Monday, August 6, 2012

Monday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday uncertain.
  • ES pivot 1379.83Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

It really wasn't very clear to me last Thursday night which way the market might go Friday as there were signs pointing both up and down.  Turns out Mr. Market chose to go up - big time with a 217 point pop in the Dow that completely canceled all the negative indications we were seeing.  So just like the last time we had a big up day like this the question is, was this a one-off or is there more in store?  Read on...

The technicals (daily)

The Dow: Friday's jolly green candle simply smashed through the descending RTC for a bullish setup and as a bonus, reclaimed the 13K level.  It also left us about to form a bullish stochastic crossover from a high level.  I've mentioned that this unusual pattern can be a good trend change indicator.  There is now resistance at 13,100 and the upper BB at 13,151.

The VIX:  Corresponding to the market's gains, the VIX on Friday took a big gap down with a small red candle that left it just above support at 15.5.  This move just brought the indicators to oversold, though there's surely some distortion here.  In short, I'm not seeing much more downside left after Friday's big move.

Market index futures: All three futures are running higher at 1:37 AM EDT with ES up just a bit at +0.04%.  However, after Friday's big move, there's no real follow-through forming and ES is just meandering right now.  We're also now back to the upper BB, which has been well-respected all year so far.  Further upside would seem to be limited here.

ES daily pivot: Tonight the pivot rises from 1364.75 to 1379.83.  With ES little changed in the overnight, we're still comfortably above the new number, so that's bullish.

Dollar index: The dollar's megaphone pattern broke to the downside on a long red candle, contrary to what I was expecting.  This move was enough to bring us to the lower BB.  While the stochastic looks to be forming a bearish crossover, this may be an artifact and I would not be surprised to see the dollar retrace some of Friday's loss in the next few days.

Euro: Like the Dow, the euro had a big day on Friday and closed outside its descending RTC on high volume for a bullish setup.And it is indeed drifting slowly higher in the overnight.  My only concern here is that the euro has moved all the way up to its upper BB now and if you look at the chart, it has really respected this line all year long so far.  I'd say a lower euro is in the works, maybe not Monday, but at some point this coming week.

Transportation: Last week I mentioned how the trans didn't spend more than two days below the 200 day MA lately and that's just what happened again.  Big down day Wednesday, doji Thursday, and then boom, Friday popped right back through the 200 MA before closing just a hair below it.  Stochastic is setting up for a bullish crossover - nothing really negative here.

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  2      0      1           0       1.000     125

     And the winner is...

The pattern all year so far has been for big up moves to be followed by small doji days and that's what I'm expecting for Monday.  With no economic news on the table, it's hard to see where the short-term push for higher prices will come from.  We're also now technically right up against a number of BB's from which reversals usually come.  So I'm going to call Monday uncertain, not because I have no idea where we're going, but because I expect little change.  It would really be splitting hairs to try to call this one higher or lower.  I don't really like doing this two days in a row, but I have to call 'em like I sees 'em.  If I really had to guess, I'd say we might close a bit lower, but that's just a guess.

ES Fantasy Trader

Portfolio stats: the account the account now rises to $180,375 after 55 trades (43 wins, 12 losses) starting from $100,000 on 1/1/12. With no real evidence for a tradeable move on Monday, I'm just going to stand aside again tonight.

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.


  1. "I'm going to call Monday uncertain...... because I expect little change."

    -Michele, I think this was quietly one of your best analytical Hoots yet. That is exactly what happened. A call for a "doji-like outcome" is indeed different from a flinging-up-the-hands kind of uncertainty, as you were doing when the Market was lurching from one Euro-rumor to another in pointless and random fashion.

    Coming into Monday I was reading extreme forecasts in either direction, and your analysis helped stay my hand-- in fact helped me to sit on both of them, thru the day. Many were head-faked by intraday moves, which ultimately amounted to nothing.

    I specifically mention this so that any new readers coming over from any of your recent Links will appreciate that an accurate call of sideways action is just as valuable as any-- and in many cases harder to envision, because the mind tends to be attracted to more dramatic scenarios.

    1. Thanks very much. It was very gratifying to see how today's session worked out. These doji calls are the hardest ones to get right. I'm glad someone noticed :-)


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