Wednesday, January 22, 2014

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, low confidence.
  • ES pivot 1836.25.  Holding above is bullish.
  • Rest of week bias uncertain.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside

Up down up down - it's now been a week since the Dow managed to string together more than one day in a row in the same direction.  No wonder this market is so tough to call and no wonder I'm now sitting on the worst forecasting record since I began keeping score.  I've only gotten one right all month.  This is getting embarrassing.  Complicating matters is that both the Nasdaq and the SPX did close with gains on Tuesday, so it must be something in the Dow.  This is really making me consider switching over to the SPX for my forecasts.  In any case, we now move on the Wednesday where we may finally see what's what.

The technicals (daily)

The Dow: The Dow continues its recent nervous consolidation.  The only thing I see here right now is a stochastic that's just about to execute a bearish crossover.  We're sitting on the edge of the rising RTC right now so if I had to guess I'd say this chart favors the downside for Wednesday.

The VIXOn Tuesday the VIX put in a big gap-up inverted hammer for a 3.46% gain.  The indicators are nearing overbought territory and meanwhile VVIX is nearing its 200 day MA from below and is already overbought.  All this makes me think that while a bit more upside might be available here, more downside seems to be in the offing pretty soon  Wednesday might be a topping day.

Market index futures: Tonight all three futures are higher at 12:26 AM EST with ES up by 0.24%.  On Tuesday ES put in a second spinning top, megaphone-style, larger than the day before.  In any event, the overnight is moving higher and with the indicators still not yet overbought and the upper BB at 1847, it seems likely we'll hit that level on Wednesday.

ES daily pivot: Tonight the pivot ticks up from 1835.42  to 1836.25.  With ES taking off in the evening hours, we're well above the new pivot so this indicator remains decidedly bullish.

Dollar index: Well the dollar did open higher on Tuesday but then it was all downhill from there, ending the day with a dark cloud cover that bounced off the upper BB.  So now I'll claim that the dollar goes lower on Wednesday..

Euro: At least the euro did move higher on Tuesday though it remains in a week-long downtrend.  However, it has now hit oversold and the stochastic is about ready for a bullish crossover, so I'd say a move higher on Wednesday is not out of the question.

Transportation:Last Friday's hammer here was confirmed on Tuesday with a 0.57% advance, providing some bullish divergence to the Dow's 0.27% loss albeit on a spinning top that just touched the upper BB.  And we also have a new bearish stochastic crossover.  But this chart in general remains ill-behaved so I'm not trying to call it for Wednesday.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    1      7      5           0       0.125     -359

     And the winner is...

At this point I have little to lose - the indicators continue to remain bullish so that's how I'm calling the close - Wednesday higher.  Perhaps I should just call the SPX instead of the Dow.  Normally these two trade in highly correlated fashion.  But that relationship has broken down since the beginning of the year for some reason.

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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