Monday, January 28, 2013

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1493.92.  Holding above is bullish...
  • Rest of week bias higher technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Last Thursday I made the call that we'd go higher on Friday only if ES could break above its pivot point of 1490.75.  That happened at 2:40 AM and we did indeed close higher, with the Dow gaining another 71 points and the SPX closing above 1502 for the first time since November 2007, right when we stood on the brink of the cliff that led us into the Great Recession.

Never discount the power of the pivot.  Take a look at last Friday's SPX chart in 5 minute bars and you'll see how they made two stabs at knocking it lower, at 10:35 AM and again at 10:45 AM.  Both times the index dropped to exactly 1490.75 on the dot and bounced right off.  And right after the second failure, the bears simply packed up and went back into hibernation.

Now let's figure out how the last week of the month might play out.

The technicals (daily)

The Dow: The Dow continues its quite extraordinary rally with six solid green candles in a row and 11 of the last 12.  We've now hit my target of 1500 for the SPX and now Dow 14K is only 105 points away.  Everything I've been saying about this chart remains true and despite the length of this rally, I see nothing technically bearish here yet.  Obviously, we have to come down sometime, but so far there's no sign of it.

The VIXWell, there might be a sign here.  On Friday the VIX posted a 1.58% gain, unusual in view of the fact that the market was up too.  This had the effect of canceling Thursday's doji and also created a bullish stochastic crossover.  With RSI continuing to rise off oversold I'd say we have a good chance of moving higher again on Monday, and that can't be good for stocks.

Market index futures:Tonight all three futures are mildly higher at 1:11 AM EST with ES up by 0.12%.  Like the Dow, ES is on a roll and after putting in two strong green candles to end last week remains firmly in its rising RTC.  The indicators also remain broken at overbought levels and with ES continuing higher once again in the overnight, there really isn't any sign of a pullback here either.

ES daily pivot: Tonight the pivot rises from 1490.75  to 1493.92.  We were above before and remain above, though  only by half as much, but that's still undeniably bullish.

Dollar index:The dollar dropped 0.23% on Friday as it continues to bounce around between 55.10 and 54.85 on the $USDUPX.  We got a morning star but also a bearish stochastic crossover.  But with this chart literally all over the place and no visible trend, I'm still not going to hazard a guess as to where this is headed Monday.

Euro: The euro had a good day Friday, hitting its upper BB and closing at 1.3469.  In the overnight we're just sort of meandering near the top of Friday's candle so there's really little to be gleaned from this chart.  The weekly chart though continues to look bullish for a while, though I note the nearby presence of the 200 week MA at 1.3521 that might provide some resistance before long.

Transportation:The trans seem just unstoppable, packing on another 0.26% on Friday to continue a streak that began way back on January 9th.  We did get a hanging man - but we also got one last Tuesday and that came to naught.  RSI remained pegged at 100 for the third straight day but still no sign of this rally ending.  The most we can do is see if this hanging man is confirmed on Monday.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    4      5      6           2       0.545

     And the winner is...

As much as I want to be bearish simply because it feels like this rally has now gone on far too long without any pullback, I'm still not seeing it in the charts.  I do think that since we managed to close above SPX 1500 that the next stop is Dow 14,000.  And if that holds, then we're going to revisit the all time highs of 2007.  I figured we'd pull back at SPX 1500 and that didn't happen.  The VIX is inching higher but the market's not going down.  I'm not sure what's going on here, short-squeeze, dumb money, PPT, name your usual suspects, but we all know that fighting the trend is a bad idea.  Therefore, while SPXS looks attractive at these levels, I'm going to hold off on my desire to hedge until the market shows me the top.

Um, oh yeah, so where are we going Monday?  Well in the absence of anything bearish-looking, I've got to say that it looks like Monday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $93,625 after 3 trades (2 for 3 total, zero for zero longs, 2 for 3 short).  Tonight we're standing aside simply because I don't want to get on the bus just before it reverses direction , and I just can't shake the feeling that this is going to be happening Any Day Now.

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