Monday lower

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

• Monday lower.
• ES pivot 1971.33  Holding above is bullish.
• Rest of week  bias uncertain technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ no longer a swing trade buy.

Recap

I called last Friday "uncertain" and with Dow closing down all of 12 points but the SPX ending up 16 points I think that was about as uncertain as it gets.  There were some interesting candles though - so let's head straight to the charts and see if we can't figure out the last day of August as we bring this miserable month to a close.

The technicals

The Dow:  On Friday the Dow was unable to make any headway at all after two big days of gains. It finished with a classic doji star which is at least something of a reversal warning. Indicators continue to rise off oversold and the stochastic is now about halfway on its trip from oversold to overbought.  More importantly perhaps is that on Friday the Dow just barely managed to recover the lower edge of its long-running multi-year rising RTC which currently stands at 16,630.  That would cancel the bearish monthly RTC setup if we can close higher again on Monday.  So while we do have a reversal warning tonight it's one of those that requires confirmation and with indicators not yet overbought I can't call this one lower yet.

The VIX:  Meanwhile on Friday the VIX continued its re-entry into low Earth orbit following its short visit outside the solar system last week.  It formed a small red candle that looks like a bullish piercing pattern.  The indicators continue falling off overbought and the stochastic has begun curving around in preparation for a bullish crossover.  It's not the best reversal indicator but I do think there's a move higher coming in the next few days.

Market index futures: Tonight, all three futures are lower at 1:08 AM EDT with ES down 1.19%. 
On Friday ES put in a perfect doji star sitting right at the top of Thursdays large gains. That was enough to send the indicators off of oversold and they are all now rising towards overbought. We remain inside the latest rising RTC, however the overnight is moving significantly lower and in fact is sitting right on the edge of that RTC .  This appears to be confirming the doji so I would be looking for a move lower on Monday here.

ES daily pivot: Tonight the ES daily pivot rises again from 1971.33 to 1983.25.  That now puts ES back below its new pivot so this indicator turns bearish.

Dollar index:  Last Friday the dollar defied a gap-up gravestone doji from Thursday and continued to move higher gaining an impressive 0.51% as it left its 200-day MA in the dust. It's now on a four day winning streak with indicators that still have not hit overbought. So in the absence of any bearish reversal signs, I can't call the dollar lower on Monday.

Euro:  Last Thursday night I wrote that "there's more downside coming here on Friday" and that proved to be exactly right as it closed back down to 1.1185. That was also the payoff for the bearish trigger we got on Thursday from Wednesdays exit from the rising RTC.  Indicators are now all falling off overbought but not yet down to oversold.  We now have four down in a row and nothing really bullish about these charts.  However, the overnight is showing us a non-trivial gain up 0.22% in the new overnight so far, so it's possible we have a bottom here since there is some good support at 1.1172.

Transportation:  Finally on Friday, the trans handily outperformed the Dow with a 0.53% gain compared to the Dow's 0.07% loss.  That now gives the trans a three-day winning streak and a new rising RTC.  The indicators also continue rising and are now off of oversold.  With a bullish stochastic crossover in full effect, there's nothing bearish on this chart tonight.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August     9      2       3           2       0.846   2199

     And the winner is...

Tonight the charts are telling me the market kind of ran out of gas after two big up days last Thursday and Friday.  With the futures guiding significantly lower, I'm just going to call Monday lower.

Single Stock Trader

Last Thursday night I thought Verizon might have a little bit more upside left to go but that proved to be too optimistic.  Instead, Thursday's hanging man was confirmed with a second reversal warning - this one a small doji star.  The indicators have also stopped rising just short of overbought and the stochastic is flattening in preparation for a bearish crossover.  That means Verizon is no longer a swing trade buy and in fact may be getting ready to move lower in the next few days.