Actionable ideas for the busy trader delivered daily right up front
- Friday higher, low confidence.
- ES pivot 1594.67. Holding below is bearish. Now watching the "U" contract.
- Next week bias higher technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
|Can you swim?|
The technicals (daily)
The Dow: Yowsa - the bottom just absolutely fell out of the Dow on Thursday as we crashed through 15K, then support at 14,956, then the lower BB at 14,869, and finally support at 14,858, all on increased volume. And like yesterday, the only thing that stopped the carnage was the bell at 4 PM. And even after two big down days, the indicators are still not oversold yet. And of course we now have a bearish RTC trigger - in fact this rising RTC is now only a distant memory.
And yet -we are now quite extended from the pivot, back at 15,182 and as I mentioned last night, the further you get from the pivot, the more likely a retracement becomes. It's also pretty unusual to close more than 100 points below the lower BB. I scrolled the daily chart all the way back to the crazy times of 2008 and found that over 80% of the time, when the Dow closes under its BB by a non-trivial amount, the next day is either flat or higher.
The VIX: Another positive note comes from the VIX which on Thursday soared 23.14%. It actually opened above its upper BB and then went higher from there, closing waay above its upper BB. The last time we had such craziness was on August 8, 2011, and the next day was a lot lower. And on that next day, the Dow gained 429 points. Of course, the VIX stood at an impressive 48 back then, so I wouldn't look for this kind of movement on Friday, but still, there it is. And of course, as I always say, the VIX rarely spends more than a day or two at its upper BB. And the higher above it gets, the more likely it is to fall hard. I note that VVIX also hit its upper BB on Thursday.
Market index futures: Tonight all three futures are significantly higher at 1:18 AM EDT with ES up by 0.49%. Thursday's ES chart was just beat up with an ugly stick. We gave up support at 1604 like it wasn't even then, then continued on down through 1600 and then even the lower BB at 1595 before finally stopping at 1584. A close 10 points under the lower BB is pretty unusual and warrants attention. We are now also very extended from the pivot, by a whopping 47 points. And while the indicators still aren't even oversold yet, that may be due more to some hysteresis in the system. I'd tend to think we're due for a relief rally or at least a DCB here real soon.
ES daily pivot: Tonight we switch from the "M" to the "U" contract just in advance of expiration. And tonight the pivot plummets from 1631.00 to 1594.67. While that still leaves ES below, it has actually been clawing its way higher since even before the close and appears intent on staging an attack on the new number. If this succeeds, that would be bullish indeed, while a bounce off would mean continued bearish.
Euro: And of course the euro took a dump on Thursday, ending at 1.3201. With two consecutive tall red candles, a bearish RTC trigger, indicators still not yet oversold, a stochastic nowhere near forming a bullish crossover, no nearby support and a lower BB down at 1.2828, you'd think that we're due for more downside on Friday. And yet the euro is actually up 0.29% in the overnight which really makes me wonder. And yes there are two paths you can go on. We'll just have to see if this stairway leads to heaven or hell.
Transportation: The trans of course got clobbered on Thursday, along with everything else, closing right on their lower BB at 6142. This is also a fair support level so I'd say there's a chance of a bounce here 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 2 5 4 0 0.286 98
And the winner is...
I'll admit, I'm as spooked as anyone by the last two days. But where I thought Wednesday's action was overdone, I think Thursday's was really overdone. We've now hit a bunch of technical reversal points that make me think we're due for a relief rally as buyers come in to take advantage of the sale Wall St. is now putting on. Of course, Friday's quadruple witching throws a big monkey wrench in the works but I'm going to go waaay out on a limb and call Friday higher anyway. Gulp.
ES Fantasy Trader
Portfolio stats: the account drops to $108,250 after 13 trades (10 for 13 total, 5 for 5 longs, 5 for 8 short) starting from $100,000 on 1/1/13.
In a strange twist, this trade turned briefly profitable just before I woke up Thursday morning and then started moving against me again. At that point I decided to just throw in the towel and take a small 4.25 point loss. Considering that I was a whopping 56 points underwater at one point, this felt like quite the comeback and almost as good as a win. Ironically, had I waited til the end of the day to cover, it would have ended up being fairly profitable. Oh well. Tonight we stand aside in part because Friday is op-ex day and also because I'm concerned that we missed a good entry point earlier in the evening.
BOT 10 false ES JUN13 Futures 1604.50 USD GLOBEX 11:51:05