Tuesday, October 7, 2014

Tuesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday uncertain.
  • ES pivot 1959.17Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

The market started off nicely Monday morning but had second thoughts after an initial burst of energyery and after only a token attempt at a rally in the afternoon, we finished with the Dow down 18 points.  But the resulting candles are interesting so let's take a look right now and figure out Tuesday's direction.

The technicals

The Dow: The net result of Mondays' roller coaster for the Dow was a long-legged doji as continuing upward momentum meets profit-taking.  And the 17K level is of course now back to being resistance.  The indicators continue rising off oversold but we remain in a descending RTC and with the doji, this chart is too tough to call tonight.

The VIX: After Friday's big gap down, the VIX rebounded Monday with a 6.25% gain on a classic bullish engulfing pattern.  However, the indicators continue to fall towards oversold and with the trade outside the rising RTC, this was technically a bearish RTC trigger.  But there's too much conflict here for me - no call..

Market index futures: Tonight all three futures are just a bit lower at 12:44 AM EDT with ES down  0.04%.  On Monday ES put in a red spinning top sitting on top of Monday's big gain and OBV is back to declining again.  The indicators are quite confused, with RSI falling, momentum rising, and money flow falling.  The overnight is also confused, trading lower but rising on a small gap down candle.  It's anyone's guess where this chart is going.

ES daily pivot: Tonight the ES daily pivot rises from 1953.50 to 1959.17.  And that's enough to put ES back below its new pivot so this indicator now turns bearish.

Dollar index:  On Monday the dollar lost nearly a full percent but still managed to stay inside its rising RTC.  Indicators though are giving a sign of finally starting to come off extreme overbought.  Still, the action remains choppy, so it's hard to say if this one day decline means much, especially given the powerhouse the dollar's been lately.

Euro: And the euro also reversed course Monday, closing up to 1.2633, just inside its descending RTC.  But indicators have now finally come off oversold and the overnight is trading outside the descending RTC for a bullish setup on a bounce off the lower BB.  So there's at least a chance of a move higher here on Tuesday.

Transportation: The trans took me by surprise on Monday as I wasn't expecting a 1.15% slide as resistance at 8500 proved to be a level too far and derailing what looked like the start of a promising uptrend.   Instead we're left with an ugly dark cloud cover, though the indicators are still rising.  With no real trend going on here, this chart too is just a bit too opaque for me tonight.


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    1       2      0           1       0.500    187

     And the winner is...

Tonight I'm seeing a lot of conflicting readings in the charts as the market tries to digest last Friday's big gains.  In fact, there's enough confusion here that the only thing I can really do it call Tuesday uncertain.

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. 


  1. Thanks for the daily analyses - your comments regarding EUR and DX are especially helpful for novice FX traders. Equities appear unsuited to my trading style at this time.

    Do you have any medium-term insights on USD? It seems that a correction would make the current bull run more sustainable and eventually lead towards even greater USD strength.

    1. Interesting you should ask that question now, as the dollar seems to be at a crossroads at the moment. Medium term, if you look at the monthly chart, you will see that the dollar has now hit its upper BB, is quite overbought, and is now at levels from which it has declined the last three times we were here (once each in the past three years).

      It is forming a monthly evening star and a monthly bearish stochastic crossover. So I'm looking for an intermediate decline in the dollar.

      The short-term picture supports this as the dollar is falling out of its daily rising RTC for a bearish setup.

      Long term though, it looks like strength in Germany and ECB efforts wrt the euro will keep the dollar moving higher. There was just a thing on CNBC where they claimed that the goal was to send the euro to parity by "twenty seven". It's not clear if they meant 2017, 2027, or something else. Either way, I wouldn't be converting my IRA to euros right now.

    2. Many thanks for your insights - they are much appreciated indeed!

    3. Glad to help (and I hope I'm right :-)

      Thanks for reading!


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