Wednesday, December 17, 2014

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 1985.92.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Holy moly - I think "uncertain" was absolutely the right call for Tuesday after a triple digit roller coast ride both up and down.  But in the end, the selling just continued.  Will Santa Claus come to the rescue?  It's getting to be about time to ask that.  Maybe the charts have the answer (or maybe not).

The technicals

The Dow:  The Dow just continued its sell-off Tuesday down another 112 points, this time on a big inverted hammer.  But reversal candles are meaningless lately so what else have we got?  Well there's RSI which at 6.21 is now extremely oversold.  And the stochastic's %K line is 2.54 - doesn't get much lower than that.  But also the 200 day MA is now moving into view at 16,861.  This whole pattern is now looking a lot like early October and that didn't end til we'd broken under the 200 MA with a couple of big dojis.  So for now we continue riding the lower BB down locked in a steep descending RTC.  No bullish signs here.

The VIX:  The VIX is looking even more like October than the Dow with a big 15% gap up long-legged doji star on Tuesday.  Back in October (10/15 to be exact) that marked the beginning of the end.  The next day saw a big blow-off top and then down we went.  And interestingly, oil had begun a steep leg lower at exactly the same time, just like now.  We actually have a completed bearish stochastic crossover in the VIX and VVIX already peaked two days ago..  I know this market has really gone off the rails but I still have to think that the VIX is going lower on Wednesday.

Market index futures: Tonight, all three futures are higher at 12:43 AM EST with ES up  0.28%.  ES had yet another lousy day Tuesday, ho hum, and seems to be trying to rally in the overnight, just like last night and we all know how that ended.  I can't rely on overnight moves anymore  the way I used to.  But RSI appears to have bottomed at extreme oversold and OBV took a turn higher   So there might be good news here but with the VIX pushing 24 we need some real confirmation before calling a rally.

ES daily pivot: Tonight the ES daily pivot falls again from 1996.92 to 1985.92.  And we once again remain below the new pivot so this indicator remains bearish.

Dollar index:  Interestingly, the dollar took a big gap down, off 0.43% on Tuesday breaking support at 59.86. to hit oversold and just north of its next support at 59.40.  Does this mean a move higher?  Not in this Kafkaesque market.  Who knows.

Euro:  The euro meanwhile continued its recent rally to end at 1.2495 on an inverted hammer that just touched its upper BB and hit overbought.   It still might be able to push higher from here, but the euro is looking a bit tired to me right now.

Transportation:  The trans just laughed at Monday's doji and resumed their march lower, down 1.32% in a move I just do not understand.  You'd think lower oil prices would help this sector.  But anyway down we go with no end in sight despite way oversold indicators.


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   3       2      4           1       0.667   -192

     And the winner is...

Well once again we're seeing a lot of good reversal signs, especially from the VIX.  I'll note too that the Morningstar Market Fair Value index has now gone below 1 - to 0.99.  And the SPC Hi-Lo indicator has now gone to a very low reading - 15.22.  The last time we were around these levels was in mid-October and that marked the end of the early October slide.  And we also had falling oil back then too.  And a VIX above 25.

So what I'm thinking is that Wednesday will be a blow-off top in the VIX and then he market will begin to move higher, perhaps on a hammer.  That would time nicely for Santa Claus and his rally - assuming he bothers to show up this year.  But then we've still got that pesky oil problem so once again I'm calling Wednesday uncertain until things calm down a bit.

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.

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