Actionable ideas for the busy trader delivered daily right up front
- Wednesday lower, low confidence.
- ES pivot 1643.42. Breaking below is bearish..
- Rest of week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader going short at 1643.00.
Despite a less than totally unequivocal picture last night, my call for a higher finish played out nicely on Tuesday with the Dow gaining another 76 points to extend the winning streak to four in a row. Can we go for five? Let's see what the charts have to say about that one.
The technicals (daily)
The Dow: On Tuesday, the Dow put in another green marubozu for a three white soldiers pattern as it continues to march towards its upper BB at 15,377. We remain in a very steeply rising RTC so there's really no suggestion of lower here. The only issue is that we've got resistance at 15,322. If we can pass that, the upper BB is assured, but with the pace of the gains decelerating and volume declining I'm wondering if there's going to be enough gas in the tank to punch through this level on Wednesday. After a nice four day run like this, I'd be expecting some profit-taking to kick in at some point.
The VIX: Last night I wrote "a VIX turnaround may be coming soon, but it's still not clear it will be on Tuesday" and a good thing too, because it wasn't. The VIX continued to sink on Tuesday, down another 2.91%. But we now have two dojis in a row - Monday's inverted hammer and Tuesday's doji star. And with VVIX actually finally posting a gain (for the first time in 10 days) with a bullish piercing pattern, there are some signs that the VIX may now be ready for that turnaround I mentioned.
Market index futures: Tonight all three futures are lower at 1:05 AM EDT with ES down by 0.12%, the first time we've seen the futures lower at this hour in a few days. In fact, while the decline is small so far, it has already left the rising RTC for a bearish setup and the candle is shaping up as a dark cloud cover. RSI is now extremely overbought (96.35), momentum and OBV appear to have peaked, and the stochastic is ever so close to forming a bearish crossover. So this chart is now looking weaker than it has in days.
ES daily pivot: Tonight the pivot rises again from 1633.67 to 1643.42. However, tonight we have a difference. ES is no longer above the new pivot. In fact it is conducting a test of this level as I write. A break under would be bearish.
Dollar index: I missed this one last night. The dollar resumed its rise, gaining 0.43% on Tuesday to cancel the bearish RTC trigger. About all I can say now is that the dollar remains in a choppy uptrend. It has now cleared resistance at 57.88 and stands at its highest level in a year. So I'm not going to stand in front of this train - the dollar will move lower when it's ready.
Euro: And the euro's vain attempt at a rally on Monday was rejected as it gave up support at 1.2823 on Tuesday to close at 1.2790 as it continues to dribble down the lower BB in a descending RTC. And with the overnight action down another 0.07%, there's now no sign of a turnaround on Wednesday.
Transportation: Dow Theory note - on Tuesday the trans greatly outperformed the Dow, up a whopping 2.26% to the Dow's 0.50%. This took them to 6440, just above their upper BB, and pushed the indicators deeper into overbought territory. While none of that is a specific reversal indicator, I have to wonder if a pause isn't on the way soon.
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 3 1 0 1 0.800 269
And the winner is...
Tonight I'm seeing some definite bearish signs on the horizon, for the first time in days. Therefore I'm going to call Wednesday lower, in large measure because the VIX looks ready to move higher and because the futures are guiding lower. That's all she wrote.
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 go short at 1643.00. Things are feeling a wee bit toppy to me tonight. I opened this position when ES broke under its daily pivot. Reminder - you can follow my entries and exits for these trades live on Twitter @nightowltrader.