Wednesday, August 6, 2014

Wednesday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher only if ES breaks above its pivot, else lower.
  • ES pivot 1917.92.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias neutral.
  • ES Fantasy Trader standing aside.

Something just didn't feel quite right last night when I made my call for a higher close Tuesday.  I never like it when the charts are saying one thing but the futures another.  You generally ignore that at your own peril.  And Tuesday we paid the price as the Dow dumped another 140 points.  This is starting to change the picture so we will sift through the rubble in search of clues to Wednesday.

The technicals

The Dow:  The Dow surprised me on Tuesday with a 140 point loss.  More importantly, it broke through the first of two long-running monthly regression trend channels I've had going for several years now.  That is a bearish monthly setup.  The Dow needs to recapture 16,500 pronto to avoid a bearish trigger.  And equally concerning is that the 200 day MA is now at 16,333, less than 100 points away and easily breachable from where we are right now.  Of course, it could also serve as support, just as it did the last time we were in a similar situation back in January.  n fact, this market looks a lot like January right now - a period of teetering about new highs, followed by a big dump, then a week of vacillation and finally a touch of the 200 MA.  If that plays out, the selling could be near an end.  But if we break under the 200 MA, then look out below!

The VIX:  On Tuesday the VIX popped right back up over its upper BB with an 11.57% gain stopped only by resistance at 17. This actually looks like January too and if so, it may be one of those instance where the VIX takes its time in coming back down.  Right now the technicals are in disarray here, so no call.

Market index futures: Tonight the futures are mixed at 12:49 AM EDT with ES up 0.01% but YM down 0.04%.  So much for Monday's bullish pattern - on Tuesday ES reversed course and broke support at 1917 for another leg down.  The indicators are pretty much stuck on oversold now and we remain in a descending RTC.

ES daily pivot: Tonight the ES daily pivot drops again from 1928.08 to 1917.92.  Despite this, we remain below the new pivot so this indicator remains bearish.

Dollar index:  On Tuesday the dollar confirmed Monday's lopsided spinning top with a big 0.25% gap up inverted hammer that twisted the stochastic around into position for a bullish crossover.  But with 2/3 of an evening star now in place and sitting just below resistance at 55.50, it seems like the dollar is more likely to go lower on Wednesday.

Euro: The euro took a big hit on Tuesday, giving up all its recent gains and breaking support at 1.3390 to close at 1.3374.  That also brings it right back into the descending RTC, the recent breakout attempt having now failed.  With the overnight below the pivot and moving lower, this chart  just looks bearish.

Transportation: On Tuesday the trans negated Monday's nice hammer, breaking support at 8125 to close just under their lower BB for a 1.10% loss to continue a descending RTC that began July 2rd.  Momentum, money flow, and OBV continue to fall so this chart now just looks 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       8      10      3           2       0.500    132
July       6       4      4           3       0.692    639
August     1       2      0           0       0.333   -134

     And the winner is...

Having been burned, I believe by some noise about Russia and the Ukraine on Tuesday, I'm now reluctant to make an outright call.  But given the proximity of ES to its new pivot, I'll make a conditional call: if ES can manage to break above its pivot and stay there by mid-morning Wednesday, we close higher.  Otherwise, it's just more of the same grind lower.

ES Fantasy Trader

Portfolio stats:  the account remains $114,250 after eight trades in 2014, starting with $100,000.  We are now 6 for 8 total, 4 for 4 long, 2 for 3 short, and one push.  Tonight we stand aside.

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