Tuesday, June 30, 2015

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher....
  • ES pivot 2060.33.  Holding below is bearish.
  • Rest of week bias uncertain  technically.
  • Monthly outlook: bias lower.
  • Single stock trader: VZ not a swing trade buy.

I know I said I was going to take the rest of the week off after last night but this action was too good (or too bad) to let pass without comment.  The Night Owl has seen this before.  Some deadbeat promises to repay you by the end of the month, consolidating everything into one payment.  Then the end of the month comes along and instead of a check he wants more time.  Then he's got some excuse where he'll ask a friend and then pay you in five days.  Uh huh.  Time to face the facts, Jack.  The Greeks ain't never gonna pay you.  The Grexit is as good as done.  The other fact is that none of this will amount to a hill of beans.  Look, in the first week of August 2011, the VIX hit 48.  Forty eight!!  And that was because?  Because??  Right - I can't remember either.  And back then the Dow was at 11,000.  So four years from now no one will remember the Greeks and their 2015 fiscal melodrama.  Next crisis!

The technicals

The Dow:  For all the drama of Monday's 350 point swan dive in the Dow, it pales compared to the 875 point drubbing the Dow took in January 2014 for example.  Absurdly overdone, IMNSHO.  In one day the Dow broke support at 17,764, broke through its lower BB, and then kept right on going crashing through its 200 day MA, stopping only because the bell finally rang at 4 PM.  That was more than enough to send it oversold and drive the stochastic to a level from which reversals come.  This chart is looking ripe for a relief rally or at least a DCB.

The VIX:  Holy moly!  On Monday the VIX exploded like a SpaceX shuttle supply rocket, gapping up 34%, vaulting right over its 200 day MA and trading mostly entirely above its upper BB for its highest close since January 28th.  Some talking head on CNBC was sniffing that the VIX is still below 20 ignoring the magnitude of the one-day delta.  Anyway, give it time.  Whenever Mr. Market goes off his meds like this, the one-and-done rule of the VIX falling after hitting its upper BB is suspended.  Vicious moves like this seem to have lots of inertia behind them so it's still possible we could see another day or two of moves higher.  Then watch for the inevitable VIX collapse.

Market index futures: Tonight, all three futures are higher at 1:15 AM EDT with ES up  0.23%.  On Monday ES had the biggest gap-down I think I've ever seen in 10 years, hitting 2047 to send the indicators all oversold.  The stochastic is now moving into position for a bullish crossover but not there yet.  But the overnight seems to be suggesting some sort of retracement for Tuesday.

ES daily pivot: Tonight the ES daily pivot crashes  from 2094.25 to 2060.33.  And even after that ES remains below its new pivot so this indicator continues bearish.

Dollar index:  The dollar also had an outsized move lower Monday, down a big 0.73%, though not more than we've seen multiple times in the past 30 days.  But it was enough to peak the indicators at overbought and form a bearish stochastic crossover so this chart looks lower for Tuesday.

Euro:  Mr. Market seemed to cheer the effect of the impending departure of the Greeks from the euro as the currency just rose throughout the day while the rest of the market got pounded.  It completely retraced a big gap down the day before, and then some.  So after all the noise, the euro closed at 1.1265, exactly where it was four days ago.  But these big one-off moves tend to distort the charts so I'm not touching this one tonight.

Transportation:  On Monday the trans moved in lockstep with the Dow so everything I wrote there applies here too.


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      5       5           2       0.615    581
June       8      6       3           4       0.667    529

     And the winner is...

Just as the futures pointed the way lower last night at this hour tonight they seem to be suggesting a bounce on Tuesday.  I note too that the SPX Hi-Lo indicator hit 9 on Monday, its lowest reading of the year by far.  These are the levels from which reversals spring.  The previous low, on March 10th was 32 and the next day began an 8 day rally.  As the markets open and traders discover that the earth is still spinning on its axis, we could attract  some bargain hunters so I'm going to go ahead and call Tuesday higher.

Of course, that could change if the Greek finance minister suddenly announces he's going to play Angela Merkel and the ECB board of governors a round of Texas Hold 'Em for the Greek debt, then all bets are off.

Single Stock Trader

VZ went oversold on Monday but there's no telling what's going to happen next so we're just continuing to sit on the sidelines here.

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