Monday, December 3, 2012

Monday lower if pivot broken

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower if ES pivot broken, low confidence.
  • ES pivot 1414.58Breaking below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader remaining short at 1396.00.

I just barely missed my call for a lower close last Friday with both the Dow and SPX eking out the tiniest of gains and the Nasdaq actually finishing lower.  Call the major averages flat on the day.  Now with December underway, it's time once again to ponder whether Santa Claus will make an appearance for his annual rally, or if Bad Santa will stagger in, fall down and pass out.  On Dow, on VIXen!

The technicals (daily)

The Dow:On Friday the Dow put in a perfect doji star whose lower shadow touched the 200 day MA and whose upper shadow failed to exceed the high of the day before.  With indicators remaining oversold for five days running, this doji  is the clearest indication of a possible reversal we've seen yet.  However, it requires confirmation, so I'm not calling this chart lower just yet.

The VIX:  And another divergence for the VIX which gained 5.38% on a day when the majors were flat.  So I was right when I wrote 'I'm going to stick to my guns and call for a higher VIX on Friday.".  And with no reversal signs to be found on this chart, I'm going to guess we go higher again on Monday.

Market index futures: Tonight all three futures are up at 1:14 AM EST with ES higher by 0.12%.  ES has been stopped for two days now by resistance around 1420 and the same thing is happening in the overnight so far.  The indicators meanwhile are maxed out at overbought and have lost their predictive power.  That leaves just the chart which right now is stuck between the 1420 barrier and whatever unseen force is preventing it from falling.  I have to say though that I don't see any real negatives in this candlestick pattern.

ES daily pivot: Tonight the pivot bumps up from 1412.92 to 1414.58.  Although ES is fading a bit, it remains above the new pivot and in fact just bounced off a close encounter with it.  So that's actually a bullish sign.  But this number absolutely bears watching on Monday.

Dollar index: On Friday the dollar dropped 0.06% but did it on a fat spinning top in dark cloud cover position.   However, having just come off its lower BB and remaining quite oversold, I believe the dollar has more upside potential than downside risk here.

Euro: Meanwhile, the euro's been on fire and playing tag with its upper BB for the third day in a row, having now crossed the 1.3000 resistance level.  And it's continuing higher in the overnight, up 0.24% so far, though drifting lower since 11 PM.  Even so, there's really no indication of a move lower here for Monday.

Transportation: As the VIX provided some negative divergence Friday, the trans followed suit, dropping 0.51% to close just above their 200 day MA at 5112.  Here we have indicators that have peaked at overbought and a bearish stochastic crossover.  I'm looking for lower trans again on Monday.  If that happens, it would be bad for stocks because the last four times the daily trans have crossed under the 200 DMA, they've then continued lower.

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      6      6           0        .538       131

     And the winner is...

I'll note that Monday is the first trading day of a month and we're now entering a period of favorable seasonality for the market.  However, I am somewhat concerned by the action of the VIX and the trans, and the repeated failure of ES to make any headway past 1420.

But until the fiscal cliff gets solved the market is totally at the whim of every politician with an opinion who decides to go on TV and begin braying loudly to advance his/her own agenda.

Still, all other things being equal, I'm going to go waaay out on a limb tonight and call Monday lower if we break below the ES pivot at 1414.58 by mid-morning.  If not, I think we might see some small gains on the day.

ES Fantasy Trader

Portfolio stats:  the account remains, for the time being, at $198,000 after 72 trades (57 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we remain short at 1396.00.  The heat's still on, but I've got plenty of A/C to keep cool.

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