VIX Selling Not Over Yet
The Night Owl Trader | Jun 29, 2016 01:51AM ET
The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Wednesday higher.
- ES pivot 2013.50. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- YM futures trader: no trade tonight.
Last night I decided to discount a bunch of 200 day MA crossings and call Tuesday higher anyway. That proved to be a good move as the Dow retraced all of Monday's losses and then some with a nice 1.57% pop. Having threaded yet another needle, let's move on to the final days of June to see what might be in store next.
But first, I've been meaning to point out the DF/DM indicator, something I first mentioned early this year. I'd tell you exactly when, but Google's "Search" feature, like their spell-check isn't working.
Recall that there's an indicator (thanks to The Stock Traders Almanac)) which counts up the number of times we get a down Friday followed by a down Monday. If that totals more than 10 by the end of the year, it's a bearish sign for the next year.
Last year ended with a DF/DM of 11. That was part of my pessimistic outlook for 2016. So far that's proven to be the case (though I admit the danger of declaring victory early). Following last week's Friday-Monday, this year the DF/DM count currently stands at 5 with the year about half over. That puts us on track for a bad 2017. Just sayin'.
The technicals
The Dow: On Tuesday the Dow advanced 269 points on a tall green marubozu that rocketed right back up through the same 200 day MA it sank under a day earlier. The stochastic is still falling but is now positioned to start a new bullish crossover and RSI has already bottomed out at oversold, so this chart looks mostly bullish right now.
The VIX: Last night of the VIX I wrote that "I'd have to guess there's more downside ahead here.". Good guess too as the VIX shed an impressive 21.38% in Tuesday as it re-entered Earth's orbit falling back below 20, very near its 200 day MA and only a little higher than where it was just before the Big Brexit Brou-haha. And with indicators still not oversold despite a big three day tumble, I'd say the selling's not done yet.
Market index futures: Tonight, all three futures are lower at 12:59 AM EDT with ES up 0.23%. As quickly as ES sliced down through its 200 day MA on Monday, it sliced right back up on Tuesday with a big green marubozu as a bullish engulfing pattern that retraced all of Monday's losses plus a bit of last Friday's. We also recovered the lower BB and the new overnight is showing some positive pin action and a fresh bullish stochastic crossover. So there seems to be enough gas in this tank for more gains on Wednesday.
Get The News You Want
ES daily pivot: Tonight the ES daily pivot rises from 1996.33 to 2013.50. ES remains well above its new pivot so this indicator continues bullish.
Dollar Index: Last night I did mention that what goes up must come down, didn't I? And that's what the dollar did on Tuesday off 0.38%with a gap-down green candle that fell right back through its 200 day MA and back to its upper BB. That completes a bearish evening star and with indicators near overbought plus a stochastic close to curving around for a bearish crossover, more downside is not out of the question here. Lookee here.
Euro: The euro continued its slow recovery from Friday's mega-dump, back to 1.10795 with an inverted hammer that tested its 200 day MA before falling back. The new overnight is higher again and mounting another attack on the MA so I'm looking for higher here on Wednesday.
Transportation: The trans quickly changed gears on Tuesday moving an impressive 2.24% higher for a bullish harami. With indicators now oversold and the stochastic starting to curve around for a bullish crossover, there seems to be enough gas in this tank for further gains on Wednesday.
Wow - what a difference a day makes. The charts that all looked so dismal last night are now looking fairly cheery, so I'm going to claim that we close Wednesday 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.