Actionable ideas for the busy trader delivered daily right up front
- Monday higher, medium confidence.
- ES pivot 1544.50. Holding above is bullish..
- Rest of week bias higher technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader going long at 1553.75.
If you recall last Thursday night I said we'd go higher Friday if the ES pivot held. Well ES made one half-hearted attempt to bust below it at 9:45 AM but that didn't last long and after that it was just up, up and away. The Dow finished up just 0.07% mostly because IBM was the lead anchor in the room. The SPX ended with a nice 0.88% gain. So once again, the pivot prevails. But that was then, what about Monday? We now challenge the charts to stand and deliver.
The technicals (daily)
The Dow: So the Dow was up just a little but in so doing it formed a nice almost-dragonfly doji. We saw one of these to the downside last week and it worked out nicely. With the indicators now very nearly oversold and the stochastic closing in a a bullish crossover, there's at least a suggestion of a reversal here. It might be stronger once we exit the descending RTC though, possibly in a day or two.
The VIX: Thursday night I wrote "the VIX rarely spends this long above its upper BB before falling back. It's now definitely due. " And sure enough, bada-bing, on Friday it came right back down, losing 14.75% and falling right back through its 200 day MA for the second time in four days. That also provided a rising RTC exit for a bearish setup and left the stochastic on the brink of a bearish crossover. Barring any sudden news on Monday that the Bank of Cyprus is going to issue new bonds denominated in Greek yogurt cups, this chart looks ready to move lower again.
Market index futures: Tonight all three futures are non-trivially higher at 1: 00 AM EDT with ES up by 0.47%. ES on Friday gave us a very solid gain on a something that looks like a bullish piercing pattern, only offset with the green candle higher than the red one. The name of this escapes me at the moment, but I believe it's bullish too. We're also getting some nice follow-through in the overnight which so far is well outside the descending RTC for a bullish setup. And the stochastic has now just completed a bullish crossover. So this chart is looking to be in pretty decent shape for Monday.
ES daily pivot: Tonight the pivot rises from 1539.42 to 1544.50. That still leaves us a good 10 points above the new pivot so that's a good bullish sign for Monday.
Dollar index: Last Thursday night I wrote "with indicators continuing to rise, I have to vote again for the dollar to move higher on Friday". And after some hesitation Thursday, the dollar posted a 0.20% gain on Friday to confirm the descending RTC bullish trigger. With that plus indicators now rising sharply, the dollar looks poised for more upside again on Monday..
Euro: It was an unusual day on Friday - both the dollar and the euro rose. And while I called them both higher, I was sure one of those calls would be wrong. But I was wrong, because I was right (if you follow me). It was a small gain on a tall inverted hammer, but a gain nonetheless. And the upside has resumed in the Sunday overnight, now up 0.07%. With the stochastic ever so close to a bullish crossover and a three-day winning streak in progress, I'm again calling both the dollar and the euro higher on Monday. And like I said on Thursday, one of those calls is probably wrong - unless the two currencies move in sync again.
Transportation: Once again, the trans greatly outperformed the Dow on Friday, even after accounting for IBM's big flop. Their 1.51% gain brought them right back to where they were three days earlier. Of course, that now established 6042 as some fair resistance but with the indicators now way off overbought and the stochastic about to form a bullish crossover, there's clearly some gas available in the tank to attempt a breakout on Monday. Friday's pop also provided a descending RTC exit for a bullish setup.
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 5 2 4 2 0.778 444
And the winner is...
With Dr. Copper giving us a descending RTC breakout on Friday, plus some guy on CNBC telling us copper no longer matters (that's always a sure sign, isn't it?) the TLT looking toppy, the trans looking ready to rise, the pivot on the upside, the SPX Hi-Low indicator only up to 90 and continuing to rise, and both the futures and currencies guiding higher, the only logical course is to call Monday higher.
I'll readily admit I'm not feeling particularly bullish after the lousy week I had last week (down 3.16%, my worst week in over a year) but I'm not here to push my feelings, only to analyze charts and make observations. And right now I'm observing a lot of positive signs on the daily charts. QED.
ES Fantasy Trader
Portfolio stats: the account remains at $98,250 after 10 trades (8 for 10 total, 3 for 3 longs, 5 for 7 short) starting from $100,000 on 1/1/13. Tonight we go long at 1553.75. Reminder - you can follow these trades live on Twitter @nightowltrader. I won't flood your feed with chatter - just the entries and exits as I make them.