Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Monday higher, low confidence.
• ES pivot 1919.33.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

It was looking pretty good for my call for a down Friday until a late afternoon mini-rally took off and torpedoed my call, though the damage was minimal.  I'm not going to lie, I'm glad May is over.  What an odd month that was.  Now let's move on to see whether or not June will be bustin' out all over.

The technicals

The Dow: Friday's 18 point gain in the Dow created a classic hanging man reversal warning.. It also traded outside the rising RTC for a bearish trigger and left the stochastic within a hair of a bearish crossover, and all on the highest volume of the week.  We also stopped exactly on resistance at 16,717 from the record high last month.  Does the Dow have the mojo needed to break through on Monday?  Going by the overboughtedness of the indicators, I'd have to say no.  OTOH, Monday is the first day of June and that's historically quite bullish.  So I'm hesitant to call the Dow lower just yet, especially since my Friday call did not pan out.

The VIX: Just when you thought the VIX couldn't  go any lower - it did, down another 1.47% on Friday to close at the low, low level of 11.40.. I had to go to the weekly chart to find the last close at that level.  It was March 11th of last year.  After that, you have to go all the way back to March of 2007 to find a lower close.  And the lowest VIX I can even find with eSignal (all the way back to 1990) is 9.39 in December 2006.  Now the monthly lower BB is 11.06 and the daily is 10.96, so I'd say 11.00 looks like about the lowest I can imagine the VIX going from here.  That level is easily attained in one day and for my money that could be Monday.  I'll even guess we could get a VIX doji on Monday.

Market index futures: Tonight all three futures are higher at 12:33 AM EDT with ES up 0.10%.   On Friday ES rose again to continue crawling up its upper BB, now five in a row.  This can't go on forever.  RSI also hit an amazing 99.53 - it doesn't get much more overbought than that.  The stochastic meanwhile is plastered flat against the ceiling waiting for a break that looks like it may never come.  But we may finally be getting some action, as the overnight is now trading outside the rising RTC for a bearish setup.  But as the frustration goes on, that action is drifting higher.  If ES can close Monday above 1925, barely higher than it is as I write this, then we're back inside the rising RTC.

ES daily pivot: Tonight the ES daily pivot rises from 1914.42 to 1919.33.   Once again we remain above the new pivot, so once again this indicator remains bullish.

Dollar index:  In a potentially telling sign, the dollar on Friday fell out of its rising RTC with a 0.17% loss for a bearish setup.  That also confirmed the bearish stochastic crossover so with indicators remaining overbought, this chart looks lower for Monday.

Euro: I was badly fooled by the euro on Friday.  I thought for sure we were going lower but instead we got a bounce that reclaimed the 200 day MA and nearly took us out of a descending RTC.  The tell will be the overnight, if it can hang on to the MA and push higher  or bounce off.  The indicators, still oversold along with a bullish stochastic crossover suggest the former.

Transportation: In a bit of bearish divergence and perhaps foreshadowing, on Friday the trans dropped 0.07% on a small doji star to break a six-day winning streak.  Though we remain in a rising RTC, we're now peeled away from the rising upper BB and the indicators are all now highly overbought so my guess is that the trans go lower on Monday.

Performance:

With May now closed, here are my cumulative 2014 YTD trading results so far, compared to the Dow, my benchmark.  I continue to include the results of my traditional IRA too.

        Trading    IRA       Dow
Jan.     0.50%             -5.30%
Feb.     3.94%             -1.94%
Mar.     6.01%    6.14%    -0.72%
Apr.     8.22%    8.46%     0.02%
May      9.20%    9.96%     0.85%

As in April, the first half of May started off pretty flat for me, but we made up the difference in the last two weeks.  However, my equivalent annual run rate dropped from 24% to 22%, reflecting the lost time in May.  I'm not too concerned about this since there's still plenty of time to make it up and in any case, 22% is still pretty respectable.

Accuracy: 

We end May with our first losing month of the year, predictionwise, though not by much.  It reflects just how odd the month was, directionwise, an observation many others have  already made.

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      10      6           0       0.333     64
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        6       7      6           0       0.462    -67

     And the winner is...

While I'm seeing signs of overextension in the charts tonight, there are only scattered bearish warnings - not enough to call Monday lower, even though I think lower is coming soon.  And given the historical advantage to the first day in June, I'm going to go with the trend, call Monday higher, and speculate that it could be a topping day.

ES Fantasy Trader

Portfolio stats:  the account remains at $121,500 after four trades in 2014, starting with $100,000.  We are now 4 for 4 total, 2 for 2 long, 2 for 2 short.  Tonight we stand aside.  I'm not committing any money here, not even play money until I get some real clarity.  Just like in Vegas, where there is no law that you have to sit down at the blackjack table and place bets.  You're free to wander around and watch.