Actionable ideas for the busy trader delivered daily right up front
- Thursday lower, medium confidence.
- ES pivot 1662.58. Holding below is bearish.
- Rest of week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Last night's call was "uncertain".. And talk about uncertain - first we were up triple digits, then we were down, then we were up again, and finally the Dow closed off 80 points, mostly courtesy of Uncle Ben. At least Wednesday wasn't the same old same old. So let's see how this yo-you day changed the charts as we plot our course towards Thursday. Steady as she goes...
The technicals (daily)
The Dow: When all the dust had cleared, the Dow finished Wednesday with a giant inverted hammer, the most bearish looking candle I've seen in two months. But even that wasn't enough to drop us out of the rising RTC though we're now flirting with the edge. I'll note again that it's been over a month since the Dow put in more than one down day in a row but from the looks of it right now, Thursday may make two.
The VIX: Last night I wrote "I think this one's looking higher on Wednesday." and almost like I knew what I was talking about, the VIX rose 3.37% on Wednesday on an interesting spinning top that poked through its upper BB before falling back a bit. This also drove the indicators overbought for the first time since April 16th and took the stochastic back to levels from which bearish crossover form. So I'm guessing now that the VIX has no more than one up day left, if that.
Market index futures: Tonight all three futures are lower at 1:32 AM EDT with ES down by 0.51%. This is the first night in quite some time that the futures have not been basically flat at this hour of the night, and ES is down substantially. Wednesday's candle just barely squeaked out a bearish RTC setup and the overnight follow-through is providing the bearish trigger. We also got a bearish stochastic crossover so it looks like this uptrend is finito. This chart is looking quite bearish - down technically but not enough to make it look due for a quick snap back.
ES daily pivot: Tonight the pivot drops from 1666.25 to 1662.58. After crashing through the pivot at 2 PM Wednesday, ES has been unable to reclaim it and is now even further below the new pivot - not a good sign at all.
Dollar index: Uncle Ben also torpedoed my call for the dollar, which jumped 0.60% on Wednesday to close at its highest level since last July. This move canceled the bearish RTC trigger and sent the stochastic curving back around for a bullish crossover from a high level - generally a good sign of higher to come for a day or two.
Euro: After a brief scouting patrol above its 200 day MA on Wednesday, the euro finally decided it was having none of it and sank right back to 1.2844, giving up all its gains of the past two days. It's still technically a bullish RTC exit but as they say in Scotland, "Iy ha' me doots". Bottom line, it looks like the sideways action in the euro will continue for a while longer, with support around 1.2835 and resistance at 1.2910.
Transportation: Last night I wrote "the momentum is clearly fading. If the trans are going to stay alive, Wednesday is do or die." Well, it was pretty clearly "die" as the trans tumbled 1.58% tripling the Dow's 0.52% loss. This tall red candle dropped us clear out of the rising RTC for a bearish trigger, formed a bearish stochastic crossover and sent all the indicators headed south. A DCB on Thursday is not out of the question, but this one's looking ugly, folks.
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 7 5 5 3 0.667 328
May 1 4 6 4 0.556 -30
And the winner is...
Tonight I'm afraid I've got to hand it to the bears. If Mr. Market manages to laugh this one off, I'll be quite surprised. I'm seeing a bunch of reversal signs that I've not seen in a while now, so I'm just going to cut to the chase and call Thursday lower.
ES Fantasy Trader
Portfolio stats: the account remains at $110,375 after 12 trades (10 for 12 total, 5 for 5 longs, 5 for 7 short) starting from $100,000 on 1/1/13. Tonight we stand aside because I'm afraid we missed the boat. The time to go short was Wednesday afternoon. With ES down already half a percent since the close, I think most of the downside has already occurred. There's nothing worse than calling the close lower and being right, but going short and losing money anyway. It's all about timing.