Actionable ideas for the busy trader delivered daily right up front
- Friday lower, low confidence.
- ES pivot 1685.42. Holding above is bullish.
- Next week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
I'm not quite sure how to characterize Thursday's action. I had expected that a drop below the ES pivot would cause a lower close and it did do that, but it didn't happen until 11:35 AM, which is more like late morning than mid-morning. Still, the idea was right. I think I will count this as neither right nor wrong in my accuracy scorecard below. It is starting to feel though like things are changing, so let's see if we can get some clues from the charts for Friday.
The technicals (daily)
The Dow: The intraday chart for Thursday's Dow looks pretty lackluster, ending with just a 26 point decline but that formed a small red spinning top in bearish dark cloud cover position, and we're still above the upper BB. Indicators remain extremely overbought and the stochastic is finally moving into position for a bearish crossover so I'd say this chart is now finally looking bearish for the first time in eight days.
The VIX: On Thursday the VIX threw me curve by rising 3.40% on a bullish harami that exited the descending RTC for a bullish setup. It also caused RSI to bottom at oversold so there's now some signs that the VIX may be moving higher on Friday.
Market index futures: Tonight all three futures are slightly higher at 1:03 AM EDT with ES up by a scant 0.03%. Like the euro (below) on Thursday ES put in a tall tomahawk type hanging man that nevertheless remained inside the rising RTC. But it also traded through the upper BB and ended up as a dark cloud cover. And the stochastic has just now completed its bearish crossover so this chart tonight really looks like it has lost its mojo.
ES daily pivot: Tonight the pivot barely budges from 1685.67 to 1685.42. ES has been threading about the pivot all evening long indicating a lot of indecision, so there's no guidance from this tonight.
Dollar index: The downtrend in the dollar remains intact as we lost another 0.04% on Thursday to remain inside the descending RTC. We are though now just oversold and the stochastic is flattening out in preparation for a bullish crossover but we're not there yet. So overall, this chart continues to look negative.
Euro: And on Thursday the euro put in a tall tomahawk-style hanging man near the top of Wednesday's big gains. It was enough to form a bearish stochastic crossover. And the overnight is now trading outside the rising RTC so that's a bearish setup. This chart is definitely looking toppy to me.
Transportation: Wednesday's hanging man was confirmed on Thursday as the trans dropped a hefty 1.08%, just enough to cause a bearish stochastic crossover although we do remain inside the rising RTC. Nevertheless, there does appear to be a tide change here and lower looks more likely than higher on Friday.
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 3 6 2 0.813 687
September 4 0 1 1 1.000 270
And the winner is...
The tide appears to be turning and the whole market is now looking toppy to me, with bearish warning signs that weren't there a few days ago starting to pop up. The NYSE AD line has also broken its recent series of higher highs and higher lows. And of course we've had a decent winning streak lately that's taken us from the lower BB to the upper. So overall, I think the logical call here is for Friday lower. See you again Sunday night.
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. I'd like to go short here but I'm just so gun-shy right now after having been badly burned with two disastrous shorts this year, I'm just going to let it pass.