The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Tuesday lower.
- ES pivot 1852.75. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- YM futures trader: still long at 16,434 .
Hmm - well that was interesting. I made a conditional call last night saying that we could only close higher if ES could break above its pivot. Well it spent a few hours bumping up against it until about 4 AM (presumably when the Europeans all woke up and said "Zut, alors!") and then fell off a cliff. It was all downhill from there and we indeed closed lower. That all made for some interesting chart-reading so let's get right to it.
The technicals
The Dow: On Monday the Dow tanked right out the gate before a late-afternoon rally left it with a 178 point loss and a red hammer. That's a reversal sign, though it would be a lot better one if the indicators were anywhere near oversold, which they're not. Still, we nearly touched the lower BB on Monday at 15,732 so we're left with a vague possibility of a move higher on Tuesday but one which requires confirmation.
The VIX: On Monday the VIX rang the gong, just like the pole and sledgehammer at the old county fairs. It gapped up 11% on a tall doji star to just about touch its upper BB at 27.94 before ending at a still lofty 26. That sent all the indicators scurrying higher towards overbought though we're not there yet. But with 2/3 of a bearish evening star in place and a waning gap below it's hard not to think there's some downside coming Tuesday.
Market index futures: Tonight, all three futures are lower at 12:30 AM EST with ES down 0.96%. ES had an awful day on Monday as it extended a precipitous week-long decline with a very tall red spinning top that broke year-long support (January and last August at 1855). It conducted a successful test of the lower BB at 1843 but the new overnight is continuing lower in non-trivial fashion as the lower BB just falls away. Although indicators are now oversold, there's nothing bullish at all on this chart.
ES daily pivot: Tonight the ES daily pivot falls from 1885.17 to 1852.75. That still leaves ES below its new pivot so this indicator continues bearish.
Dollar index: On Friday the dollar took an unsuccessful stab at its 200 day MA. Then on Monday it made a dramatic gap-up rush to vault over it right out the gate, only to spend the rest of the day fading, falling right back through to end very nearly where it began and with a 0.49% loss to boot. This makes the mother of all dark cloud covers so with indicators still not even oversold and a 200 MA cross, I'd say the dollar looks lower Tuesday.
Euro: After breaking above its 200 day MA last week, ES has sort of stalled in a congestion zone around 1.1185 with strong resistance at 1.1224. Monday retraced all of Friday's losses but was unable to break that eve. The new overnight seems equally powerless. And with overbought indicators and a fresh bearish stochastic corssover I'm inclined to think the euro goes lower on Tuesday. Note that this conflicts with my call for a lower dollar. One of those calls is going to be wrong but I just call each chart as I see it. We're living in funny times.
Transportation: We also got a doji star out of the trans on Monday, which fell only 0.27%, a lot less than the Dow. In fact the trans remain in a see-saw kind of uptrend that never manages to hit overbought. Being now near the lower edge of that trend and with a big gap above, I'm sort of thinking that we could see a move higher here on Tuesday.
The market has been building negative momentum for two days now and it looks like that has yet to run its course. ES taking out its January support is a bad sign. I'm expecting perhaps some sort of washout on Tuesday as we're starting to get pretty short-term oversold here. But pending that I'll just have to call Tuesday lower.
YM Futures Trader
Nothing new again here.