Actionable ideas for the busy trader delivered daily right up front
- Monday lower, low confidence.
- ES pivot 1435.83. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader going short at 1433.50 (this entry corrected from last night - the ESFT section below and the Twitter posting were both correct - I just forgot to update this line).
Last Thursday I said "I'm expecting a doji day or spinning top on Friday ... with a slight bias to the up side". I'd say that was a pretty good call considering the Dow finished up just 15 points on a fat little spinning top. OK, so that was an easy one. Now things get a bit harder so lets go back to the charts and figure out where Monday is headed.
The technicals (daily)
The Dow: Friday's move played out exactly as expected with that spinning top almost hitting the upper BB. But even with last Thursday's big gains we're still not quite up to overbought levels on the indicators. So technically there's no immediate reversal indicator on this chart.
The VIX: Last Thursday I called for more downside to come for the VIX and it indeed dropped another 7.82% on Friday. This leaves it in a steep descending RTC and brings the VIX back below 15. However, even after two big losing days, the VIX is still not quite down to oversold levels on the indicator and has a ways to go before reaching its support at 13.45. So like the Dow chart, there's no immediate reversal indicator here so I have to say the VIX could run lower again on Monday.
Market index futures: Tonight all three futures are down at 1:35 AM EDT with ES lower by 0.33%. After managing an unusual small green marubozu on Friday parked at the top of Thursday's big move and trading entirely above the upper BB, the new candle is developing as a bearish harami. The other interesting point about Friday is that it closed very close indeed to the upper resistance line of the rising wedge I mentioned last week. Noting that this line has not been crossed successfully since its beginning on May 29th, the logical next move from there is down
RSI and momentum have already turned down from overbought, though the stochastic has not yet started setting up a bearish crossover. This chart is now giving the impression of running out of gas.
ES daily pivot: Tonight the pivot jumps from 1422.17 to 1435.83. The size of the gain coupled with ES drifting lower in the overnight means we crossed below the pivot right at midnight, so this signpost now becomes negative.
Dollar index: The $USDUPX took a massive 0.99% drop on Friday on a gap-down red marubozu. It also failed to hang onto its 200 day MA after clinging on for four days in a row. But this chart at least is showing some signs of reaching a bottom. It hit the lower BB on Friday and is now into oversold territory. I'd say we could see the dollar move higher before mid-week.
Euro: As the dollar moved lower Friday, the euro moved higher on a tall green candle that blasted right through its upper BB and carried the euro very close to its 200 day MA at 1.2859. With resistance expected there, plus the BB, plus very overbought indicators, plus the fact that the euro seems to be going exponential over the past week, all makes me think that it will be moving lower on Monday. And it is indeed already backing off in the overnight.
Transportation: The trans are now actually giving us a positive divergence, having gained 0.55% on Friday to the Dow's 0.11% and the SPX's 0.40%. The pair of green marubozus is a bullish pattern and the indicators are now about halfway up from oversold on their way to overbought. Like the Dow and VIX, I see no reversal signs in this chart and no reason to believe the trans won't go higher on Monday.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
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 8 6 8 1 .600 -78
September 1 1 2 0 .500 -55
And the winner is...
Tonight we have another mixed picture. The Dow, VIX and trans look positive but the dollar, euro, and futures look negative. Then there's a bit of bad news coming out of China.right now. I think that's going to tip the balance for me. The currency and futures traders seem to be expecting a lower market on Monday. And copper has gone exponential. Add in September seasonality and that's a bus I don't want to stand in front of, so I'm calling Monday lower.
ES Fantasy Trader
Portfolio stats: the account now rises to $176,500 after 61 trades (46 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we go short at 1433.50. I expect this to be a quick trade as I definitely don't want to risk getting caught up in any positive Fed news on Thursday.
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.