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- Wednesday higher.
- ES pivot 2023.50. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- Single stock trader: VZ still not a swing trade buy.
It seems more like the dog days of summer than the middle of October as the Dow put in a tiny 13 point loss on Tuesday. There's just no calling small moves like this so it's just as well I punted on Tuesday's call. But now we have a little more data to work with so let's go right to the charts and see which way Wednesday is headed.
The Dow: Well the Dow has now given us two reversal warnings in a row - a classic hanging man on Monday followed by a classic spinning top in harami position on Tuesday. The closes of the last three days are all within a few points of 17,220 as the Dow continues to struggle at that level. Indicators are now falling off of overbought with the stochastic trying to gear up for a bearish crossover. With two bearish reversal candles on the books now my guess is that the Dow ready to move lower on Wednesday.
The VIX: After falling below its 200-day MA last Thursday, the VIX has been trying to recover ever since. It has found some decent support just above the 15 handle and gave us two reversal candles on Friday and Monday. They were followed by a third one, a green spinning top on Tuesday as the VIX finally managed to gain 5%. That was also enough to send the indicators off of oversold and cause the stochastic to form a bullish crossover. So the overall impression here is bullish Wednesday.
Market index futures: Tonight, all three futures are higher at 12:14 AM EDT with ES up 0.25%. On Tuesday ES confirmed Monday's hanging man with a downward move back to 2020.50. The indicators are now falling off of overbought but still nowhere near oversold. The stochastic meanwhile has completed a bearish crossover so that all looks negative - except for the fact that the overnight actually is moving slightly higher on a candle that is so far looking like a hammer. So this chart is pretty much up in the air for Wednesday.
ES daily pivot: Tonight the ES daily pivot ticks up from 2023.25 to 2023.50. The overnight gain in ES is enough to keep it above its new pivot so this indicator continues bullish.
Dollar index: Like I mentioned the dollar could move lower but it required confirmation. And indeed on Tuesday the dollar did gap down hard out of the gate but then proceeded to claw its way back to finally finish virtually unchanged on the day. The resulting candle was a green marubozu that did not confirm Monday's spinning top. Indicators continue to rise but have not yet reached overbought. So on the whole this chart looks positive for Wednesday.
Euro: I did miss the euro last night because on Tuesday it did not continue lower and instead finished with a stubby green spinning top to close at 1.1346. That left it sitting right on the edge of a steep descending RTC. And in the new overnight it is trading entirely outside that with a non-trivial gain, and that is a bullish setup. Indicators have not yet hit oversold but the stochastic is starting to curve around for a bullish crossover. So despite the overnight gap up I think there's a good chance that the euro could close higher on Thursday.
Transportation: Last night I mentioned the trans looked ready to move higher and in a bit of bullish divergence on Tuesday that's just what they did gaining 0.64% on a day the rest of the market was down. The resulting candle confirmed Monday's spinning top and arrested the descent of the indicators before ever reaching oversold. The stochastic is also narrowing in preparation for a bullish crossover so tonight this chart overall look bullish.
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 7 4 8 1 0.667 1404
October 4 4 3 1 0.556 455
And the winner is...
The charts aren't entirely clear tonight. The VIX is throwing off a vague reversal warning but we have some nice positive divergence in the trans and the futures are guiding higher. So I think I'm going to go with the latter and call Wednesday higher.
Single Stock Trader
Verizon had a nice $0.54 gain on Tuesday on a move that it took it past its upper BB before falling back. The resulting candle was a gap-up inverted hammer and that is a bearish sign. Indicators are also now back solidly overbought though the stochastic is still having trouble forming a bearish crossover. Nevertheless the over all impression is negative and it is definitely not a swing trade buy.