Monday lower

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

• Monday lower, low confidence.
• ES pivot 1352.67.  Holding below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader standing aside.

Recap

The only surprise on Friday was the extent of the decline with the Dow dropping 124 points to finish at 12772.  Although we put in a higher high last week, can the rally that began in early June be saved?  Silence!  The charts will now speak...

The technicals

The Dow: And what the Dow chart has to say isn't pretty.  Friday's loss gave us a bearish trigger after Thursday fell out of the rising RTC.  In addition, the stochastic bearish crossover is nowe complete.  And to top it all off, both RSI and money flow have peaked at overbought and are now headed back down - all bearish signs.  And the Dow has no technical support until 12,650.

The VIX:  Thursday's breaish warning gap up star in the VIX was confirmed on Friday with a big bearish engulfing pattern that resulted in a 2.29% drop.  In addition, we got a dark cloud cover in the futures.  This all points to a lower VIX on Monday which would be good for stocks.  This is somewhat at odds to the picture being painted on the other charts and makes me think of the cases where the VIX has a gap down open but then spends the rest of the day rising to end up on the day.  I guess we'll see.

Market index futures: The wishy-washy moves of last week seem to be gone with all three futures in the red tonight and ES down by % at 1:  AM EDT.

ES daily pivot: Tonight the pivot drops from 1364.50 to 1352.67.  Holding under is bearish.

Dollar index: The dollar strengthening considerably on Friday, moving up 0.75% in the $USDUPX and just passing its upper BB at 57.61.    However, the indicators are still not yet overbought.  All that can stop this chart now is resistance at 57.78 and we are nowhere nearly as overbought now as the last time we approached that level back in May.  WIth no indication of a reversal in Friday's solid green candle, there's no reason to believe the dollar's coming down on Monday, ergo bad for stocks.

Transportation: The trans chart looks a lot like the Dow: RTC exit (though only a bearish setup, not the trigger yet), stochastic bearish crossover, and an RSI that peaked at highly overbought levels and is now descending.  All in all, this one looks like more downside to come.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points trade

April   7      9      2                    .438
May    10      7      3           2        .632 
June    8      6      6           1        .600     632   +$330
July    3      0      1           0       1.000     180
 
     And the winner is...

xxx

ES Fantasy Trader

Last Wednesday night's short turned out quite nicely, as I resisted the temptation to take a small profit or loss on Thursday, betting instead on more downside on Friday.  And ka-ching, ES paid off nicely for a handy 18.5 point profit that didn't even leave much on the table  Follow me on Twitter @nightowltrader for my next live ES trade (but be prepared to stay up really really late :-)

Portfolio stats: the account now rises to $149.625 after 49 trades (38 wins, 11 losses) starting from $100,000 on 1/1/12. 

BOT    10    ES    false    SEP12 Futures     1345.00    USD    GLOBEX    JUL 6 11:35:32   

SLD    10    ES    false    SEP12 Futures     1363.50    USD    GLOBEX    JUL 5 01:06:09   

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.