Tuesday, July 29, 2014

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence.
  • ES pivot 1969.92.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

I called Monday lower and while the Dow did once again fall right out the gate, Mr. Market changed his mind right at the 10 o'clock reversal hour, regained the pivot, and then bobbed along there for the rest of the day and a modest gain despite some arguably worse than expected home sales numbers.  Go figure.  Let's continue our navigation of this tricky week as we study the charts for clues to Tuesday.  Reminder - I'm already calling Wednesday as "uncertain" due to the impending Fed announcement.  That's always a market mover and the battery in my bug in the Fed's conference room is still dead.

The technicals

The Dow: The Dow ended the day with just a 22 point gain, but also a classical hammer whose tail nearly touched the lower BB.  The indicators are all over the place - RSI and momentum are moving higher, money flow and the stochastic are moving lower and OBV is sideways.  All that really leaves us with is the candlestick.  Hammers that touch the lower BB  after a big decline are usually pretty good, but the conservative in me says wait for confirmation.

The VIX: OTOH, the VIX chart is quite the sight.  A tall inverted hammer here exactly touched both the upper BB and 200 day MA, which coincidentally just happen to be in the same spot - RE-jected!  The trading was outside the descending RTC so that's nominally a bullish trigger, but I'm not too sure about that.  The descending trend wasn't all that well-behaved. and with a similar inverted hammer in VVIX, I'm going to claim the VIX goes lower from here.

Market index futures: Tonight all three futures are lower at 12:23 AM EDT with ES down  0.05%.  On Monday, ES gave us an even bigger hammer than the Dow.  Indicators remain overbought but one cannot discount this sort of candle.  The indicators are just now exiting overbought and the overnight is trading outside a short, narrow descending RTC for a bullish setup.  So there's at least a suggestion here that the selling may be over, but one that requires confirmation.

ES daily pivot: Tonight the ES daily pivot drops from 1973.42 to 1969.92.  That's enough to put ES back above the new pivot for the first time in several days, so this indicator turns bullish.

Dollar index:  Last night I wrote "there's a bigger chance of a move lower from here than higher" but it was a push, with the dollar finishing Monday exactly unchanged.  But with the bounce off the upper BB confirmed and with RSI now at 100 (doesn't go any higher) I still think the next move is lower.

Euro: Last night I wrote "there's no sign of a move higher here" and indeed there wasn't as the euro finished Monday unchanged just like the dollar.  But with a doji star and oversold indicators, the next move now seems likely higher, an idea that's being confirmed in the new overnight.

Transportation: In a bit of understatement, last night I wrote "this chart looks bearish for Monday".  And wow - the bears roared on Monday as the trans dove 1.13% on a long red marubozu that capped three days of accelerating losses to form a classic inverted exponential waterfall.  The indicators are all now moving lower though still not yet oversold.  But this kind of chart looks to me like a reversal is pretty close.  What goes down, must come up.


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       5       3      3           3       0.727    394

     And the winner is...

With the VIX seemingly out of gas and bullish candles in both the Dow and ES, I think I'm seeing just barely enough signs to call Tuesday higher.  But with more economic news coming out and a Fed announcement due Wednesday, I'm not expecting any big moves in either direction.  I think we're going to be in wait&see mode.

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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