Monday, February 4, 2013

Monday uncertain, doji possible

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday uncertain, doji possible..
  • ES pivot 1504.33.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Recall that last Thursday night, bearish sentiment appeared to be on the wane and although things didn't look particularly bullish either, I let my vote be decided by the historically strong odds favoring the upside for the first day of February.  And that bet was rewarded with a nice 149 pop in the Dow that gave us out first close back over 14,000 since teh historic highs of October 2007.  And predictibly, that was the lead-in story to the TV news that night, and it hit the front page of the paper the next day.  That alone is generally a good bearish sign, but is it ready to kick in just yet?  Aye, there's the rub.  Let's scratch the charts and see who purrs.

The technicals (daily)

The Dow: Friday's 1.06% gain rescued the Dow from the very edge of the rising RTC to put us solidly back into it.  It also canceled the developing trend of two consecutive red candles.  And it kept the indicators at overbought, but that's counted for little lately.  So now 14K becomes support and there's no real bearish signs on this chart tonight.

The VIXAs the Dow popped on Friday, so did the VIX tank, re-establishing their inverse correlation nicely.  In fact the VIX fell 9.68% in a big gap down that dumped it right out its rising RTC for a bearish setup.  It also caused a bearish stochastic crossover.  And caused the indicators to peak at overbought and begin moving lower.  That's three strikes, yer out.  I'd expect more downside here on Monday.

Market index futures:Tonight the futures are mixed at 1: 07AM EST with ES down by 0.03%, NQ down 0.11% but interestingly, YM actually up 0.02% - an unusual occurrence.  With a bearish setup last Thursday, things were looking iffy for ES for Friday.  However, Friday's pop rescued the RTC here too and just managed to get us back inside.  And I note that we just got a bullish stochastic crossover from a high level.  We've seen three of those in the last three months and every time after that ES moved higher.

So I'd say unless we get a day or two of red candles, this run's not over, even at these levels.  I'm thinking now that with the SPX having hit 1500 and not immediately fallen back, and with the Dow now above 14K, we're going to revisit the all-time highs before seeing a pullback.

ES daily pivot: Tonight the pivot rises from 1494.83  to 1504.33. We were above before and remain above, though with ES flat, it's only by two points now.  Still, it remains bullish unless ES cracks through the ice Monday morning.

Dollar index:The dollar also resumed its inverse correlation with the market Friday, gapping down 0.11% for a doji and continuing to dribble down the lower BB.  But with indicators now quite oversold and the stochastic just a hair away from a bullish crossover, there's at least a chance of a move higher Monday and if not then, then on Tuesday.

Euro: After another big gain Friday, the euro is giving back some ground in the Sunday overnight, now at 1.3628.  That leaves it right on the edge of its rising RTC.  Any close lower and its a bearish setup.  It will take a close above 1.3658 to cancel that.  With indicators finally starting to come off overbought, it's looking like the euro may see more downside Monday.

Transportation:Late last week we were looking at what appeared to be the start of a breakdown in the trans as they fell right out of their rising RTC on Wednesday and then only managed a weak doji on Thursday.  But on Friday they bounced right back for a 0.91% gain that confirmed the doji and makes the earlier action look like the two day fake out breakdown we got on January 7th and 8th.  More upside seems likely here on Monday.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3       0.533

February   1      0      0           0       1.000     149

     And the winner is...

The usual pattern is generally for big up days to be followed by a day of consolidation.  With no major economic news coming out on Monday and with no great technical tugging either up or down, I think that this is pretty much what we can expect.  Accordingly, I'm going to call Monday uncertain, not because I have no idea if we're going to have a big move up or down, but because I think we'll have a finish near where we start - another doji day.

ES Fantasy Trader

Last Thursday night we went long for the first time this year despite some bearish-looking RTC signals.  The decision was vindicated as we took a decent 9,75 point profit just before lunchtime Friday morning.  I took this exit not on any quantitative signal but just because it looked to me like ES was done for the day.  Turns out, we were pretty close to the top by then so it wasn't a bad trade.
Portfolio stats: the account now rises to  $98,750 after 5 trades (4 for 5 total, 1 for 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're going to stand aside in anticipation of a low probability of any significant moves.
SLD    10    false    ES    MAR13 Futures     1507.50    USD    GLOBEX    FEB 1 11:43:52
BOT    10    false    ES    MAR13 Futures     1497.75    USD    GLOBEX    FEB 1 00:46:19

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