Monday, November 26, 2012

Monday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, low confidence.
  • ES pivot 1400.00.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader going short at 1399.00.

I hope everyone had a tasty and relaxing Thanksgiving.  We skipped Friday's rump session that soared 173 points because, well who knows why the Dow did that.  But my last call was for Wednesday lower and that ended up being wrong by 49 points.  But now it's Sunday night and time to get back to the markets, so let's run down the charts.
The technicals (daily)

The Dow: Black Friday was all green for the Dow as it popped 1.35% to retake the 13K psychological support level.  And even that wasn't enough to send this index to overbought levels.  So there's really nothing negative on this chart tonight.

The VIX:  In an interesting bit of divergence, while the Dow jumped on Friday, the VIX declined, but only by 1.11%, and that was on a green candle.  And after spending three days playing tag with its lower BB, Friday's action broke away.  And finally, the stochastic on Friday just eked out a bullish crossover.  All that spells a higher VIX on Monday.

Market index futures: Tonight all three futures are down at 1:30 AM EST with ES lower by a non-trivial 0.43%.  After Friday's big gains, this move still keeps us well inside the current rising RTC but it also leaves us highly overbought and with a stochastic that just formed a bearish crossover.  This is definitely the weakest looking chart of the evening.

ES daily pivot: Tonight the pivot drops jumps 1385.00  to 1400.00 even.As I write this, ES just spent about half an hour playing with this new level and now looks to be breaking below it, a bearish sign.

Dollar index: The dollar took a big gap down on Friday, losing 0.90% and that was enough to drive it oversold.  We're also getting close to the lower BB but there's still no immediate reversal in sight here.

Euro: After getting hung up on the 200 day MA last Wednesday, the euro had its best day since September 7th jumping all the way to its upper BB at 1.3008 and driving its indicators well into oversold territory..  After a run like that, a pullback is to be expected and that is indeed what we're seeing in the Sunday overnight, now back to 1.2958.  The stochastic also seems to be setting up for a bearish crossover so I'd say the euro looks like it may take a breather on Monday.

Transportation: After small gains last Wednesday and a big 1./09% boost on Friday, the trans are now in a clear rising RTC and are still a good ways from being overbought.  The only negative here is some resistance at 5060 but all in all this chart looks pretty good.

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    8      5      8           0        .615     208
November   6      4      4           0        .600     200

     And the winner is...

With the big gains we saw on Friday for no particularly good reason, I'd expect a bit of profit taking come Monday.  That feeling seems to be reflected in the current state of both ES and the currencies where we have some incipient bearish technical indicators.  And while the SPX Hi-Lo index isn't quite pegged yet, at 93.55 it's signaling some serious overboughtedness (is that a word?).  Finally, there's a historic bullish bias to the last week of this month, but it doesn't particularly apply to month.  So all things considered, I'm going to just go ahead and say, Monday lower.

ES Fantasy Trader

Portfolio stats:  the account remains at $197,750 after 71 trades (56 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we go short at 1399.00.

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