Wednesday, August 27, 2014

Wednesday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher only if ES remains above pivot, else lower.
  • ES pivot 1997.83.  Breaking below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

OK, I'll be the first to admit, the market fooled me on Tuesday.  I figured that with looming resistance, Mr. Market might want to regroup before another push higher.  But no such luck and the Dow managed a 30 point gain while the SPX put in a record close to crack the 2K mark.  This leaves us in an interesting spot so let's see how the charts sort out for Wednesday.

The technicals

The Dow:  The Dow took off right out the gate on Tuesday but then gave back most of its gains though it still managed a 0.17% gain.. That leaves resistance at 17,150 intact.  We now have an inverted hammer but these reversal warnings haven't counted for much since the July 31st bottom.  We remain in a rising RTC and the upper BB is rising away, now at 17,184.  So with the indicators continuing at broken-overbought, it looks like the only reasonable call here is bullish.

The VIX:  And on Tuesday the VIX lost 0.60% but on an unusual green inverted hammer.  That follows Monday's actual hammer and with the trade coming entirely outside the descending RTC that gives us a bullish trigger.  Indicators remain quite oversold, so I have to think the next move here is higher..

Market index futures: Tonight all three futures are essentially flat at 12:15 AM EDT.  Actually YM is up just 0.02% and ES is dead even. With just three losses in the last 13 sessions, the current rising RTC looks like it's headed to the moon, Alice.  There's simply zero bearish signs on this chart right now.  The overnight action so far seems to be lacking in enthusiasm though but I'm wary of fighting this particular tape.

ES daily pivot: Tonight the ES daily pivot rises again from 1994.50 to 1997.83.  We remain above the new pivot so that's nominally bullish but  at less than a point over, the pivot is clearly in play.  The overnight action so far seems to be lacking in enthusiasm though but I'm wary of fighting this particular tape.

Dollar index:  And what of the dollar?  On Tuesday it simply kept moving higher, completely ignoring Monday's big gap up.  In fact the entire trade was above the upper BB.  Indicators remain broken-overbought and we remain well within a rising RTC so I have to think this chart continues to look bullish.

Euro: And as the dollar rose, the euro sank - again.  Down to 1.3174 on Tuesday to continue a descending RTC back to 8/18. And a longer one back to 7/1.  And an even longer one back to 5/8.  Things look even worse on the weekly chart (never a good sign).  We're now hanging on year-long support.  If that gives way (and there's no reason why it shouldn't), we're headed for 1.3117.

Transportation: In some continuing divergence, the trans on Tuesday lost 0.39% on a red candle that keeps them in a week-long consolidation area and solidifies the 8460 area as resistance.  This failure to advance while the rest of the market moves higher is a bearish sign, Dow Theory-wise.


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     7       7      2           1       0.533     39

     And the winner is...

Tonight is a tough call.  We're seeing mostly bullish signs with the exception of the trans, which is always a concern when it diverges from the Dow, and the VIX which looks to be flattening out its recent daily declines.  But with the futures seeming to be weakening a bit and ES is close proximity to its pivot, I think it's time for another conditional call.  If ES can manage to stay above its pivot by mid-morning Wednesday, we'll close higher.  If it breaks under though, then we close 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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