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- Thursday lower, low confidence.
- ES pivot 1685.42. Holding below is bearish.
- Friday bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader remains short at 1643.00.
The market continued trading sideways on Wednesday and while the Dow and SPX both posted small losses, they weren't enough to establish a new downtrend. So we're closing out July in a similar situation to that which we found at the beginning of the month. The hard part is figuring out if it will resolve the same way, upwards, but the charts will help us figure out the answer tot that one.
The technicals (daily)
The Dow: On Wednesday the Dow lost 25.5 points. While that's not that much, the candle was bearish engulfing and it brought us very close to the edge of the rising RTC. With indicators still slowly coming down off overbought, this chart now looks bearish.
The VIX: And the VIX finally managed to string together two consecutive up days with a 4.11% advance on Wednesday. This ended just outside the descending RTC for a bullish setup and caused the stochastic to form a bullish crossover so more upside is likely here on Thursday.
Market index futures: Tonight the futures are mixed once again at 12:48 AM EDT with ES down by 0.07%, YM down 0.07% but NQ up 0.11%. Last night I wrote "this chart may be headed lower on Wednesday" and sure enough, down we went on a tall spinning top that dropped us out of the rising RTC for a bearish setup. The overnight so far is a bullish hammer but one must remember that from half-baked candles come half-baked predictions. So as long as we remain in a descending RTC with falling indicators and no nearby support, this chart remains bearish.
ES daily pivot: Tonight the pivot steps down from 1689.92 to 1685.42. This means we remain below the new pivot, though now by less than three points. On the face of it, this is bearish, but watch for any attempt to cross the pivot in the wee hours of Thursday morning.
Dollar index: The dollar broke out of its descending RTC on Wednesday for a bullish setup with a 0.44% gain. Add in a bullish one white soldier candle and indicators that remain oversold and it looks like the dollar could go higher again on Thursday.
Euro: On Wednesday the euro put an end to its recent advance as the three white soldiers threw down their weapons and surrendered with a bearish harami. But the overnight is regaining some ground, up 0.08% so far. I think this one will depend on whether or not we can cross the pivot, now at 1.3212. The euro is closing in on that as I write.
Transportation: Last night I wrote "the stars are aligning for lower here on Wednesday" and sure enough, we lost another 1.12%. With three days of steepening losses, this chart is going exponential to the downside, suggesting that a reversal isn't too far off. There's also support just below us at 6426 and the indicators are now halfway to oversold. So we likely have at least some more downside here on Thursday and then we'll have to see about Friday.
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 6 5 6 0 0.545 543
July 9 1 2 3 0.923 496
And the winner is...
I've grown wary of making calls for down days recently because the larger trend has been persistently higher, but tonight I have to say that I'm seeing all bearish charts with a picture that has been weakening for several days now. So I'll just have to ignore my feelings and appeal to logic. And right now, logic says Thursday lower.
ES Fantasy Trader
Portfolio stats: the account remains at $115,000 even after 14 trades (11 for 14 total, 6 for 6 longs, 5 for 8 short) starting from $100,000 on 1/1/13. Tonight we remain short at 1643.00. At least we regained some ground here on Wednesday..