Monday, June 9, 2014

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence..
  • ES pivot 1945.58.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

I took a chance last Thursday night calling Friday higher because we had already hit the upper BB, but it worked out in the end with an 88 point gain for the Dow as we continue the march into record territory.  This is admittedly something new for me.  I started following the markets eleven years ago so I've been through the 2000-2004 slump, the subsequent rise into 2007 and the Great Recession.  But I've never seen a series of one record close after another like this.  Will Monday be another?  We consult the charts for answers.

The technicals

The Dow: After last Thursday's breakout, about the only thing to do was bet on the bulls since the indicators are now completely useless, pegged on overbought.  We now have a three day winning streak going and no reversal candles so although we closed above the upper BB on Friday there's really no indication of a move lower yet..

The VIX: The big news though is the VIX which tumbled 8.13% on Friday to 10.73..  Now last Thursday I did say "it looks like more downside is possible Friday".  Good call, if I do say so myself.  This big gap-down marubozu broke through the lower BB while simultaneously sending RSI oversold and the stochastic into a bearish crossover before ever hitting overbought.  And that's bearish in my book.  I had to go out to the monthly chart to see when the last time was we closed this low - it was February 2007.  The VIX may still have some room to run lower, but history suggests it's not much.  Note too that VVIX was actually up on Friday.

Market index futures: Tonight all three futures are just barely lower at 12:24 AM EDT with ES down  0.03%.  ES, like the rest of the market continued its advance on Friday so my comments for the Dow apply here too.  However, the failure of ES to make any further headway in the overnight so far makes me wonder if it isn't planning on taking a pause on Monday.

ES daily pivot: Tonight the ES daily pivot ticks up from 1933.42 to 1945.58.  We remain above the new pivot, though by a reduced amount tonight, but it's still bullish.

Dollar index:  After Thursday's big dump, the dollar put in a not unexpected doji on Friday just above Thursday's lows.  The indicators are now well off overbought so there's at least a chance of a move higher on Monday.

Euro: And on Friday the euro was unable to capitalize on Thursday's big push above its 200 day MA, falling back with a classic dark cloud cover on very high volume.  This bodes ill for the euro on Monday.

Transportation: Like the other charts, the trans had a big day last Friday, up another 0.86%, outperforming the Dow and still short of their upper BB.  We even got  an unusual bullish stochastic crossover from a high level and as I always say, those are often good for another day or two of gains.


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        6       7      6           0       0.462    -67

June       3       1      1           0       0.750    123

     And the winner is...

The back half of last week saw a nice run-up.  Continuing in record territory, there are no more resistance levels left.  We're also left without half our usual guidance since all the indicators are pegged on overbought and therefore have lost their predictive power.  So tonight I'm left with the candlesticks, which are uniformly bullish, the VIX, which has declined so far so fast I'm thinking it's due for a bounce, and what may be a top in copper.  What's interesting is that recently, copper tops have been followed by market declines, brief though they may be.  I guess all I can do is weigh the evidence and go with what I have, and tonight the scale comes down on the bulls' side ever so slightly.  So with some trepidation, I call Monday higher.  Could be a doji for that matter.

ES Fantasy Trader

Portfolio stats:  the account remains at $112,125 after six trades in 2014, starting with $100,000.  We are now 4 for 6 total, 2 for 2 long, 2 for 3 short, and one push.  Tonight we stand aside. 

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