Actionable ideas for the busy trader delivered daily right up front
- Tuesday higher, low confidence.
- ES pivot 1749.58. Holding below is bearish.
- Rest of week bias uncertain.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Well that was probably my worst call of the year. The Dow obviously did not go up on Monday. So much for the power of the first trading day of the month. Instead, weak economic news sent the Dow down 325 points in an ugly sell-off that had whiffs of panic in the air. So as the bears continue to roar, let's see where Tuesday's is headed.
Olympic Alert: The Night Owl is a self-confessed Olympaholic. And I have a particular thing for the Winter Olympics. I just can't get enough of all the winners and the lugers. So while I'm not at the moment planning on taking the whole two weeks off, if I get wrapped up in some exciting hockey game or death-defying downhill that runs into overtime, I may take a pass on the blog that night. Hey, being retired has its privileges.
The technicals (daily)
The Dow: Last night I wrote "the 200 day MA is now within easy striking distance at15,465. Given recent moves, we could hit that in a day or two. " Too bad I didn't pay more heed to that when I finally decided to call the market higher, because the Dow just crashed right through support at 15,712 and then the 200 day MA at 15,474 on Monday like buttah, stopping only because the bell finally rang at 4 PM. This leaves us well inside the descending RTC with indicators mired at oversold. The only hope for the bulls at this point is for a DCB on Tuesday. The rest of this chart is just plain ugly.
The VIX: ANd while the Dow dumped, on Monday the VIX rocketed up 16.46% to close at its highest level since last June. And in so doing it not only closed way above its upper BB but also smashed through its 200 week MA at 19.39. And that's actually a good sign (well bearish for the VIX) because six of the last eight times the VIX broke above its 200 week MA, it came right back down hard within a week. The two times it didn't were back in 2011 and 2010 when everyone was wringing their hands about Greece. (Remember the Greeks? Me either). So if the VIX looked toppy last night, it looks really toppy tonight. I may have been a day early, but I'm going to claim once again that the VIX is ready to move lower.
Market index futures: Tonight all three futures are significantly higher at 12:30 AM EST with ES up by 0.42%. Last night at this time, I pointed out a symmetrical triangle in ES and wrote "I'd expect the break in a day or two, perhaps back to support at 1770". Well ES broke hard on Monday and 1770 went by in the blink of an eye. So did 1758 and 1739. But it looks like this move may have shaken out the weak hands and the bargain hunters are stepping in. I've been burned in the past by paying too much attention to the futures, last night being a good example, but I have to think that a nearly half percent gain before 1 AM is not the sign of a market that's planning on continuing lower on Tuesday.
ES daily pivot: Tonight the plunges from 1775.33 to 1749.58. Even with the gains in the overnight, that still leaves ES a good 10 points under the new pivot so this indicator remains bearish.
Dollar index: On Monday the dollar lost 0.36% on a pattern that's vaguely evening star meets abandoned baby. Either way, it pushed the indicators overbought, and dropped the dollar out of an admittedly short rising RTC. So this chart now looks bearish.
Euro: Last night, in the face of two steep daily declines I wrote "I still have to think a reversal is coming soon". And that's what did in fact happen on Monday with the euro recovering nearly 2/3 of last Friday's losses. The indicators remain oversold, we've now bounced off the lower BB, and the stochastic is close to making a bullish crossover. But we've fallen under the daily pivot as the overnight has been drifting lower. The stage is set for further gains but the euro will have to break above 1.3514 for that to happen. And I'm not sure it's got the requisite moxie at the moment.
Transportation: Like the Dow, the trans took a huge hit on Monday and closed below their lower BB, confirming Friday's doji in a big way. They closed exactly on a good support line at 7054 and holding that is critical. But the trans have been good about respecting their lower BB so this chart looks ready for a DCB at the least. I'd not be going short right here.
Accuracy (daily calls):
For the record, I finished the month of January up 0.50%.
And the winner is...
Once again, we got a down Friday followed by a down Monday - a bad sign. However, in the short-term I think the selling has been overdone. Much has been made about the Dow breaking its 200 day MA. But that's not always instantly fatal. Three of the last four times this happened, the Dow popped back above the MA within a day or two. The one exception was in November 2012 when the market was worrying about the debt ceiling, the government shutdown, or one of 20 other disasters that never happened. So with many charts at extremes that practically beg for reversals, I just have to hold my nose and cross my fingers (that's not easy to do) and call Tuesday higher.
ES Fantasy Trader
Portfolio stats: the account remains at $103,000 after the first trade of 2014. We are now 1 for 1 total, 1 for 1 long, 0 for 0 short. Tonight we stand aside.