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- Wednesday uncertain.
- ES pivot 1672.25. Holding above is bullish...
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader remains short at 1643.00.
It's not a sure thing, but the conditional call works pretty well a lot of the time. In the case on Tuesday, ES remained above its pivot after my post last night until 9:40 AM Tuesday when It made its first attempt to break under. This was rejected but a more prolonged attack that began at 10:30 AM succeeded (recall that I make "mid-morning" as one of the qualifiers for a conditional call) and it was all over. The Dow closed down 32 points. QED. And with that little theorem out of the way, we move on to Wednesday.
The technicals (daily)
The Dow: After a weak gain on Monday, the Dow gave it all back plus a bit more on Tuesday in the form of a stubby hanging man. But more importantly, this sideways action has now (finally) taken us out of the strong rising RTC of late for a bearish setup. And after peaking at 98 on Monday, RSI has begun moving lower. So things appear to be falling into place for a move lower here.
The VIX: On Tuesday the VIX finally gained some traction with a 4.57% gain, it's biggest since June 20th. This exited the descending RTC for a bullish trigger and brought RSI off of zero when it had languished for two days. And VVIX posted similar gains. So everything's pointing to more upside here on Wednesday.
Market index futures: Tonight all three futures are somewhat surprisingly higher at 1:06 AM EDT with ES up by 0.06%. ES was stopped cold by the 1679.50 level on Tuesday and gave up all of Monday's gains with a red candle that just exited the rising RTC for a bearish setup. Indicators remain quite overbought, so despite tonight's modest move higher (so far), the overall look of this chart is negative.
ES daily pivot: Tonight the pivot dips from 1675.58 to 1672.25. After spending Tuesday below the old number, we remain just below the new pivot, though ES is actively knocking on that door as I write. A break above before the open would be bullish. A bounce off would be bearish.
Dollar index: Last night I wrote "I'm thinking the dollar goes lower on Tuesday", and it did indeed, gapping down 0.67% as it was unable to continue its attempt to fill that big gap down from last week. This now drives the dollar officially oversold and moves the stochastic into position for a bullish crossover, though not necessarily on Wednesday. I see at least one more down day coming here first..
Euro: After bouncing around its 200 day MA for three days, the euro finally got some mojo and took off on Tuesday to close at 1.3163. But that also took it into overbought territory and moved the stochastic closer to a bearish crossover - but not just yet. Still, we're down 0.14% in the overnight, so some retracement isn't out of the question here for Wednesday. But like last night, I can't call both the dollar and the euro the same direction, so one of these is wrong. I just go by how each individual chart looks. And like last night, it's hard to tell which one that might be.
Transportation: The trans continued their up/down thing by dropping 0.72% on Tuesday, outpacing the Dow's 0.21% decline and with a bearish engulfing pattern. So Monday's bearish RTC trigger paid off and with the indicators still pretty overbought, it looks like more downside is possible on Wednesday. We also have a pretty clear megaphone top pattern forming, so that increases the odds of a move lower 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 6 1 0 3 0.900 467
And the winner is...
While the charts are looking rather bearish in general tonight, there's a slight problem and his name is Ben Bernanke. His remarks on Wednesday are what will move the market, not any technicals here (gee, I could have saved myself the trouble). So since I have no way of knowing what he's going to say (the battery died in my bug in his office) the only logical course of action tonight is simply to call Wednesday uncertain. 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 remain short at 1643.00. I'm still not quite ready to give up on this one.