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- Monday uncertain.
- ES pivot 1626.92. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Well chalk up another miss for the ES pivot theory. By mid-morning Friday ES looked more interested in holding below its pivot than above. But a late-afternoon rally helped propel it, along with the rest of the market to modest gains, so that's a miss for us. Whatever - we leave that behind and look ahead to what the charts may tell us about the upcoming week.
The technicals (daily)
The Dow: Rather than confirming last Thursday's spinning top warning, Friday's small hanging man merely prolonged the indecision. We remain inside a strong rising RTC while the indicators are all very overbought, much like the stretches we saw back in January and March. The most bearish thing I can see here is that we've peeled away from the upper BB. But if you look back YTD, every time that's happened, we've only moved sideways for a while, not down. So for the time being, I'm still not bearish on the Dow for Monday.
The VIX: After seemingly breaking out of its latest trading range on Thursday, the VIX dropped right back into in, closing in fact a bit below it at 12.59. This gave us a bearish stochastic crossover from a low level, and those are usually good for a day or two of lower prices. With the break below 12.65, next support is in the 12.25 - 12.00 area. I think we have a shot at that on Monday.
Market index futures: Tonight all three futures are lower at 1:13 AM EDT with ES down by 0.28%. After looking like it was ready to turn on Thursday, ES surprised by rising Friday to remain in its ascending RTC. The gap down in the overnight, however, drops us out of that channel for a bearish setup. What's not clear though is if ES is actually planning a move lower or just some sideways consolidation between 1620 and 1630. This pattern isn't at all clear so I'm going to wait for some confirmation on Monday.
ES daily pivot: Tonight the pivot inches up from 1625.58 to 1626.92. After a gap-down at the open on Sunday evening, ES has been slowly drifting back up. This is an encouraging sign, but we're still below new the pivot. We'll need to break above or this indicator will remain bearish.
Dollar index: Last Thursday I wrote "there's still a bit of room to run higher from 56.85 on Friday." And run it did, as the dollar touched its upper BB before pulling back a bit for a gap-up evening star. With overbought indicators, this pattern usually means lower is ahead, so that's what I'm expecting on Monday.
Euro: On the other hand, I wasn't expecting the euro to drop back below its 200 day MA and on down to its lower BB on Friday, which it did before recovering to close just above at 1.2853, giving up support at 1.3000. Still, the euro seems to want to try again, as it is now down 0.06% in the Sunday overnight, just barely above the 200 MA at 1.2973. I'm not looking for a big crash on Monday, but we could see the euro remain in the general vicinity of the 200 MA.
Transportation: The trans really surprised me on Friday. I was sure they were going lower but instead they scored a 0.58% gain, handily beating the Dow's 0.24%. This sort of outperformance indicates a resilience I'm reluctant to stand in front of, so despite all the negative factors I cited last Thursday night, I'm now not convinced the trans will move lower 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 7 5 5 3 0.667 328
May 1 2 1 4 0.714 26
And the winner is...
Things aren't really looking all that bad tonight - with the lone exception of the futures. Now the Monday after Mother's Day is historically pretty strong, but this is also op-ex week with all that implies. So while I'd like to call the market higher on Monday, I keep coming back to those futures. But with nothing else seeming to lend much support to the bears, I'm going to simply have to call Monday uncertain.
ES Fantasy Trader
Portfolio stats: the account 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 because of the "uncertain" call.