Tuesday, November 18, 2014

Tuesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday lower, low confidence.
  • ES pivot 2035.17.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader remains short at 2027.25.

Like Casablanca Chief of Police Renault, I'm shocked, shocked to discover that Mr. Market did not give a hoot about Japan falling into recession on Monday.  After all, it seemed like a good bet since the market shot higher on October 31st when the BOJ announced some QE, that it would go lower on news of recession.  But the world's third largest economy is in the toilet and no one cares?  What the heck??  Ah well, serves me right for trying to game the news.  We should stick to pure technical analysis, so let's check the charts for Tuesday without any pesky distractions from the new tickers.

The technicals

The Dow: On Monday the Dow simply continued its week-long pattern of congestion about the 17,625 level with yet another doji, this one a stubby little spinning top, meaning probably nothing.  And yet both the stochastic and money flow have been declining for four days now and I have to believe that means something.  I'm not changing my bearish stance on this chart, Jack.

The VIX: Now here's an interesting tidbit - on Monday we got one of those rare days when both the Dow and the VIX rose, in this case with the VIX up a non-trivial 5.11% in a move that gapped right up above the 200 day MA - though the candle was a red marubozu.  It makes sense though in the context of the news since all of the gain was in the opening minute and it was all downhill from there.  So we're now sitting on the 200 MA as support.  That means there's no guessing as to whether or not it will hold and therefore we simply take a pass.

Market index futures: Tonight, all three futures are barely lower at 12:12 EST with ES down 0.04%. On Monday, ES gave us a tall skinny hanging man no doubt influenced by the Japan news.  But four of the last five candles have been reversal warnings - and no reversal yet.  The new overnight is playing it close to the vest, so I'm just waiting for the break on this chart too.

ES daily pivot: Tonight the ES daily pivot dips from 2036.58 to 2035.17.   Thanks to a mid-day rally Monday that puts us back above the new pivot so this indicator turns bullish.

Dollar index:  Bah - the dollar is stuck in a rut, consolidating about the 59.56 level for eight straight days now.  Monday's gain of .0.45% is meaningless in this context.  Until I see a trend, I'm calling for just more sideways motion here.  Though I'll admit the fact that we got a bearish rising RTC exit but no pullback is a bullish sign.

Euro:  And of course as the dollar rose, the euro fell on Monday, back to 1.2454, a level we've seen for eight in a row now.  Monday's loss kind of put the kaibosh on a weakly rising trend, so this one looks sideways for the foreseeable future too.

Transportation:  And finally in some Dow Theoretic divergence, the trans dropped 0.54% on Monday with a red marubozu and a bearish trigger on a rising RTC exit.  All the indicators have now topped so I have to believe there's more downside on the way.


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    6       6      3           1       0.538    271 
November   4       4      2           0       0.500     78

     And the winner is...

The picture's a bit murky tonight, but I'm looking at a market that's having trouble making much more headway from where it is now, suggesting that there's not too many would-be- buyers around.  Also, all the indicators are beginning to come off their extreme overbought levels so I'm going to stick to my guns and once again call Tuesday lower.

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 remain short on a  counter-trend play I called risky last night at 2027.25.

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