Actionable ideas for the busy trader delivered daily right up front
- Friday lower, low confidence.
- ES pivot 1871.58. Holding below is bearish.
- Next week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
It was nice to get one right for a change as Wednesday night's technical setup played out to perfection on Thursday with broad losses across the board. Trouble in Europe, housing prices, whatever - the nice part about technical analysis is that you can ignore the news - it's already baked into the charts. So let's take a peek inside the oven to see maybe what's cookin' on Friday.
The Dow: Thursday was a good example of the power of regression trend analysis coupled with candlestick charting. Tuesday the Dow gave us an inverted hammer that touched the upper BB. Wednesday's drop took us out of the rising RTC for a bearish setup, and then boom, on Thursday the bottom fell out. We've now got a bearish RTC trigger and a fully developed bearish stochastic crossover. The indicators suggest there's still more downside to come but the magnitude of the losses of the two past days makes me think that we could see a DCB before proceeding on to the lower BB which is now at 16,345.
The VIX: On Thursday the VIX broke out of a narrow three-day range with an 8.22% pop with an inverted hammer. But with indicators only just now coming off oversold, s fresh bullish stochastic crossover, and an upper BB not til 14.25, it looks like more upside is not out of the question. I am a bit bothered by a star/inverted hammer combo in VVIX though, which suggests lower so that might act as a brake on the VIX on Friday.
Market index futures: Tonight all three futures are lower at 1:23 AM EDT with ES down a slight 0.03%. ES is, so far at least, seeming to have found some support around 1866. But with indicators still only halfway to oversold and the lower BB not til 1856.73, there's clearly still some room left to run lower.
ES daily pivot: Tonight the ES daily pivot dives from 1888.25 to 1871.58. And even that's not enough to put ES above the new pivot so this indicator remains bearish.
Dollar index: Last night I wrote "the dollar looks lower on Thursday" and it was, just 0.09% but on a really tall red candle that broke above its upper BB at the top and pushed the indicator s to very overbought. A bearish stochastic crossover is now complete so I think this somewhat unorthodox bearish evening star is suggesting lower still on Friday.
Euro: Meanwhile in euroland on Thursday we got a simple long-legged doji I did say last night that "I'd be looking for a higher euro on Thursday" and that's just what we got with a close of 1.3714. But with this sort of indecision, where we go from here is anyone's guess. I'm not touching this chart with a 10 foot Pole - or Ukrainian.
Transportation: The trans suffered on Thursday, but only 2/3 as much as the Dow and ended with a respectable hammer suggesting a reversal. But we also got a bearish stochastic crossover along with indicators coming down off highly overbought and a fresh descending RTC. I think that takes precedence, so I'd have to say this chart is still looking bearish for Friday.
And the winner is...
ES Fantasy Trader
It seemed like a reasonable setup last night so I decided to go for it with a short play and was rewarded with a nifty 19.75 point profit Wednesday morning. Not bad for 11 hours work, most of which I, once again, spent sleeping. We only left a little bit on the table so I can't really complain. Here's the trade right from the Interactive Brokers ledger, as posted live on Twitter:
BOT 10 false ES JUN14 Futures 1865.25 USD GLOBEX 11:08:31
SLD 10 false ES JUN14 Futures 1885.00 USD GLOBEX 00:17:12
Portfolio stats: the account now rises to $121,500 after four trades in 2014, starting with $100,000. We are now 4 for 4 total, 2 for 2 long, 2 for 2 short. Tonight we stand aside with the expectation that we've caught the meat of the current trend and that a reversal could be coming soon.