Monday, May 5, 2014

Monday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday uncertain.
  • ES pivot 1877.50.  Holding below is bearish.
  • Rest of week bias lower technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

I wasn't really sure which way we were going last Friday but the ultimate verdict was lower on a number of economic and geo-political factors.  So now we might have some more clarity to pick a direction for the new week, and we'll get right to it.

The technicals

The Dow: The Dow did it's part to dispel the uncertainty on Friday.  Though it lost only 46 points, it was a bearish RTC trigger along with a new bearish stochastic crossover.  With momentum, OBV, and RSI all headed lower now, this chart now looks bearish.

The VIX:  Ah, but the mystery deepens.  On Friday, for the second day in a row, the VIX continued its highly unusual positive correlation to the rest of the market.  Normally, VIX goes down, market goes up.  On Friday, they both went down.  IN fact the VIX is now in a five day losing streak.  And with support at 13 broken and falling indicators, there's no reversal in sight.  I've not heard any theories about why the VIX is suddenly correlated with the market.  In over 10 years of doing this, I've never seen this.

Market index futures: Tonight  all three futures are lower at 12:27 EDT with ES down 0.13%.  ES, like the euro below, is giving signs of heading lower.  Last Thursday we got a spinning top, and then another, larger one on Friday sitting just below Thursday's candle.  Now the new Sunday overnight is trading below that, and outsid3e the rising RTC for a bearish setup.  That has also sent all the indicators lower and formed a new bearish stochastic crossover.  That all spells lower in my book.

ES daily pivot: Tonight the ES daily pivot ticks up from 1877.33 to 1877.50.   That leaves us below the new pivot so this indicator is now bearish.

Dollar index: The dollar has an interesting day Friday, opening way up only to collapse back to Thrusday' close for a net loss of 0.02% on a tall red candle.  That keeps us in a descending RTC and kind of puts the kabosh on any aspirations of a higher dollar Monday.

Euro: The euro is now giving some signs of wanting to go lower.  Thursday was a gravestone doji followed by a tall star doji on Friday  While the overnight is a bit higher, it's on another star with a stochastic about to form a bearish crossover.  Resistance is quite strong around 1.3885 and I don't see the euro breaching that on Monday.

Transportation: On Friday the trans fell along with the Dow for a dark cloud-coverish affair that also generated a bearish RTC setup.   But the indicators are indecisive, so the general tenor is bearish but not conclusively so.


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      9       3      5           0       0.750    482
May        0       1      1           0       0.000    -22

     And the winner is...

Tonight the technicals are looking fairly bearish and there's some noise on the wires of things heating up in the Ukraine.  Also, we have now exited the historically favorable first two days of May and are now entering the "sell in May" zone.  So all things considered, I'm just going to call Monday lower.

ES Fantasy Trader

Portfolio stats:  the account remains at $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.

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