Monday, August 27, 2012

Monday possibly higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1405.67.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader going long at 1411.50.

After four straight losing days, the Dow redeemed itself on Friday with a 100 point pop, thanks in part to Uncle Ben's comments on the economy.  We now move on to what promises to be a nervous week as traders await new pronouncements from on high - high being tony ski resort Jackson Hole, of course.  It's also the last week of the month and next week starts with a holiday.  Should be interesting.

The technicals (daily)

The Dow: The Dow's 0.77% gain was just enough to take us out of last week's descending RTC for a bullish setup.  It also bottomed out the RSI and set up the stochastic to start forming a bullish crossover.  And the candle itself is a bullish piercing pattern.  So on this chart at least, things are looking good.

The VIX:  As the Dow moved up, the VIX moved down, by 4.89%.  It's close Friday at 15.18 was just shy of exiting its rising RTC and its stochastic is ever so close to executing a bearish crossover.  RSI has peaked here too and the futures were down 4% on a big bearish engulfing pattern.  This all suggests a lower VIX again on Monday which would be good for stocks.

Market index futures: Tonight we have a mixed market at 1: 09 AM EDT with ES up by 0.07%, YM down 0.02% and NQ up 0.33%.  ES holding on here to the top of Friday's tall green candle is a good sign, and its stochastic is looking very close to executing a bullish crossover.  Although this chart doesn't look strongly bullish, I'd not be wanting to go short right here.

ES daily pivot: Tonight the pivot barely ticks up from 1405.33 to 1405.67. With ES little changed in the overnight, we remain above the pivot, which is bullish.

Dollar index: After putting in a doji last Thursday just above its 200 day MA on the $USDUPX, the dollar on Friday gave us, yes, another doji, only this one a bit higher for a 0.3% gain.  So not much resolution here.  However, the stochastic just managed to squeak in a bullish crossover, pointing to further gains on Monday.  However, with the dollar becoming somewhat decoupled from the market lately, this isn't necessarily bad for stocks.

Euro: Meanwhile, the dollar's gain on Friday was the euro's loss on a chart that had a bit more clarity, with the euro dropping out of its rising RTC for a bearish setup.  Its indicators all declined for the second day in a row off highly overbought levels and it stochastic completed a bearish crossover.  This all points to continued downside on Monday and the euro is indeed running lower in the Sunday overnight, giving support to this theory.

Transportation: Finally, the trans on Friday poked under the 200 day MA again, and for the second day in a row rallied back to close just above it at 5119 with a doji.  The indicators continue to decline and while not yet oversold, are getting close.  With the 200 MA seemingly acting as support here, the doji indicates at last a possibility of moving higher on Monday.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  7      5      5           1        .615     -67

     And the winner is...

I'm seeing enough bullish signs to believe that last week's slide is over and that we could conceivably see some follow-through to last Friday's gains, though I'm not expecting another 100 point day.  But I am just barely confident enough to call Monday higher.  But this whole week is going to be tough to call.  The wisest course might actually be to just take an early Labor Day vacation.  I don't plan on doing much trading myself this week.

ES Fantasy Trader

Portfolio stats: the account now remains at $168,500 after 58 trades (44 wins, 14 losses) starting from $100,000 on 1/1/12.  Tonight we go long at 1411.50.

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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