Wednesday, October 8, 2014

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1936.17.  Holding below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Well I am certainly glad I called Tuesday as "uncertain" because I sure wasn't expecting a 273 point dive in the Dow.  Holy moly!  Once again, this changes the picture so we return to the charts as every night  for clues to Wednesday' close.

The technicals

The Dow:  With a big dump straight out the gate, it looked like that was it for the Dow on Tuesday.  But then things got worse, with a late afternoon sell-off doubling the loss and ending only when the bell finally, and mercifully rang.. The 1.6% loss confirmed Monday's doji in a big way, drove the indicators back to oversold and turned an incipient bullish stochastic crossover right into a bearish one.  So the only hope now is for a DCB on Wednesday.

The VIX:  The VIX meanwhile confirmed Monday's bullish engulfing pattern in a big way with an 11.25% gap-up rocket ship that brought it all the way back to year-long resistance at exactly 17.20.. It also sent the indicators higher again and formed a bullish stochastic crossover.  But being at strong resistance now, it's not clear that the VIX will be able to push further on Wednesday.

Market index futures: Tonight all three futures are higher at 12:26 AM EDT with ES up 0.16%.   ES had a big loss on Tuesday that confirmed Monday's spinning top and short-circuited a nascent uptrend to break under support at 1938.  It also turned a bullish stochastic crossover right back into a bearish one.  The small overnight gains may either be a DCB or just a fake-out for Wednesday - there's nothing really bullish about this chart.

ES daily pivot: Tonight the ES daily pivot plunges from 1959.17 to 1936.17.  And even with that ES remains below the new pivot so this indicator turns bearish. 

Dollar index:  Last night I wasn't ready to commit to a dollar decline, but by Tuesday morning, it was clear that we were going lower, down another 0.31% to form a new, steep descending RTC and send the indicators all off overbought and moving lower. I did however make a case for a lower dollar in a comment Wednesday afternoon which I'll reprint here for those who missed it:
"[T]he 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."

Euro: And while the aforesaid euro did manage to post a gain on Tuesday, it was only to 1.2670, right at weekly resistance, with a tall doji.  And the overnight seems to be confirming that, down 0.24% so far.  We do have a bullish RTC exit but I'm going with the candles here and calling the euro lower on Wednesday.

Transportation:  On Tuesday the trans took it on the chin even harder than the Dow (not a good sign) to break support at 8242 with a 2.5% loss, their worst showing since, uh, all of four days ago.  But even that wasn't enough to send the indicators oversold, though it did force a bearish stochastic crossover.  Next support isn't til 7990 (yikes!) and right now there's nothing bullish about this chart.


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      1           1       0.500    187

     And the winner is...

With all these wild triple digit swings lately, I'm surprised the VIX is only at 17 - it feels more like 27.  It's driving the indicators crazy and it's also driving me crazy.  While the overall look of things tonight remains bearish, I'm hesitant to call it so just because of the irrational way Mr. Market has been acting the past few weeks.  So as the spooky month of October rolls on, I'm pulling the sheets up over my head, leaving the light on, and calling Wednesday 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. 

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