Monday, August 5, 2013

Monday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • 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 VIXAh, 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
                                             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
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.


  1. "We're in too deep to ditch this trade now." Sounds like a good R&B song title.

    Me and Mrs. NightOwl,... we got a thing,... going on. We're in too deep to ditch this trade now... We both know that it's wrong, but it's much too strong... to let it go now.


  2. I feel for you Night Owl. Only you can decide what is best for you and your account. All the best to you. From what I recall, although you usually don't need to use your stops, you usually have 1 in place just in case. I hope this cycle lets you out of this trade soon. Thank you again for your nightly posts.

    1. No need to feel *too* bad for me. The ESFT is a paper trade, so the only thing that's really hurt here is my pride.

      I don't run with any stops in the ESFT, though in this particular case they might have helped.

      For the record, my real account is still up 13.65% YTD, so that's not too bad. Also, if you look at my "Accuracy" section, you'll see that in my daily calls, I've collected positive Dow points in six of the first seven months of this year.


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