Tuesday, September 30, 2014

Tuesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday uncertain.
  • ES pivot 1967.33Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Last night we called for the market to close higher only if ES could break above its pivot by mid-morning Monday, ie. around 10:45 AM.  ES did make a half-hearted attempt to break out, but not until 11:10 AM and just bounced off its upper BB and right back below the pivot.  And that was that - the Dow finished down 42 points.  We now close out the month with one last forecast for September before moving on to October.

The technicals

The Dow:  The Dow too was stymied by its pivot on Monday, bumping up against it after a big drop right out the gate (apparently due to a large number of Hong Kongians angry, very angry at the Chicoms (and rightfully so)), and then two more times before ending the day parked right on it..  The result was a tall hammer but one sitting at the top of Friday's big gain, not at the bottom the way we'd like to see it.  Last night's incipient bullish stochastic crossover was short-circuited and the indicators continue to decline without yet having hit oversold.  So overall there really isn't much positive about this chart, other than the fact that support at 17K held.

The VIX: Shoot - I really thought the VIX was ready to go lower on Monday.  Instead, it gained 7.61% but did it with a curious red hanging man, almost identical to last Friday's.  I looked for this "double hanging man on the upper BB" pattern.  Searching back to 2007 I only found four matches for this and in every case, the next day was higher.  Just sayin....

Market index futures: Tonight all three futures are modestly higher at 12:22 AM EDT with ES up 0.04%.  On Monday, ES like the Dow put in a hammer floating at the top of Friday's green candle.  That leaves us inside the descending RTC though the overnight seems to be trying to gear up for some sort of rally on Tuesday.

ES daily pivot: Tonight the ES daily pivot falls from 1970.58 to 1967.33.  That finally puts ES back above the new pivot so this indicator now turns bullish.

Dollar index:  On Monday the dollar took a bit of a break, down just 0.06% on a tiny little star.  No trend change is remotely evident though and the uptrend remains intact. We now have to go back to the end of November 2010 to find the last time the dollar was this high.

Euro: On Monday the euro put in a small green spinning top after last Friday's big drop.  But the indicators all remain broken oversold and we just continue cascading down the lower BB so we can't really say this is a reversal warning.

Transportation: Here's a bit of good news - on Monday the trans showed some positive divergence, gaining 0.16% on a day the Dow was down.  We've exited the descending RTC for a bullish trigger and the indicators remain quite low, just off oversold.  The lower BB has provided support for three days running now so I'm thinking there's more upside potential than downside risk here on Tuesday.


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     8       7      2           2       0.588     81

September  6       6      4           2       0.571    376

     And the winner is...

The last day of September is historically quite week due to mutual fund end of quarter restructuring.  It was indeed so last year, but then we were in the middle of a strict downtrend, not the sort of herky-jerky random bobbing we've seen the past week - the Dow is now exactly in the same place it was four days ago.

Then the SPX Hi-Lo index remains quite low, though recovering from the 30 reading we got last week, a bullish sign.   We also note the NYSE A/D line which has just now apparently broken a bearish month-long pattern of putting in lower highs and lower lows, also a bullish sign.  And the VIX may be headed lower, and ES is putting in a few bottoming signs.

So there you have it.  I'd like to make a bullish call based on the technicals, but I don't like the end of month/end of quarter timing.  And with all the choppy trading lately, I think the wisest course is to simply declare Tuesday uncertain.

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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