Wednesday, May 28, 2014

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1905.42.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.
Interesting article of the day

There was an interesting article in Seeking Alpha today here entitled "Is This The Next 10 Years Of The Dow Jones Industrial Average?" by Seth Walters about a simple model that can apparently predict the market surprisingly well.  It's not long or overly mathematical and well worth a look.  Like they say down at the Public Library, check it out.


Well the SPX had another record close on Tuesday, but the Dow did not.  It just seems to go along with the overall confusing tenor this month has had.  How the market looks seems to depend a lot on what you're looking at.  So tonight we look at the usual charts to figure out where Wednesday is headed.

The technicals

The Dow: The Dow made it four in a row on Tuesday with a 69 point gain that kept it railroad-straight in a rising RTC.  Indicators are now overbought but there's no resistance til the upper BB at 16,720 which is coincidentally the same as the all-time high from earlier this month.. So I'd say we're getting close to a doji here, hanging-man style.

The VIX: Once again we had an unusual divergence form the VIX which gained 1.32% on a day the Dow was also higher.  The inside harami candle with oversold indicators and bouncing off the lower BB makes me think the next move here is higher.  And the stochastic is now well-positioned for a bullish crossover Real Soon Now.  However, VVIX continues to move lower slowly refilling a big gap from two weeks ago, so a higher VIX on Wednesday isnt' entirely assured.

Market index futures: Tonight all three futures are ever so slightly higher at 12:22 AM EDT with ES up 0.03%.  Now last Friday ES closed right on its upper BB..  Then on Tuesday it closed above the BB to extend its winning streak to four.  However, the indicators have now gone overbought and the new overnight candle is forming as a doji star sitting right on the edge of the rising RTC, making me a bit cautious here.

ES daily pivot: Tonight the ES daily pivot rises from 1895.25 to 1905.42.  That's the first time we've ever seen the pivot this high but even at that we're still above the new number so this indicator remains bullish.

Dollar index:  After a hanging man on Friday in evening star position the dollar moved lower on Tuesday by 0.06% with a long-legged doji.  But with indicators still quite overbought and a fair gap up remaining unfilled, it looks like the next move is more likely lower than higher.

Euro: After some indecision a couple of weeks ago the euro resumed its march lower until finally hitting its 200 day MA on Friday.  Then on Tuesday it bounced right off with an asymmetric spinning top and a stochastic trying to maneuver itself into a bullish crossover.  And although we're still in a descending RTC, it looks to me like the euro is trying to set up a move higher on Wednesday.

Transportation: Like the SPX, the trans hit a record close on Tuesday, also with a four day winning streak as they climbed the upper BB.  The indicators are now fairly overbought but we're still solidly in a rising RTC and without a reversal candle it's too early to call this chart lower.


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      5           0       0.750    482
May        6       6      4           0       0.500    -49

     And the winner is...

The last three times ES has hit its upper BB it has moved lower in just one or two days.  ES is now more overbought than the last time we were in this situation.  There are no overtly bearish signs in the charts tonight other than a VIX that looks like it wants to go higher and an ES chart that is starting to look a bit toppy.  But those aren't enough to warrant an outright bearish call.  So I guess I'll just have to settle for calling Wednesday uncertain.

ES Fantasy Trader

Portfolio stats:  the account remains at $121,500 after four trades in 2014, starting with $100,000.  We are now 4 for 4 total, 2 for 2 long, 2 for 2 short.  Tonight we stand aside.

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