Tuesday, December 2, 2014

Tuesday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher only if ES breaks above its pivot, else lower.
  • ES pivot 2054.33.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

On Monday the Dow tried hard to rally off an early deficit but ultimately failed, starting off December with a 51 point loss.  The action may not have been a wild ride but the charts are interesting so let's take a gander at them and figure out whither Tuesday.

Also, the Night Owl will not be publishing Thursday night as I have to get up at the ungodly hour of 7 AM on Friday so I'm going to have to turn in much earlier than usual on Thursday.  But we'll be back next Sunday night as usual.

The technicals

The Dow: After a week-of-nothing, the Dow broke to the downside on Monday with a stubby hanging man that tested but rejected the lower bounds of its rising RTC.  This leaves the indicators still overbought.  I started scrolling back to find the last time were were this overbought this long.  I got as far back as 2002 before giving up.  This is really quite extraordinary and makes one think that Monday's drop may be a warning that there's lower ahead.

The VIX: The VIX did indeed follow on to last Friday's big jump with an impressive7.20% pop on Monday.  The result was a gap-up spinning top that blasted right through the 200 day MA to finish in evening star position and nearly touch its upper BB.  Though indicators are still not yet overbought, this pattern is at least a warning that the VIX may be played out.

Market index futures: Tonight, all three futures are higher at 12:25 AM EST with ES up  0.13%.  On Monday ES had its biggest move in a month to the downside with a gap-down marubozu that fell right out of the latest rising RTC for a bearish setup.  It was also enough to finally take the indicators off the overbought levels they've been at since October 22nd.  The stochastic is now in full-on bearish mode too.  But thr lack of bearish pin action in the overnight  suggests at least a possibility of a reversal Tuesday.

ES daily pivot: Tonight the ES daily pivot drops from 2068.17 to 2054.33.   We're still below the new pivot but just barely.  It's bearish for the moment but that could change soon since as I write ES seems to be drifting slowly higher.

Dollar index:  Last night I wrote "I'd look for a lower dollar Monday" and I didn't have far to look as the dollar fell 0.49% on a nice doji star.  But with the indicators jittering about all over the place and no real trend here, I'm not going to call this one tonight.

Euro:  O Monday the euro posted a small gain on a stubby spinning top.  This chart is as indecisive as the dollar so no call here either.

Transportation: On Monday the trans just fell out of bed with a giant 2.71% drop on a red marubozu that exited their rising RTC in a big way for a bearish trigger and confirmed the bearish stochastic crossover.  There are bearish consequences, Dow Theory-wise here for the Dow and this chart just looks flat-out bearish.


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      5           0       0.444     38

December   1       0      0           0       1.000     51   

     And the winner is...

Though most of the charts now look fairly bearish after Monday's action, the overnight futures are acting like the selling is about washed up.  And after all this is December.  The VIX also seems poised for a move lower.  But it's enough of a mixed picture that I'm going to try a conditional call: if ES can break above its pivot by mi-morning Tuesday, we'll close higher.  If it can't then we close lower.

ES Fantasy Trader

Portfolio stats:  the account now stands at $110,500 after ten trades in 2014, starting with $100,000.  We are now 7 for 10 total, 5 for 5 long, 2 for 4 short, and one push.  Tonight we stand aside.


  1. "I got as far back as 2002 before giving up."

    I bet in the late 1990s into 2000 overbought zones persisted several eons longer.

    1. OK, well I scrolled back some more to check, all the way back to 1990 this time. And while it appears that the market indeed spent a lot more time overbought than oversold that entire decade, and more than lately, I didn't find any instance where it was continuously overbought for so long.

      In any case, it looks like the collapse of oil has now taken care of that problem, eh?


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