Monday, November 3, 2014

Monday depends on ES pivot

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday higher only if ES remains above its pivot, else lower.
  • ES pivot 2005.00.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

SPX +1.17% on Halloween, yum!
Ah so!  On Friday the Bank of Japan handed Mr. Market a big Halloween treat in the form of a nearly 200 point gain in the Dow to close out the spooky month of October in style.  Domo arigato!

We now leave the annual period of negative seasonality and look forward to the market's historically best six months.  So let's head back to the charts as we digest our NSRGY Crunch bars and HSY Kisses to see where Monday's going.

The technicals

The Dow: The Dow rallied hard on Friday with a pretty broad-based advance on higher than normal volume.  .Last Thursday night I wrote "I think there's still some room left here to touch the upper BB Friday.".  And that's exactly what happened.  We even closed 35 points above the upper BB with a nice green marubozu for another new record.  The indicators all remain broken at highly overbought but we remain well inside a long rising RTC.  With no bearish signs the only question is, is there still enough gas in the tank after two big days to keep climbing?  I'm not so sure.  The last ten out of ten times we hit the upper BB, there was a pullback within one or two days.

The VIX:  On Friday  the VIX broke its support at 14.39 and went on to just break under its 200 day MA at 14.08 with an inverted hammer.  With indicators back to oversold, I expect the VIX to linger in this neighborhood for a day or two.

Market index futures: Tonight all three futures are lower at 12:35 AM EDT with ES down  0.14%.  ES obviously had a great day Friday and very nearly hit its upper BB on a tall green marubozu to stay in a rising RTC.  We're in a long overbought stretch but after a while that becomes meaningless.  However, the overnight is showing some signs of weakness

ES daily pivot: Tonight the ES daily pivot rockets from 1980.67 to 2005.00.  But even that jump still leaves ES above the new pivot so this indicator is still bullish.

Dollar index:  Well the dollar fooled me on Friday by not completing what looked like an evening star.  Instead it gapped up again to trade entirely above its upper BB. Holy greenback, Batman!  I had to back out to the monthly chart to find the last time we were at these lofty levels - it was September 2010!  And while we're there, the dollr is forming a monthly bearish stochastic crossover.  But back on the daily level, we now have at least a suggestion of a possible move lower on Monday.

Euro: And of course the euro kept a three day losing streak going on Friday to make it four in a row, down to 1.2478 - its lowest since August 2012. With support at 1.2529 gone, the euro now seems to want to keep dribbling down its lower BB.  There are certainly no bullish signs on this chart tonight.

Transportation: Even with the Dow's outstanding performance Friday the trans still managed to outdo that with a 1.44% gain that totally quashed what looked like the end of an uptrend.  This big green marubozu turns this chart right back to bullish again.


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     8       7      2           2       0.588     81 September  6       6      5           2       0.571    376 October    6       6      3           1       0.538    271

     And the winner is...

The first week of November is historically quite bullish and the Sunday night charts all do indeed seem to support that.  But on Sunday night we're looking at two day old data with the exception of the futures, and they seem to suggest we may be in for a pause.  That's been the trend for weeks now - one or two up followed by one small down day.

Still, I feel funny calling for a lower close given the absence of outright bearish signals.  So this seem like a good night to make a conditional call: if ES manages to remain above its pivot by mid-morning Monday we'll close higher.  If it breaks under, we close lower.  So sez I.

ES Fantasy Trader

Portfolio stats:  the account remains at $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.

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