Monday, July 30, 2012

Monday maybe lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, low confidence.
  • ES pivot 1373.42Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader going short at 1377.50..
Quote of the Day
“You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct.”  
               - Warren Buffett


OK, I know I said I was going to take two weeks off to watch the Olympics, but who am I kidding - I need to watch the market too.  I admit it - I'm hooked.  I may omit some of the usual details, but for now at least it looks like I'll keep the usual schedule.

Anyway, I was surprised at the extent of Friday's gains which leave us at a number of extremes now but not necessarily reversal indications

The technicals (daily)

The Dow: Last Thursday I said a big up day in the Dow was often followed by a doji.  That obviously didn't happen.  But now we've got two big up days, the second of which blew right past the 12,950 resistance line, the 13K psychological line and the upper BB too.  At the risk of repeating myself, I'm going to say again that we're due for a doji day or even a small loss following such an impressive run.

The VIX:  The VIX dropped again Friday but has no support in sight.  More downside possible here Monday.

Market index futures: All three futures are in the red Sunday night with ES down 0.34%.  Like the Dow, ES put in two days of outsized gains that took it above its upper BB.  And unlike last Thursday night, tonight there is no continuing upside follow-through and that worries me.

ES daily pivot: Tonight the pivot jumps from 1347.08  to 1373.42.  While this still leaves us above the new number, we're now pretty close.  Once again we have to watch the pivot for a break under.

Dollar index: The dollar gave us a doji Thursday, and then a second, lower one Friday.  But with so much additional news coming out of Europe over the weekend, it's hard to draw any conclusions form this chart.

Euro: After three days of gains, the euro seems to be running out of gas and has been unable to recover from a Friday afternoon slide.  Of all the charts I look at, this one seems the closest to turning bearish on Monday.

Transportation: Unlike the Dow, the trans still seem to have lots of room to run up some more.

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   11      1      6           1        .923     981

     And the winner is...

Once again, another tricky night full of mixed messages.  The Dow, VIX, and the trans are looking good, the euro is looking poised to move higher which would be bad for stocks, and the ES overnight is bearish.  All things considered though, I'm going to go with the futures which have reversed within a day the last five times they hit their upper BB.  Accordingly, I'm calling Monday lower, though I'm not feeling particularly confident about saying that.  I hope my facts, hypotheses, and reasoning are all correct.

ES Fantasy Trader

Portfolio stats: with no trade last Thursday night the account remains at $176,000 even after 53 trades (42 wins, 11 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1377.50.  If this trade isn't profitable Monday, I think it will be Tuesday.

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.  Act accordingly.

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