Monday lower

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

• Monday lower, low confidence..
• ES pivot 1435.58.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

OK, I'll admit I was surprised by Friday's action.  The technicals looked bullish to me.  I don't know if it was news or whatever that sent us lower, but the fact that we did close lower in the face of seemingly positive technicals is shall we say, interesting.  Now let's see where this coming week might go.

The technicals (daily)

The Dow:  Friday's 49 point drop was enough to keep us inside the descending RTC.  This is particularly significant since we opened right on the edge for a bullish setup, but it was all downhill from there.  The incipient bullish crossover of which I spoke on Thursday did not happen either.  While this chart is not in itself particularly bearish, it looks weaker in light of failed expectations than it would otherwise.

VIX daily

The VIX:  Sigh - I was wrong about the VIX too.  It did not move lower on Friday, instead gaining a solid 6% for a bullish harami.  Oddly enough, it also closed outside the rising RTC for a bearish trigger.  But look at the chart - I see a developing symmetrical triangle here.  And since the previous major trend was down, there's a good chance the break, which should be any day now, will also be down which would be good for stocks.


Market index futures: Tonight all three futures are down at 1:00 AM EDT with ES lower by 0.45%.  Friday's ES candle, which opened up promising, eventually disappointed and stayed within the descending RTC, and tonight's new candle is doing the same.  The only bright spot is that ES has developed some support around 1427 and we're real close to that right now.

ES daily pivot: Tonight the pivot drops from 1437.67 to 1435.58.  We were below before and are still under the new pivot, and even a bit more as ES continues to drift lower in the overnight, a bearish sign.

Dollar index: On Friday the dollar gained an impressive 0.54% completely confounding my expectations that it would move lower.  This bullish engulfing pattern left the indicators at overbought-broken with no more predictive power and it canceled the incipient bearish RTC setup.  At this point, there's not reason why the dollar should not move higher again on Monday.

Euro: While the dollar moved higher on Friday, the euro moved correspondingly lower, totally retracing Thursday's gains.  And it's continuing lower on Sunday night, now at 1.2828 and has in fact just breached its 200 day MA of 1.2835.  Last Thursday I said the euro would have to go below 1.2848 on Friday to cancel a bullish reversal.  Well it very nearly did, and in fact did hit that level soon after trading began this evening.  So this chart looks likely to go lower still on Monday, which would be bad for stocks.

Transportation: I'd been kind of dissing the trans all last week basically expecting some sort of rebound after the huge drop we saw on the 20th.  Instead we simply gota week's worth of consolidation and then on Friday a close of 4893, below the week-long support line at 5190.  The indicators are now all oversold-broken and have thus lost their predictive powers.  Even though we have now exited the descending RTC for a technical bullish trigger, I don't like the looks of this chart.  It looks bearish for the market as a whole.


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     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
     And the winner is...

I don't get it - I'm hearing some pretty bullish comments from people I respect like Rob Hanna and J-Trader but I guess I'm just not seeing it in the charts tonight.  The trans are looking a bit shaky and the currencies (including the Swiss franc) seem to be guiding lower  However, the VIX at least seems to stand a chance of moving lower.  On the other hand we've got some weak Asian numbers coming out tonight and our own ISM due on Monday morning and I'm guessing they're going to disappoint, so all things considered I'm going out on a limb tonight and call Monday lower.  Watch out for a break below 1427 in ES.

ES Fantasy Trader

Portfolio stats: with no trade again last week the account remains at $180,875 after 65 trades (50 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight I really really want to go short but I just can't do it until I see ES break below 1427 and right now it's not cooperating.  It's close but no cigar.  And since I just can't stay up all night waiting for it I'm reluctantly going to have to wave bye-bye to this particular bus.  Nothing ventured, nothing lost.

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.