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- Thursday lower, medium confidence.
- ES pivot 1619.25. Holding below is bearish.
- Rest of week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader going short at 1600.25.
Sigh - I called Wednesday higher, and indeed it was - for about 60 seconds. Then it was all downhill from there as the Dow closed just above the lows of the day at 14,995 for an ugly 127 point loss. I'm getting the impression that the gestalt of the market is changing but we need to consult the charts to quantity that just a bit. So let us dive in and test the waters.
The technicals (daily)
The Dow: Well there you have it - we've now snapped the two day losing streak for the Dow(n). Wednesday's dump brought us back into the descending RTC and formed a fresh bearish stochastic crossover. Nothing but pure ugly on this chart.
The VIX: Once again the VIX confounded me by posting an impressive 8.9% gain on Wednesday that canceled Tuesday's doji and confirmed a bullish stochastic crossover. Actually, looking at the recent action of the VIX, it's looking pretty jittery. This made me take a look at the VIX of the VIX and lo and behold, it has absolutely spiked in the past two days with a bullish stochastic crossover of its own. But it's also now near resistance levels from which it has moved lower in the past, so I'm thinking that while we could still have a few more days of upside action here, things will settle down before too long, maybe like next Monday. A drop in $VVIX will lead to a lower VIX which will improve the market.
Market index futures: Tonight all three futures are significantly lower at 1:46 AM EDT with ES down by 0.57%. We're back in the descending RTC, the indicators continue to fall but are still nowhere near oversold, and the developing candle is giving us a very bearish-looking three black crows pattern. This chart is just looking quite weak tonight.
ES daily pivot: Tonight the pivot falls from 1630.33 to 1619.25. ES was below all day and remains below despite this large drop, so that's definitely a bearish sign.
Dollar index: At least I got something right. Last night I wrote "There's nothing bullish about this chart" and after breaking below its 200 day MA, the dollar sank even more on Wednesday, down another 0.20%. The indicators are all oversold-broken now and have lost their predictive power. So nothing has changed here and still no sign of a reversal. With the 200 MA and support at 55.79 ($USDUPX) gone, there's no more support until 55.38.
Euro: And of course the euro continues to march higher, locked solidly in a rising RTC with a green spinning top on Wednesday. But that doji has already been canceled as the euro is already up another 0.21% in the overnight alone. There's weak resistance at 1.3391, then 1.3455. But for now, no sign of a lower euro.
Transportation: Same story as the Dow here - confirmed doji, two down candles, bearish stochastic crossover, bleah.
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
May 3 4 6 4 0.636 85
June 1 4 2 0 0.200 -75
And the winner is...
Much as I'd like to see a turn-around, everything I'm looking at tonight is bearish. Also, the Asian markets are getting pounded, with the Nikkei down 6% as I write. I don't usually mention these, but a drop that big kind of gets your attention. So I think the only logical call here is for Thursday lower. I'll be happy to be proven wrong.
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 go short at 1600.25. I'm afraid we've missed the majority of this move, but I think there's still a few scraps left to pick up on the short side.
Posts
Michele, I have a quick question. Since you look at both the relative strength and also use pivot points, which one in your opinion trumps?
ReplyDeleteThanks,
Russ
That's a great question. In general, I find that the pivot is the better short-term (as in one day) predictor. RSI is an important indicator and it's one of my Fave Five (the others are money flow, momentum, OBV, and the stochastic) but it's definitely slower responding. And sometimes RSI can go overbought and stay that way for a long time before coming down, as we saw so much earlier this year. So I look at everything together and make my decision.
ReplyDeleteThat said, sometimes none of this amounts to a hill of beans. For example, last night RSI was not yet oversold and we weren't particularly extended from the pivot, and yet this morning we're up, not down as I had expected. Live and learn... or at least live I guess. Thanks for writing!