Monday, February 3, 2014

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1775.33.  Holding above is bullish.
  • Rest of week bias uncertain.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Well now that was interesting.  January is done and the famous First Five Days of January Indicator flopped.  And the entire January Barometer itself was an epic fail.  People have been talking up the Stock Traders Almanac pointing out that a down January is only a 50-50 chance of a down year.  But if you look at the chart there (on page 18) you'll see that there were only two up years when the loss in January was greater than 3.8%.  And this year the Dow lost 5.3%.  There were only six Januaries with bigger losses and two of those were in the outlier years of 2008 and 2009.  Clearly the greater the loss in January, the greater the odds of a losing year.  And this January came in way down the list.

So I am starting to feel bearish on the rest of 2014.  But that's still a long ways off so let's see what the charts have to say about Monday.

The technicals (daily)

The Dow: Oh and that's the other thing - it is known that a series of down Fridays followed by down Mondays is a bearish sign and we've been getting a bunch of those lately, in marked contrast to last year.  Last Friday's 150 point decline in the Dow  on a normally bullish day closed out the week and the month on a decidedly negative note.  The candle itrself was bearish engulfing and it pushed the Dow back into a month-long descending RTC.  And to top it off, the 200 day MA is now within easy striking distance at15,465.  Given recent moves, we could hit that in a day or two.  The stochastic is just pancaked at oversold so this chart now looks bearish.

The VIXLast Friday the VIX popped right back up to its upper BB but did it on a red hanging man.  While the VIX is showing more propensity to stick around its upper BB lately rather than falling back immediately, this pattern makes me think that a move lower is coming in a day or two.

ES daily
Market index futures: Tonight all three futures are higher at 12:36 AM EST with ES up by 0.20%.  Lst Friday we got something of a spinning top out of ES but it looks to me like there's a symmetrical triangle developing - check it out here.  (The three descending parallel lines are last week's RTC).  Since it was entered from above, we should expect a 3 out of 4 chance of the exit to be lower.  Since the triangle is nearly complete, I'd expect the break in a day or two, perhaps back to support at 1770.

ES daily pivot: Tonight the pivot drops from 1780.32  to 1775.33.  The move combined with a higher ES, puts it back above the new pivot, so this indicator turns bullish.

Dollar index: Last Thursday night I wrote "more upside is not out of the question for Friday".  And indeed the dollar rose another 0.26% gapping up again to nearly touch its upper BB, which is also resistance.  But the indicators are still only about halfway to overbought, so Monday could be a topping day for the dollar.

Euro:   I thought the euro might bottom on Friday, but while it did move decisively lower breaking support at 1.3550, the resulting red candle is hardly a reversal sign.  But we've now hit the lower BB and the indicators are getting extremely oversold (RSI = 0.46) so I still have to think a reversal is coming soon.  We're basically flat in the overnight so far and that's an encouraging sign for a move higher.

Transportation: Last Fridqy the trans were not hurt nearly as badly as the Dow, down just 0.18% on a long-legged doji.  The trans have been alternating daily gains and losses for a week now ad with this doji plus the absence of an RTC, this chart is just too tough for me.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      6           0       0.333

     And the winner is...

The charts are looking mostly bullish tonight, and with the first day of February having a stellar reputation for the bulls, I'm going to call for a close of Monday higher.

ES Fantasy Trader

Portfolio stats:  the account remains at $103,000 after the first trade of 2014.  We are now 1 for 1 total, 1 for 1 long, 0 for 0 short.  Tonight we stand aside.

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