Actionable ideas for the busy trader delivered daily right up front
- Thursday higher only if ES pivot passed, else lower.
- ES pivot 1615.25. Breaking above is bullish.
- Next week bias higher technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Ugh - another dismal day on Wall St. as the Dow posted its second triple digit loss in four days. Was today's 217 point dump a washout or is there more in store? Let's sift through the wreckage in search of clues for a direction on Thursday as this miserable week grinds on.
The technicals (daily)
The Dow: Wednesday's close of 14,961 was actually under the lower BB at 14,999. I note that the last four times this has happened, all the way back to November 2012, the Dow bounced within two days. This was true even when the Dow was not very oversold, just like now. On the downside, this tall red marubozu is no reversal candle. However, as I noted last Thursday night, every time the Dow has had a big dump, it retraced about 50% the next day. That happened Friday as well as the other four times we saw that this year. So I think there's at least some expectation the bears might take a rest on Thursday.
The VIX: The VIX greatly surprised me on Wednesday by not falling back after spending three days on its upper BB. In fact, almost the entire candle traded above the upper BB on Wednesday. This is starting to feel like last December when we had a seven day run above the BB that didn't end until an exponential blow-off. We're not quite there yet but the indicators are now quite overbought and while it's been a nice run, I wouldn't be going long the VIX here.
Market index futures: Tonight all three futures are higher at 1:35 AM EDT with ES up by 0.31%. After a tall red marubozu on Wednesday that closed way under its lower BB, ES seems to be looking for some sort of bounce in the overnight. With the indicators now fairly oversold and momentum turning higher for the first time since May 13th, this chart looks ready for a relief rally.
ES daily pivot: Tonight the pivot dives from 1632.83 to 1615.25. After spending Wednesday in the Marianas Trench, ES has been drifting higher since the close and is now in striking distance of the pivot, by just two points. A break above would be the first bullish sign here in several days.
Dollar index: The dollar remains stuck in a downtrend and Wednesday's 0.23% loss negated Tuesday's inverted hammer. Instead, we got a long-legged doji, so once again there's a reversal suggestion for Thursday but one that requires confirmation. The indicators are certainly sufficiently oversold to support this notion.
Euro: After a spinning top of indecision on Tuesday, the euro proceeded to give us a pure doji of indecision on Wednesday sitting just barely above the previous candle. So far at least, it doesn't seem to be getting confirmed as the euro continues to rise in the overnight. Inf act at 1.3101 we are now near the upper BB at 1.3124. With indicators now fairly overbought, my expectation is for the euro to touch its upper BB on Thursday and then reverse course. That would sync with my call for a higher dollar.
Transportation: Once again the trans underperformed the Dow, putting in a very weak performance with a 1.90% loss on Wednesday that closed a good 50 points below their lower BB. This also drove the indicators very oversold and caused the stochastic to begin moving higher, albeit not with a bullish crossover. And while we remain solidly in a descending RTC, there's at least some sign that we could see a pause in the selling or a DCB here on Thursday.
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 3 4 6 4 0.636 85
June 1 1 1 0 0.500 62
And the winner is...
Technically, it's looking like we're about due for some sort of bounce, relief rally or whatever on Thursday. However, there are a bunch of jobs numbers coming out and I think that's what's going to drive the market rather than the technicals. So I'm going to delegate some of the work of prediction to the ES pivot and make a conditional call. I claim that if ES can retake its pivot and stay there by mid-morning, then we close Thursday higher. But if we bounce back off the pivot, then it's game over, 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 on the conditional call.