Monday higher

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

• Monday higher, medium confidence..
• ES pivot 1920.33.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias neutral.
• ES Fantasy Trader going long at 1925.00.

Recap

Oh well - last Thursday night I figured Mr. Market would come to his senses on Friday and realize Thursday's big dump was overdone, but it was not to be  In retrospect I think the big problem with that thesis was that it was in fact a Friday.  No one wanted to be long with the ongoing geopolitical uncertainty, PIGS, interest rate fears, etc. making headlines today.  But that was then, this is now.  Like the 7-year old in the back seat, we can now ask "Are we there yet?"  Don't make me stop this blog!

The technicals

The Dow:  So after a classic inverted exponential rundown last week, the Dow ... kept right on going lower on Friday, losing another 70 points.  Of note and of concern here is that we stopped just short of the lower trend line of a monthly rising RTC dating all the way back to February 2013.  So far, despite last week's action the bull market remains intact but if this line gives way, I'm going to have to reassess the situation.  For now at least the stubby hammer we got on Friday plus extreme oversold indicators suggests a reversal may (finally) be at hand.

The VIX: After last Thursday's gap-up rocket ship, the VIX had enough momentum left over to gain another 0.47% with a green spinning top sitting nearly entirely above its upper BB.  And like I always say, the VIX rarely spends more than a day or two above its upper BB before falling back.  And with the indicators extremely overbought and the stochastic just about to form a nice bearish crossover, this chart is looking to me ready to come down on Monday..

Market index futures: Tonight all three futures are higher at 12:36 AM EDT with ES up a not inconsiderable 0.34%.  Like the Dow, last Friday ES put in a stubby spinning top playing out entirely below the lower BB.  The indicators are now extremely oversold and the stochastic is  in perfect position for a bullish crossover (though not quite there yet).  With the Sunday overnight looking positive, I think we have the pieces in place for a move higher on Monday.

ES daily pivot: Tonight the ES daily pivot falls again from 1937.92 to 1920.33.  That drop combined with ES's gain in the overnight finally puts us back above the new pivot so this indicator now turns bullish.

Dollar index:  After a spinning toppish inverted hammer on Thursday the dollar lost 0.18% on Friday making it look a lot like the top is in. Nevertheless, even after that we remain inside a rising RTC.  But with indicators having topped at overbought and now moving lower, my money's on a lower dollar Monday.

Euro: On Friday the euro spiked up to close at 1.3430, enough to pop out of a long-running descending RTC for a bullish setup.  That also moved indicators off their extreme oversold trough and with the overnight showing no interest in moving lower again, I'd say the euro looks higher on Monday.

Transportation: Maybe a good indication that the selling is done came form the trans last Friday as they put in a long-legged spinning top that hit the lower BB before rebounding. That also gave us a completed bullish stochastic crossover - always a good sign.  Along with the other indicators, now extremely oversold, this chart looks ready to reverse course and move higher on Monday.

Accuracy:

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
June       8      10      3           2       0.500    132 July       6       4      4           3       0.692    639
August     0       1      0           0       0.000    -70

     And the winner is...

$RHSPX, daily

Tonight we have some rather positive technicals in place in both the futures and the VIX.  I also want to share with you this chart of the SPX Hi-Lo index, courtesy of stockcharts.com (click the image to enlarge).  Notice the three big spikes down, on June 10th, April 11, and February 5th.  That's it for 2014, so far.  Until last Friday when we got another similar spike (on the very right edge of the chart).

Now the thing is, is that the day after every one of these three preceding spikes down, the market was higher.  Note also the MACD in the lower panel tells a similar story.  I find this chart to be very useful as a bottom-finder.

And the NYSE A/D line hit its lowest level since February last Thursday.  Also, the Morningstar Market Fair Value Index, which had been running at a YTD high of 1.05 at the start of last month, came back down to just 1.01 last Friday, the same level it hit on April 11th - one of those Hi-Lo chart spikes.

I think that this is enough evidence for me to call Monday higher.

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 go long at 1925.00.