Monday higher if ES pivot passed

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

• Monday higher only if ES pivot passed, else lower.
  
• ES pivot 1602.67.  Holding below is bearish.
• Resr of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

My reluctance to call the market higher again last Friday after three solid days of gains proved well-founded with the Dow dropping 115 points as triple-digit days being to prove more common than the thermometer in Las Vegas this summer.  So much for end-of-quarter window dressing.  Now we're faced with another holiday-shortened week - this one coming in the middle of the week.  How will this affect the mood of Mr. Market?  Let's catch up with him before he fires up the grill and touches off the fireworks.

The technicals (daily)

The Dow: On Friday the Dow gave back all of its gains from Thursday and then some, cutting short the advance of the three white soldiers in dramatic fashion with a quick exit from the rising RTC for a bearish setup.  The stochastic continues to rise but OBV is now down for three days straight.  With an almost-bearish engulfing pattern in place, this chart is suddenly looking rather negative.

The VIX:  After a small green spinning top on Thursday the VIX gave us a bigger red one on Friday.  Net result - zip, zero, nothing as the VIX closed absolutely unchanged.  It did however close outside the descending RTC so that's a bullish setup.  However, the indicators are still only about half way to oversold so I'm a bit wary of this.  OTOH, VVIX tested its 200 day MA once again on Friday and succeeded again, so we might indeed be seeing a higher VIX soon.  Last Thursday night I wrote "this run may be reaching an end and we could see a reversal in a few days", and I'm sticking to it.

Market index futures: Tonight the futures are mixed at 1:05 AM EDT with ES down by 0.13% but NQ up 0.03% and YM up two ticks (0.01%).  On Friday ES gave us a nearly dark cloud cover-looking thing that closed outside the rising RTC for a bearish setup.  However the overnight is forming as something of a hammer as ES has been drifting higher since 9 PM.  At this rate it should hit the pivot around dawn which will be do or die time.  Since the indicators are still not overbought, this chart is something of a mixed picture tonight so I'm not calling it.

ES daily pivot: Tonight the pivot dips from 1605.17  to 1602.67.  After dropping under the old number just before Friday's close we remain below the new pivot, a bearish sign.

Dollar index: On Friday the dollar posted a big bullish engulfing pattern to soundly reject Thursday's doji and remain inside its rising RTC.  But indicators are now at extreme overbought levels and with some resistance in the 57 - 57.15 area ($USDUPX) it's not clear to me how much upside is left here.  We'll need to see some confirmation on Monday.

Euro: The euro tested its 200 day MA on Friday and was rejected but nonetheless closed just outside its descending RTC for a bullish setup on small losses.  With the indicators now quite oversold and some decent support in the 1.3010 area, this chart looks ready to move higher.  And we are indeed drifting higher in the overnight so far up 0.06%.

Transportation: On Friday the trans also gave us a rising RTC exit for a bearish setup along with a bearish harami candle.  So even though the indicators are not yet oversold I'm starting to think we could see lower here soon.


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        3      4      6           4        0.636     85
June       6      5      6           0        0.545    543

     And the winner is...

Much of the bearish aspect of Friday's charts was baked in by a last minute downdraft as traders ran for the exits ahead of a pre-holiday week weekend.  Still, the bulk of the evidence points to a lower close on Monday.  However, Monday is the first trading day of July and historically one of the best days of the entire year, so I'm also loath to go against that sort of track record.  So with two conflicting forces at work I'm going to appeal to the ES pivot with a conditional call: if ES manages to break through its pivot by mid-morning, we'll close Monday higher.  If not, we close lower.

ES Fantasy Trader

Portfolio stats: the account remains at $115,000 even after 14 trades (11 for 14 total, 6 for 6 longs, 5 for 8 short) starting from $100,000 on 1/1/13.  Tonight we stand aside on the conditional call.