Monday, June 18, 2012

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1333.50.  Holding above is bullish..
  • Rest of week bias lower technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

I'm not too proud to admit that I really could not figure out which way the market was going to go last Friday.  Turns out it was up, in decisive fashion with the Dow adding on another 115 points.  One more day like this and we'll be able to put in the "up-arrow" for the swing trend.  So apparently those who bet on a positive (for the market) outcome to the Greek elections were proven correct.  But will this carry over into Monday?  After all, it was just a week ago that we had the World's Shortest Rally on Spanish bank bailout news.  Let's run the charts.

The technicals

The Dow: On Friday the Dow put in the second of two consecutive strong candles.  It's always better to see a 150 and 100 point up day in a row than a 200 followed by a 50.  But particularly interesting is that the volume on Friday was huge - the greatest since March 16th.  Of course back then, the Dow had just hit its upper BB, just like this past session.  Hmmm...  Unfortunately, the indicators are all pegged at overbought now and so have lost their predictive power.  OTOH, the weekly chart actually looks quite positive, showing two consecutive solid green candles on increasing volume with a stochastic that just formed a bullish crossover last week.

The VIX:  On Friday the VIX dropped another 2.63% to complete a three candlestick pattern known as the three outside down, generally a good bearish reversal indicator.  And of course more VIX downside is good for stocks.

Market index futures: Wait - we've seen this movie before.  Wasn't it exactly one week ago that the futures spiked on Sunday evening on news of a Spanish bank bailout?  Well only this time it's not quite the same.  While all three futures are indeed up at 1:20 AM EDT, this time ES is up only 0.36%, not the giant 1%+ pop we saw this time last week.  ES was higher earlier this evening though, up to 1347.50 initially, which was right up to its upper BB.  I actually prefer to see this than the sort of irrational exuberance we got last time around.  There may be less buyer's remorse come Monday.

ES daily pivot: Tonight the pivot jumps from 1319.75 to 1333.50.  But after the big pop on the open Sunday evening, we're still comfortably above the pivot, but not too far above (which would be a negative sign).

Dollar index: My dollar chart ($USDUPX) is only available during regular trading hours, so instead I'll comment on the euro, (6E#F in eSignal) which is trading Sunday night.  Here obviously we've got the Greek pop that took the euro clear to its upper BB at 1.2765 for a huge 0.6% gain.  This will surely drive the dollar lower on Monday and that's generally good for stocks.

Transportation: This chart is similar to the Dow although Friday's gain was noticeably weaker than Thursday's, striking a note of caution.  Add to this the fact that RSI peaked on Thursday and the rest of the indicators are overbought, and I would not be surprised to see the trans move lower on Monday, which could bode ill for stocks later this week.

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      2      4           1            .667        +77   +$66

     And the winner is...

Another tough call with the charts once again being distorted by an exceptional news event.  True, the futures are all up right now, but they were up a week ago too and last Monday turned out badly.  Fool me once, etc.  With the Dow already at its upper BB, I think there might still be some Greek-driven upside on Monday but will be limited.  At some point, the recently overbought nature of the market will reassert itself and we'll go lower.  The only question is if it will be Tuesday or mid-day Monday.  But the market does seem to have some momentum behind it at the moment, so I'll go for a higher close Monday.  I'll be buying DIA at the open.

ES Fantasy Trader

Portfolio stats: the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1  Once again there's no trade tonight, this time because, as like a week ago, I feel that the train left the station before we got there.  And one of my rules is to never chase.  I look at this instead as an opportunity to exercise my patience.

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.

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