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- Tuesday uncertain, bottoming possible.
- ES pivot 1648.08.. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
The condition for my call worked out as ES made three weak attempts to break above its pivot, one early in the wee hours of Monday morning and the last at 10:55 AM. After that it was all over and the market ended down with the Dow losing another 71 points for its first four day losing streak of the year. So is it over yet? We pore over the sea of red tonight looking for clues to Tuesday.
The technicals (daily)
The Dow: The Dow on Monday looked pretty much like the Dow on Friday. The main difference is that everything that was oversold then is even more oversold now. RSI is down to 5.7 and the stochastic %K line is about to fall right off the chart at 3.45. But unlike Friday, the selling only stopped on Monday because the bell rang. All in all, this chart's looking pretty ugly right now. We've closed below the lower BB for four days running now and the lower BB just keeps falling away. If support at 15K breaks on Tuesday then the next line is at 14,900. We remain in a descending RTC and I see no reversal signs here.
The VIX: Meanwhile, the VIX fooled me by gapping up right over its 200 day MA on Monday to finish 5.08% higher. This makes three days in a row now that it's closed above its upper BB and that's about as much as it ever does before going lower again. The candle was also a tall hanging man, lending support to the idea of a move lower.
Market index futures: Tonight all three futures are lower at 1:27 AM EDT with ES down by 0.09%. After four straight down days, the developing candle remains solidly inside the descending RTC and has just broken support at 1645. While the indicators are now oversold, OBV is looking rather worrisome, declining steadily since 8/13. There's really nothing encouraging on this chart tonight.
ES daily pivot: Tonight the pivot drops once again, from 1654.17 to 1648.08. And once again, ES continues lower to remain below the new pivot so this one remains negative.
Dollar index: The dollar found some stability on Monday, interestingly given the continued downside in the markets, losing just 0.04%on a stubby little spinning top. That makes two dojis in a row now but no real indication that the dollar is getting ready to attempt a retracement of Friday's big dump. This chart is purely wait & see.
Euro: And the euro is even more indecisive, with a similar double doji but with the overnight simply continuing in the same range of 1.3333 - 1.3357. The only real clues here is something of a symmetrical triangle developing, which would suggest the next move will be higher.
Transportation: So much for Friday's bullish piercing pattern. On Monday the trans dropped 0.72% with a pattern that resembles a bullish stick sandwich, though not perfectly. But since we remain in a descending RTC, it's too early to call a move higher here for Tuesday.
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 3 1 1.000 635
And the winner is...
The SPX AD line continues to put in lower highs and lower lows. And the Morningstar Market Fair Value index has been running overvalued since July 9th. And all the charts look bearish. There are just two bright spots - one, the VIX looks about ready to move lower, and two, the SPX Hi-Lo index appears to have bottomed last Friday at 25, its lowest level of the year by far. It was back to 40 on Monday. The last two times it bottomed were June 24th and February 26th, and the very next day in both cases we moved higher. I'd be all over a bearish call were it not for these two items.
So here's the deal - I'm reluctant to go against the Hi-Lo, but there's just so much momentum to the downside lately that I also don't want to stand in front of this bus. But it does look like the selling should be over soon. So I'm going to call Tuesday uncertain, not because I have no idea which way the market's going, but because I'm expecting Tuesday to be a bottoming day, hammer style. Yes, I will quite possibly live to regret it, but I'm going waaay out on a limb and calling a bottom.
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 take a break until a new trend develops.
Posts
I enjoy reading your technical take. You stick to the tried and true basics, understand probabilities and risk, recognize patterns and trend analysis and don't melt in the heat of the moment. I also like the quality of your book list and blog buddies. It's nice to read someone who doesn't appear to have an oversized ego, agenda, or the commercial bull that blinds the ignorant masses of shallow frivolous investor types. No, this isn't your mother. lol. Keep rowing that boat.
ReplyDeleteThank you so much for the kind words. It's always nice to hear from my readers - it helps keep me going.
DeletePerhaps it's the engineer in me, but I always strive to present a logical analysis of what generally seems to be a completely irrational system. And somehow it seems to work, more often than not (knock on lexen LCD screen).
Happy trading!
Looks like your call was right thus far. Do you place a lot of emphasis on the Hi-Low (as it seemed to be just enough to move you to uncertain in the face of the downward momentum bus) normally?
ReplyDeleteIf you had to rely on 3 signals for short term movements, which have proven the most reliable?
Well so far so good :-) I guess we'll know by the end of the day if I'm a hero or a zero.
DeleteI don't have a separate line item for the Hi-Lo indicator in the blog but I do look at it every day. I find that it is very good at predicting bottoms but not so good at predicting tops, as it can get stuck at 100 for extended periods of time. But when it breaks sharply lower, it's always a good sign that a reversal may be on the way. This is one of the many things I learned from the great Dr. Brett Steenbarger.
My three favorite short-term indicators (where "short-term" means daily) are the stochastic, the Hi-Lo (for bottoms), and the RSI. For swing trends, I like regression trend channels and Bollinger bands.
And of course I consider the VIX as being of prime importance to predicting daily moves.