Monday uncertain, bias higher

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

• Monday uncertain, bias higher.
• ES pivot 1425.33.  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader remains long at 1431.25..

Recap

Last Friday the Dow provided us with a classic doji that finally stopped four ugly days of decline.  Does this mean that a turn-round is at hand?  Time for the daily chart run-down as we seek out answers.

The technicals (daily)

The Dow: Friday's monster two point gain pretty much summed up the indecision in the market at the moment.  On the plus side, RSI has now gone oversold and the stochastic is flattening out for a bullish crossover from a very oversold level.    On the minus side, we remain inside a declining RTC.  So while this chart is now looking more bullish than bearish, we need confirmation on Monday before calling the current downtrend over.

The VIX:  Last Thursday night I really wasn't sure about this chart.  Turns out the VIX gained 3.53% on Friday, but this bounce was enough to cause a bearish stochastic crossover and those are usually pretty good reversal indicators.  On that basis alone, I'd be looking for a lower VIX early this week.

Market index futures: As has happened a few times in the last week, tonight all three futures are mixed at 12:47 AM EDT with ES flat, NQ up by 0.1% and YM down by 0.02%, reflecting the continued uncertainty and dare I say it general confusion about direction among market participants.  Friday's red candle kept ES inside its now six day declining RTC, but the action so far this evening has moved us out the right hand edge.  If ES can stay above 1416 on Monday, that will cause a bullish setup.  The indicators are now supporting this idea, with RSI extremely oversold at 5.73 and the stochastic just about to execute a bullish crossover - I had to look at the actual numbers to see that it hasn't quite happened yet.

ES daily pivot: Tonight the pivot drops from 1429.67 to 1425.33.  This still leaves us below the new number but only by half as much.  Nevertheless, until and unless we see ES break above this level, it's a negative sign.

Dollar index:Last Thursday's dollar doji was confirmed on Friday with the dollar shedding another 0.15%, enough to form a bearish crossover on this chart.  With no support until 54.69 on the $USDUPX, I'd say the dollar still has lower to go on Monday.

Euro: After posting some small gains on Friday that resulted in a bullish RTC trigger, the euro turned back downward again this evening.  Although the euro seems poised to move higher this week, it's not clear right now that this will happen on Monday.

Transportation: Here's a positive sign: after two days of dojis, the trans on Friday gave us a disproportionate 0.88% jump that was enough to cause a bullish stochastic crossover from a high level.  Typically these are good indicators of higher to come.  If higher trans bode higher markets, then this is a positive development.


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
October    4      4      2           0        .500    -116
     And the winner is...

The factors that began coming together on Friday for a bullish turnaround remain in play and are even more pronounced now.  This market is looking technically ready for at least a short-term bounce.  Unfortunately, we don't have enough confirming signs, as opposed to reversal suggestions, for me to make the call for a higher close Monday, so I'll just have to settle for calling Monday uncertain but with a bullish bias.  I definitely would not be going short at these levels.

ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. In a classic case of "you snooze you lose", this trade was actually profitable early Friday morning but I was sleeping.  Hey, ya gotta sleep sometime.  In any case, like I said last week, I still have confidence that it will turn profitable tomorrow.

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.