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- Wednesday uncertain.
- ES pivot 1641.08. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Last night while musing about all this sideways action I wrote "I'm expecting a resolution before too long.". Turns out we didn't have long to wait at all, as the Dow rocketed up 124 points on Tuesday to blast right through the upper limit of its recent trading range of 15,125. Now the question becomes, was this a one-off or are we back to the races? We handicap the winners right here with candlestick charts for racing forms.
The technicals (daily)
The Dow: The Dow's decisive breakout on Tuesday puts it back near the top of its rising RTC but did not hit the upper BB, now at 15,266. So the uptrend remains intact and there's even a bit more free room to run. And of course there are no more resistance levels since we're back in record territory.
The VIX: Last night I wrote that "the VIX should be ready to begin a new uptrend any day now." And we did move higher on Tuesday by 1.75% on a second inverted hammer in a row. This was one of those unusual days when both the VIX and the markets rose together. This also had the effect of reinforcing support at 12.50. However, it extended the recent consolidation to eight straight sessions. If the VIX is in fact going to begin a new uptrend rather than just bounce around in a trading range, it's going to have to do it pretty soon. In any case, I think it's still looking more like it wants to go higher than lower on Wednesday.
Market index futures: Tonight all three futures mixed at 1: 18 AM EDT with ES down by all of one tick, or 0.02% but YM up 0.03% and NQ up 0.06%. So it's pretty much flat. That in itself is bullish considering the pop ES took on Tuesday. The big green marubozu was enough to propel ES right back into its rising RTC even after four days of consolidation. The indicators remain broken, so the RTC is the main predictor here and that is looking bullish.
ES daily pivot: Tonight the pivot zooms from 1628.50 to 1641.08 But amazingly, we're still above the new pivot, and by a good seven points. This is clearly a bullish sign.
Dollar index: As I suspected last night, the dollar did advance again on Tuesday, though with a 0.42% gain it was more than just "a bit". It was in fact enough to close just above the upper BB..The dollar has now cleared all resistance back to last July and still isn't even overbought on the weekly chart. I wouldn't be surprised to see the $USDUPX hit 57.80 by the end of the week.
Euro: Well scratch my theory about the euro bouncing off its 200 day MA. That pretty much collapsed on Tuesday as the euro sank back below again to close at 1.2939 and remain in its descending RTC. The last time we had a 200 day MA crossing, we got several more days of lower prices and it looks like the same thing may happen this time too. We're seeing mainly sideways action i the overnight but with the strength of the dollar, I wouldn't be surprised to see the euro continue lower on Wednesday.
Transportation: Pretty much the same story here as the Dow, only more so as the trans popped for 1.92% on Tuesday to the Dow's 0.82%. But again, that still leaves us shy of the upper BB. It also gives us a bullish stochastic crossover from a high level, and that's usually good for another day or two of gains.
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 2 3 4 0.714 26
And the winner is...
With the trans on a tear and the TLT in the toilet, plus a vacillating VIX, a powerful pivot, and a dazzling Dow, things seem to be looking up tonight, alliteratively speaking. My only concern here is the natural tendency to pause after a day of big gains. And also note that there are no fewer than nine different pieces of economic news coming out on Wednesday morning and that's a lot of headline risk, even if the numbers seem to be coming in BTE lately. Also, it's still op-ex week and that makes me cautious. So my best guess is that we might be in for another doji day on Wednesday but the official call is simply Wednesday uncertain.
ES Fantasy Trader
Portfolio stats: the account remains at $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 with another "uncertain" call..