Monday, April 28, 2014

Monday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, low confidence.
  • ES pivot 1862.25Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader stands aside.

Last Friday was a textbook-perfect example of the regression trend analysis technique.  Thursday traded outside the rising RTC for a bearish setup with a sdoji star.  And on Friday, boom, the bearish RTC trigger as the Dow dumped a quick 140 points.  Earnings, Putinoia, whatever - the technicals showed the way.  Now we gear up to do battle with Mr. Market once again as we bid farewell to April and say hello to (sell in?) May.

The technicals

The Dow: The Dow set the tone quickly last Friday, tanking right out the gate and it was all downhill from there.  This move solidified a bearish stochastic crossover and sent the indicators lower, though still overbought.  So this chart per se continues to look bearish.

The VIX:  I took a pass on this chart last Thursday night and it's just as well since I didn't expect a gap-up 5.56% jump that tested the 200 day MA.  That probe was rejected but we're still oversold and the inverted hammer notwithstanding, there's plenty of gas left in the tank for another crack at the MA on Monday.

Market index futures: Tonight  the futures are mixed at 12:11 EDT with ES up all of one tick but YM down one - call it essentially flat.  On Friday, unlike some other charts, ES only produced a bearish RTC setup, not a trigger.  Recall that a chart has to trade outside its RTC on two successive candles for a trigger.  Still with the indicators having clearly topped at overbought and continuing lower and the bearish stochastic crossover now in full bloom, this chart continues to look bearish for Monday.

ES daily pivot: Tonight the ES daily pivot falls from 1873.08 to 1862.25.   Even with that drop, the failure of ES to make any headway in the Sunday overnight keeps us below the new pivot so this indicator continues bearish.

Dollar index: Last THursday I said "I'd say there's more downside to come on Friday." and it's good I said it because the dollar lost 0.07% on Friday, though admittedly with a stubby green hammer.  he dollar also stopped right at support on Friday so with the indicators halfway between overbought and oversold, there's at least a chance of a move higher on Monday.

Euro: Last Friday the euro put in a doji in evening star position.  And so far in the overnight we seem to be getting some significant confirmation with the euro down 0.10% on a bearish engulfing pattern.  The indicators have also peaked before even reaching overbought - that's always a bearish sign.  So I'd say it's likely the euro goes lower on Monday.

Transportation: On Friday the Dow tanked but the trans got simply run over, losing 1.61%, almost double the Dow's loss.  That's a clear bearish RTC trigger and bearish stochastic crossover.  Even at that, we're still overbought, so I'd say it's likely there's more downside to come on Monday.


Month    right  wrong  no call  conditional  batting   Dow
                                             average  points

January    5      10      6           0       0.333
February   5       2      2           1       0.750    107

March     12       3      6           0       0.800    431
April      8       2      4           0       0.800    482

     And the winner is...

There are still no reversal signs in the charts tonight and the technicals continue to look bearish, so the only logical call is for Monday lower.

ES Fantasy Trader

Last THursday night I finally saw what is pretty much my ideal trade setup, a bearish RTC exit coupled with a bearish stochastic crossover, and the expected move had not yet started at the time I like to enter trades - around midnight to 2 AM.  So I took advantage of it was was rewarded on Friday with a nifty 12 point gain.  Not bad for 12 hours of work, most of which I spent sleeping.  Admittedly I left some money on the table as ES kept going lower, but such is life.  I can't complain.  Reminder, I post all these trades live on Twitter @nightowltrader.

BOT    10    false    ES    JUN14 Futures     1859.50    USD    GLOBEX    APR 25 12:53:30
SLD    10    false    ES    JUN14 Futures     1871.50    USD    GLOBEX    APR 25 00:32:06

Portfolio stats:  the account now rises to $111,625 after three trades in 2014, starting with $100,000.  We are now 3 for 3 total, 2 for 2 long, 1 for 1 short.  Tonight we stand aside, on the off chance of a DCB on Monday.


  1. On the index futures, it seems - to me - there's a clear 123 reversal pattern. (09:00 CEST)

    1. Hmm, I guess I'm just not seeing it. What timeframe chart is this on? Is this a bullish or bearish reversal? On ES? Thanks.

  2. It’s a bullish reversal pattern. I saw it (subjective) in the 1 hour and lower TF, Dow futures. It did work till 5PM (CEST) but I’m intraday though. Anyway I’m more confident in your analysis than in patterns. Thank you again for your helpful posts!

    1. Well you must really be liking today's action - what a roller coaster ride!


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