Monday, October 21, 2013

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1734.58.  Holding above is bullish.
  • Resrt of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside

Well the bears made two attempts to knock 'em lower Friday morning but ultimately to no avail.  The Dow ended up another 0.18% while the SPX gained a healthy 0.65%.  But that was then and this is now.  So let's get right to it and figure out where Monday may be going.

The technicals (daily)

The Dow: Thursday's dragonfly doji came to naught on Friday as we added on another 28 points.  I've noticed that despite its whimsical name and rather dramatic appearance, the dragonfly doji isn't the best reversal indicator.  So with rising volume and a strong rising RTC, it looks like this chart remains bullish despite being fairly overbought at this point.

The VIXLast Thursday I wrote "I don't think the VIX is done falling."  And it wasn't, down another 3.26% on Friday.  But it was  on a green spinning top.  Combined with now oversold indicators and a modicum of support in the immediate vicinity, we've got at least a hint that the VIX is gearing up for a move higher in the next day or two.  A rise in VVIX supports this idea.

Market index futures: Tonight all three futures are higher at 12:56 AM EDT with ES up by 0.13%.  ES continued marching up its upper BB on Friday despite indicators that are now pretty overbought.  But it remains well inside its rising RTC and with a three white soldiers pattern this chart continues to look bullish.

ES daily pivot: Tonight the pivot rises from 1720.92   to 1734.58.  We remain above the new pivot so this indicator remains positive.

Dollar index: On Friday the dollar put in a skinny little doji to arrest its  recent decline.  The indicators are now oversold as we continue to hug the lower BB, but it doesn't look like the downtrend is over just yet..

Euro: After last Thursday's massive gains, the euro took a breather on Friday with a little spinning top on top of Thursday's giant marubozu.  Some retracement seems to be in order here and it looks like the overnight is starting to provide it.  I'd be hesitant about going long the euro right now.

Transportation: On Friday the trans outperformed the Dow, up a big 1.23% to close well above their upper BB  That leaves us well inside the rising RTC.  The indicators meanwhile are pegged on overbought so have lost their predictive power.  Therefore this chart continues to look bullish.

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    11      3      6           2        0.813    687
September  8      3      3           3        0.800    485
October    4      2      6           1        0.710    534

     And the winner is...

Once again the charts continue to look bullish technically.  Simply being overbought or bumping the upper BB is not enough to call the market lower.  There is one note of caution though and that is that the Morningstar Market Fair Value Index has hit 1.05, tied for its YTD high, last set on May 20th.  And that very day marked the end of a month-long rally.  So I'm a bit cautious about the next few weeks but for now given the lack of bearish signs, logic dictates calling Monday higher.

ES Fantasy Trader

Portfolio stats: the account remains at $110,625 after 17 trades (13 for 17  total, 7 for7 longs, 6 for 10 short) starting from $100,000 on 1/1/13.  Tonight we stand aside.again.

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