Wednesday, June 4, 2014

Wednesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, low confidence.
  • ES pivot 1920.50.  Holding below is bearish...
  • Rest of week bias lower technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader going short at 1920.25..

Well it looks like June wants to continue playing the same games May was.  After a dump right out the gate on Tuesday, the Dow crawled out of the pit to end with only a small loss.  But it made for some interesting moves, chartwise, so let's take a look.

The technicals

The Dow: Although the Dow battled back from some early losses Tuesday, it left us with a trifecta of hanging men, with the latest being the first with a lower high. The indicators remain overbought and the stochastic's on again-off again bearish crossover looks like it may finally be gaining some traction.  So I have to think this chart continues to look bearish.

The VIX: The VIX finally broke out of its magical attraction to the 11.50 level on Tuesday - sort of.  The +2.5% move was the biggest we've seen in over a week even if it was on a gap up stubby red spinning top.  But it took the indicators out of oversold so we at least have some sign that the VIX may finally be getting ready to move higher.  Unless of course Tuesday's move was just a little evening star.  That's just a good example of how this nervous market is playing its hands close to the vest.  I still think the short-term outlook is higher but we'll need some confirmation on Wednesday..

Market index futures: Tonight all three futures are lower at 12:17 AM EDT with ES down  0.09%.  On Tuesday ES put in a doji star - exactly like the one it made on Monday.  Two of these in a row is highly unusual, and quite bearish.  We also traded outside the rising RTC again for a bearish trigger.  The indicators continue to be pegged at overbought (RSI = 99.22) so I just have to think the next move from here is lower.  The overnight seems to be confirming that in the form of a big bearish engulfing candle.

ES daily pivot: Tonight, like last night, the ES daily pivot ticks up from 1919.92 to 1920.50.  However, the slow drift lower of ES in the overnight has just put it below the new pivot, barely - but that still turns the indicator bearish.

Dollar index:  As another example of how tricky this market is, last night I thought the dollar looked higher, having just cleared its 200 day MA.  Well on Tuesday it fell right back under the MA for a 0.12% loss - but on a green candle.  Go figure.  This chart is now totally bollixed and I have no clue where it's headed on Wednesday.

Euro:Well at least I got this one right, calling the euro higher for Tuesday on the hail Mary idea that if it went lower Monday it was going higher Tuesday - and it did!  There's some sophisticated analysis for ya! But Tuesday's gain just left us still in the same week-long consolidation range.  We may see some action later this week when the ECB makes some policy announcements.  No doubt the euro is just marking time until then.

Transportation: Well the trans sure fooled me.  Last night I called them higher but the trend proved not to be my friend as they dumped 0.84% on Tuesday to fall out of their rising RTC for a bearish setup and cause all the indicators to peak at overbought.  So this chart is now looking clearly bearish.


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       2       0      0           0       1.000     47

     And the winner is...

Actually, I think the entire market is waiting for the ECB to make its move on Thursday as we see a plethora of dojis on the charts tonight.  In the meantime though, the bearish pressures that existed last night are still there tonight, and even more so, so I guess I might as well just call Wednesday lower.

ES Fantasy Trader

Last night I decided to go short.  It seemed like a good idea at the time and there were in fact multiple opportunities to get out with a small profit Tuesday morning.  Unfortunately I was still asleep, so I settled for a break-even exit and was glad I did because ES just kept creeping higher the rest of the day.  Oh well - you snooze, you lose.  Here's the trade:

BOT    10    false    ES    JUN14 Futures     1920.75    USD    GLOBEX    12:44:37
SLD    10    false    ES    JUN14 Futures     1920.75    USD    GLOBEX    00:24:08

Portfolio stats:  the account still remains at $121,500 after five trades in 2014, starting with $100,000.  We are now 4 for 5 total, 2 for 2 long, 2 for 2 short, and one push.  Tonight we take another stab at this same play, going short at 1920.25, just below the ES pivot.

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