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- Monday lower, medium confidence.
- ES pivot 1371.00. Overextension under is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes long at 1349.50..
Last Thursday night, the market direction was too tough for me to call technically so I said to just watch the jobs numbers instead. Well the numbers came out and they were stinky indeed, so down we went again to the tune of a hefty 168 point plunge for the Dow. And if that wasn't bad enough, tonight comes word that the French have given le Sarkozy le boot. Zut alors! Should be another interesting week coming up...
The Dow: Candlestick-wise, Friday's daily Dow chart looks awful. A hanging man on Wednesday confirmed by a loss on Thursday followed by an even bigger solid red candle Friday. And all that has only brought the indicators maybe halfway down from overbought. The only good thing here is that the 13K support line was respected Friday. But I said the same thing about 13,200 the day before, and that fell like it wasn't there. After that, there's nothing til minor support at 12,930, then major support at 12,650. And there's no sign of a reversal on this chart. Just plain ugly.
The VIX: The VIX's big move up on Friday just put it into overbought territory, but at 19.16 it is still well short of the upper BB at 20.57. It's not a given that we'll reach that level but the futures support more upside with two solid green candles and indicators rising off of oversold levels. All of which bodes ill for stocks.
And note how we punctured the lower BB tonight and then recovered back to it. And finally note how the recent decline has that exponential waterfall look to it. Those are encouraging signs. The horizontal blue line is where I went long a few minutes ago. Tonight's gap down feels like a selling climax to me.
ES daily pivot: Tonight the pivot, unsurprisingly, drops from 1391.08 to 1371.00. With the gap down on the Sunday evening open, we're now way below the pivot. Being under the pivot is normally bearish. But being way under the pivot can be bullish, as no chart likes to get too far extended from this magic number for very long. This, perversely enough, is a bullish sign.
Dollar index: On Friday the dollar continued a four day march higher with a strong 0.37% move. But even that was not enough to reach overbought levels. And tonight the euro is taking a powder on the French election news. A long bet on the dollar Monday would seem like a reasonable idea - but bad for stocks in general.
Transportation: Two big down days here too brought us right into the Twilight Zone, halfway between the BB's. Although there is a support level at 5225, both the candles and the indicators support further downside here.
History: As if it wasn't bad enough, according to The Stock Traders Almanac, Monday is historically extremely bearish.
Month right wrong no callApril 7 9 2
May 2 1 1
And the winner is...
It's a funny night. I think the futures are going to drag the market down on Monday so I will call for a lower close on that basis. Well, that plus some ugly looking charts as detailed above. However, I also think that ES has gotten overextended to the downside here and a bounce is not out of the question which is why I'm going long tonight. We'll see how that works out. That's all she wrote!
ES Fantasy Trader
Portfolio stats: the account remains at $142,625 after 34 trades (27 wins, 7 losses) starting from $100,000 on 1/1 Tonight we're going long at 1349.50.
Reminder - you can now follow these entries and exits live on Twitter @nightowltrader. And let me note that I always buy on the ask and sell on the bid to make things more fair. This way there's no question that the trade would have executed for real. But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post. Also keep in mind that these trades run with no stops and no preset targets.