Monday, April 23, 2012

Monday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, medium confidence.
  • ES pivot 1376.58Holding under is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader remains short at 1372.25.

Arrrgh!  Thursday I though the market would go higher and it went lower.  Friday I thought the market would go lower so naturally it went higher.  The Night Owl is now 0 for 3 and getting kind of depressed.  But this is pretty much a reflection of the market itself - unable to find a direction.  And I did mention a week ago that options expiration weeks tend to be squirrelly.  Well now that we've got that out of the way, maybe we can do better for Monday.

The technicals

The Dow: After closing outside its rising RTC on Thursday for a bearish setup, the Dow on Friday closed right back inside with its 65 point gain thus canceling the bearish signal.  However, the stochastic completed it bearish crossover.  The stochastic has called every top correctly so far this year.

The VIX:  The VIX chart is too tough to call on both the daily and weekly time frames.  However, the futures are giving at least a hint that the VIX may be going higher, in the form of oversold indicators.  And that would be bad for stocks.

ES daily
Market index futures: Tonight, once again, all three futures are trading lower with ES down 0.16% at 1:29 AM EDT.  The indicators also continue to move lower.  But more importantly, I think is the developing symmetrical triangle as you can see in this daily chart.  Notice how we've been putting in lower highs and higher lows for ten straight days now.  This has gone on about as long as it can.  It should be ready to break any day now and since it was entered from above, the break is most likely to be to the downside.

ES daily pivot: Tonight the pivot remains virtually unchanged,  nudging up from 1376.00 to 1376.58.  As we continue to hold below this and ES shows no signs of making any attempt on the pivot, that's a negative sign.

Dollar index: Meanwhile the dollar on Friday took a big gap down for a nearly half percent loss.  This took the indicators much closer to oversold than overbought and with some unsettled news from Europe over the weekend, I wouldn't be surprised to see the euro move lower on Monday.  That would drive the dollar higher and be bad for stocks.

Transportation: Friday the $TRAN put in a small spinning top at the bottom of Thursday's big drop.  That's only a potential reversal indicator and requires confirmation on Monday.  But with the stochastic just finishing a bearish crossover, I'm expecting more downside here too.

History: According to The Stock Traders Almanac, Monday is historically only slightly bullish.


Month right  wrong  no call
April   5      6      1

     And the winner is...

Once again, I think I was a day early on my bearish call, so I'll just say it again.  Given the mostly negative look on the charts I follow, I think we're going lower Monday.

ES Fantasy Trader

Portfolio stats: the account remains $131,500, after 31 trades (24 wins, 7 losses) starting from $100,000 on 1/1  Tonight we remain short from last Thursday.  Reminder - you can now follow these entries and exits live on Twitter @nightowltrader.

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