Wednesday, May 14, 2014

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, low confidence.
  • ES pivot 1894.92.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Last night I cautiously called Tuesday higher with "the expectation of a much smaller move than Monday and possibly a doji day."  I'd say Tuesday's modest 20 point gain on a stubby inverted hammer qualifies.  So with that out of the way, we move on to Wednesday without further ado.

The technicals

The Dow: Tuesday's inverted hammer left us clinging to the upper BB while driving the indicators further overbought, though not yet extremely so.  We also remain in a rising RTC so what we have here is a reversal warning but one which requires confirmation..

The VIX: :Last night I thought the VIX might be getting ready to move higher but it wasn't quite time as it dropped a meager 0.82% on Tuesday, once again touching its lower BB with a lumpy-looking spinning top.. We remain right around an important support level above 12 so I still think the next move is higher from here.

Market index futures: Tonight all three futures are higher at 12:45 AM EDT with ES up 0.12%.  Last night I expressed some concern about ES approaching its upper BB and how that could provide resistance.  That proved to be the case as ES made a failed attempt to break above the BB on Tuesday finishing just below it with a lopsided spinning top.  However - the overnight is not confirming that sign and despite indicators now overbought, both money flow and OBV continue to rise.  And the new candle is in fact making a new move on the upper BB.  With Tuesday acting as something of a backstop now, this chart still looks bullish to me.

ES daily pivot: Tonight the ES daily pivot rises from 1886.92 to 1894.92.  Thanks to a slow drift higher after the close Tuesday ES remains above the new pivot by a few points so this indicator continues bullish.

Dollar index:  Last night I anticipated a drop in the dollar - a bit prematurely, as the dollar took a big 0.31% gap-up pop on Tuesday.  But that formed 2/3 of a classic evening star pattern.  And given that the indicators are now overbought and that the stochastic is starting to flatten out in anticipation of a bearish crossover, I'd not be going long the dollar on Wednesday.

Euro: And so of course I was wrong about the euro to, which continued its now week-long slide on Tuesday to close below its lower BB at 1.3697, right on a support line.So this is one falling knife I'm not going to try and catch.  We remain in a descending RTC and until I see an exit, it's lower for the euro.

Transportation: Amazingly, on Tuesday the trans continued to outperform the Dow, gaining another 0.46% to trade entirely above their upper BB.  That drove the indicators well into overbought territory and started me thinking that what goes up that much must come down eventually.  The last four days' action has the look of an exponential run-up anyway which makes me think some profit-taking is coming Real Soon Now.


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        2       3      3           0       0.400    -26

     And the winner is...

What a difference a day doesn't make.  Tonight we're pretty much in the same situation as last night technically, with charts, near various support and resistance lines.  And the conclusion seems to be pretty much the same as last night too - in the absence of any direct bearish signs, I guess I just have to cautiously call Wednesday higher.

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.

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