Monday lower unless ES pivot breached

The Hoot 

Actionable ideas for the busy trader delivered daily right up front

• Monday lower, low confidence.
• ES pivot 1214.75.  Switched to March contract.
• Rest of week bias uncertain
• Monthly outlook: bias down, on technicals.
• ES Fantasy Trader holding long at 1220.25.

Recap

Last Thursday I called for Friday to go higher.  As Maxwell Smart used to say, "Missed it by that much!" as the Dow closed with a 2.4 point loss.  Things were looking up right out the gate only to be torpedoed around 11AM by, yawn, more bad news from Europe.  I can't keep track of it anymore.  What was it this time, Italian bonds again?  Whatever, it put the kabosh on what was looking to be a promising rally.  But at least the SPX and the Naz managed to score modest gains.

This week being the week before Christmas, I expect to see more market bumpiness as the big boys go on vacation.  And the market continues to get jerked around by what you'd think would be largely irrelevant news.  Like tonight, it was reported that the North Korean dictator, Kim Jong Il kicked the bucket.  You'd think that would be great news, but ES took a big hit when that came out.

What did people think - that North Korea was going to launch their entire nuclear arsenal in random directions all at once because of this?  Anyway, by 2 AM, it was all forgotten.  But that still left ES down almost half a percent.

Anyway, this week, I'm going to shorten my daily posts a bit since I expect a lot of people will be taking the week off anyway.  I'm also super busy with the holidays and working on my book.  Putting the Night Owl together takes me over an hour every night.  So please forgive me if I go into less detail than usual this week.  The research is still all there.

The technicals

The Dow: Being Sunday night, I like to go to the weekly charts, and I'm definitely not feeling the love here.  After two weeks of gains, we put in a dark cloud cover on much higher volume.  Not a good sign.  The daily doji on Friday clearly shows how the incipient rally was cut short.  Although the daily indicators seem to point to gains on Monday, the overall tenor of this market doesn't seem to support that notion.

Market index futures: Hmm - well in just the last hour (it's 2:15 AM EST right now), ES has made something of a comeback though we're still stuck under the daily pivot of 1214.75.  But this eight point gap is not impossible to close.  And both the ES weekly and daily charts are showing some support not evident on the Dow charts.

     And the winner is...

Hmm - the winner is a big mystery.  Oddly enough, it seems like there's more uncertainty now, with the VIX having fallen back under the 30 level than there was a month ago.  With light volume expected this week, look for any news events to exaggerate market moves.

If Santa Claus is going to show up, right now is the time.  All I can suggest its to watch the ES pivot.  If ES continues its move up in the rest of the night until the open on MOnday and manages to decisively cross the pivot, then the oversold indicators may yet prevail and we can move higher.  If ES reverses course, or even just continues to wander around below the pivot, we're closing lower Monday.  I wish I could be more definite about it all, but you can only play the hand you're dealt.  Tonight we have a bunch of 6's and 7's.

ES Fantasy Trader

On Friday, I decided to hold my slightly underwater long over the weekend, a decision I may yet come to regret.  But it is what it is.  We'll see.. Portfolio stats: the account remains at $134,375 after 44 trades (29 wins, 15 losses) since inception on 8/18 with $100K. Reminder: the portfolio will reset to $100K cash on January 1st, to make year-over-year comparisons easier