Monday, June 11, 2012

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, high confidence.
  • ES pivot 1321.25.  Holding above is bullish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

Last Friday was quite interesting for me because some fool with a backhoe dug up the local fiber cable and knocked out Internet service in our entire neighborhood.  Service wasn't restored until about 5 PM, so I basically had the day off.  I used the time to rethink the idea of installing a dual WAN router and subscribing to a wireless ISP like Clearwire.  That would prevent these sorts of problems.

Anyway, by watching CNBC I was able to see my call for a lower close go down the drain as the market relentlessly trended up the entire day for an impressive 93 point gain to close out its best week  this year so far (and my best week also).  But with some new wrinkles over the weekend from Spain and China, where are we likely to go this coming week?  We turn to the charts for the answer.

The technicals

The Dow: Thursday's shooting star reversal warning was shot down by Friday's strong green candle.  With indicators still not yet at overbought levels, the only thing in our way now is a small resistance shelf at 12,580, give or take.  After that, there's another line at 12,700 and then the psychological 13K again.  Right now, there's nothing on this chart to suggest anything but continued higher on Monday - and that was before the weekend news.

The VIX:  And on Friday the VIX formed a classic dark cloud cover, one of the most powerful bearish reversal patterns around.  With its indicators still not oversold yet, there's no reason to believe the VIX can't go lower still on Monday.

Nobody expects the Spanish Inquisition!
Market index futures: Tonight all three futures are up sharply, of course on the news from Spain.  I sure wasn't expecting that.  ES is up a monster 1.22% at 1:10 AM EDT - the biggest gain at this time of night I've ever seen.  This big gap up handily cleared resistance at 1332 and brought us right to the upper BB at 1350 which coincidentally is another resistance line.  So I'd say futures-wise, we've probably already seen most of the gains, but the markets as a whole should follow suit on the open Monday morning.

ES daily pivot: Tonight the pivot ticks up from 1319.42 to 1321.25.  We moved above the old number on Friday and of course now we're way above the pivot, always a good sign (initially at least - getting too extended from the pivot eventually starts to bring a reversionary pull into play).

Dollar index: The dollar on Friday completed sort of a morning doji star, except for the fact that Friday's candle was red instead of green.  But its stochastic just barely squeaked out a bullish stochastic crossover and the candle itself landed right on the edge of the descending RTC for a bullish setup.  This seems to suggest a move higher by the dollar on Monday.  But - and this a a big but, the euro gapped up big time in Sunday night trading on the news from Spain, so I wouldn't be surprised to see the dollar move lower on Monday.  Canonically, that should be good for stocks.

Transportation: Dow theorists take note - the trans gave us a 1.06% gain on Friday, better once again than any of the major averages.  And this move negated Thursday's gravestone doji so here too we have a chart that looks like it still has more upside potential.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632

June    4      1      1           0            .800        +220  +$211

     And the winner is...

Well tonight is pretty clear I'd say.  While the charts already looked mildly bullish at the end of last week, right now the futures are pointing to a higher close Monday.  I'll be a buyer of DIA at the open.

ES Fantasy Trader

Earlier this evening we covered last Thursday night's trade at 1343.50 for an ugly 29.75 point loss, a victim of the (unexpected) news from Spain and last Friday's network outage that kept me from closing the position when I wanted to in the face of steadily rising prices. Tonight we are regrettably standing aside.  I'm pretty sure most of tomorrow's gains have already occurred.  This one was simply not tradeable.

Portfolio stats:  the account falls back to $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1

BOT    10    ES    false    JUN12 Futures     1343.50    USD    GLOBEX    19:53:26   
SLD    10    ES    false    JUN12 Futures     1313.75    USD    GLOBEX    JUN 7 20:21:18 

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.


  1. Michele-

    I have a special request tonite, hopefully you’ll see this comment before diving into your analysis, cogitation, and hoot.

    You’ve mentioned a number of times the absolute truth that we’re in one of those periods where there's genuine uncertainty. History is forming around us. This kind of true un-knowableness is to be contrasted with the “appearance of uncertainty”, otherwise known as the Wall of Worry.

    We are swimming in event risk, headline news knee-jerk reactions, rumors that trigger program-buys and sells, etc.

    It literally makes the kind of day-to-day technical analysis used by the day or swing trader quasi-irrelevant. A longer timeframe investor has the luxury of just going off and working on the golf game for a few weeks, until things sort out. But for someone like you, who tries to best-guess the next-market day, the randomization makes for spiky, irrational markets.

    But we are living-through-history, and such periods always make technical analysis difficult; and it is what it is so we deal with it.

    But Michele, rather than grind away again at what might again prove an exercise in futility, might I ask that you do as you’ve done before, and devote some of your time and space here to a look at the weekly charts, and the weekly timeframe..?

    There are some slow developing themes which may give a clue as to ultimate price resolution on the Dow, and the broad market indices, and these themes are getting drowned out by the day to day sound, fury, and noise of “chattery markets” like the present one.

    It’s OK if you had a prepared approach for this evening’s posting, and doing anything like that would add too much time or compexity.

    Thanks for your generous sharing of your time and your insights.

  2. Thank you Daniel as always for your insightful observations. It's 12:40 AM and I was just sitting down to begin my nightly post when I read your comment. And after watching today's action I was pretty much thinking it was time to do exactly what you suggest - step back and look at the longer view. We'll see what that yields.

    Oh, and you might want to check my profile again - I've added in the rest of my favorite movies besides Pi :-)


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