Wednesday, May 1, 2013

Wednesday higher if ES stays above pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher if ES stays above pivot, else lower.
  • ES pivot 1589.25 Breaking below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Last night we called for a higher close if ES could stay above its pivot by mid-morning.  Well after a brief failed test below that level off the open, ES broke right back above at 10:40 AM and the market did indeed finish higher, with the Dow gaining 21 points.  QED.  Now on to Wednesday, where we seek out the logic in the charts to arrive at an indisputable conclusion.

The technicals (daily)

The Dow: The Dow's small advance on Tuesday gave us a classic hanging man and also exited the rising RTC for bearish setup.  RSI and the stochastic are both quite high right now, though the later still isn't in position for a bearish crossover.  So let's just say the current trend is in jeopardy but it's still too soon to call it done.

The VIXThe VIX lost 1.39% on Tuesday and is now clearly channeling between 13.5 and 13.9.  Being as we're now at the bottom end of that range with quite oversold indicators and an RSI that seemed to have now bottomed, Wednesday would seem to favor a move higher here.

Market index futures:Tonight the futures are mixed again at 1:05 AM EDT with ES down by 0.03% but NQ up 0.05% and YM up 0.02%.  Call it basically unchanged, so no guidance here.

ES daily pivot: Tonight the pivot rises from 1584.75  to 1589.25.  Like last night, ES remains above the new pivot even after that jump, so this predictor remains bullish.  Tuesday's daily ES candle though formed a hanging man but remained inside the rising RTC.  Indicators are now quite overbought, but we've seen this year that they can stay that way for a long time before the market goes lower.  So there's really not that much in the way of bearishness on this chart.

Dollar index: The dollar is back in its normal inverse correlation with the market, dropping a big 0.48% following Monday's big losses.  This has now driven the indicators oversold and brought us back to support from earlier in April at 56.12 on the $USDUPX.  Given that the dollar also touched its lower BB on Tuesday, I'd say it's due for a reversal soon - either Wednesday or Thursday..

Euro: Last night I wrote "I'd look for continued upside on Tuesday." and that's exactly what happened with the euro accelerating its gains to close now at 1.3166 and just touching its upper BB intraday.  In fact this chart is looking like an exponential run-up and we know how those always end.  Indeed, the overnight is now forming a bearish shooting star..  With overbought indicators, I'd say the euro is looking ready to roll over.

Transportation: The trans on Tuesday advanced nicely, up 0.45%.  While this formed a hanging man, it also kept us right in the middle of the RTC.  Meanwhile RSI is pegged at 100 for the second day in a row.  But recall that RSI spent four days in a row on 100 back in January while the trans continued higher, and that all ended with only a single day decline.  So like the Dow, it's too soon to call   top here.

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      7      5           2        0.500    121 

April      7      5      5           3        0.667    328

     And the winner is...

Technically, I'm seeing a number of dojis warning of reversals and a number of charts sitting on BB extremes.  On the other hand, there are no good clear reversal warnings out there right now.  Add to the mix the fact that Wednesday is the first day of May, and that's historically very strong.  And it's also a Fed day.  Because there's no clear-cut direction, I'm going to make another conditional call.  If ES can stay above its pivot of 1589.25 by mid-morning, then we'll get a higher close Wednesday.  If on the other hand, we break below the pivot in convincing fashion by the 10:45 AM'ish area, we close lower Wednesday.

ES Fantasy Trader

Portfolio stats: the account now rises to $107,750 after 11 trades (9 for 11 total, 4 for 4 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside again in view of the conditional  call.

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