Friday, June 13, 2014

Friday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher if ES breaks above pivot, lower if it stays below..
  • ES pivot 1934.33.  Breaking above is bullish..
  • Next week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

The conditional call last night worked a treat on Thursday as ES seemed to be rising above its pivot in the overnight, then tested it in the wee hours before finally breaking under at 8:15 AM and then it was all over, Jack.  The Dow closed down 110 points.  QED.  The predictive power of the pivot is not to be discounted.  So let's move on to Friday and see how the week may finish off.

The technicals

The Dow: It was pretty much a rerun of Wednesday in Dow-land on Thursday with another triple-digit loss.  The net effect was to finally drive the indicators off their extreme overbought levels where they'd taken up seemingly permanent residence.  With everything now pointing lower, we can call this chart bearish with a bit more confidence..

The VIX: Last night I wrote "it looks like there's still more upside to come on Thursday."  And sure enough the VIX took off on Thursday for an 8.26% gap-up jump that nearly took it to its upper BB.  It also nicely completed the bullish stochastic crossover and sent all the indicators well on their way from oversold to overbought.  Now if you look at the recent trajectory of the VIX it has the feel of an exponential run-up, so that makes me think a reversion is on the way soon.  But in the absence of any true overboughtedness yet, I'll say the VIX still has room to run, atr least up to the upper BB at 13.06.  Then look for a move lower.

Market index futures: Tonight all three futures are higher at 12:44 AM EDT with ES up 0.4%.  On Thursday ES had its biggest down day since May 15th.  That helped se3nd the indicators on their way from overbought to oversold and established a new descending RTC.  When will the selling end?  Well there's some support at 1922 but we'll need to see some more definitive signs than that.  Until then, there's nothing bullish about this chart - except for the small hammer now forming at the base of the sell-off, suggesting a reversal in the works.

ES daily pivot: Tonight the ES daily pivot drops from 1944.50 to 1934.33.  We're still below the new pivot, though by a lot less now.  Still, unless ES can make a successful attack on the pivot, this indicator remains bearish.

Dollar index:  The dollar had me stymied last night but it took a big hit on Thursday down over a quarter of a percent, eventually finding support at its 200 day MA.  But this move sent all the indicators lower and prompted a bearish stochastic crossover.  So I don't think the MA will hold and I'm looking for more downside on Friday.

Euro: Last night I wrote "the selling may be over for now".  And almost like I knew what I was talking about, the euro had a good day on Thursday, rising back to 1.3564 after bouncing off its lower BB.  That also set up the stochastic for a bullish crossover (but not quite).  And this action caused a bullish RTC setup do overall I'd say we're headed higher again on Friday.

Transportation: And finally last night I wrote "everything now points to lower again on Thursday."  And it was a good point because the trans got hammered, down nearly two percent on a tall tall red marubozu with increased volume.  But even that wasn't enough to send the indicators oversold.  So in the absence of any reversal signs, I'd have to guess the selling here isn't done yet.


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       7      6           0       0.462    -67

June       5       2      2           1       0.714    139

     And the winner is...

When we get into the sequence of accelerating losses, I like to look at the SPX Hi-Lo index.  And what we see there is interesting.  Two days ago, this index took a huge drop, to nearly zero.  The last time we saw this was April 11th, after another two-day back-to-back sequence of big down days.  These sorts of moves in the index often presage a recovery.  Similarly, the TRIN hit 1.69 on Thursday.  The last time we were this high was May 20th, also after a big drop - and the next day was higher.

Also, while the NYSE A/D line took a hit on Thursday, it has not been exhibiting the bearish pattern lately of lower highs and lower lows.

And also, the Morningstar Market Fair Value Index, which hit a YTD high of 1.05 on the 9th., just before this latest dip, came back in to 1.04 on Wednesday (I wish they'd update these numbers to show the current day).

And also, Dr. Copper hit oversold on Thursday and looks to be getting ready to move higher.

That said, the overall gestalt of the charts tonight is still quite bearish.  What to do, what to do?  OK, here's what I think.  We haven't seen more than two consecutive days of selling all year.  As soon as Mr. Market figures out that the fact that one band of religious lunatics who hate us killing another band of religious lunatics who also hate us does not actually constitute the end of the world, we should see the selling dry up.  And as I pointed out above, there are already some signs of this, including the overnight futures.  So let's do a conditional again: if ES can break above its pivot and stay there by mid-morning Friday, we close higher, but if it doesn't we close lower.  That's all she wrote.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  Tonight we stand aside.

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