Monday, August 18, 2014

Monday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher, low confidence.
  • ES pivot 1950.25.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

There are people who say that technical analysis doesn't work, and they're wrong.  It does work.  It just doesn't always work.  And the biggest reason for that is headline risk.  And on Friday, for the second time last week, we saw a good example of this as news of further unpleasantness between the Rooskies and the Ukrainians sent the market lower even though technically it looked like it would be higher (and I still think that that was a good call - technically).  But the news generally trumps the technicals, so there you have it.  So let's turn our attention to Monday as the bumpy month of August rolls on.

[Blogspot's spell checker seems to be on strike again so I apologize in advance for any typos].

The technicals

The Dow:  The Dow actually did open higher on Friday - and then the news kicked in.and the Dow fell off a 200 point cliff (from high to low) before recovering with just a 51 point loss once Mr. Market figured out that once again, the world is still not coming to an end.  The result was a fat, long-legged spinning top.  And with overbought indicators plus a stochastic that is just about to form a bearish crossover, this chart looks ready to roll over on Monday.

The VIX:  And of course the news spiked the VIX all the way to 15 before some measure of snity returned and it ended with just a 5.88% gain on a failed attempt to break above the 200 day MA.    But the candle is bullish engulfing, the indicators remain oversold, and we got a newly completed bullish stochastic crossover.  We're also sitting just next to the edge of the descending RTC so it won't take much for a bullish setup.  Overall, this chart looks bullish for Monday,.

Market index futures: Tonight all three futures are higher at 12:20 AM EDT with ES up 0.31%.  On Friday ES put in a tall tomahawk (my name for a hanging man that has a bit of an upper wick showing).  With indicators now highly overbought and the stochastic ever so close to a bearish crossover, this would look like a great sign of a move lower.  But instead, the overnight is significantly higher.  It's not immediately clear what that's all about, but I never like to discount the movement of the futures in the overnight, especially when they are non-trivial as they are tonight.  I always feel like they know something I don't.

ES daily pivot: Tonight the ES daily pivot barely ticks up from 1950.17  to 1950.25.  We remain above that level so this indicator remains bullish.

Dollar index:  On Friday the dollar took a bit hit, down 0.22% with a lopsided gap-down spinning top that stopped near support of 55.35 ($USDUPX).  Indicators are now coming off overbought and the stochastic just completeed a bearish crossover so this chart overall looks bearish with the exception of the support level.  That means we need to see if that will hold before calling this chart lower.

Euro: And similarly the euro had a great day on Friday closing up to1.3400 on a tall green candle and confirming two days worth of reversal signs.  With two descending RTC's now exited this chart looks ready to move higher, although the Sunday overnight isn't so optimistic.

Transportation: And in a final indication of uncertainty, the trans ended last Friday exactly unchanged, though the candle was a long-legged red spinning top.  The indicators here are now extremely overbought, the stochastic is on  the verge of a bearish crossover and we're hanging on the edge of the rising RTC for a looming bearish setup.  All in all, that spells lower in my book.


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       8      10      3           2       0.500    132

July       6       4      4           3       0.692    639 August     3       5      1           1       0.444   -190

     And the winner is...

Sunday night is always difficult to call because a lot of the charts reflect data two days old already.  That sometimes doesn't matter too much but lately the market has been hyper-news driven and tonight may be one of those nights.   Near as I can tell, there's something about the Russians and Ukrainians playing nice again, and about the Kurds kicking the religious pyschopaths' butts in Iraq.  So while overall the general look of the charts is that we're due for a move lower, it may not be right on Monday.  I never like to go against the futures esepcially when they're up this much in the overnight so I'm going to go with that and call Monday higher.  This Monday is historically bullish anyway.

ES Fantasy Trader

Portfolio stats:  the account remains $114,250 after eight trades in 2014, starting with $100,000.  We are now 6 for 8 total, 4 for 4 long, 2 for 3 short, and one push.  Tonight we stand aside.

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