Monday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Monday uncertain.
  
• ES pivot 1588.42.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Last Thursday night, ES never even once challenged its pivot and the rest is history - a 142 point gain for the Dow, including a brief intraday foray over the 15K mark, and another new record for the SPX, closing at 1614.  I'll admit I'm unaccustomed to trading at such lofty levels and it makes my job harder since there are no resistance levels left above us.  But the charts will guide us as they always do so let's see what's cooking for Monday.

The technicals (daily)

The Dow: Friday's strong performance for the Dow totally canceled all the bearish signals we were seeing earlier last week - the RTC exit, the overbought indicators and the stochastic.  However, in their place we have two new bearish signs - first, the Dow closed above its upper BB at 14,957 and second, it is now rather highly extended from its daily pivot, at 14,789.  But neither of these is an immediate reversal sign and the Dow has amply demonstrated it mountaineering talent all year so far with its amazing ability to keep climbing the upper BB for days on end.  So we still can't call a top here.

Oh, and Friday's gain was notable also for breaking through resistance at 14,370 that stopped the market cold twice last month.  That also leaves the weekly chart looking rather bullish.

The VIX:  And meanwhile the VIX on Friday posted a 5.45% gap-down loss to form a nice bullish morning star.  But that won't be complete until Monday and this drop was enough to just barely form a bearish stochastic crossover from a low level.  And just as the bullish crossovers from a high level are often good for a day or twoof higher action, so the bearish crossover from a low level often means lower to come in the short term.  My best guess is that we won't see much movement in the VIX on Monday.

Market index futures:Tonight the futures are mixed at 1:01  AM EDT with ES dead flat, YM up 0.07% and NQ up by 0.18%.  Like the Dow, ES closed above its upper BB on Friday but like the Dow it's too soon to call ES lower just because of that.  Note too that ES has the same stochastic crossover thing going like the VIX - this one bullish from a high level.  Whenever you see this, very often it takes precedence over other bearish signs.

ES daily pivot: Tonight the pivot pops from 1588.42  to 1604.08, crossing the 1600 mark I believe for the first time ever.  It is a tribute to the strength exhibited by ES on Friday that even after this big jump, we're still above the new pivot by a good four points, so this metric remains bullish.

Dollar index: On Friday the dollar posted a 0.11% loss on an inverted hammer.  But we still have a newly completed bullish stochastic crossover and indicators just coming off oversold.  Friday also gave us a bullish RTC trigger so I'm going to guess the dollar goes higher on Monday..

Euro: And the euro managed to retrace some of its Thursday losses on Friday to close at 1.3113.  That just missed getting us back into the rising RTC so technically that counts as a bearish trigger.  The Sunday overnight however is trading a bit higher, up 0.09% as I write, so this chart is sort of caught in the middle and just too tough to call.

Transportation: As it has often recently, the trans outperformed the Dow again on Friday, posting a 2.05% gain to the Dow's 0.96%l  This impressive jump arrested the decline of the indicators and canceled all the bearish signs (see the Dow above).  We did hit the upper BB intraday but pulled back a bit into the close.  This all makes me think there's still enough gas in the trans tank to motor at least a bit higher on Monday.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

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      7      5      5           3        0.667    328
May        0      0      0           3        1.000      0

     And the winner is...

I am encouraged by the failure of ES this evening to show any interest in retracing last week's big gains.  Beyond that we have a strong showing from the trans, copper exiting a downtrend, and the TLT tanking - right through its 200 day MA,  So while last Friday's big moves left some charts bumping up against possible resistance points, I think there's enough mojo left to squeeze out at least one more day of gains.  However, because Thursday and Friday were so strong, it may be time for a pause so I'm just going to play it safe and call Monday uncertain.  If I had to hazard a wild guess, I'd say maybe we'll go higher a bit in view of the lack of any scheduled economic news that might torpedo the market.  A doji day is not out of the question.

ES Fantasy Trader

Portfolio stats: the account now remains at $107,750 after 11 trades (9 for 11 total, 4 for 4 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside again in view of the uncertain call.