Wednesday, September 2, 2015

Wednesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Wednesday higher.
  • ES pivot 1927.00  Holding above is bullish.
  • Rest of week  bias uncertain technically.
  • Monthly outlook: bias lower.
  • Single stock trader: VZ not a swing trade buy.

Last night I noted a number of good reversal signs in the charts and called Tuesday lower.  All it took was some more bad news from the Chinese to push the market back over the cliff and right back down again we went retracing more than 50% of the two big days of gains we got last week.  So once again the picture has changed and we head to the charts as usual to see where Wednesday is headed as scary September gets off to a rocky start.
The technicals

The DowOn Tuesday the Dow tanked right out the gate and then was unable to make any sort of a comeback, ending near the day's lows.  That tall red candle was enough to short-circuit the indicators which have been rising and send them back down towards oversold.  The stochastic is also just about to execute a bearish crossover.  And this move was also a bearish trigger on our last rising RTC.   So with no support until 15,672 it's looking like a retest of last week's lows might not be out of the question.  There's just nothing bullishit all about this chart tonight.

The VIXLast night I wrote that the VIX "looks like it has more upside left for Tuesday."  And indeed the VIX took a 10 and a half percent pop to form a perfect gap-up spinning top.  That's now two thirds of an evening star but with the stochastic just forming a bullish crossover it's too soon to call the VIX back lower yet and it wouldn't surprise me to see more upside on Wednesday.

Market index futures: Tonight, all three futures are higher at 1:06 AM EDT with ES up 1.15%.  Like everything else ES tanked on Tuesday falling all the way back to 1931 on a tall red candle that exited its rising RTC for a bearish set up.  It also formed a bearish stochastic crossover.  However the rest of the indicators are completely confused with RSI and momentum rising but money flow falling.  In any case the overnight seems to be staging some sort of rally attempt therefore it is impossible to call this chart lower again on Wednesday.  At the moment, it's looking like a good bullish piercing pattern - but it's tough to call half-baked candles.

ES daily pivot: Tonight the ES daily pivot dives again from 1972.08 to 1927.00.  But that plunge plus a move higher overnight in ES now leaves it back above its new pivot, so this indicator turns bullish again.

Dollar indexLast night I said this chart look lower for Tuesday and so it was with the dollar falling 0.43% on a fat gap-down red spinning top that stopped just short of its 200-day MA at 63.93.  (Recall that this is on the $USDUPX not the $DXY since those cheapskates at eSignal started charging for the latter).  And also like the other charts it traded entirely outside its latest rising RTC for a bearish trigger.   The indicators are now falling before even having reached overbought so there's nothing bullish about this chart tonight and it looks like it may go lower again on Wednesday.

EuroMeanwhile on Tuesday the euro put in its usual mirror image of the dollar with a nice gain that just touched its own 200 day MA before falling back a bit to close at 1.1296.  That also sent the indicators oversold for the first time in a month and also curved the stochastic around just into position for a bullish crossover.  With two white soldiers now in place you'd think this would mean the euro's getting ready to mount another attack on its 200 MA.  But with the overnight actually lower and in the form of a dark cloud cover I'm not so sure.  That makes this chart too tough to call for Wednesday.

TransportationThe trans got hammered on Tuesday just like everything else with a 2.14% drop that caused them to fall out of their rising RTC for a bearish trigger.  That also sent the stochastic around just short of a bearish crossover and with all the indicators now heading lower there's nothing bullish about this chart for Wednesday.


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       0.706    552
July      10      1       5           4       0.938   1212

August    10      2       3           2       0.857   2314

September  1      0       0           0       1.000    468
     And the winner is...

 All the charts are looking just dreadful tonight.  However, with the VIX back above 30 again and some non-trivial moves higher this time in the futures, it looks like we're due for some retracement of Tuesday's big move which looked overdone to me.  Heck most moves lately have been overdone leading to the wild oscillations we're seeing as we retrace the retracements.  So anyway, I'm  going to go out on a limb and call Wednesday higher.
And finally, to quote Columbo, just one more thing.  On Tuesday technician Louise Yamada on CNBC said that declining momentum "is suggesting to me that we are looking at a bear market".  She says that the SPX could test its uptrend at 1800.  I think it's actually worse than that.  I show the monthly rising RTC from 2009 currently at 1864 and that's not all that far away from where we are right now.  In fact if you go back to the 2012 rising trend the SPX hs already exited that one for a bearish set up.  That's looking a lot to me like the bull market is dead.

Single Stock Trader

Last night I said that Verizon had more downside left on Tuesday and it turns out that it, along with the rest of the Dow, took a dive gapping down for a 2.4% loss on a red spinning top.  That's a reversal warning but not a great one and with the lower BB not too far away at 44.19 and the stochastic still very elevated and just getting ready for a bearish crossover the selling may not be over here yet.


  1. Below I quote from a note written by Steven Rusolillo on Nov. 2012:
    “A plethora of investors and strategists have cautioned that the market’s recent pullback could portend an even bigger correction, perhaps even the start of a new bear market. Concerns about the looming fiscal cliff top the list of worries for investors (today is China?!).
    But, as Jeffrey Rubin at Birinyi points out in a note to clients, there have been plenty of 5%-to-10% pullbacks throughout the years that have come and gone without much harm being done. Since the March 2009 bottom, the S&P 500 has had 17 falls of at least 5%, according to Rubin.
    The market has recovered from each one of them.”
    Unfortunately, the same Birinyi was quoted on Feb. 2000 – just one month before the onset of the dotcom crash - on Business Week, “Relax--the Bear Is Still Hibernating... Of course, every bear market starts with a correction. … Poor business conditions can also turn a correction into a bear market, but that's hardly the case now... this bull market is not about to end.”
    That is the question: Correction or bear? This is the answer: Regardless, the market has recovered from each one of them.

    1. That is an excellent observation and some great commentary. Personally, I'm doing nothing with my core holdings (trust, IRA, trading base). I figure if I could ride out 2008, I can ride out whatever's coming this (or next) year. Timeframe, as always, is everything.

      As far as 2012 goes, the difference is that back then we never broke the lower edge of the rising regression trend channel that began in 2009, even at the bleakest (that would be 11/16/12 when the Dow hit 11,471).

      In this case though, we exited the very same rising RTC on July 24, 2015 and never regained it. That makes July the bearish setup and August the bearish trigger. According to my system (which I learned from a wise trader over at Interactive Brokers), the bearish payoff will be starting now.

      Regression trend analysis is a powerful technique. If you look at the last bull market and draw the RTC from the bottom in 11/02 to the top in 10/07, we left that RTC in 6/08. And we all know how that turned out.

      So bottom line, I think the bear market has begun. I'd be happy to be proven wrong.


Due to some people who just won't honor my request not to post spam on my blog, I have had to re-enable comment moderation. Comments may take up to 24 hour to appear, depending on when they're made. Sorry about that.