to the upside by a giant 0.76% on a tall marubozu that just blasted through its upper BB and continued on clear to its 200 day MA at 55.85, where it was finally stopped. .It also leaves us quite overbought. The last time we were in this situation (11/09/12), the 200 day MA proved to be formidable resistance. The dollar spent a week fighting it before finally giving up. I don't see why this time should be any different so I'm skeptical there's much further upside left for the dollar.
Euro: And as the dollar rose, the euro fell, though not by nearly as much. But Wednesday's losses are continuing in the overnight with the euro just now hitting its lower BB at 1.3238. While the lower BB could provide some support, it doesn't always, and since the developing candle pattern is quite negative we need to see confirmation on this chart too before calling a move higher for the euro.
Transportation:What a difference a day makes. We went from the trans looking quite bullish last night to quite bearish on Wednesday night. We retraced all of Tuesday's big gains and then some with a bearish engulfing pattern than punched right out the bottom of the rising RTC for a bearish setup. And although the indicators all finally came off extreme overbought levels,they're still less than halfway to oversold. But we had a similar situation on January 30th and the next day the trans bounced right back. It's frustrating, but even after a big move like this, we still have to wait for further confirmation of a trend change.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 2 3 3 4 0.667 32
And the winner is...
This market continues to confound with one curveball after another. It seems to me that today's move was out of proportion to the trigger (speculation about what the Fed may or may not do in March). Then a bunch of people who've been just waiting to sell for a long time now just used that as an excuse to unload their positions. To me, that doesn't sound like the start of a protracted leg down - but I could be wrong. I will note though that the Dow hasn't had more than two losing days in a row all year long so far and we just had a big one. My guess is that we'll either see a DCB or a doji on Thursday and because I can't be sure, I just have to call Thursday uncertain. Either way, I think the shorting opportunity here has come and gone.
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.