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- Monday higher, low confidence.
- ES pivot 1544.83. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
I was patting myself on the back when the Dow tanked right out the gate on Friday morning because I had called the close lower - and then spent the rest of the day second-guessing myself as the market clawed back from a triple digit decline to finish just 41 points down. I find that sort of resilience most interesting and worthy of further investigation. And so without further ado, we investigate further. Bring on the charts!
The technicals (daily)
The Dow: On Friday the Dow put in a classic hammer but it doesn't mean much as it's not coming at the end of a trend. What we have here is more sideways movement but that has caused an exit to the rising RTC, so we now have a bearish trigger for the Dow. Increased volume and indicators declining off overbought support this notion. So this chart looks bearish tonight.
Market index futures: Tonight all three futures are higher at 1:14 AM EDT with ES up by 0.10%. On Friday ES gave us a hammer but remained in its descending RTC. However, the small overnight gains so far are enough to swing the indicators back to rising mode and the stochastic is very close to forming a bullish crossover. So Friday's decline seems to have wrung a lot of bearishness out of this chart. And while it's a bit premature to call it higher on Monday, the stage is at least set for that.
ES daily pivot: Tonight the pivot drops from 1552.67 to 1544.83. That, combined with the slight gain in ES has now pushed us above the new pivot, a bullish sign.
Dollar index: And another hammer on this chart too. This time, its tail.just tickled its lower BB before rebounding. There's no RTC for guidance here but the stochastic appears to be gearing up for a bullish crossover in a day or two. This pattern requires confirmation, but I'd say the dollar at least has a shot at moving higher from here.
Euro: And in the "what was I thinking" department, I blew this one badly last Thursday night. The euro did not decline on Friday, instead it posted a second day of healthy gains - so healthy in fact that they drove RSI to officially overbought. And I'll note that it's been all downhill since early Friday afternoon, with the Sunday overnight already down 0.22%. So there are at least some signs that the euro may move lower on Monday and that would correlate with my guess of the dollar moving higher.
Transportation: In one of the largest divergences I've seen in a while, the trans gained 0.46% on Friday when the Dow was down 0.28%. And while the trans put in a similar-looking candle to the Dow, this one was a clear hammer. In addition, it closed just outside the declining RTC for a bullish setup. And the stochastic completed a bullish crossover. And RTC went oversold and momentum bottomed and is now rising. Those all point to continued higher for the trans on Monday.
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 5 7 5 2 0.500 121
April 1 1 1 0 0.500 41
And the winner is...
Call me crazy, but with copper seemingly finding support, the TLT putting in a huge gap-up evening star, the trans outperforming, the VIX readying a move lower, no major economic news on Monday to potentially torpedo the market, ES back above its pivot and showing no sign of wanting to follow through Friday's decline, I'm going to vote for a close of Monday higher, despite the currencies and the fact that Monday is historically weak. That's all she wrote.
ES Fantasy Trader
Portfolio stats: the account remains at $94,000 after 9 trades (7 for 9 total, 3 for 3 longs, 4 for 6 short) starting from $100,000 on 1/1/13. Tonight we stand aside yet again because this isn't really quite the setup I'm looking for. It might be by tomorrow night.