Monday, January 13, 2014

Monday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday uncertain.
  • ES pivot 1835.50.  Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside

January is not a kind month to the Night Owl.  Last year was the only month I had a negative prediction ratio and so far this year is starting out no different.  Though both the SPX and Nasdaq were higher on Friday, the Dow was not, so that counts as a miss.  With a disappointing jobs number now behind us, let us consult the charts once again to see whither goeth Monday.

The technicals (daily)

The Dow: It is possible to draw a descending RTC for the Dow from the high on December 31st, but it's not a very good one (Pearson's = just 0.786).  If anything the Dow found support, once again in the 16,426 area.  Indicators continue to drift lower but are not yet down to oversold.  The candle was a spinning top, the second in a row so who knows.  Overall, it looks weakly bearish but I'm tired of getting burned so no call here tonight.

The VIXAt least I nailed this one when I wrote last Thursday "the VIX is headed down on Friday".  And we got some more divergence as it dropped 5.82% while the SPX gained just 0.23% and the Dow was actually lower.  At 12.14, the VIX is now right on some pretty decent support and has now gone oversold.  The stochastic is not quite yet ready for a bullish crossover and VVIX looks to be in no hurry to move higher.  So overall, no reversal sign here quite yet, though we're definitely getting close.  Monday could be a bottoming day for the VIX.

Market index futures: Tonight all three futures are lower at 12:13 AM EST with ES down by a non-trivial 0.22%.  After three consecutive days of dojis, ES is starting to feel toppy here.  The Sunday overnight candle is developing as bearish engulfing and OBV has just turned lower.  RSI is nearly overbought and the stochastic is flattening out for a bearish crossover.  I'm not feeling the love here tonight.

ES daily pivot: Tonight the pivot rises from 1832.08  to 1835.50.  Unfortunately, the overnight dip in ES combined with the gain in the pivot dropped us below the new number right at midnight so this indicator turns bearish.

Dollar index: Last Thursday night I wrote about the dollar that  "the next logical move is lower".  .And logic prevailed as the buck dropped a big 0.47% on Friday with a tall red marubozu that peaked all the indicators on overbought.  It also gave use a bearish stochastic crossover so with the usual caveats about the possibility of a DCB after such a big one-day move, this chart remains bearish.

Euro: And last Thursday night I also wrote "the euro looks higher for Friday".  And it was indeed with a big payoff from Thursday's RTC bullish trigger.   And it's continuing higher in the Sunday overnight.  With a nicely-completed bullish stochastic crossover and indicators still only halfway to overbought, I see further upside for the euro.

Transportation: The trans ended last week remarkably with a 1.17% gain that trounced the Dow's 0.05% loss.  In fact the damn things are going quite exponential and have very nearly hit their upper BB at 7488.  Even at that, they're still not yet overbought.  You'd think this would be bullish for the Dow but whatever cross-currents are operating right now are beyond me - I don't get it.  In any case, it's quite remarkable.  I don't know how much higher the trans can go from here.  A top just has to be coming soon.

Accuracy (daily calls):

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    1      4      2           0       0.200     -134

     And the winner is...

Tonight we have the Dow continuing its conflicted course, the VIX possibly bottoming, the futures looking bearish but the trans looking quite bullish.  After getting burned so often this month so far and with these sorts of conflicting signals, I'm just going to have to call Monday uncertain.

ES Fantasy Trader

Portfolio stats:  the account continues the new year at $100,000 as we wait for the right moment to enter our first trade of 2014.

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