Wednesday, October 15, 2014

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher, low confidence..
  • ES pivot 1877.42.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

My call for a higher close was doing really well until an afternoon fade hit the Dow and the bell rang just a few minutes too late to save it.  At least the SPX and Nasdaq did finish higher.  So the fundamental thesis was correct.  But yet again, we've got interesting charts tonight, so let's take a gander at them, shall we?

The technicals

The Dow: Looking at the previous three days of the Dow, one might conclude that the end of the world was at hand.  But one would be wrong, for on Monday the Dow gave us a nice long-legged doji that combined with oversold indicators (finally), a negative exponential run and a reasonable excursion below the 200 day MA all make me think that a reversal could be at hand.  Of course with the VIX still above 20, nothing is certain, but I feel a bit better about this tonight.

The VIX:  And speaking of the VIX, it was foolish of me to abandon my long-standing thesis that the VIX rarely spend much time above its upper BB, because it came right back down 7.51% on Monday for a bearish harami doji.  Indicators remain overbought and the stochastic has now finally curved around in preparation of a bearish crossover.   So I'd say lower looks likely from here.

Market index futures: Tonight the futures are mixed at 12:44 AM EDT with ES down  0.05% but YM up 0.04%  On Tuesday ES gave us a green inverted hammer as it seemed to find support at 1865.

ES daily pivot: Tonight the ES daily pivot ticks down from 1878.42 to 1877.42.  After a drift lower this evening, ES is now back below the new pivot so this indicator returns to bearish.  The new overnight, while down a bit is actually trading just outside the latest steep descending RTC so that's a bullish setup.  And the stochastic has just made a bullish crossover from a very oversold level.  Overall, this chart actually looks fairly positive to me.

Dollar index:  On Tuesday the dollar completed an unusual pattern called the bullish tri-star with a 0.25% gap up gain.  It's also trading entirely outside its descending RTC for a bullish trigger and it has formed a bullish stochastic crossover.  So all signs seem to point to a higher dollar Wednesday.

Euro: After a breakout attempt early Tuesday the euro gave up and closed at 1.2654, just below Monday's close to give us a tall red marubozu.  The overnight is guiding lower but with a skittish five day pattern, there's really no calling this one.

Transportation: And finally in a bit of bullish divergence, the trans vastly outperformed on Monday gaining a big 2.61% on a Day the Dow was flat.  This upside bullish piercing pattern also broke back up above the 200 day MA and completed a bullish stochastic crossover even as indicators remain oversold.  SO this chart now clearly looks ready for more upside 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  October    3       4      2           1       0.500    184

     And the winner is...

Tuesday was a day of bullish reversal signs across the charts.  The conservative approach would be to wait  it out for confirmation, but what the hey - I'll throw all caution to the wind and just call Wednesday higher, with the usual caveat that with the VIX still pretty high, all it will take to derail this is one negative comment from some central bank or Fed Head, or another case of Boola-Boola in America.  We live in crazy times.

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.


  1. The market doth protest too much, methinks. In my analysis no reversal in sight, going south still one or two weeks. I’m praying you’re right, though praying and hope does not work. I should know, I've tried again and again.

    1. Yup, hope is not an investment strategy, as they say. Looks like I picked another bad day to be wrong - again. We are now simply in hunker-down mode.

  2. I Tawt I Taw a Puddy Bottom! Praise be to the LORD, for he has heard my cry for mercy.

    1. Ha ha ha! Smells like ... capitulation. That sure is one heck of a hammer there. Maybe prayer *is* an investment strategy after all :-)


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