Thursday, October 16, 2014

Thursday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday higher, low confidence..
  • ES pivot 1847.67.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Holy moly!  Mr. Market has just gone stark raving bonkers, completely off the rails.  The talking heads on CNBC were all in a dither on Wednesday.  It's the end of QE.  It's Ebola (which is Alobe spelled backwards).  It's not QE.  It's Germany.  It's Greece (for what, the fourth time?).  Hey, it's exaggerated.  We got some interesting charts tonight for sure though so pull up a seat, break out the popcorn and let's get munching on Thursday.

The technicals

The Dow:  Wow, I sure picked an even worse day to be wrong (again) with the Dow down a massive 460 points at its low to finish "only" 173 points lower.  On Wednesday the Dow appeared to be in free-fall until just after lunch, at which point some traders noticed that the sun was still up in the sky and the earth was still turning, and started buying.  The net result was a giant hammer exiting off the left side of the descending RTC (a bullish sign), very oversold indicators and a bullish stochastic crossover.  That all looks like a bullish reversal to me.  But with the VIX somewhere out in low-earth orbit, who the heck knows.

The VIX:  Earth to VIX!.  You're cleared for re-entry!  With the VIX spiking to just over 31, a level not seen since, uh, the Middle Ages, it put in a perfect doji star on Wednesday that was still a 15% gap-up pop.  Yowsa!  The indicators are now all quite overbought and the stochastic is curving around for a bearish crossover, but the lessons of summer 2011 show that when the VIX gets this irrational, it can stay that way for months on end.  So while technically it may look like the VIX is ready for a fall, I'm now going to require confirmation first.  Seeing is believing.  So there!  Nyah!

Market index futures: Tonight all three futures are higher at 12:16 AM EDT with ES up 0.32%.  ES had a huge move with a big hammer on Wednesday like everything else that looks an awful lot like capitulation.  With indicators remaining oversold and a bullish stochastic crossover in place, an no further losses in the overnight, I'd have to guess that maybe, just maybe, this chart is ready to turn around.

ES daily pivot: Tonight the ES daily pivot plummets from 1877.42 to 1847.67.  But tonight we're finally above the new pivot, thanks to a combination of that big drop and a rising ES overnight.  So this indicator is now back to bullish.

Dollar index:  Huh - so much for Tuesday's big bullish tri-star.  On Wednesday, the dollar took a 0.81% dump on a big hanging mannish thing (it should come after a trend, which we don't have right now).  That curved the stochastic around for a bearish crossover but even with this big move, this chart remains too tough for me.

Euro: I had the sense to stay away from the euro last night and it was just as well since I wasn't expecting a big jump to 1.2781 o Wednesday.  That was good for a bullish stochastic crossover and we're seeing positive pin action int he overnight so now I'm saying there's more upside to come on Thursday.

Transportation: Dow Theorists take note - in a second day of bullish divergence, the trans gained an impressive  0.23% on a day that everything else on the planet was getting hammered. In fact they exited an 8 day descending RTC for a bullish setup with oversold indicators and a completed bullish stochastic crossover.   They also held on to Tuesday's breakout above their 200 day MA.  This all spells higher in my book.


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      5           2       0.571    376
October    3       5      2           1       0.444     11

     And the winner is...

I notice that TLT put in a monster inverted hammer at the end of a big run-up on Wednesday, a bullish sign.  OTOH, Dr. Copper remains in the toilet, and for the foreseeable future.  But we've now got some pretty good reversal signs on the charts involving giant hammers and those are among the highest probability candles.  But we've also got a VIX now at 26.25, a level I'd classify as "moderately schizophrenic" and just short of "armed and dangerous".

What to do?  Well since we're getting such wild swings lately, and with the futures looking higher, it might be worth a shot to call Thursday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $121,625 after nine trades in 2014, starting with $100,000.  We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push.  Tonight we stand aside - I am by policy boycotting the market until the VIX goes back below 20.

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