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- Monday lower, medium confidence.
- ES pivot 1582.25. . Holding below is bearish..
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader going short at 1576.00.
Last Thursday night I wrote "Perhaps this will be the doji I thought we'd see (but didn't) on Thursday." Well sure enough, Friday gave us a perfect dragonfly doji, with a Dow closing down just 0.08 points (not percent). So on Sunday night, with the market at the same level it was on Thursday, what has changed? The charts will tell us, as usual.
The technicals (daily)
The Dow: The dragonfly doji is not all that common, and coming as it does after four solid up days is at least a little cause for concern. It did not take us out of the rising RTC but it did drive RSI even more overbought (now 90), sent money flow lower and put the stochastic into position to execute a bearish crossover. So overall, this chart now has a bearish cast, for the first time in a week.
The VIX: And I was right not to call the VIX higher last Thursday night, as it continued downward for the seventh day in a row losing another 1.47% on Friday to close at 12.06. But RSI is now quite oversold (1.35), the stochastic is in position for a bullish crossover soon, and even the lower BB isn't too far away now at 11.57. Although the candles aren't suggesting a reversal yet, the overall gestalt here suggests we might get a hammer on Monday.
Market index futures:Tonight all three futures are lower at 1:36 AM EDT with ES down by 0.28%. Friday's ES candle was a distinctly negative bearish engulfing pattern. And the overnight is seeming to confirm that as we continue lower. Friday closed just outside of the latest rising RTC for a bearish setup and it looks like we're now getting the bearish trigger. We also have a just completed bearish stochastic crossover, so all the signs are pointing lower tonight.
ES daily pivot: Tonight the pivot dips from 1587.17 to 1582.25. After spending Friday below the old number, we remain below the new pivot thanks to a decline around 10 PM Sunday, so that's a bearish sign.
Dollar index: The dollar's got a funny declining stair-step thing going as its candles have been alternating between higher and lower for six days now, though the overall trend is down. So despite oversold indicators, we don't really have any sign of a trend change here yet.
Euro: The euro continues to struggle with resistance at 1.3116. After failing there on Friday and closing lower, the Sunday overnight was similarly rejected and is down again, now 1.3083. And with the indicators looking to have peaked at oversold, more downside seems to be in the cards here.
Transportation: And the trans on Friday moved lower for the second day in a row, down 0.34% this time. This left them right on the edge of their rising RTC. Any close lower on Monday would be a bearish setup. With the indicators now overbought and both momentum and money flow having peaked, more downside is at least a possibility - though I have more confidence in the euro moving lower Monday , which would imply a move higher for the dollar.
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 3 2 3 0 0.600 20
And the winner is...
Tonight things seem to be lining up on the bear side. The trans appear to have ended their run and are down two in a row, the VIX may be getting ready to move higher, and the futures are looking decidedly negative. So I just have to go with what I'm seeing and call Monday lower.
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 go short at 1576.00.