Wednesday, April 30, 2014

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1870.67.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Last night the charts were a bit on the confused side, but we were able to correctly resolve the ambiguities and were rewarded with an 87 point gain in the Dow on Tuesday.  We now move on to the last day of April to figure out how we might close out the month.

The technicals

The Dow: On Tuesday the Dow exited its (admittedly short) descending RTC for a bullish setup on increased volume that handily confirmed Monday's tomahawk candle.  (Recall that the tomahawk is my own invention.  It is bullish like a hammer, but with a small upper shadow showing.)  Money flow and OBV continue to rise while the stochastic appears to be squeezing in for a bullish crossover in a day or two.  Overall, the pattern here now looks bullish.

The VIX:  This was a chart that perplexed me last night.  In the end, the inverted hammer and failure to capture the 200 day MA won the day and the VIX sank 1.86%.  While the indicators continue to rise off oversold, the candles are looking bearish.  This notion is reinforced by VVIX which broke through two levels of support on Tuesday with a red marubozu.

Market index futures: Tonight  all three futures are lower at 1:31 EDT with ES down 0.17%.  On Tuesday ES had a small gain that was nevertheless enough to just break out of its descending RTC for a bullish setup, and also form a bullish stochastic crossover.  However, both money flow and OBV have now turned negative and the overnight isn't showing any follow-through, so it's not at all clear that ES can move any higher on Wednesday.

ES daily pivot: Tonight the ES daily pivot rises from 1860.58 to 1870.67.   We just crossed under the new pivot at midnight so this indicator now turns bearish.

Dollar index: On Tuesday the dollar took a big gap up for a 0.15% gain that also just formed a bullish stochastic crossover.  But this candle forms 2/3 of a bearish evening star pattern so we need to wait for confirmation on Wednesday for this one.

Euro: I thought the euro would go higher on Tuesday but it was not to b as it instead very nearly fell out of its rising RTC.  The new overnight is in fact trading outside, so that's a bearish setup.  We also now have a new bearish stochastic crossover, so this one is looking lower for Wednesday.

Transportation: On Tuesday the trans confirmed Monday's reversal doji with a 0.43% gain.  The stochastic is flattening out though not at a bullish crossover yet.  But this move up wasn't enough to get us out of a descending RTC so I'm not all-in on the bull case here.


Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      6           0       0.333
February   5       2      2           1       0.750    107

March     12       3      6           0       0.800    431
April      9       3      4           0       0.750    482


     And the winner is...

Hmm - there are still some mixed signs on the charts tonight but the preponderance of evidence has shifted from bullish to bearish.  However, with a Fed announcement due on Wednesday, I am going to stick to my official policy which is to never make a call on Fed days.  The last two times I tried to break this rule I got my head handed to me.  So while I will come out and say that technically the market is looking lower, the official call is simply for Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we
stand aside in view of the "uncertain" call.

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