Friday, July 18, 2014

Friday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher only if ES breaks above pivot, else lower.
  • ES pivot 1959.33.  Holding below is bearish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

One might argue whether the market went down because the technicals called it thus or because an airplane went down in the Ukraine but the end result is the same.  It seems like an over-reaction to me, but the tape is the tape.  So now let's see how this might change our view of Friday's action.

The technicals

The Dow: The Dow took a big dump on Thursday due to [insert favorite reason here - downed airliner, Putinoia, etc.].  But it should be noted that we remain in a rising RTC and have not even broken the midline of the trend.  In fac tit seems that for the past two months, every sven sessions, we have a day or two of triple point losses.. Nevertheless, Thursday's effectively exited the rising RTC for a bearish trigger, formed a bearish stochastic crossover and sent all the indicators lower before ever reaching overbought.  So this is all simply de facto bearish.

VIX daily
The VIX: On Thursday the VIX took a monster 32% pop the likes of which we've not since since last January, back when the big crisis was... yeah, I can't remember either..  Be that as it may, in one swell foop we a. broke out of a descending RTC for a bullish trigger, crashed right through the upper BB, continued on right through the 200 day MA, and. formed a bullish stochastic crossover.  It's really quite amazing and worth a look-see (click to enlarge) --->

Now the one thing about the VIX is that it usually has second thoughts after such extreme one day moves, so I'd look for no more than a doji here on Friday and possibly a move lower.

Market index futures: Tonight all three futures are lower at 12:19 AM EDT with ES down  0.13%.  Like the other charts, on Thursday ES dropped out of its rising RTC for a bearish trigger and a completed bearish stochastic crossover.  The only positive here is the overnight trade which is forming a nice hammer after nearly touching its lower BB.  So while half-baked candles have to be taken with a grain of salt, there's at least a suggestion here that the selling may be over.

ES daily pivot: Tonight the ES daily pivot drops from 1973.25 to 1959.33.  That's still not enough to put us back above the new pivot, so this indicator continues bearish.

Dollar index:  Last night, anticipating an evening star I wrote that the dollar "has a lot more downside risk than upside potential."  And that's how it played out on Thursday with a 0.07% loss trading mostly under Wednesday's doji.  We remain overbought and the stochastic is flattening in preparation for a bearish crossover.  I now expect the 200 MA, just below, to exert some attraction, so I'm calling this one lower on Friday.

Euro: After two big read marubozus, the euro took a breather on Thursday with a tiny little star near the lower end of Wednesday's drop.  We're still on the lower BB, indicators are now quite oversold, we're right on a support line and the overnight is unchanged.  That all suggests support kicking in and the possibility of a move higher on Friday.

Transportation: And finally, the trans took a big hit on Thursday just like everything else, though they'd been so high, this move just barely exited the rising RTC for a bearish setup.  But we also got the bearish stochastic crossover and indicators peaking at overbought so this one looks bearish for Friday too, though  DCB cannot be discounted.


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       8      10      3           2       0.500    132
July       4       0      1           2       1.000    323

     And the winner is...

Hmm - despite some tragic news on Thursday, I think the market has over-reacted in the short-term and some retracement is in order on Friday.  But I'm hesitant to call the market higher as long as ES is below its pivot so I'm going to make a conditional call: if ES can manage to break back above its daily pivot by mid-morning Friday, we'll close higher.  If not, then lower.  That's all she wrote.  See you again Sunday night!

ES Fantasy Trader

Portfolio stats:  the account remains at $113,000 after seven trades in 2014, starting with $100,000.  We are now 5 for 7 total, 3 for 3 long, 2 for 3 short, and one push.  Tonight we stand aside.

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