Thursday, March 21, 2013

Thursday higher if ES pivot holds

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher if ES pivot holds, else lower.
  • ES pivot 1547.08.  Holding above is bullish.
  • Rest of the week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Last night IO wrote, "My unofficial guess though is that unless the Fed makes some pronouncement the market hates, we just might close higher.".  I guess I should have made that official, as the Dow ended the day higher by 56 points.  With the Fed's announcement of nothing new, they bought the (lack of) news.  But that, as they say, is that.  Now let's look at this, being the forecast for Friday.

The technicals (daily)

The Dow: On Wednesday the Dow confirmed Tuesday's big doji with a 56 point  gain to recover its losses back to last Friday.  This move also caused the indicators to arrest their descent from overbought less than halfway to oversold.  In fact the stochastic looks like it's getting ready to make a bullish crossover from a high level.  Those are usually good for one or two days of continued gains.  With no RTC currently running, that's about all the guidance we get here.

The VIXMeanwhile the VIX opened with a big gap down to lose nearly 12%.  Remember how last night I wrote "the VIX is now quite extended from its pivot at 13.19.  Whenever this happens, very often it will try to revert towards the pivot the next day".  QED.  This move caused the indicators to peak just short of overbought.  The stochastic has now climbed to a level from which a bearish crossover could be in place in the next few days.  At this point, it looks like the wind is out of the sails of the VIX.

Market index futures:  Tonight all three futures are just barely higher at 12:43 AM EDT with ES up by 0.03%.  This chart is perhaps the clearest of the lot.  On Wednesday ES put in a bullish engulfing candle that took it right to the edge of its descending RTC.  The overnight is trading outside that.  If we close above 1547 on Thursday, that will be a bullish setup.  In addition, the stochastic has just completed a bullish crossover.  With RSI and money flow now moving higher, this chart is looking bullish.

ES daily pivot: Tonight the pivot rises from 1541.75  to 1547.08.  We're back in the mode form last week where we were above the old number and remain above the new pivot, though by less.  Still, that's a positive sign.

Dollar index: The dollar gave back nearly all of Monday's gains on Tuesday, falling 0.32%with a long-legged doji.  But with a freshly minted bullish stochastic crossover now in place, more upside could be in the cards here on Thursday.

Euro: And the euro soundly rejected its 200 day MA on Wednesday, retracing nearly all of Monday's losses and form a bullish stochastic crossover in the process.  With the overnight candle hanging around the top of Wednesday's range, it looks like the euro could go higher Thursday.  And yes that leaves us in the odd position of both the dollar and euro charts looking bullish, so one of those is probably wrong.  At this point, the dollar is looking more likely to move higher than the euro.

Transportation: A bit of divergence here today as the trans dropped 0.35% even as the Dow rose 0.39%.  With four losing days in a row now, the trans have reached the edge of their rising RTC.  Thursday is make or break day for the trans.  One more losing day and the current uptrend will be over.  And the indicators, still overbought and declining, seem to favor more downside at this point.

Accuracy (daily calls): 

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      4      5           6        0.692    131
March      5      4      4           0        0.556    270

     And the winner is...

With the sole exception of the trans, I'm having trouble finding anything technically bearish tonight.  So unless there are some bad misses in the economic data coming out Thursday on housing and jobs numbers, I'd say we have a good shot of seeing Thursday higher.  However, I am concerned with the proximity of ES to its pivot, so I'm going to make a conditional call.  If ES can manage to stay above its pivot of 1547.08 by mid-morning, we're going higher Thursday.  On the other hand, if we break below, then watch for a lower close.  Watch for a bounce off that number in the wee hours of the morning.

ES Fantasy Trader

 Portfolio stats: the account remains at $94,000 after 9 trades (7 for 9 total, 3 for 3 longs, 4 for 6 short) starting from $100,000 on 1/1/13.  Tonight we stand aside because of the conditional call..

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