The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Wednesday lower.
- ES pivot 1922.58. Holding below is bearish.
- Rest of week bias lower technically.
- Monthly outlook: bias higher.
- YM futures trader: no trade.
I figured that despite Monday's big advance we were going lower on Tuesday and that's just what happened as the toppiness I noted last night came into play. The Dow dropped 189 and put a quick end to what looked like the beginning of another rally. So with this change in the charts let's see where Wednesday is headed.
The technicals
The Dow: On Tuesday the Dow gave up the ghost right out the gate and simply moved lower all day long to finish with a broad bearish inside harami. Even that still left the indicators all overbought and it was enough to squeak out a brand new bearish stochastic crossover. So while the harami is not the greatest of all reversal indicators the overall impression here is nevertheless bearish.
The VIX: Last night I thought that Tuesday might be a bottoming day for the VIX. But it turns out that it wasn't at all interested in testing either its lower BB or its 200-day MA. Instead it simply rose all day long to finish with a tall green marubozu that was good for an 8.26% gain. That still leaves us in a descending RTC but very close to the edge. However with indicators all still oversold and the stochastic on the verge of a bullish crossover it looks like it's entirely possible there could be more upside here on Wednesday.
Market index futures: Tonight, all three futures are lower at 12:12 AM EST with ES down 0.22%. On Tuesday ES put in a bearish red inside harami giving up most of Monday's gains to close back down to 1916. That wasn't enough to move the indicators very far though and they all remain overbought. However, the stochastic has just squeaked out a brand new bearish crossover. That all looks bearish - on the other hand the new overnight seems to be trying to stage something of a rally. All of which leaves this chart slightly confused
ES daily pivot: Tonight the ES daily pivot falls again from 1929.42 to 1922.58. That still leaves ES below its new pivot so this indicator continues bearish.
Dollar index: Last night I noted that the dollar looked like it was ready to form a bearish evening star after a huge gap up on Monday. However the dollar was having none of that and instead continued climbing another 0.1%. This time though it was with a tall green spinning top that extended the indicators even further into overbought territory and left the stochastic flattened out at overbought, ready for a bearish crossover at any moment. So with this second reversal warning in a row, I still have to stick to my guns and think that the dollar is going lower any day now.
Euro: And of course I got fooled by the euro too because after its big dump on Monday, I thought there was a chance of at least some sort of a bounce on Tuesday. Instead it just kept right on falling through its lower BB, putting in a small red spinning top to close at 1.10145. The indicators are now quite oversold but the new overnight seems to be continuing lower again. It looks like we could be in one of these situations where the euro just dribbles down its lower BB for a while until it's ready to move higher. It should be noted that the next level of support isn't until 1.10245.
Transportation: After outperforming the Dow to the upside on Monday, on Tuesday the trans underperformed with a 1.29% loss to end with a lopsided red spinning top. It looks like a bullish piercing pattern, however with indicators still quite overbought and the stochastic getting ready for a bearish crossover at any moment this looks more negative than positive to me.
So far the final week of February is upholding its reputation as being rather weak and the charts tonight generally feature confirmations of bearish warnings form Monday so there's nothing really positive on that front either. Overall, it looks like the best course is to call Wednesday lower.
YM Futures Trader
No trade tonight.