Wednesday, May 27, 2015

Wednesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday uncertain.
  • ES pivot 2085.92.  Holding below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias higher.
  • Single stock trader: VZ now close to a swing trade buy.

Hmm - apparently Mr. Market is still not over his Fed-induced snit from last Friday as the selling continued unabated Tuesday ending just off session lows.  At least it was not entirely unexpected as we pointed out last night.  So now let's continue on to Wednesday and see when we might sound the all-clear.

The technicals

The Dow:  The Dow took a nasty little 190 point dump on Tuesday and it was enough to send the indicators from overbought to oversold in a single day, a fairly rare occurrence.  In fact the last time was saw this was August 11, 2010!  And at that time there was a bunch more downside to go, though we also had a 200 day MA cross going which is not the case now.  Still, this drop's got "falling knife" written all over it so until I see at least a reversal candle, I'm not touching it.

The VIX:  Last night I wrote that the VIX "looks primed for more upside."  And was it ever, with a nearly 16% gap-up pop on Tuesday that took the indicators from oversold nearly to overbought.  The resulting inverted hammer is a reversal sign and there is a gap now that'll be wanting filling but we need some confirmation.  A move lower on Wednesday would form a  bearish evening star.

Market index futures: Tonight, all three futures are lower at 12:33 AM EDT with ES down 0.07%.  ES had a bad day Tuesday though no worse than just three weeks ago on May 5th ending five days of congestion with a big sneeze downward.  That was enough to send all the indicators off overbought though not quite to oversold.  So we still can't call a reversal and the overnight isn't showing much enthusiasm either.

ES daily pivot: Tonight the ES daily pivot falls again from 2126.08 to 2085.92. So we remain below the new pivot and therefore this indicator continues bearish.

Dollar index:  Like everything else on Tuesday the dollar had an outsized move, gapping up a huge 1.35% to trade entirely above its upper BB - highly unusual.  That drove the indicators quite overbought and flattened out the stochastic to make way for a bearish crossover.  But we're not there yet.  And as we saw back in March when the dollar spent three weeks climbing its upper BB, just because it's gone up doesn't mean it can't go higher.  So we need to wait a day for confirmation.  I'd expect a move lower soon but it might not be Wednesday.

Euro:  And on Tuesday much noise was made about the euro's fall back to 1.0874.  But the fact is, we've been here six times already this year.  This time though we hit the lower BB and the indicators are highly oversold (RSI=3.79).  Still we remain in a descending RTC with no sign of a reversal candle so until then I just have to wait & see.

Transportation:  The trans, which have been having a hard time lately had an even harder one Tuesday, tanking 1.55% to cascade down their lower BB.  this move has flattened out the stochastic in preparation for a bullish crossover but the indicators are still not oversold so it's still too soon to call a reversal.


Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976 April      3      8       7           0       0.273      1
May        6      4       4           2       0.667    618

     And the winner is...

On Tuesday the market fell far enough and fast enough to make a relief rally or at least a DCB not out of the question.  However, technically there are still no signs of a reversal and all the charts continue to look bearish.  But because there's some doubt here I'm going to settle for calling Wednesday uncertain.

Single Stock Trader

Last night I recommended staying away from VZ and that proved to be a good idea since it fell along with the rest of the Dow on Tuesday.  The resulting spinning top touched its lower BB which has been a good reversal sign in the past though the indicators are still not quite as oversold as I'd like to see.  If this one looks to be finding support at the open on Wednesday (an event I'll never see), it might be looking attractive.  For now though I'm still waiting.

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