Thursday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday lower, low confidence.
• ES pivot 1838.83.  Holding below is bearish.
• Friday bias lower.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside

Recap

The mysterious 2014 market sea change continued on Wednesday.  I called the Dow higher, but while the Nasdaq and SPX both did rise, the Dow moved lower once again.  I am now seriously considering abandoning the Dow as my benchmark.  In nine years of doing this I have never seen such a disconnect between the Dow and the SPX.  And another odd thing - my REITs, which had underperformed most of 2013 are suddenly roaring ahead.  I'm now up 2.47% YTD after just three weeks into the new year.  I guess you just have to love that about the market - just when you think you've got it down, it throws you a new curve.  So let's see if we can wind up and get the signals straight for Thursday.

The technicals (daily)

The Dow: Last night I wrote "this chart favors the downside for Wednesday" and that proved to be correct.  But I called the close bullish anyway based on the other charts that looked bullish.  So we're left with this strange situaiton where the Dow seems to be getting decoupled from the rest of the market.  And the odd thing is that it isn't the same players yanking it around every day.  It's pretty strange.  In any case, on Wednesday we got a fat spinning top that provided us with a bearish RTC trigger and a bearish stochastic crossover so I'd say there's more downside to come on Thursday.

The VIX:  We now have two inverted hammer in a row here, rising indicators and a rising, though choppy, RTC.  So although the VIX actually lost 0.23% on Wednesday, it now at least seems to be wanting to move higher.

Market index futures: Tonight all three futures are lower at 12:49 AM EST with ES down by 0.30%.  ES has now put in four dojis in a row.  It has attacked the 1844 level five days in a row and failed every time.  The net result has been congestion between 1832 and 1844.  We're now right on the lower end of that range again.  With RSI overbought and momentum, money flow, and OBV moving lower, we may be setting up for a move lower out of this range.

ES daily pivot: Tonight the pivot steps up from 1836.25  to 1838.83.  But ES fell under the old pivot around 10 PM so this indicator turns bearish.

Dollar index: I also missed the dollar on Wednesday as it posted a small gain off Tuesday's slide.  That was enough to push the indicators overbought.  The pattern is very nearly a bullish piercing line but with the dollar having had a two day streak only once so far this month, this chart remains too tough for me.

Euro: I thought the euro was going higher on Wednesday and while it did that intraday, it ended giving it all back and then some for a small loss and a fat little spinning top.  The new overnight is forming as doji and its outside the descending RTC for a buollish setup.  Indicators are now oversold and the stochastic is ready for a bullish crossover so I'll claim once again that the euro is ready to move higher.

Transportation: We got some more bullish divergence on Wednesday as the trans jumped over a percent while the Dow fell 0.25%.  The trans closed on their upper BB with a green marubozu that also caused a bullish stochastic crossover from a high level.  These are unusual and often good for a few additional days of gains.  So as we march further into record territory, more upside is not out of the question.


Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    1      8      5           0       0.111     -400

     And the winner is...

Tonight the balance seems to have shifted in favor of the bears so I'm calling Thursday lower.

ES Fantasy Trader

Portfolio stats:  the account continues the new year at $100,000 as we wait for the right moment to enter our first trade of 2014.