Actionable ideas for the busy trader delivered daily right up front
- Monday lower, low confidence.
- ES pivot 1973.42. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Finally. After four days of reversal warnings and no reversal, the break came on Friday and it was lower. Friday's big move should at last give us something we can sink our talons into so let's get right to the charts and figure out Monday's direction as we begin a week that's jam-packed with economic news that will certainly generate lots of action. Oh, and let me note right now that with a Fed announcement on Wednesday, my Tuesday night call will be "uncertain" as per my long-standing policy.
The technicals
The Dow: On Friday the Dow took a big dump right out the gate and never really recovered.. We gave up the 17K level again and finished just above support at 16,947. This move also finally gave some real direction to the indicators and they're now all traveling lower and getting close to oversold. So while that all looks bearish, there's still the chance of a DCB on Monday following such a big drop - that happened four out of the last four times we had a similar triple digit one day loss. So we can't just call this one lower.
The VIX: Interestingly, on Friday the VIX broke out of a descending RTC with a 7.18% green marubozu for a bullish RTC setup.. The stochastic has also curved around nicely and is on the cusp of a bullish crossover. Also, RSI and momentum appear to have bottomed and are moving higher. There's a similar pattern in VVIX which has now broken above its 200 day MA. So net net, this chart looks bullish.
Market index futures: Tonight all three futures are lower at 12:27 AM EDT with ES down 0.15%. On Friday, ES exited its rising RTC for a bearish setup. That move also sent all the indicators lower and formed a bearish stochastic crossover. That all spells bearish in my book, and the overnight pin action so far seems to be confirming that.
ES daily pivot: Tonight the ES daily pivot drops from 1981.08 to 1973.42. We remain below the new pivot so this indicator remains bearish
Dollar index: After three days of crawling up its upper BB, the dollar on Friday decided to skip walking and instead just leap 0.20% with a gap-up spinning top that busted resistance at 55 (on $USDUPX) like it wasn't there. Indicators remain extremely overbought and now that we have a reversal candle sitting on the upper BB making 2/3 of an evening star, I'd say there's a bigger chance of a move lower from here than higher.
Euro: The euro's two-week downtrend continued unabated on Friday with another stairstep leg lower that was stopped at 1.3430 only by the 200 week MA. If we break this, there's no more support til 1.3380 and with two black crows on the weekly chart, there's no sign of a move higher here.
Transportation: On Friday the trans conclusively exited their rising RTC for a bearish setup. The uptrend back to July 8th is now over, Jack In fact after last Wednesday's record peak, we now have anew descending RTC going. With indicators continuing to come off overbought, this chart looks bearish for Monday.
Accuracy:
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
June 8 10 3 2 0.500 132
July 5 2 3 3 0.800 416
And the winner is...
With futures guiding lower and the VIX looking higher, the charts overall have a rather bearish cast to them. Accordingly, I will simply call Monday lower.
ES Fantasy Trader
Portfolio stats: the account remains at $113,000 after seven trades in 2014, starting with $100,000. We are now 5 for 7 total, 3 for 3 long, 2 for 3 short, and one push. Tonight we stand aside.
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