Actionable ideas for the busy trader delivered daily right up front
- Friday uncertain.
- ES pivot 1664.00.. Holding below is bearish.
- Next week bias higher technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader remains short at 1643.00.
After noodling around for the better part of a week going nowhere, the market broke decisively to the downside on Thursday. Remember the bearish AD line divergence I showed here last night? Well there you go. Also interestingly, unlike many days recently, buyers did not come back in the afternoon to drive the indices back up and we finished near session lows. As one talking head put it on CNBC, "something seems different". Or is it? One thing that remains the same - there are clues in the charts that will give us Friday's direction, so let's get sluicing.
The technicals (daily)
The Dow: Well the Dow took a big dump out the gate on Tuesday and that was that. Its biggest single day loss since June 20th left it far below its descending RTC but oddly did not drive the indicators to extreme oversold levels. In any case, next support is right at the psychological 15K level and we're not too far from that. And right now I see nothing on this chart that would preclude taking a look at that on Friday.
The VIX: I wasn't getting a good read on the VIX last night but I sure wasn't expecting a 12.96% pop that rocketed the VIX right through its upper BB, off the left edge of its rising RTC and was stopped only by its 200 day MA right at 14.72. The 200 MA is pretty good resistance and while the VIX is now overbought (though not extremely so) I'd say chances are good it might take a pause here on Friday, especially considering Thursday's giant gap up.
Market index futures: Tonight all three futures are higher at 12:49 AM EDT with ES up by 0.18%. The downside break is clear in Thursday's tall red marubozu that began at the lower end of the recent congestion range and just went on from there, down through the lower BB, then the 40 day MA and finally support at 1661. However, it also exited the left edge of the descending RTC, an unusual move that can sometimes be bullish, primarily because it indicates a downward move that's overdone. In any case, the indicators are now oversold, though still not extremely so. But in the overnight we are seeing some sort of stabilization going on and I wouldn't be expecting that if there was some more massive downside left. It looks more like setting up for a DCB
ES daily pivot: Tonight the pivot plummets from 1685.42 to 1664.00 even. But we were so far below the pivot on Thursday that even with this drop, we remain below the new number, though by considerably less. Still, it's far enough below to remain a bearish sign.
Dollar index: The dollar took a big dump of its own on Thursday, down another 0.67%.after an early attempt to breach the 200 day MA failed miserably. This leaves us with a stochastic looking like it's ready to make a bearish crossover, but also with nearby support. So all in all, we might see a hammer here on Friday.
Euro: And of course as the dollar fell the euro jumped on Thursday, rocketing out of its descending RTC for a bullish setup to close at 1.3349. It also formed a bullish stochastic crossover. And with resistance and the upper BB both around 1.3390, I see no reason why the euro can't visit those levels soon, so I'm looking for another up day on Friday.
Transportation: Last night I wrote "If [support] fails on Thursday (and I see no reason why it won't), we're headed for the lower BB at 6352." Well we ripped right through that like butter eventually closing at 6337 with a classic three black crows pattern. But with oversold indicators, there's at least a hint of a possible reversal soon. Also, note that we stopped right at a support line of 6341. After three big declines, this level might just hold, so this one is too tough to call tonight.
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 10 2 4 4 0.875 486
August 9 0 2 0 1.000 635
And the winner is...
With the VIX at a potential resistance line and with Friday being op-ex and historically quite bullish, I'm somewhat loathe to join the sky-is-falling crowd just yet despite the fact that I don't see any immediate strong bullish reversal patterns on the charts. And it is interesting that the futures are rising at the moment. And I note that the SPX Hi-Lo index hit 60 today, a level from which rallies generally soon follow. Similarly the SPX AD line has now reached levels last seen on June 19th, also suggesting a rally is coming soon.
But on Friday? I wish I knew. We're a bit too far below the ES pivot for a conditional call to work and it's still just maybe a day too early to make the bullish call, and I still just hate catching the falling knife, and there's the usual op-ex hoopla so I'm just going to have to wimp out and call Friday uncertain. Have a great weekend and see you again as usual Sunday night!
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. We've now amazingly recovered nearly all of our previous unrealized losses on this trade. In the absence of a clear bullish trend, I'm going to let this one ride a bit longer.