Tuesday, January 7, 2014

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence..
  • ES pivot 1823.50.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside

Well the Santa Claus rally is now officially over and if the First Five Days of January indicator is going to kick in, it had better get going soon, as the market moved lower again on Monday with the Dow down another 45 points.  Last night I was looking for Monday to provide some clarity.  Let's check the charts to see if it did and where Tuesday is headed.

The technicals (daily)

The Dow: The Dow's 0.27% drop on Monday canceled Friday's spinning top with a bearish engulfing pattern.  The indicators are now on the march toward oversold, having just left overbought and we now have a new descending RTC so this chart now looks bearish for Tuesday.

The VIXLast night I wrote "lower looks more likely than higher here on Monday." and in an unusual bit of divergence, the VIX fell 1.53% on a day when the broader market also fell.  This established a new descending RTC and just squeaked out a new bearish stochastic crossover.  So despite the spinning top, with indicators very nearly overbought, this chart looks continued bearish.

Market index futures: Tonight all three futures are higher at 1:2:34 AM EST with ES up by 0.21%.  After a second, lower spinning top on Monday, ES has now gone officially oversold and its stochastic is leveling out in preparation for a bullish crossover.  We're also trading outside the latest descending RTC for a bullish setup.  So it's not guaranteed, but the signs of a reversal are getting stronger, I'd guess within a day or two.  And the overnight is supporting this idea with a developing bullish engulfing pattern that would provide a bullish RTC trigger if it holds up.

ES daily pivot: Tonight the pivot drops again from 1826.33  to 1823.50.  That move combined with ES's drift higher has (finally) popped ES back above the pivot, so this indicator now turns positive.

Dollar index: On Monday the dollar put in a dark cloud cover that bounced off its upper BB and turned both RSI and momentum lower.  There's no RTC to follow right now but the signs we do have point to lower again Tuesday..  And it's trading just outside the descending RTC for a bullish crossover so I'd say Tuesday looks higher for the euro.

Euro: I missed the euro which bounced off its lower BB on Monday for a bullish piercing pattern.  Though the overnight is fairly flat, it's moving the stochastic into position for a bullish crossover.

Transportation: The trans guided lower on Monday with an ugly 1.27% dive that provided the payoff for Friday's bearish RTC trigger.  The indicators are now close to, but not quite oversold so there really still isn't yet a reversal sign here for Tuesday.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    0      2      1           0       0.000     -164

     And the winner is...

The crystal ball isn't exactly, uh, crystal clear tonight, but I'm going to key off the VIX and the futures, both of which are looking positive.  It is always unwise to go against what these two are telling you, and for my money, they're saying Tuesday higher.

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.

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