Wednesday, October 1, 2014

Wednesday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher only if ES pivot passed, else lower.
  • ES pivot 1968.08Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

The market on Tuesday made a vague meandering progression to the bell.  It was up, it was down, and in the end it was all of 28 points lower.  I'm glad I called this day "uncertain".  Now we begin a new month and a new quarter.  Will the charts tell us where we're headed?  You betcha!

The technicals

The Dow: After Monday's strange "high hammer", on Tuesday we got a lopsided red spinning top.  It comes with a bullish stochastic crossover but remains in a descending RTC,  All I get out of this is continuing indecision.

The VIX:  The VIX finished Tuesday with a 2% gain in a bullish piercing pattern.  We remain well within a rising RTC though indicators remain overbought.. Just looking at the daily candles would be confusing but if you look at VVIX, it fell 2.68% on Tuesday in an interesting bearish divergence.  It's not much to go on, but I'd be very careful about going long the VIX on Wednesday.

Market index futures: Tonight all three futures are lower at 12:29 AM EDT with ES down  0.10%.   ES continued its nervous path lower on Tuesday, influenced no doubt by end of month and end of quarter maneuvering, not to mention the latest geopolitical jitters, this time from Hong Kong.  THis lopsided red spinning top does little to provide much guidance.  The overnight is gapping down, but only to support at 1961.  And it must be noted that ES is actually drifting slowly higher and has now exited its latest descending RT for a bullish setup.

ES daily pivot: Tonight the ES daily pivot ticks up from 1967.33 to 1968.08.  ES just wasn't able to hold its pivot on Tuesday and has now sunken below the new number, so this indicator is back to bearish.

Dollar index:  Another day, another jump as the mighty dollar, faster than a speeding bullet, able to leap tall resistance levels in a single bound, gapped up another 0.38% on Tuesday, clambering up its upper BB like a monkey up a palm tree. I now have to back out to the monthly chart to find the last time we were at these levels - it was September 2010, yes four years ago.  I'm not sure how much longer this can go on, since the dollar has hits its upper BB and looks likes it's going exponential on the monthly chart - and that's saying a lot, Jack.

Euro: Similarly, the euro continued, yet again, its relentless excavation to zippo on Tuesday closing at 1.2635.  I have to look at the monthly chart here too to find the last time we were at this level - September 2012.  Interestingly, the euro is going inverse exponential on the monthly chart and has now hit its lower BB there.  This is all making me think that a major currency reversal is on the horizon before too long, like in a month or so - just sayin....

Transportation:  So much for bullish divergences - on Tuesday the trans dropped 0.55% to give up all of Monday's gains and leave us right at something of a support level at 8450.  But the indicators are just off oversold and the stochastic has a shallow bullish crossover going so I'm no sure the trans have much more downside left to them 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     8       7      2           2       0.588     81

September  6       6      5           2       0.571    376

     And the winner is...

Tonight we've got some conflicts in the charts.  This is often the case as we near a bottom.  It's also worth nothing that the Morningstar Market Fair Value Index hit 1.0 for only the third time this year.  The last two times were 2/5 and 8/6 - and both those dates marked the bottom of the two biggest downtrends we've seen so far in 2014.  The SPX Hi-Lo index and NYSE A/D line also both continue to hover around levels indicative of a bottom.

Now far be it from me to call a bottom.  Bottom calling is a fool's errand and just one step removed from catching the falling knife.  But if I had to guess, I'd say we'd be due for a rally sometime this week.  Will it be on Tuesday?  Hard to say.  The first day of the month is generally bullish and that holds for October, though not as much by far as other months.  The market seems to be signalling a readiness to rise, but it's hard to tell until someone hits the starter.

Therefore, I'm going to do another conditional call: if ES can break above its pivot in the wee hours, or no later than mid-morning (say 10:45 AM-ish), then Wednesday will close higher.  If we stay below the pivot, or make a false breakout and fall back below, 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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