Monday may move lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Monday lower, medium confidence.
• ES pivot 1309.08.  Holding under is bearish.
• Rest of week bias uncertain pending Fed.
• Monthly outlook: bias up.
• ES Fantasy Trader short at 1305.75.

Recap

Friday was a very strange day.  I had called it lower, and while the Nasdaq did indeed end down 0.06%, the Dow motored to a 0.76% gain, propelled by large moves in IBM, HPQ and MSFT.  And I made money on my ESFT short, even though the S&P closed up 0.07%.  It was sort of like one of those days when it's raining while the sun is out.  But what of tomorrow?  Will the sun come out again?  Let's figure it out.

The technicals

The Dow: The Dow continued its winning ways with what's looking a lot like a Three White Soldiers pattern, and those guys are bull bull bullish.  But it might have been too much of a good thing with the close of 12,720 actually exceeding the upper BB at 12,693.  Volume though was running higher than normal, showing continued buying interest.

The VIX:  The VIX meanwhile just plunged below the important 20 level to close down a big 8% at 18.28.  The VIX now has only minor support around 17, and that goes all the way back to last July.  And its indicators are still not even to oversold levels yet, implying the possibility of still lower to come which would be good for stocks.

Market index futures: Tonight everything's in the red with ES leading lower, down 0.31% at 1:35 AM EST  But we've seen this movie before several times last week and the market then went on to rally the next day.  Will this happen again Monday?  I'm not so sure.  Friday ES put in a classic hanging man.  Tonight's trading opened with a gap down.  Taking that as confirmation of the hanging man, it seems to be guiding lower.  In addition, all of my Fave Five indicators have now put in peaks at quite overbought levels.

ES daily pivot: Rose from 1307.08 to 1309.08 tonight.  That means we're now below the pivot.  That is bearish on the face of it although I note that we've been slowly creeping higher since 9 PM.

Dollar index: The buck is at a critical juncture, having dropped right to the bottom of its rising RTC on Friday.  It has no support here.  Tomorrow will be key - if the dollar goes lower, look for a big rally in stocks.  Otherwise, we may see a down day or two.

Copper: Ah, the good Doctor struck a sour note on Friday, declining for the first time in three sessions on an ugly sagging red candle.  It gives every indication of having peaked, including very overbought indicators.  Look for lower copper on Monday.

Morningstar Market Fair Value Index: Continues a gradual uptrend that began on December 27th, to hit 0.93 last Friday.  This type of movement is bullish.

History: According to The Stock Traders Almanac, Monday is historically very bearish, though things improve as the week goes on.

     And the winner is...

I'm going to say it's the bears for Monday.  I'm still optimistic for the next few weeks at least but there are clearly a number of reversal indicators worth paying attention to right now.  I note also that the Greece fire seems to be at least sputtering on the back burner over the weekend and that could dampen things on Monday.  So I'm going to call the close lower Monday.  I'm not looking for a spectacular dive, but lower nonetheless.

ES Fantasy Trader





On Friday we took a profit of 3.75 points.  It was an odd day - the S&P closed higher, but I made money on a short anyway.  Portfolio stats: the account now becomes $99,250 after 5 trades (3 wins, 2 losses)   Tonight we go short at 1305.75.

BOT   10    ES    false    MAR12 Futures     1306.75    USD    GLOBEX JAN 20 12:13:11
SLD   10    ES    false    MAR12 Futures     1310.50    USD    GLOBEX    JAN 20 01:38:22