Tuesday, January 14, 2014

Tuesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday lower, low confidence.
  • ES pivot 1821.08.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside

Wow, I am really glad I called Monday as "uncertain", because I sure didn't expect a 179 point plunge in the Dow.  Apparently, just when we thought Mr. Market had gotten over his taperphobia, turns out he hadn't.  Thanks a lot, Lockhart.  These are the sorts of days that technical analysis just can't help - fact of life, oh well.  So let's move on and see how Tuesday will shape up, technically-wise.

The technicals (daily)

The Dow: Monday's big dump did some technical damage to the Dow.  It solidified the descending RTC and put a definitive end to the wishy-washy action of the past week.  It also drove the indicators just barely into oversold but none of this is a reversal sign so this chart continues to look bearish.

The VIXAnd as the Dow dropped, the VIX shot up nearly 10% on Monday in a move that exited the descending RTC in a big way for a bullish setup.  It also caused a bullish stochastic crossover and caused RTC to bottom at oversold.  So this chart's now looking bullish.

Market index futures: Tonight all three futures are marginally lower at 1:25 AM EST with ES dead flat but both YM and NQ down 0.06%.  ES took a big hit on Monday with a giant red candle that sliced clear through the rising RTC for a bearish setup and formed a bearish stochastic crossover.  While the overnight seems to be stabilizing a bit at this hour, there's really nothing technically bullish on this chart right now.

ES daily pivot: Tonight the pivot dives from 1835.50  to 1821.08.  And even that move wasn't enough to put ES back above the new pivot, so this indicator is still bearish tonight, by a fair amount.

Dollar index: Last night I wrote "this chart remains bearish" and the dollar indeed lost another 0.18% on Monday to establish a new descending RTC and set the indicators moving off overbought towards oversold.  With two black soldiers, this chart still remains bearish.

Euro: The euro did not mirror the dollar on Monday, putting in instead a lopsided spinning top and unable to make any headway past resistance at 1.3686.  With indicators nearly overbought and the overnight moving lower and just dipping below the pivot, this chart looks bearish.  Of course that means either this call is wrong, or my dollar call is wrong - can't help it - that's just how these two charts look to me.

Transportation: Last night I mentioned that the trans looked to be going exponential and said "a top just has to be coming soon".  And that's exactly what happened - the trans rose until 11 AM when they hit their upper BB and then boom, down in flames for a 1.40% loss.  Those pesky exponentials get you every time.  So we now have an RTC exit for a bearish setup, a bearish engulfing candle, indicators turning back down and a stochastic getting set for a bearish crossover.  So this chart looks distinctly negative now.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    1      4      3           0       0.200     -134

     And the winner is...

After such a sudden and unexpected move down I really want to say we have a DCB coming but I just can't ignore the fact that all the charts are now looking pretty ugly.  On the bright side, Monday's move brought us very quickly a lot closer to being oversold, but for now all I'm seeing is Tuesday 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.

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