Actionable ideas for the busy trader delivered daily right up front
- Thursday higher if ES pivot passed, else lower.
- ES pivot 1551.17. . Holding below is bearish..
- Rest of week bias higher technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Oh so we're back to the yo-yo market, are we? On Wednesday the Dow gave up all the gains it made on Tuesday when it retraced the losses it suffered on Monday. I'm certainly glad I called Wednesday "uncertain" because I honestly did not see this one coming. Now let's take a stroll through Chartville looking for directions to Thursday.
The technicals (daily)
The Dow: Two things immediately strike me about Wednesday's chart - first, that we seem to have some substantial support at 14,600. Second, that although we dropped 138 points, the close at 14,619 was higher than the close on Monday following that big drop. And third (OK, three things) the stochastic is now well-positioned to begin forming a bullish crossover, possibly by Friday. Still, the ability of the bears to drag the market back down after Tuesday's rally concerns me. And I note that volume on the two down days was notably higher than on Tuesday. So overall, this isn't looking too promising.
The VIX: On Wednesday the VIX popped right back over its 200 day MA, its third crossing in as many days. It also closed back above its upper BB again and in fact hit an intraday high even higher than on Monday. But the same factors come back into play: the VIX rarely remains above its upper BB more than a day or two, so odds are that the VIX will back off again on Thursday.
Market index futures: Tonight all three futures are mildly higher at 1:05 EDT with ES up by just half a point, or 0.03%. Still, this chart doesn't look as weak as Wednesday's big decline might suggest. First, support held here too and appears to continue to hold in the new developing candle overnight.Second, the indicators have come a fair way off overbought already. And third, the stochastic is now in prime position to form a bullish crossover.
ES daily pivot: Tonight the pivot falls from 1560.58 to 1551.17. ES's weak drift higher in the overnight so far is not enough to break above even this lowered pivot, so this remains bearish.
Dollar index: On Wednesday the dollar put in a most impressive gap-up green marubozu, good for a 1.18% pop that cleared its descending RTC for a bullish setup. It also brought the indicators out of the oversold gutter so I'd say we could move higher again on Thursday.
Euro: Like the other charts, the euro reversed course on Wednesday, giving up all of Tuesday's gains and then some. Although it's up 0.23% in the overnight, there's nothing in the indicators to suggest a higher close on Thursday. That would mesh with my guess of a higher dollar too.
Transportation: A similar pattern to the Dow here but with an even bigger loss on Wednesday, as the trans fell 1.52%. However, support at 5913 held and the stochastic was driven down to the point from which bullish crossovers usually begin. While we have no reversal candle here, the indicators suggest that further downside is limited.
Sentiment: Once again it's time (actually it was time two nights ago) for the latest weekly TickerSense Blogger Sentiment Poll. We continue to track the poll to see how well it performs.
Wk.# Week % Bullish % Bearish NightOwl Poll SPX Accuracy
1 12/31 40 48 - - 1402 0/1
2 1/7 47 30 + + 1466 1/2
3 1/14 52 15 + + 1472 2/3
4 1/22 50 21 + + 1486 3/4
5 1/28 44 26 + + 1503 4/5
6 2/5 40 36 + + 1513 5/6
7 2/11 43 25 + + 1518 6/7
8 2/19 21 43 - - 1520 6/8
9 2/25 30 52 - - 1516 6/9
10 3/4 29 39 - - 1518 6/10
11 3/11 41 26 + + 1551 7/11
12 3/18 41 37 + + 1561 8/12
13 3/25 31 38 + - 1557
14 4/1 38 38 + x 1569
15 4/8 32 50 - - 1553
16 4/15 33 50 + - 1589
Again, the SPX number is the closing price of the S&P on the Friday before each new poll comes out. The "NightOwl" column is how I voted. The "Poll" column is how the majority of participants voted. Since the poll is for 30 days out, after the first four weeks we're able to see how well we did. This week we see that I voted bullish four weeks ago, so both I and the majority were correct. We therefore continue the year with an accuracy of 8 for 12, or 67%.
The only surprise this week is that the poll is almost unchanged from last week. And I did change my vote back to bullish, marking the second time this year I've disagreed with the majority. I find the continuing bearish sentiment interesting. We've only had two weeks this year where a majority voted bullish, and the highest was only 52% back in mid-January. If you believe that extreme bullishness is required for a correction, we're not finding it here.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 3 4 5 6 0.692 131
March 5 7 5 2 0.500 121
April 5 2 4 0 0.714 444
And the winner is...
Just on the basis of Yo-yo Theory (which worked so well most of last month), I'd call Thursday higher. But the bear case is weaker than it was last night, unless our three-day support lines give way. But with a bunch of economic news coming out Thursday morning, including Phillie Fed, it's too risky to make an unconditional call. So I'll make a conditional call: if ES can break above its pivot of 1551.17 by mid-morning, we'll close higher Thursday If on the other hand, it makes a run at it and bounces off (or just continues lower), we close lower.
ES Fantasy Trader
Portfolio stats: the account remains at $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13. Tonight we stand aside in the face of the conditional call.