Actionable ideas for the busy trader delivered daily right up front
- Thursday higher only if ES stays above pivot, else lower..
- ES pivot 1636.67. Direction of break is critical.
- Friday bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
I wasn't quite sure where we were headed on Wednesday but I refrained from calling the day lower on the basis of the late-nite futures action, despite otherwise gloomy-looking charts. Good thing too, because the Dow posted a middling 48 point gain. A DCB perhaps, but hey, a win is a win. So as the dog days of August wind down, let's sniff out where Thursday is headed. Arf arf.
The technicals (daily)
The Dow: The Dow managed to stem its two day decline on Wednesday, robbing the bears of their momentum and turning the indicator back upward, just coming off oversold. Still, this isn't any reversal pattern I know of and we remain inside a descending RTC, so this chart remains bearish.
The VIX: On Wednesday we got the confirmation I was looking for last night. While the VIX declined only 1.67%, it did it on a big bearish engulfing pattern that spanned the upper BB but closed below it and in fact traded entirely outside the rising RTC for a bearish setup. So I'd say the VIX is ready to move lower again Thursday.
Market index futures: Tonight the futures are mixed at 1:51 AM EDT with ES dead flat but YM up 0.04% and NQ up 0.14%. On Wednesday, ES put in a DCB but it at least demonstrated that the market is finding some footing here. The meandering drift higher in the overnight so far is encouraging too so this chart is now looking a bit more positive than last night.
ES daily pivot: Tonight the pivot dips from 1636.67 to 1632.08. As I write, ES is threading about the new pivot, trying to find direction. This definitely puts the pivot in play and at the moment it's too close to call.
Dollar index: A long-legged doji for the dollar on Wednesday reflects the continuing indecision here - there's no telling where this one's going on Thursday..
Euro: The euro has been similarly undecided, alternating between gains and losses for five days now, Wednesday's drop taking it back to 1.3339. And the overnight is continuing lower, down another 0.16% so far. With the bearish RTC exit complete, I'd say the euro still has lower to go.
Transportation: The trans didn't quite match the Dow's advance on Wednesday, losing 0.10% on a small doji sitting at the bottom of Tuesday's marubozu. But this suggests a reversal is possible, though we should wait a day for confirmation.
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 11 2 6 1 0.857 718
And the winner is...
Well if all those hot-heads in the middle East can manage to stave off Armageddon one more day, it looks like we might have a chance to see a bit more upside on Thursday. The charts are looking a bit more encouraging tonight than last night but with all the headline risk about in the world right now, we're faced with a difficult task. So I'm going to make a conditional call: if ES finally decides to break above the pivot by mid-morning, we'll close Thursday higher. However, if we make a definitive break lower, then we close lower.
ES Fantasy Trader
Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15 total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13. Tonight we continue to stand aside - while I again think we're going higher from here, I'm not sure how long this will last.