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- Wednesday higher, medium confidence.
- ES pivot 2004.83. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
This is about why I called Tuesday as "uncertain": Dow up just 18 and the SPX down 5.7. Everyone was clearly waiting for the results of Tuesday's elections. One of the advantages of being a Night Owl is that we can now see those results and it's pretty clear that Mr. Market likes them. We'll run down the charts as usual, but it looks like Wednesday is pretty much a foregone conclusion at this point.
The Dow: From a purely technical point of view, the Dow is now looking very toppy, with highly overbought indicators and a duet of dojis that have bounced off the upper BB leaving 17,400 as serious resistance.. We remain inside the rising RTC for now but all it will take is a close 50 points lower on Wednesday to initiate a bearish setup.
The VIX: On Tuesday the VIX posted a strange gap-up inverted hammer that might count as a reversal candle but I think it reflects more just ongoing uncertainty than anything else. This should all resolve on Wednesday..
Market index futures: Tonight all three futures are higher at 12:21 AM EDT with ES up 0.24%. On Tuesday ES confirmed Monday's star with a hanging man. The indicators are still pretty much broken overbought but the stochastic has been fading lately. All in all this chart seems to have more downside risk than upside potential.
ES daily pivot: Tonight the ES daily pivot drops from 2012.42 to 2004.83. That's enough to put ES back above its pivot so this indicator now turns bullish.
Dollar index: Add this chart to the reversal warnings. On Tuesday the dollar lost 0.37% to fall back below its upper BB on something of an evening star pattern. That was also enough to trade entirely outside a steep rising RTC so this chart now looks pretty bearish.
Euro: Similarly, the euro on Tuesday traded outside its descending RTC for a bullish setup and bounced off its lower BB with oversold indicators. This all looks like a good setup for a higher euro on Wednesday.
Transportation: Like the Dow, the trans on Tuesday put in an inverted hammer that, following Monday's hanging man makes two reversal warnings in a row. The index is no doubt being buoyed by declining oil prices but it looks toppy short-term to me.
And the winner is...
Tonight looks like one of those nights where the news trumps the technicals, which frankly don't look so hot. And the days surrounding election day are typically bullish anyway so I'm just going to ignore the reversal signs in the charts (possibly at my own peril) and call Wednesday higher.
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.