The Hoot
Actionable ideas for the busy trader delivered daily right up front.
- Wednesday uncertain.
- ES pivot 1948.42. Holding above is bullish.
- Rest of week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Recap
In retrospect, my original call of Tuesday being uncertain was better than the change I made to a lower close. Although we did open lower, we continued with the pattern we've been seeing so often later with the market clawing its way back above water, though in this case by less than three points. That said, I'll note that the SPX did close lower but my forecasts are for the Dow. Oh well. So let's look into how this changes the picture for Wednesday.
The Technicals
The Dow: After a lopsided spinning top on Monday the Dow gave us an absolutely classic hanging man on Tuesday. It also closed just barely outside the rising RTC for a bearish setup. We also didn't reach the upper Bollinger® Band (BB) and with indicators remaining extremely overbought, you'd think that there would be a down day coming Real Soon Now.
The VIX: Ah, the poor poor VIX. This chart is the poster child for the "I've fallen and I can't get up" movement. After bouncing back on Monday from a big dump last Friday, the VIX was totally unable to make any headway (much to my surprise). Instead we followed a bullish harami with a bearish engulfing pattern. With the lower BB still falling away, this chart reverts to bearish.
Market index futures: Last night all three futures were lower at 12: 17 AM EDT with ES down a modest 0.06%. With a tall hanging man on Tuesday, ES is clearly having problems breaching 1950. Worse yet, this action took us just outside the rising RTC fore a bearish setup and a bearish stochastic crossover. And FWIW, the new overnight candle is forming up as a bearish engulfing pattern, though with the usual caveat about reading into half-baked candles. Still, on a purely technical basis, this chart now looks bullish.
ES daily pivot: Last night, the ES daily pivot dipped from 1950.25 to 1948.42. That is just enough to bring us back above the new pivot despite a slight overnight sag, so this indicator now turns bullish.
Dollar index: At least I got this one right when I wrote "there could be more upside from here" last night. There sure was, with a 0.20% gap up on Tuesday, right to the upper BB. That also gave us a bullish stochastic crossover and with the indicators still rising I'd say there's still more upside available on Wednesday.
Euro: I also nailed the euro last night, writing "we have a good shot at going lower again on Tuesday." That took the euro clear to its lower BB for a three day losing streak. After this and with the 200 day MA now history, I'd have to wonder if that might not mark the end of the selling.
Transportation: On Tuesday, the trans underperformed the Dow, losing 0.13%. I noted the reversal warning last night and it was borne out on Tuesday with a tall hanging man. That also just gave us a new bearish stochastic crossover so this chart now looks bearish for Wednesday.
The market continues to look technically toppy to me, even more so than last night. But lately bearish sentiment and fifty cents will buy you a phone call (if you can still find a pay phone). So tonight I'm going to stick with what my original plan was last night. In the face of bearish signs that require confirmation, I'm just calling Wednesday uncertain.
ES Fantasy Trader
Portfolio stats: the account remains at $112,125 after six trades in 2014, starting with $100,000. We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push. Tonight we stand aside as we wait for a new trend to develop.