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- Monday lower, low confidence.
- ES pivot 1701.58. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader remains short at 1643.00.
Last Thursday night I wrote "we will see Friday higher, but less than Thursday. We could possibly see some sort of topping candle in the process." And that's exactly what we got, with the Dow advancing 30 points on a classical hanging man. Bada bing! Now things get tricky. Will we see a follow-through on the reversal candle or is this going to be yet another head fake of the sort we've been seeing all year? Only the charts can say so that's where we're headed right now.
The technicals (daily)
The Dow: It's a funny thing about the hanging man - it means the Dow ended the day at its high of the session, and yet this is a bearish candle. However, looking at the bigger picture, it doesn't look all that grim. The upper BB is still at 15,704, the indicators are now overbought but not extremely so, we remain in a new rising RTC, and the stochastic is nowhere near forming a bearish crossover. So overall this one has to be a question mark that will require confirmation on Monday.
The VIX: Ah, the poor poor VIX - last Thursday I wrote "[a bunch of stuff] spells continued lower for Friday. Next support isn't til 12.43". Well 12.43 came and went in the blink of an eye as the VIX closed down 7.42% to break just under 12. We're now sitting on the lower BB and have just entered oversold territory. However, the stochastic is only halfway to forming a bullish crossover. Still, the VIX is one of those charts that consistently respects its BB's. So I'd expect a bounce within a day or two at the most here.
Supporting this idea is VVIX which also hit its lower BB on Friday with a hammer along with extremely oversold indicators and a stochastic positioning itself for a bullish crossover.
Market index futures: Tonight all three futures are lower (for a change) at 12:51 AM EDT with ES down by 0.10%. On Friday ES put in a tall hanging man that brought the indicators back to overbought. Coming as it does so close to passing 1700 makes me think this chart may be taking a pause on Monday.
ES daily pivot: Tonight the pivot rises from 1696.17 to 1701.58. This marks the first time the pivot has passed 1700. ES's drift lower in the overnight is leaving it just barely above the new pivot so I will be expecting a test before the open on Monday. As usual, bouncing off is bullish, breaking under is bearish. The latter is a definite possibility.
Dollar index: The dollar remains in a down/up/down oscillating pattern, down 0.54% on Friday with a bearish engulfing pattern. But we saw an identical pattern on Wednesday and it didn't pan out. So with 200 day MA support just below us, I'm not touching this chart. Logic says it's going lower but this chart has been anything but logical lately..
Euro: Despite putting lower highs and lower lows for three days now, the euro remains in a rising RTC and on Friday it put in a bullish piercing pattern. That said, the indicators are still closer to overbought than oversold and the overnight is unable to advance. I think on balance this chart is bullish for Monday but not unequivocally so.
Transportation: Last Thursday I was worried about the trans being overextended from their pivot though I thought one more up day might be possible. Alas it was not to be as the trans dropped 0.28% on a divergence from the Dow which was up 0.19%. This little star at overbought levels makes me think that lower is on the way here 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 3 4 6 4 0.636 85
June 6 5 6 0 0.545 543
July 10 2 4 4 0.875 486
August 2 0 0 0 1.000 158
And the winner is...
I'm starting to see some more bearish warning signs tonight compared to last Thursday. Of particular concern are the VIX and the trans. Then there's the fact that tonight is the first night in a while that all three futures have not been moving higher at this hour of the morning. So despite some hesitation because this has been a tricky call all year so far, I'm going way out on a limb and calling Monday 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 remain short at 1643.00. We're in too deep to ditch this trade now. I think it would be a mistake to dump it just when the market hits a record high.