Actionable ideas for the busy trader delivered daily right up front
- Monday higher, low confidence.
- ES pivot 1953.50. Holding above is bullish.
- Rest of week bias higher technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Last Friday saw a nice bounce as the Dow gained 1.24% to close back above 17,000. This move makes for some interesting chartage, so let's check out the charts and figure out where Monday's headed.
The technicals
The Dow: Friday's big 209 point pop in the Dow constituted a classic morning star, and this is a major bullish reversal pattern. Confirming that is a now fully formed bullish stochastic crossover. The indicators are now also all off oversold and we're very close to a bullish RTC exit so this chart looks clearly bullish form here.
The VIX: Last Thursday I wrote "there's more room to run lower here on Friday.". Well after spending a highly unusual seven of the last nine noodling about its upper BB, the VIX finally gave it up on Friday confirming Thursday's inverted hammer, gapping down 10% to fall right out of its rising RTC for a bearish setup. We also got a completed bearish stochastic crossover and the indicators continue to descend, just off overbought. VVIX is along for the ride so this chart looks like its got more downside on Monday.
Market index futures: Tonight all three futures are higher at 12: 32 AM EDT with ES up a decent 0.27%. ES's gains on Friday were even more dramatic than the Dow's, completing a morning star and exiting its descending RTC for a bullish setup. Indicators are all rising off oversold and surprisingly considering the big bump on Friday, we're still getting some positive pin action in the Sunday overnight, which makes it all the more impressive. So this chart just looks plain bullish.
ES daily pivot: Tonight the ES daily pivot leaps from 1934.17 to 1953.50. And even with that impressive gain, we're still above the new pivot, so this indicator remains quite bullish.
Dollar index: Well this is one that fooled me. The dollar did not go lower on Friday, instead having its biggest day in a month, gapping up a huge 1.32% to break out of its upper BB and the left side of its rising RTC. The mighty dollar is now at levels not seen in four years, and it looks like there's still nothing to stop it.
Euro: And meanwhile the euro collapsed on Friday, giving up all of Thursday's gains and then some to hit its lower BB and close at 1.2515 for a two year low there. Indicators remain useless lying oversold on the floor and the descending RTC remains firmly in place. There's no sign of a turnaround here.
Transportation: Last Thursday I wrote "this chart really looks ready for more upside" and was it ever, gaining a big 2.12% on Friday to bounce right back into the middle of last week's congestion zone around 8482. But with indicators now all clearly rising off oversold and a nice bullish stochastic crossover in place, it looks like there's still more upside available even after Friday's great run.
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 6 4 4 3 0.692 639
August 8 7 2 2 0.588 81
September 6 6 5 2 0.571 376
October 1 1 0 1 0.667 205
And the winner is...
After hitting 11, its third lowest level of the year on Thursday, the SPX Hi-Lo indicator rebounded nicely on Friday. That's always a good sign on a bottom. Also, the Morningstar Market Fair Value Index hit 0.99 on Thursday, its first undervalued reading of the year so far, another bullish sign. Tonight the charts still look bullish. So in the absence of any reason not to, I will simply call Monday higher.
ES Fantasy Trader
Late Thursday night Mr. Market handed me a gift in the form of a trade setup too good to pass up. It was really my ideal setup - a big hammer following a long downtrend with oversold indicators and positive follow-through. At the time I wrote that it was "just about the perfect setup for my system". This was the prettiest one I've seen all year so I jumped on it and was rewarded Friday morning with a dandy 14.75 point gain - not too shabby. Here's the trade:
SLD 10 false ES DEC14 Futures 1957.25 USD GLOBEX OCT 3 11:40:41
BOT 10 false ES DEC14 Futures 1942.50 USD GLOBEX OCT 3 00:10:52
Portfolio stats: the account now rises to $121,625 after nine trades in 2014, starting with $100,000. We are now 7 for 9 total, 5 for 5 long, 2 for 3 short, and one push. Tonight we stand aside.
Reminder: you can follow these trades live on Twitter @nightowltrader. And since I was asked about this, these trades are almost always entered late at night, like around 12 - 1 AM Eastern time. I always plan to exit sometime the next trading day, though if I've got a loser that looks like it might come back, I'll hold on. There are no stops and no targets. I don't usually wake up until 11 AM, so if I'm long and the market peaks at 10 and then craters, then there go my profits. Hey, you gotta sleep sometime.
I always buy on the ask and sell on the bid, to make things fair. As soon as I place the trade, I send the tweet. But there's no guarantees it will make it. I've had Twitter fail to post a tweet twice now since I started doing this. If my computer crashes just before posting the tweet, there could be a delay. And remember, these are paper trades. There's no way I could sleep at night knowing I've got 10 ES contracts at risk for real with no stops overnight, not that I could even afford to trade that many in the first place. That's why it's called "fantasy trading". The point of the exercise is largely to demonstrate my street cred.
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