The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Thursday higher only if ES remains above its pivot, else lower.
- ES pivot 2058.83. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- Single stock trader: N:VZ still not a swing trade buy.
Last night, I refrained from calling the market on Wednesday because of the looming Fed decision. In retrospect, the nearly 200 point gain in the Dow was not entirely unexpected, but that's just my policy. In any case, it was an interesting candle, so let's take a look at the charts for Thursday and see where that's headed.
The technicals
The Dow: As is so often the case when the Fed's decision comes out, the Dow took off in one direction (in this case lower) only to suddenly reverse course and then finish in the other direction (in this case a 1.13% gain.) That proves that the 200 day MA served as support for the second day in a row. But it still leaves the indicators overbought and after a tall green marubozu, leaves us just short of the upper BB at 17.878. So there's no bearish reversal candle immediately, but it's not clear how much upside Dow has left.
The VIX: After looking toppy last night on a lopsided red spinning top, on Wednesday the VIX declined 7.13% on a very long-legged red spinning top that almost hit its lower BB at 12.54. That confirmed Tuesday's bearish candle, and with indicators that have now begun moving lower before ever reaching overbought, it looks like there's more downside possible for the VIX on Thursday.
Market index futures: Tonight, all three futures are lower at 12: 13AM EDT, with ES down 0.32%. Thanks to Auntie Janet, on Wednesday ES broke through its recent resistance around 2065 with a big pop back all the way back up to 2085. That means we have now retraced all of the big losses from August. Indicators remain overbought, but without a reversal candle insight yet, there is no way I can call it lower on Thursday despite it sagging somewhat in the overnight.
ES daily pivot: Tonight, the ES daily pivot rises again from 2058.83 to 2075.08. That leaves ES above its new pivot, though not by much. But for now, this indicator remains bullish.
Dollar index: The dollar went nowhere on Wednesday until the Fed decision. Then it just absolutely took off to finish with a 1.13% gain that sent it clear above its upper BB for its highest close since August 7th. That still leaves the indicators all highly overbought and the stochastic completely threaded out at a high level. But this was not a reversal candle, so it is too soon to call a move lower in the dollar yet.
Euro: After breaking under its 200-day MA last week, the euro has been absolutely unable to get anything together. On Wednesday, it confirmed Tuesday's lopsided spinning top with a big decline to 1.0909, its lowest level since August 7th. That leaves all the indicators still quite oversold and the overnight appears to be trying to stage a rally, but it is by no means clear that the euro can finish higher from here on Thursday.
Transportation: On Wednesday, the trans put in a nearly perfect long-legged doji star for a tiny 0.08% gain. Of course, on Tuesday they had an enormous decline, so any sort of recovery on Wednesday would not be entirely unexpected, as moves this big tend to add credibility to reversal dojis. So I wouldn't be surprised to see the trans move higher on Thursday.
I don't know - we don't really have any good bearish signs on the charts tonight, but I'm concerned that Wednesday's action, or rather Fed-reaction might have been overdone and that the market could be in for some retracing. So I'm going to take advantage of the close proximity of ES to its new pivot tonight to make another conditional call. If ES remains above its new pivot by mid-morning Thursday, we'll close higher. But it it galls below by then, we close lower.
Single Stock Trader
After a sharp decline when the Fed announcement came out, Verizon managed to battle back to gain $0.31. You'd think that would cancel the last three days' bearish tri-star pattern, but Wednesday's candle turned out to be yet another doji star, making it four bearish reversal signs in a row. Indicators remain quite overbought, so it still looks like the next move is lower.