Actionable ideas for the busy trader delivered daily right up front
- Monday lower, low confidence.
- ES pivot 1511.67. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Well an early morning plunge and a late morning dip made it look like my call for a lower close Friday would be vindicated but it was not to be as the Dow finished up, admittedly only by 35 points but up nonetheless. Now let's figure out where we're headed on Monday.
The technicals (daily)
The Dow: While Friday's 0.25% gain doesn't seem like much, it gave us a classic hanging man. This follows an inverted hammer for two dojis in a row. It also just wasn't quite enough to keep us in the rising RTC, so that's a bearish setup. We're still not quite overbought though, so this is only a vague warning of a move lower, particularly since the upper BB has now risen to 14,115. I still think the Dow is going to want to have a look at its record 2007 highs, but I'm not convinced that will be on Monday.
The VIX: After a hammer last Thurday the VIX put in an inverted hammer on Friday to finish little-changed down just 0.97%. The striking feature here is a developing symmetrical triangle. Since the long-term trend is higher, the expectation is for the break to be higher too. If this holds true (and it's not a sure thing) then I'd be looking for a higher VIX within a day or two since this triangle is nearly complete.
Market index futures:Tonight all three futures are lower at 1: 03AM EST with ES down by a not insubstantial 0.43%. Friday's candle was a tall hanging man that followed Thursday's spinning top - two reversal warnings in a row. And the new candle forming now is trading outside the rising RTC for a bearish setup. And the stochastic is getting close to executing a bearish crossover. Overall, this chart is looking bearish for Monday.
ES daily pivot: Tonight the pivot dips from 1515.50 to 1511.67. With a gradual drift lower all evening long, we broke under the old pivot around 6 PM and remain below the new pivot - a bearish sign.
Dollar index:On Friday the dollar gave us the mother of all evening stars with a giant 0.43% gap up that just about touched the upper BB intraday. Although we remain inside a rising RTC, with indicators now slowly coming off overbought, it looks like the dollar may very well try to fill in this gap on Monday. I'm watching for a move lower here. .
Euro: Meanwhile the euro remains in its own two week long descending RTC after a far red spinning top on Friday. This move also broke support at 1.3054. Next support isn't til 1.2978 and with the euro just now bouncing off its daily pivot in a failed attempt to mover higher, I wouldn't be surprised to see it moving lower on Monday. And note that it would be unusual for both the dollar and the euro to move lower on the same day. So one of these guesses is probably wrong. All I can go by is how the charts look to me. This will be interesting to see.
Transportation:And to top off the charts, here's a bit of divergence. ON Friday the Dow rose 0.25% but the trans dropped 0.14%. Same pattern though - inverted hammer, then a hanging man. This does make me think that a retracement of last Wednesday's big gains is in the cards.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 3 4 5 6 0.692 131
March 0 1 0 0 0.000 -35
And the winner is...
With no major economic news slated for Monday and the whole sequester thing looking more like a non-sequesitur (and yes, I just invented that) and some bearish signs popping up in the charts tonight, I'm simply going to call Monday lower.
ES Fantasy Trader
Portfolio stats: the account remains $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13. Tonight we're standing aside and I'll tell you why. ES is already down a substantial 0.43% in the overnight. As a result of this, it's actually looking bullish on the hourly chart and in fact has begun rising since right around midnight. I think this bus has already left the station. I'd hate to go short, have the market close lower, and end up losing money anyway.