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- Tuesday higher, low confidence.
- ES pivot 1632.00 . Holding above is bullish.
- Rest of week bias higher technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Last night I noted that recently "big one day drops have been followed by something like a 50% retracement." And that's just what we saw on Monday with the Dow regaining just a bit more than half of Friday's losses in a 138 point rebound. So now let's move on to Tuesday.
The technicals (daily)
The Dow: Monday's retracement caused the indicators to begin rising from oversold and also set up the stochastic for a bullish crossover. The Dow also regained its pivot in the closing hour so I am cautiously optimistic about this chart for Tuesday.
The VIX: On Monday the VIX gave us a big bearish inverted hammer, very nearly a gravestone doji with a close above the upper BB. That marks the second day in a row for a close there which means we're about due to see the VIX fall. The VIX's last three excursions above the 200 MA have been fairly brief and I expect this time to follow suit.
Market index futures: Tonight the futures are mixed at 1:33 AM EDT with both ES and YM down by 0.03% but NQ up 0.03%. ES gave us a bullish hammer on Monday. Combined with oversold indicators and no negative follow-through in the overnight so far means we have a shot at moving higher on Tuesday.
ES daily pivot: Tonight the pivot drops from 1637.75 to 1632.00 even. This move, plus the slow upward drift of ES since 6 PM has put it back above the new pivot, so this now becomes a bullish sign.
Dollar index: On Monday the dollar gave us a classic hammer that along with oversold indicators and a new bullish stochastic crossover makes me think that we could see more upside on Tuesday..
Euro: As fast as the euro fell through its 200 day MA on Friday, it zoomed right back above on Monday, closing at 1.3073, its highest level since May 9th. This move drove the indicators overbought and left the stochastic right on the cusp of a bearish crossover. With a 0.11% decline in the overnight, I wouldn't be surprised to see the euro move lower on Tuesday. That also syncs with my higher dollar theory.
Transportation: On Monday the trans formed a perfect doji that tested the lower BB before bouncing. It also left the indicators quite oversold and just managed to squeak out a bullish stochastic crossover. While we remain in a descending RTC here, there is at least some suggestion of a reversal on Tuesday.
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 0 0 0 1.000 138
And the winner is...
We've been seeing a lot of choppy action in the past week so this is a tricky one. The safe move would be to simply call Tuesday uncertain, but I'm seeing enough bullish signs in the charts tonight to warrant a call instead of Tuesday higher. And that's my final answer.
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 in view of all the choppiness. I'd rather watch this from the sidelines than get my head chopped off.