- Monday uncertain, small positive bias..
- ES pivot 1510.50. Holding above is bullish..
- Rest week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
On Friday in the absence of any major market moving news, the technicals reasserted themselves and we got the results I'd been expecting Thursday night with the Dow gaining 120 points. We now get set for a full week of trading and crunch the numbers to see which way Monday might go.
The technicals (daily)
The Dow: Friday's big move was significant because it not only reclaimed the 14K level (just barely) but also just edged out of a new developing descending RTC. And it puts us right back to where we've been all month long, either opening or closing very close to 14K. So just when it looked like a pullback might be getting underway, we're back to where we started. Those two down days last week did take us almost to oversold levels though, providing more space for another run to the upside. But with the weekly chart now showing three dojis in a row, it looks like the most likely scenario is more sideways action for a while.
The VIX: Notice how well the VIX worked out on Friday. Thursday night I pointed out how the VIX had spent two days touching its upper BB and how it rarely did that more than two days. Well on Friday it obliged us by dropping 6.90% to confirm Thursday's inverted hammer. With a red candle in and indicators having peaked at overbought, I'd say more downside is likely from here.
Market index futures:Tonight all three futures are just barely higher at 1:06 AM EST with ES up by 0.05%. The ES daily chart continues to resemble the Dow, so those comments again apply here - an incipient breakdown seems to be stalled but with such a big move up on Friday, we might be in for some consolidation on Monday. I will note the increased volume on Friday indicating conviction buying and a newly completed bullish stochastic crossover - always a positive sign.
ES daily pivot: Tonight the pivot rises from 1501.92 to 1510.50. We were so far above on Friday that even with relatively flat trading in the overnight, we remain above the new pivot, a bullish sign.
Dollar index:The dollar put in a small 0.04% gain on Friday on an inverted hammer. With indicators now quite overbought (RSI = 97.9), I wouldn't be surprised to see a move lower here on Monday. The dollar also has a large unfilled gap from last week waiting to be retraced. .
Euro: While the euro didn't move higher on Friday as I had expected, instead putting in a spinning top, it is moving higher in the Sunday overnight where it is already up 0.17%. While we remain in a descending RTC, it's a fairly wide one (so not very good) and the euro has just broken above its daily pivot so I'd say it might just continue higher on Monday.
Transportation:The trans did quite well on Friday with a 1.16% gain giving us a bullish engulfing pattern and causing the indicators to hook up from nearly oversold levels. The pattern all year though has been for big one-day gains to be followed by some retrenchment, so a small loss isn't out of the question here on Monday.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 3 3 3 5 0.727 152
And the winner is...
All in all, the charts aren't looking too bearish tonight but with the big move we had on Friday, we might need a day or so to digest those gains. So my expectation is for an uncertain Monday but with a small positive bias. his isn't a bull market or a bear market - it's a crab market as we continue to crawl sideways.
ES Fantasy Trader
Well we had the right idea going long last Thursday night but got in just a bit too late and out a bit too early. The net result was a meager 0.75 point gain. Still, that beats a loss of any size so I'll take it.
Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13. Tonight we're standing aside again.
SLD 10 false ES MAR13 Futures 1506.00 USD GLOBEX FEB 22 11:05:05 0001f4e5.5126f867.01.01 20.10 null
BOT 10 false ES MAR13 Futures 1505.25 USD GLOBEX FEB 22 01:11:27 0001f4e5.5126ae88.01.01 20.10 null