The Hoot
Actionable ideas for the busy trader delivered daily right up front.
- Thursday uncertain.
- ES pivot 1909.17. Holding above is bullish.
- Friday bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Recap
Last night I called the market uncertain despite a four day rally based in part on an "ES chart that is starting to look a bit toppy." I think Wednesday's action bore me out with the SPX down 0.11% and the Dow down a quarter of a percent. Now the question becomes, is this a top or a one-shot? We search the charts for clues to Thursday as we do this and every night, until victory.
The Technicals
The Dow: The Dow meandered about on Wednesday before ending down 42 points. It didn't seem like much but it was enough to not only put an end to the rally but also just drop out of a rising RTC for a bearish setup. Indicators remain overbought and the stochastic is curling over for a bearish crossover. This failure of the Dow to take out this month's earlier highs concerns me, so this chart now looks bearish.
The VIX: Last night I wrote "the next move here is higher". And so it was, with the VIX up 1.48% on Wednesday in a move that's approximating a rising triangle. We also just barely got a bullish stochastic crossover and we broke out of the descending RTC (finally) for a bullish setup. So that just reinforces my belief that the VIX is not yet done going higher. A nearly 4% bump and bullish stochastic crossover in VVIX reinforces that belief.
Market index futures: Last night, all three futures were higher at 12:20 AM EDT with ES up 0.10%. On Wednesday, ES clearly did not pack the gear to serve in the bulls' corps as it pooped out around the 1910 level with a classic red spinning top. That also just dropped it out of its rising RTC for a bearish setup. We are also on the verge of a bearish stochastic crossover. But the overnight doesn't seem to be confirming any of that, at least so far, with a non-trivial gain. So it's too soon to call a top here.
ES daily pivot: Last night, the ES daily pivot rose from 1905.42 to 1909.17. ES's Wednesday gains were enough to keep it above the new pivot so this indicator remains bullish.
Dollar index: Last night I was figuring the dollar for a move lower on Wednesday but it was not to be, though I might just have been a day early as the buck put in a classic hanging man after being repelled by its 200 day MA. Indicators continued higher to very overbought and while we remain in a rising RTC I'm going to stick to my guns and claim a reversal is coming Real Soon Now.
Euro: And so of course I missed the euro too on Wednesday. Instead of bouncing off its 200 day MA, it simply sank right though, glub glub to remain in a now two-week downtrend. And despite oversold indicators, I see no reversal signs so there's no other choice than to call the trend my friend and say the selling isn't over yet.
Transportation: Unlike the rest of the market, in a bit of bullish divergence the trans rose 0.72% on Wednesday to remain in their rising RTC and continue crawling up their upper BB. Indicators pushed further into overbought territory but with no reversal signs here I can't call this chart lower yet.
Accuracy:
Month right wrong no call conditional batting Dow average points
January 5 10 6 0 0.333 64
February 5 2 2 1 0.750 107
March 12 3 6 0 0.800 431
April 9 3 5 0 0.750 482
May 6 6 5 0 0.500 -49
And the winner is...
We are now seeing some signs of trends ending, a down one for the VIX and an up one for the Dow. However, the overnight futures don't seem to be confirming any of this and our reversal signals are the sort that require confirmation. So that all leaves us frustratingly just about where we were last night. The market still looks toppy but also not quite ready to roll over. Accordingly, all I can do is once again call Thursday uncertain. Maybe after that we'll get some clarity.
ES Fantasy Trader
Portfolio stats: the account remains at $121,500 after four trades in 2014, starting with $100,000. We are now 4 for 4 total, 2 for 2 long, 2 for 2 short. Tonight we stand aside. However, I have taken out an insurance policy in the form of some SH at 24.07.