Actionable ideas for the busy trader delivered daily right up front
- Wednesday lower, medium confidence.
- ES pivot 1869.17. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Well I'm glad I called Tuesday as uncertain because I wasn't expecting as 130 point dump from the Dow. The nice thing is that it resolved a number of ambiguities in the charts, as we shall now examine with an eye to Wednesday.
The Dow: I guess I was right last night when I wrote "the overall impression continues to look negative here." Tuesday's big read marubozu confirmed the bearish stochastic crossover, kept us way off the left edge of the descending RTC and drove the indicators further off overbought. Now there's some support at 16,360 but I see no reason why we can't reach that number on Wednesday.
The VIX: Well some sanity finally returned to the VIX on Tuesday as it rose 3.84% to the Dow's 0.78% drop with a green hanging man. But it also gave us a descending RTC exit for a bullish trigger, so go figure (hey that rhymes). My overall impression though is that the VIX wants to go higher again on Wednesday. This is supported by a VVIX that has itself found support and is now quite oversold.
Market index futures: Tonight all three futures are lower at 12:21 AM EDT with ES down 0.07%. After waffling inconclusively for several days, ES finally broke down on Tuesday giving up nearly all of last weeks gains. The indicators are all once again lined up and headed lower and there are no candlestick reversal signs so this chart just looks bearish tonight.
ES daily pivot: Tonight the ES daily pivot falls from 1872.08 to 1869.17. Even with that drop we remain below the new pivot so this indicator turns bearish.
Dollar index: Whoa! On Tuesday the dollar just fell out of bed with a Grand Canyon gap-down that traded entirely way below its lower BB and ending at its lowest level since last October with a small gravestone doji. That pushed the indicators further into oversold and gave us 2/3 of a bullish morning star. This kind of gap just begs retracing, so if I had to guess I'd say the dollar's going higher on Wednesday.
Euro: And on Tuesday the euro broke out of its railroad track-straight rising RTC - but to the upside, stopping right at resistance at 1.3934, also it's highest level since last October. That also hit the upper BB and took the indicators overbought. I'd expect the euro to take a rest after this move and the overnight so far seems to be supporting that idea, down 0.05% at the moment.
Transportation: After a confusing sequence of inverted hammer, hammer, on Tuesday the trans finally rejected Monday's reversal sign and confirmed the trend - lower. We also now have a new bearish stochastic crossover and with the new candle just a vaguely spinning toppish sort of thing, I'd say this chart has lower to go.
And the winner is...
Tonight we see mostly bearish signs in the charts. The Morningstar Market Fair Value Index has come back to 1.02, but that's still a bit high for a reversal. And the SPX Hi-Lo index similarly has not dropped far enough yet to call an imminent reversal. Same for the NYSE A/D line - it's down, but not extremely so. Dr. Copper's drifting lower, the TLT is in an uptrend, and Wednesday is historically quite bearish so all in all I really don't think it's unreasonable to call Wednesday lower.
Laff of the week
Here's a comment I got in an email from blogspot this evening:
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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.