Tuesday Higher On Potential One Day Relief Rally
The Night Owl Trader | Jun 28, 2016 01:47AM ET
The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Tuesday higher.
- ES pivot 1996.33. Holding above is bullish.
- Rest of week bias lower technically.
- Monthly outlook: bias lower.
- YM futures trader: no trade tonight.
On Monday, it mattered not to Mr. Market that we'd run down so far so fast on Friday, he was still in "the sky is falling" mode as the selling continued unabated with the Dow dumping another 261 points to finish just off session lows. More ominously perhaps, the Dow, the SPX, and ES all broke under their 200 day MA's on Monday (and the dollar broke above its own). So with that bit o' news let's see what Tuesday might hold.
The technicals
The Dow: In addition to the 200 MA cross, on Monday the Dow also fell out of its long rising monthly RTC that defined the current bull market going all the way back to the March 2009 lows. It's also now formed a monthly bearish stochastic crossover. A bearish stochastic crossover is also in full swing on the daily chart so there's really nothing optimistic about this chart at all right now.
The VIX: Adding to the general weirdness lately, this was one of those rare days when the VIX fell along with the rest of the market. At least that confirmed the extraodrinary hanging man I noted last night as the VIX cam ein 7.41% on Monday. That was enough to curve the stochastic around close to a bearish crossover and form something of an evening star. I'd have to guess there's more downside ahead here.
Market index futures: Tonight, all three futures are higher at 12:23 AM EDT with ES up 0.86%. As I mentioned, ES fell below its 2200 day MA Monday in a move that sent the indicators oversold. But 200 MA crosses sometimes rebound and this may be one of those cases as the new overnight is actually running higher for a change.
ES daily pivot: Tonight the ES daily pivot falls again from 2045.67 to 1996.33. And that, plus a rally in the overnight is finally enough to put ES back above its new pivot so this indicator is now back to bullish.
Dollar index: Last night I was wary of calling the dollar lower just because it had gapped up so much on Friday. Turns out that was good - because it gapped up again almost as much on Monday, up another 1.16% blasting right up through its 200 day MA with a second spinning top in a row. And even that didn't send the indicators overbought as the stochastic continues in bullish crossover mode. But by now I'm thinking "what goes up must come down" so this can't go on forever. Just look at this chart. I've never seen anything like this.
Get The News You Want
Euro: Add the euro to the list of charts that crossed their 200 day MA on Monday as this one gapped down back to 1.10035. Indicators are now oversold but the stochastic continues falling. We do however see a small rally attempt building in the overnight so with Monday's low higher than Friday's, a bottom might be in.
Transportation: The trans really took it on the chin Monday, down a massive 3.10%, doubling the Dow's loss. Move along, nothing bullish to see here.
In ordinary times, I'd be a bit skeptical of an overnight rally in the futures in the face of such an array of bearish charts. But like I said before, these are not ordinary times. ES is putting in a nice bullish piercing pattern at the moment on a non-trivial rally, and the VIX seems to have peaked and is coming back down to earth. I don't know if this is shorts getting nervous and doing some preemptive profit-taking, or bargain hunters deciding the world isn't actually coming to an end after all. Either way, I have a vague suspicion we could be in for at least a one day relief rally so I'm going to go out on a limb and call Tuesday higher.
YM Futures Trader
No trade tonight.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.