Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday lower, low confidence.
  
• ES pivot 1641.75..  Holding below is bearish.
• Friday bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Well after some usual Fed-induced gyrations, M.r Market finally he didn't like the Fed minutes, no sirree, not at all and the Dow extended its losing streak to six, a number not seen since, well quite some time now, down another 105 points.  So much for my reading of a higher bias.  This was a perfect example of why I automatically call all Fed days as "uncertain".

The technicals (daily)

The Dow: The Dow continued its decline on Wednesday, locked to its descending RTC like a railroad track and giving up the 15K support line in the process, not to mention support at 14,911.  Next support is nearby at 14,860 and the indicators are quite oversold now, but when we get into these waterfall declines that continue to creep down the lower BB, they can go on for a while.  Nothing bullish on this chart tonight, sad to say.

The VIX:  On Wednesday the VIX completely ignored three good reversal warnings, and thanks to the Fed, jumped 6.91% on a big gap-up evening star.  The VIX has now been closing at or even above its upper BB for five straight days now, a pretty unusual event and reminiscent of the latter part of May.  VVIX is in a similar position though, making me think that what goes up must come down.  Technically, anyway.  And if the technicals can reassert themselves, the VIX is looking lower for Thursday.

Market index futures: Tonight all three futures are lower at 1:12 AM EDT with ES down by 0.12%.  Wednesday featured yet another ugly red candle to keep us in a steep (Pearson's = 0.933) descending RTC.  But one thing about a steep channel is that it doesn't take much of a sideways move to leave it and ES is on the edge right now.  The indicators are all more oversold now than they've been since last November, but with no positive overnight action and no reversal candle in sight, I can't bring myself to believe the selling is over just yet.

ES daily pivot: Tonight the pivot drops from 1649.42 to 1641.75.  After spending most of Wednesday below the old number, we remain below the new pivot by a good six points, so this one remains bearish tonight.

Dollar index: The dollar continued its funny random walk lower on Thursday by gaining 0.36% on a gap-up inverted hammer. .At least I called this one correctly.  Now we've got a stochastic about to form a bullish crossover but a bearish candle, so tonight this chart is a wash.  Could go either way.

Euro: On Wednesday the euro respected its upper BB and gave back half of Wednesday's gains to close at 1.3376.  The overnight is gapping down, already off 0.24%.  That leaves it teetering on the edge of its rising RTC with a newly completed bearish crossover so I'd say the euro's going lower on Thursday.

Transportation: Interestingly, while the Dow has been nothing but DOWn lately, the trans have been consolidating in a narrow range of 6330 - 6388, alternating up ad down days for a week now.  Wednesday was down 0.60%but traded outside the descending RTC for a bullish trigger.  With oversold indicators, this is a bullish sign for the market.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

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      5           1        1.000    635

     And the winner is...

Well you know how Mr. Market is.  When he goes off his meds he really gets into a funk.  And with the failure of the attempted "Prague Spring" rally on Tuesday, that sort of reinforces the subsequent downside.  The failure of the SPX Hi-Lo index (which came right back off 100 on Wednesday) is of particular concern to me.  Right now I'm casting about for bullish signs.  About all I can see are the VIX, which really looks due to move lower, and the trans which are ready to move higher.  Is that enough to overcome all the other bearish signs still lying about?  Or are those signs overdone artifacts of an overreaction to Wednesday's Fed minutes?

Hard to say, but with momentum turning lower again I'm afraid that the only logical call is for Thursday lower.  I'd love to be proven wrong, because my trading account is getting hammered here.

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, waiting on a new trend to start.