The Week Ahead

So much for streaks

Well I guess it turns out  that six was the magic number.  Last week the Dow snapped a record but one losing streak at six weeks in a row, with a 43 point gain to finish the week up a modest 59 points.  So for the folks holding out for a record tying seven straight week down, close but no cigar.

In a way, I would have been happier if the week had ended lower.  That would have decreased the historical odds that this coming week would end lower.  Had we gone down seven weeks in a row, that would put us in record territory, since the Dow has never gone down more than seven in a row, at least not in the 82 years a I looked at (see earlier posts).

Greece is the word

So where do we go next? A tip of  the Hatlo hat tonight to Greg Salvaggio, a senior vice president for Tempus Consulting who made what I'm going to call the Quote of the Week:

“The ECB made a valid point: if it was Greece alone they’d let it default, but there’s a strong argument for the contagion effect and the precarious state of markets since the financial crisis,"

So there you have it: Domino Theory, 2011. As Greece goes, so go we all. If we can avert this modern day Greek tragedy, undeserving though they may be, we may yet avert the dreaded double dip.

 The lessons of history

So much for the good news. Now here's the bad news, courtesy of The Stock Traders Almanac:

"Week After June Triple Witching, Dow Down 11 in a Row and 18 of Last 20"

Holy moly, 11 in a row??  Last week I asked if you were really going to fight the odds that the market could continue lower after six straight down weeks. Tonight I have to wonder about these particular odds.  18 out of 20?

The futures

But, but - tonight we take a look at the ES futures, and note that we're now looking at the September contract, ES U1.

Since it's a new week, here's the weekly chart. Two things jump out: we're technically quite oversold, and we're at a decent support level at 1263 (blue line). After two long red candles, last week formed a doji, indicating classical indecision in the market. this is a reversal indicator, though admittedly one that requires confirmation.

The RTC for the daily ES chart shows that we have exited the descending channel that began on June 1st. That is a bullish setup. The Dow is still headed for an unpleasant encounter with its 200 day MA as I've discussed previously, however, the momentum of its descant seems to be slowing.

I think Monday's action will set the tone for the entire week. I'll have a better idea later on tonight when I can get a handle on the overnight - come back around 2 AM for an update.

Late night update

Well, it's 1:30 AM and the futures have spoken.  All three are down and ES is not only down more than half a percent, but at 1259.25 it's a full 8 points below Monday's daily pivot at 1267.25.  And that also means the 1263 support line caved in just like that.  Apparently Greece may be the word but it isn't the last word, and traders are not impressed by the Europeans' latest can kicking efforts.  At least not tonight.

So while we do have some mixed signals among the tea leaves for the week ahead, I think we're going lower tomorrow.