Wednesday, January 7, 2015

Wednesday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher only if ES breaks above its pivot, else lower.
  • ES pivot 2000.75.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader closed.

Yep, I figured as much.  The Dow dumped another 130 points on Tuesday to make it five in a row lower for the broader market.  But the interesting thing is that the market is actually easier to call when it's moving up or down than when it's just drifting sideways.  So let's take a gander at how Tuesday's dive changes the picture.

The technicals

The Dow:  The Dow just kept on tumbling Tuesday, enough to drive its indicators extremely oversold.  Though we're not yet near the lower BB, the stochastic is in prime position to form a bullish crossover.  I'm over the catching the falling knife business so the most I'll say is that it looks like we're nearing a reversal here.

The VIX:  On Tuesday the VIX emitted what I believe to be a good reversal sign.  It gained 6% but did it on tall spinning top that just touched its upper BB along with quite overbought indicators and a stochastic that is ever so close to a bearish crossover.  I give it better than even odds of moving lower Wednesday.

Market index futures: Tonight, all three futures are higher at 12: AM EST with ES up  %  On Tuesday ES extended its losing streak to five, giving up 2000 in the process but also driving the indicators extremely oversold.  Meanwhile we're actually seeing an uptick in the overnight which has just caused a bullish stochastic crossover.  This is different from lately so perhaps the selling is about over for now.

ES daily pivot: Tonight the ES daily pivot falls again from 2024.58 to 2000.75.  This time that was just enough to leave ES sitting right below the new pivot.  And it is knocking on the door as I write,  A break above would be bullish.

Dollar index:  After a big gap-up red candle Monday the dollar gained more on Tuesday but with a doji sitting right on the upper BB.  Considering how overbought the dollar is short-term, this just might be a sign that the dollar will take a rare break on Wednesday though the overall trend is still inexorably higher.

Euro:  And nothing new in euro-land as we closed down again Tuesday, this time to 1.1921.  The bots are shorting the euro hard in a "kick 'em while they're down" effect with OBV now running an amazing -3 million.  And the new overnight is, surprise, still lower, now 1.1883.  The 1.1763 I've been talking about isn't so far away now.

Transportation:  What is it with the trans?  You'd think that of any sector, lower oil would help this one.  But nooo, the trans continued to underperform in a big way on Tuesday down a big 1.65% to break supprot at 8747.  Indicators are now quite oversold but we remain in a steep descending RTC.  However, it's encouraging that we bounced off the lower BB.  I'd say that a reversal is at hand here, if not Wednesday then more likely Thursday.


Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    2      0       0           0       1.000

     And the winner is...

We're getting a bunch of reversal signs in the charts   However, oil continues to move lower in the overnight and the SPX Hi-Lo index is only down to 68 - not the level from which reversals come.  The Morningstar Market Fair Value Index has though come way down from a year-long high of 1.06 on 12/26 to 1.02 but I think we still need to wring out another tick or two here before turning bullish.  So the picture is mixed.  And because of the proximity of ES to its pivot I'm going to try a conditional call: if ES can break above its pivot by mid-morning Wednesday we'll close higher, else lower.

Single Stock Trader

Recall that we're watching Verizon here now, and only Verizon.  And interestingly, VZ was one of the few Dow components that rose on Tuesday.  And in fact it triggered all my classic indicators.  So at Tuesday's close of 47.18, I am now officially calling VZ a swing buy.

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