Wednesday

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Wednesday higher.
• ES pivot 1950.08  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ still not a swing trade buy.

Recap

Despite what looked like a bearish technical pattern last night the futures prevailed and Mr. Market had a great day on Tuesday, possibly due to some good news out of China. Who knows. I don't even pay any attention to any of that anymore. My position is that you can't believe anything they say, good or bad. So on we go to Wednesday to see where the charts may lead us next as this holiday shortened week progresses.


The technicals

The Dow:  On Tuesday the Dow confirmed historical precedents by rocketing higher right out of the gate and then continuing on to close on the highs of the day with a handy 2.42% advance. Looking at the daily chart one can imagine a double bottom now in place over the last week . Interestingly, Tuesday's action has also caused the stochastic to curve back around just about into position for a bullish crossover from a high level. And as I always say those are often good for a day or two of higher prices following. With the Dow now looking like it has broken out of its recent week-long congestion area I'd say this chart looks good to move higher again on Wednesday.

The VIX:  Last night I wrote that the VIX looks like it was ready to move higher again on Tuesday. That was of course completely wrong as the VIX instead confirmed Monday's tall spinning top and then gapped right back down again to close more than 10% and below its levels of last Friday. But it did it on yet another doji star. T hat makes three in a row. This would be a classical bearish tri-star pattern except for the fact that that is entered from below whereas this one is entered on a descending trend from above.

That just leaves us with indicators that are totally confused with RSI rising but momentum falling, and the stochastic continue to be threaded out at a low level. Tuesday's doji would suggest there is a possibility of the VIX moving higher on Wednesday and with the indicators still closer to oversold than overbought that still might happen.

Market index futures: Tonight, all three futures are higher at 1:00 AM EDT with ES up 0.67%.  ES had a fantastic day on Tuesday putting in a tall green marubozu that handily cleared three days' resistance to close at 1966. The indicators are still not yet overbought and the stochastic in fact has generated a bullish crossover from a high level just like the Dow did. This all makes me think that despite Tuesday's big gains iES might still have enough gas left in the tank to continue higher on Wednesday. The fact that the overnight continues moving higher tends to support that view.

ES daily pivot: Tonight the ES daily pivot rises again from 1926.25 to 1950.08. That still leaves ES above its new pivot so this indicator continues bullish.

Dollar index:  Last night the dollar was looking too tricky for me to call. On Tuesday turns out it lost 0.26% to fall right back to where it opened last Friday. However we now have three consecutive days of the dollar putting in lower highs and that was enough to send the indicators moving lower off of overbought peaks. We also now have a stochastic that has completed a bearish crossover so I would say Tuesday's candle points to continued lower on Wednesday.

Euro:  At least I got the euro correct. Last night I said it had a good chance of closing higher on Tuesday and so it did, back up to 1.1186 on a tall spinning top, the second one in a row. All the indicators now continue moving higher off of oversold and we have a bullish stochastic crossover in place. However the new overnight is moving lower after having gapped up, now calling into question whether this is the start of a new rally or just another fake-out breakout like we saw last week.

Transportation:  On Tuesday the trans outperformed the Dow with a giant 2.81% advance that clearly broke recent resistance at 7908. All the indicators continue rising but are not yet overbought so with a tall green marubozu now in place there are no bearish signs on this chart .

Accuracy: 

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  4      0       1           0       1.000   1424

     And the winner is...

With no bearish technical indications to speak of on the charts tonight and some decent follow-though in the overnight futures, it doesn't seem unreasonable to call Wednesday higher.

Single Stock Trader

Last night Verizon wasn't looking at all like my preferred swing trade buy set up, but on Tuesday it got caught up in the general market euphoria and gapped up anyway over 2 and a quarter percent to put in a green hanging man. But that also caused the stochastic to suddenly curve back around just shy of a bullish crossover. And with the other indicators having arrested their fall from overbought and now moving higher again it looks like VZ may continue higher on Wednesday - but this is still not my preferred buy setup.