Monday, November 17, 2014

Monday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Monday lower, medium confidence.
  • ES pivot 2034.83.  Breaking above is bullish, below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader going short at 2027.25.

OK, so last Friday was pretty much a rerun of Thursday with the Dow down just 18 points but the SPX up 0.49 - pretty much just sideways action.  At times like this it's useful to step back from the trees and take a look at the forest.  And that's what charts are for, so let's start blazing a trail for Monday.

The technicals

The Dow:  With all the record highs the Dow's been setting lately, it becomes hard to tell if we're just taking a pause before the next leg up or if we're topping out.  Well unlike the last three times we had a down day in the current rising RTC, we've now exited said RTC for a bearish trigger.  Uh oh.  With indicators still highly overbought but the stochastic sagging, I think the Dow is setting up for a move lower on Monday rather than higher.

The VIX:  On Friday the VIX tested its 200 day MA and was rejected for the second day in a row with a red bearish engulfing candle.  It remains to be seen if the VIX can break resistance at 13.98, call it 14, or not.  My guess would be that we'll test that on Monday and then bounce off lower.

Market index futures: Tonight, all three futures are lower at 12:43 EST with ES down a significant 0.47%, possibly on Japan recession news. On Friday ES put in a bullish engulfing candle but it was entirely outside the rising RTC for a bearish trigger.  The new overnight seems to be confirming the latter and with indicators remaining highly overbought but the stochastic sliding lower, it looks like this chart is ready to move lower on Monday.

ES daily pivot: Tonight the ES daily pivot ticks up from 2034.83 to 2036.58.   We are now however back under the new pivot so this indicator turns bearish.

Dollar index:  On Friday the dollar made an early, and failed attempt to break out of the 59.53 area  The result was a big read bearish engulfing candle that combined with still overbought indicators and a declining stochastic all spell lower for the dollar on Monday.

Euro:  And so as the dollar declines, the euro has now broken above its recent resistance of 1.2496 to establish a shallow rising trend.  The Sunday overnight seems to be confirming that so I'd say a higher euro looks likely Monday.  That squares with my call for a lower dollar.

Transportation:  On Friday the trans also lost ground, down 0.13%unable for the fourth day in a row to pierce the 9095 level.  More importantly, we closed outside the rising RTC for a bearish setup and the indicators have begun moving off highly overbought - all bearish signs.


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 November   4       3      2           0       0.571     91

     And the winner is...

The markets have been looking more like they're topping to me than consolidating as some would have it.  We're also seeing some distinctly bearish signs tonight and the futures are supporting that idea.  Accordingly, I'm calling Monday lower.

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 go short on a risky counter-trend play at 2027.25.

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