Wednesday, August 20, 2014

Wednesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday lower, low confidence.
  • ES pivot 1975.08.  Breaking below is bearish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Once again, the technicals worked to perfection s the Dow rose another 81 points on Tuesday while the Dog Days of Summer drag on.  So with this snoozer behind us, we move on to Wednesday.  I expect things to start getting interesting as we get get closer to Auntie Janet's pronouncements from Mt. Jackson.  In the meantime, we simply worry about Wednesday.

[Blogspot spell checker still on the fritz.  Hey Google!  Knock knock, anyone home?  How about fixing this?]

The technicals

The Dow:  .Not too much to say about this chart as the Dow slowly wended its way higher thoughout the day to close with a green marubozu good for another 0.48%.  This keeps us squarely in the rising RTC and keeps the indicators useless at extremem overbought.  We've now retraced all of July 31st's plunge and aftermath.  We closed just shy of the 16,933 resistance line I mentioned last night and I still think the Dow wants to take a look at that.  So there's still nothing bearish on this chart.

The VIX: Last night I opined that the VIX was seeming to be having a lot of trouble getting going, and that continued on Tuesday with a mere 0.89% decline on a small spinning top.  Indicators continue oversold and we now have a reversal warning, albeit one that requires confirmation so we're going to just have to wait & see on this one.

Market index futures: Tonight all three futures are lower at 12:17 AM EDT with ES down  0.04%.  ES had another good day on Tuesday with a nice half-percent gain to stay well inside its rising RTC.  Indicators are now extremely overbought and we're nearing record resistance at 1985.75 from last month.  The move lower in the overnight isn't great for now, but it's enough to leave us right on the edge of the rising RTC for a bearish setup.  It's looking like ES may either be running out of gas, or getting ready for another pause.  The latter would fit with the up-up-down pattern we've already seen completed twice in the current uptrend.

ES daily pivot: Tonight the ES daily pivot rises again from 1964.08 to 1975.08.  While we are once again above the new pivot, this time it's only by one point, so that puts the pivot in play.  It's nominally bullish for now, but  with ES drifting vaguely lower all evening, a test of the pivot is not out of the question.

Dollar index:  On Tuesday the dollar took a big pop, gaining 0.37% with a gap-up green marubozu that just managed to latch onto the upper BB and send the indicators overbought.  It's also the dollar's best showing in a year and if we look at the weekly chart we see that we've now confirmed the 200 week MA breakout we got three weeks ago after two weeks of doji indecision.  Daily though, when the dollar makes big moves to touch the upper BB, that's often followed by a decline, and that's what I'm expecting here on Wednesday.

Euro: The euro finally broke out of its week-longconsolidation when it broke support around 1.3355 and ended with a red marubozu that took it all the way to its lower BB at 1.3326. That drove the indicators oversold but with a summer-long downtrend in effect, the euro might not bounce off the BB and could just start dribbling down it.

Transportation:  The only point of real concern tonight is in the trans.  While they did advance another 0.11% on Tuesday, it was in the form of a gravestone doji.  These patterns are fairly uncommon, but also pretty good reversal signs when you do see them. We remain in a rising RTC but with indicators extremely overbought, this chart could move lower on Wednesday.


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     5       5      1           1       0.545     67

     And the winner is...

Tonight we're seeing some signs that the recent strong advances in the market may be slowing down.  The trans are losing steam and there are some reversal candles around.  But the real kicker is that Wednesday is a Fed minutes day and over the past two years, these days have been decidedly negative, with the SPX being down an average of 0.26% according to Bespoke Investment Group.  So I'm going to play those odds and call Wednesday 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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