Monday, December 17, 2012

Monday higher only if ES stays above pivot, else lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher if ES stays above its pivot, else lower, low confidence.
  • ES pivot 1417.33Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Last Thursday we were thinking that we could go higher but only if ES stayed above its pivot by Friday morning.  Well after dancing around that line like a field sobriety test, ES finally veered off to the downside around 7 AM and that was that.  The Dow lost 36 points and the SPX dropped 6.  So now that Mr. Market has had the weekend to sleep it off, can he manage a turnaround on Monday?  Let's ponder the charts on this midnight dark and dreary.

The technicals (daily)

The Dow: From an RTC point of view, Friday's Dow was a bearish trigger plain and simple.  With indicators still just inside overbought and now headed lower, and a completed bearish stochastic crossover, there's nothing bullish at all on this chart.

The VIXThe VIX made a corresponding move to the upside on Friday, gaining 2.66% to give us a bulllish RTC trigger and a completed bullish stochastic crossover.  With no resistance until the 200 day MA at 17.47 there still seems to be some upside left here for Monday.

Market index futures: Tonight, all three futures are up at 1:32 AM EST with ES higher by 0.25%.  Friday gave us a red spinning top and the overnight action so far seems to be confirming a reversal with a gap up.  But the gap seems to be filling as the night wears on so the market may be having second thoughts about whatever weekend fiscal cliff rumors propelled it higher here on Sunday evening.  In fact, the current level of 1418.50 brings use right back into the descending RTC.  With indicators continuing to march from overbought to oversold, I really don't see anything bullish on this chart, despite the move higher so far tonight.

ES daily pivot: Tonight the pivot falls from 1421.75 to 1417.33.  We were so far below that even this evening's gap up did not take us above the old level, but the drop at midnight now puts us above the new pivot, though not by much.  It's a positive sign, just, but bears watching for attempts to cross back under.

Dollar index: On Friday the dollar traded entirely outside its descending RTC, so that's a bullish trigger, despite the fact that it lost 0.45%.  It was an interesting move in that both the Dow and the dollar were down on the same day.  But the dollar is now getting fairly oversold and its stochastic is getting ready for a bullish crossover later this week, so I'd say we're due for a move higher here pretty soon, like Monday or Tuesday.

Euro: The euro continued its latest uptrend unabated on Friday on a tall green marubozu that just about hit its upper BB at 1.3185.  The overnight opened with a gap up but has been coming back down ever since, now back to 1.3166.  The indicators are now overbought and the stochastic is getting into position for a bearish crossover, probably in a couple of days.  This, along with the evening star developing candle suggests the euro may be getting ready to move lower.

Transportation: I mentioned the devil's pitchfork on Thursday for this chart - three tall skinny inverted hammers in a row.  Well  Friday gave us, yes, another one.  Now we have a four-tined fork as the trans just can't seem to get past the 5200 level.  This has resulted in indicators now peaking from overbought, a completed bearish stochastic crossover, and a chart that has hit and then backed away from its upper BB, so logic dictates that there's more downside risk than upside potential here.

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   7      5      5           0        .583
December   4      1      1           4        .889     320

     And the winner is...

I know the futures are up tonight and my friend buddy pal J-Trader is going all-in long here  We sort of had a similar situation last Thursday night when I wrote "sometimes the overnight enthusiasm dissipates by morning and the trend reasserts itself", and that was just what happened on Friday.  But once again, the charts remain bearish technically so I'm going to make the same conditional call I made last week: if ES can manage to stay above its pivot by mid-morning Monday, we're going higher, but if it breaks below, then we're going 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, in the absence of a clear edge we stand aside again.

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