Actionable ideas for the busy trader delivered daily right up front
- Tuesday lower, low confidence.
- ES pivot 1701.08. Holding below is bearish. Switching to the Z contract on Tuesday.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader going short at 1695.50.
I just love it when Mr. Market throws me a lollypop. Today's (lolly)pop in the Dow was obvious by the time I began last night's post. Thanks, Larry! Tonight though, it looks like we're back to the usual grind so let's round up the usual suspects.
The technicals (daily)
The Dow: Monday's big gain tightened the rising RTC and closed on the upper BB, forcing the indicators to extreme overbought levels (RSI now 93.6). While the candles remain bullish, we did get a bearish stochastic crossover. That, plus the BB hit, plus the fact that we stopped right at a resistance line makes me wonder if the Dow might not be doing a bit of retracing on Tuesday.
The VIX: Most interesting - while the Dow had a big gain, the VIX was also up, by 1.55% on Monday. That's quite rare. In fact, the candle was a bullish engulfing pattern. And while the 200 day MA still represents resistance, the indicators now seem to have bottomed at oversold. And Friday's candle was a bullish RTC trigger so it's looking like the VIX is ready for further gains on Tuesday. And VVIX has already hit its lower BB, supporting this idea.
Market index futures: Tonight all three futures are lower at 12:51 AM EDT with ES down by 0.13%. This is perhaps the3 most telling chart of the night. ES put in a big gap-up evening star on Monday that pushed right through the upper BB before closing right on it. And the stochastic has just formed a slow rounded bearish crossover. So with indicators still very overbought, this chart is looking toppy tonight.
ES daily pivot: Tonight the pivot just leaps from 1686.50 to 1701.08 The drift lower in the overnight in ES was enough to run right into that wall and put us below the new pivot right at midnight, so this indicator now turns bearish. On Tuesday with the U contract expiring soon, we will switch to the Z contract.
Dollar index: An unusual setup in the dollar on Monday. It put i a tall green marubozu, but because it gapped down hard at the open, it was still a 0.23% loss on the day.. And that drove the indicators hard oversold (RSI now just 1.0) so I'd say the $ is getting ready to move higher on Tuesday.
Euro: The euro had the same unusual pattern as the dollar, in mirror image. And this one dropped it out of its rising RTC for a bearish setup. Indicators remain highly overbought we just got a bearish stochastic crossover and the overnight is following lower, so it's looking likely that the euro will close lower on Tuesday.
Transportation: Like the Dow, the trans hit their upper BB on Monday, breaking through resistance at 6587. But unlike the Dow, they fell back to close off their highs. We remain in a rising RTC and 6587 is now support but with indicators continuing overbought, there's something of a mixed picture here. With the trans prone to quick one day reversals, Tuesday might be one such.
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 11 3 6 2 0.813 687
September 5 1 1 1 0.857 314
And the winner is...
Tonight the charts are all pretty much looking like they're ready to retrace at least some of Monday's big gains. In fact I no longer see any of the bullish signs that were around last week so the logical call is for Tuesday lower. I suspect some traders may be wanting to lock in Monday's gains ahead of the expected Fed taper announcement on Wednesday.
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 go short at 1695.50. These counter-trend trades have been risky all year and have cost me dearly, so I'm not planning on holding this one for long, but I think it just might make us some money.
Posts
At last the Night Owl pounces!
ReplyDeleteAfter resembling a statue of an owl these past couple months, she spots an alignment which is irresistable, and swoops.
After hitting a high of over 27, at the end of August, the reading on the ADX-13 for the S&P500 has eased back to a recent low of about 19.
(For those of your readers not familiar with this indicator, it uses a lookback period of about 12-14 days and assesses the overall "trendiness" of the particular market movement. I personally split the difference, hence an ADX-13.)
Clearly in the short timeframe the stock market has been trending strongly upward. But just before that it spent about an equal time trending briskly downward. So this intermediate term indicator is just now beginning to tick back upward.
If "trendiness" is indeed starting to re-establish, then there's no question which is the directional bias of intermediate term nature-- it's upward.
Price is very stretched above the simple 10day MA, which in a day or two will rise to about 1680, an area of support last week. That would represent about a 1/3 retracement of the overall move from those late August lows.
Any attempt at 'targeting' (a generally dubious activity, imo) might look at that area for a start...
No guts no glory, eh? But keep in mind how many stops are sitting there, just above recent price Highs, and how bots jus' love to run stops...
Yup, well said. I did mention when I entered this trade that "These counter-trend trades have been risky all year and have cost me dearly". Looks like now we can add one more to the list. I guess some people never learn.
DeleteStill, you ention "price stretching". It is a truism that prices don't like to move far from their pivot (or as you mention, an MA). This was one of the factors I considered, and you can see where it got me.
Wednesday should be most interesting, with all eyes on the Fed.