Actionable ideas for the busy trader delivered daily right up front
- Monday higher if ES pivot holds, else lower, low confidence.
- ES pivot 1415.58. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias uncertain.
- ES Fantasy Trader standing aside.
Last Thursday, my guess was that we'd go higher on Friday because I thought the Dow would want to check out its upper BB, and it definitely made a good start in that direction, gaining 81 points on the day. This week promises to be quite interesting.with a Fed meeting on tap and the endless reruns of that popular soap opera, All My Fiscal Cliffs. But before we move on to the charts, I want to mention the excellent comment left by alert reader Daniel on last Friday's post. I urge you to check it out (just scroll down). He makes some very good points.
The technicals (daily)
The Dow: Friday's action was significant because of the follow-through it provided to Thursday's gains. It kept us inside a rising RTC, solidified the 200 day MA as support, and even caused an unusual bullish stochastic crossover from a high level. My thesis that the Dow is headed for it supper BB remains intact, and that number is now .13,214. After that we've got some resistance just shy of 13,250, so I'll say I'm expecting some limited upside here on Monday.
The VIX: I got the VIX right on Friday too as it gapped down 4.10% and traded entirely outside its rising RTC for a bearish trigger. Along with a completed bearish stochastic crossover, it looks like the VIX has more room to run lower on Monday, which should be good for stocks.
Market index futures: Tonight the futures are mixed at 1:00 AM EST with ES barely higher by 0.05%, YM up 0.03%, but NQ down 0.02%. Call 'em basically flat. In daily candles though, ES has now given us a quite bullish three white soldiers pattern and remains in an admittedly short rising RTC. And like the Dow, we now have a bullish stochastic crossover from a high level and those are often good for a pop of a few days. But and this is the big but, ES has been facing some stiff resistance in the 14120 neighborhood for days now. As Daniel points out, everyone and his brother is watching this level. Can we crack 1420? I'd say that technically there's a chance, but a lot will depend on what the Fed has to say this week.
ES daily pivot: Tonight the pivot rises from 1410.17 to 1415.58. We were above the old number all day Friday and remain above the new pivot, but just barely. This number will have to be watched closely for signs of a breakdown. between now and the morning. As long as we can hold above it though, that's a positive sign.
Dollar index: On Friday the dollar gapped up to form an evening star. But it's not complete yet and the indicators are not yet overbought, so this is just a warning. And given the day-to-day gyrations in the dollar lately, I'm hesitant to make a call either way off of this chart tonight.
Euro: Fortunately, the euro chart offers a bit more clarity. After more losses on Friday, the Sunday overnight is continuing the downward trend, off another 0.18% right now at 1.2905. We remain inside the descending RTC and are not yet oversold, so I'd say this run's not over yet Note something funny though, for three straight days now the euro has been declining while the Dow has been advancing. I've never really seen a divergence like this before and I'll admit I'm not quite sure what to make of it.
Transportation: The trans on Friday put in a spinning top with a 0.24% gain that featured a successful retest of their 200 day MA. The bullish stochastic crossover is complete and we have a bullish RTC trigger, but we also have resistance at 5150, so like the Dow, I'm going to call for some more upside on Monday, but limited.
Accuracy (daily calls):
October 8 5 8 0 .615 208
November 7 5 5 0 .583 135
December 3 1 1 0 .750 115
And the winner is...
Hard to say. With mixed economic news from China on Sunday night, cryptic non-sequiturs out of Washington from the Emperor and Herr Boehner, no major domestic economic news on Monday, and a Fed meeting coming up, the winds are looking light and variable. Right now the trend is still up and I expect that to continue on Monday just because the bears seem to have gone into hibernation lately. But with so much uncertainty, I think a lot of people won't be wanting to put on any big bets either way on Monday. We have positive seasonality but this coming week is the weakest of the month. So I'm expecting some small gains Monday as long as ES can hang onto its pivot. If we break under 1415.58 in the morning, it's likely we'll close lower.
ES Fantasy Trader
Portfolio stats: the account remains at $188,750 after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12. Tonight we stand aside in the face of so much uncertainty.