Actionable ideas for the busy trader delivered daily right up front
- Monday higher, low confidence.
- ES pivot 1637.75. Holding below is bearish.
- Rest of week bias higher technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
OK, the Night Owl has been travelling and I took a week off, so there's not much point in doing a recap. I will simply point out that I was right about last Tuesday going higher and we all know the rest of the week was stinkola. You know the drill so without further ado, let's move on to another week. We're back, baby!
The Night Owl Gets Taken
But first - yes, the Night Owl fell victim to a scam last week, so I thought I'd share the experience with you. Now normally I pride myself on being pretty world-wise and savvy. When I get emails from the Chief of Police of Nigeria promising me $10,000,000, I just click Delete. But last week I got scammed and I'm still steaming. How did this happen?
Well, I always flew between New York and Florida in Business Class on Airtran. Last year Airtran was acquired by Southwest Airlines. I went to the Airtran website last week and was redirected to Southwest. I looked up my favorite flight there and found a range of fares, from $198, which presumably entitled you to travel in the hold, to $463 which was advertised as "Business Select". So naturally, that's what I chose. The price was about $20 higher that my last trip on Airtran but I figured, it's inflation.
So you probably already know what's coming. I get to the gate, I get on the plane. I look around the corner, and I'm like "Uh, where's Business Class?" There isn't any. It's simply Steerage Class from row 1 to infinity. And of course by this point it's too late to do anything about it. I wasn't going to get back off the plane after getting up extra early to catch this flight.
So after spending 2 1/2 hours with my knees up against my chin seated next to a disturbing assortment of Twelfth Night characters, I'm done. I called Southwest "Customer Relations" and their attitude was basically "tough luck pal, we delivered everything we advertised". Well I beg to differ - offering a fare called "Business Select" sure sounds like Business Class to me. Last I looked, the word "select" meant "choose" or "choice", not "non-existent". So realizing that it was a lost cause arguing with someone who obviously couldn't care less, I hung up and proceeded to file a dispute with Visa. We'll see where that leads.
In the meantime, I am apparently the last person on the planet who did not know that Southwest operates nothing but Steerage Class on all their flights. Given that, it strikes me as fraudulent advertising to promote something called "Business Select" when all it does it give you a free drink coupon and the same tiny cramped seating everyone else gets. That was the most expensive drink I ever had in my life, and it's not sitting well. Needless to say, my first flight on Southwest was also my last. Stay tuned for updates.
The technicals (daily)
The Dow: Uh OK so anyway back to the markets. Last Friday's ugly 209 point rout in the Dow on high volume drove the indicators oversold for the first time since April 22nd. (And that day proved to be a bottom). OTOH, the weekly chart is looking just plain ugly. It' still quite overbought and features an inverted hammer for a bearish RTC trigger. Ugh. So with that, no daily reversal candle, and no support til the lower BB at 14,946 I have to say this ain't looking good for Monday. The only thing that might help is the recent pattern where big one day drops have been followed by something like a 50% retracement.
The VIX: On the other hand, the VIX on Friday took a giant leap, not for mankind but for the bulls, by blasting right through its 200 day MA and its upper BB in one fell swoop to close at 16.30, the highest level since April. And once again, as I always say, the VIX rarely spends more than a day or two above its upper BB before falling back. So with that number at 15.38, I'm looking for a lower VIX on Monday. Especially given how overbought its indicators are now.
Market index futures: Tonight all three futures are higher at 1:29 AM EDT with ES up by 0.18%. Big one-day drops in ES have tended to be followed by gains, cf. April 15/16. And along those lines we note that Friday's close of 1629 left ES quite extended below the pivot. Whenever that happens, look for a retracement of some sort. The failure of any negative pin action to appear at this late hour of the night is encouraging.
ES daily pivot: Tonight the pivot crashes from 1651.75 to 1637.75. . We were way below the old number, and even with this big drop we remain below, so that's a bearish sign.
Dollar index: The dollar has been zig-zagging its way lower for a week now until Friday's bullish harami, also in thte form of a spinning top. Momentum and RSI have now turned higher and the stochastic is fairly oversold, so I'd say there's a chance (though not a certainty) of the dollar moving higher Monday.
Euro: Late last week the euro tried and failed to cross its 200 day MA. It's trying again as I write but with the indicators now overbought it's not clear how much gas is left in the tank, particularly given Friday's dark cloud cover-ish candle. If the euro cannot crack the 200 MA, it's going lower on Monday. I realize that's not a prediction, but this chart isn't crystal clear tonight
Transportation: Friday saw a 0.82% drop in the trans, notably less than the Dow's 1.36%. This drove them quite oversold (RSI=9.67) on a bullish inverted hammer. That said, we fell through the pivot on Friday afternoon and remain well inside a descending RTC. And with the lower BB still not until 6231, I think there may be a bit more downside left here before moving higher.
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 3 4 6 4 0.636 85
And the winner is...
There are some signs, though not a lot, of a reversal coming over the next few days. But one thing I think is that the late-day sell-off on Friday made the charts look worse technically than they would otherwise be, and this was complicated by the fact that Friday was the end of the month. So for all the triple digit loss on the Dow, the SPX Hi-Lo index hasn't budged and remains on 100 - check it out at stockcharts.com here. And of course, Monday is the first trading day of June, and that's historically pretty good. So call me crazy, or maybe I've been out in the roasting Florida sun too much, but I'm going to call Monday higher.
ES Fantasy Trader
Portfolio stats: the account remains at $110,375 after 12 trades (10 for 12 total, 5 for 5 longs, 5 for 7 short) starting from $100,000 on 1/1/13. Tonight we stand aside because after being away for four days I want to take a day or two to get back into the swing of things before putting on any new trades.