Actionable ideas for the busy trader delivered daily right up front
- Wednesday higher only if ES breaks above its pivot, else lower.
- ES pivot 1793.17. Holding below is bearish.
- Rest of week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside
Well, looks like my "toppy" feelings last night played out on Tuesday with the Dow dropping 94 points. Now after three down days things get interesting. Tonight the charts earn their keep for telling us where Wednesday may be going.
The technicals (daily)
The Dow: We are now officially in a new descending RTC - the previous up-trend is over. Tuesday's solid red candle makes two black crows and with indicators still only halfway to oversold, this chart continues to look bearish.
The VIX: The VIX blasted right through its 200 day MA on Tuesday, surprisingly, but formed a red spinning top doing do. It also closed way above its upper BB and is now fairly overbought. Taken together, these signs all point to a lower VIX very soon, if not Wednesday then more likely Thursday.
Market index futures: Tonight all three futures are higher (for a change) at 12:18 AM EST with ES up modestly by 0.08%. Tuesday's increased selling action in giving up the 1800 level drove the indicators oversold and left us right around support at 1793. The stochastic seems to be trying to set up a bullish crossover but isn't there yet. Meanwhile the overnight action seems to suggest some sort of bottoming in progress.
ES daily pivot: Tonight the pivot drops from 1801.92 to 1793.17. That now leaves us just one tick below the new pivot, so the pivot is definitely in play tonight. A bounce off would signal continued lower, but a break above would be bullish. It's just too soon to tell right now.
Dollar index: Last night on the dollar I wrote "I'm more inclined to think it's going lower Tuesday.". .And the evening star played out to perfection, with the dollar sinking 0.40% on a gap down that neatly covered Monday's gap up. You've got to hand it to those old Japanese rice traders - the evening star is a high probability play. But now what? With a new spinning top right where we ended last week, it's not at all clear where the dollar's going next. >Shrug< - we'll see.
Euro: Last night I knew one of my calls would be wrong and it was the euro, which completely retraced Monday's losses on Tuesday. With indicators remaining overbought, we're now in a sideways consolidation that's too tough to call.
Transportation: Last night I wrote "I'm going to take a guess that this one may be going lower on Tuesday". Good guess, eh, as the trans dropped nearly a full percent on a big red marubozu. That caused RSI to peak, the bearish stochastic to continue, and a big RTC bearish trigger. So this chart looks continued bearish now.
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 8 3 3 3 0.800 485
October 7 5 8 2 0.643 674
November 6 6 2 1 0.538 123
December 1 0 1 0 1.000 94
And the winner is...
After a bit of a sell-off, I'm now seeing at least some technical signs that a reversal might be near but it's not clear it will be on Wednesday. Accordingly, and given the proximity of ES to its new pivot, I'm going to make a conditional call: if ES can break above its pivot by mid-morning, we will close Wednesday higher. On the other hand, if ES fails to break above the pivot, we close lower.
ES Fantasy Trader
Portfolio stats: the account remains at $110,625 after 17 trades (13 for 17 total, 7 for7 longs, 6 for 10 short) starting from $100,000 on 1/1/13. Tonight we stand aside.again.