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- Monday higher.
- ES pivot 1953.33. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- Single stock trader: VZ still not a swing trade buy.
On Friday morning the market had me wondering where I'd gone wrong with my call for a higher close after opening with a nearly triple-digit loss. But while I was contemplating that, the Dow reversed course and finally zig-zagged its way higher to finish with a decent 103 point gain. We now enter possibly the most important week of the year for it features not only op-ex but also the crucial and long awaited Fed decision on whether or not to raise interest rates. It should be an interesting ride to say the least so lets figure out which way it will begin on Monday.
The Dow: After a spinning top reversal on Thursday and what looked like a little bullish stochastic crossover I was pretty sure Friday was going to go higher and in the end it did with a 0.63% gain. But the candle was a hanging man and the stochastic went from a bullish crossover right back to a bearish crossover. The indicators are also confused now with RSI rising but momentum falling. We seem to be in a congestion zone vaguely between 16,140 and 16,536. This probably reflects ongoing uncertainty regarding the upcoming Fed decision and I don't think this is going to change much between now and Wednesday.
The VIX: Last Thursday night I said it looked like there was more downside in store for the VIX on Friday and that's just what happened with another 4.8% decline giving us two black crows on the charts and indicators that have now just gone oversold. The stochastic remains threaded out on the floor and is of no use to us at the moment. But the overall gestalt since last month's giant spike continues a general downward trend. And without a bullish reversal candle in sight there could be at least one more day of selling here.
Market index futures: Tonight, all three futures are higher at 1:22 AM EDT with ES up 0.24 %, Last Thursday night I pointed out what look like a developing symmetrical triangle in ES. And on Friday a small hanging man type candle continued to convert confirm that with a gain that stopped exactly on the upper bounding line of this triangle. The pattern is essentially complete tonight but here's something interesting. We're seeing a gap-up overnight that is moving ES to the upside out of this triangle. That's highly unusual as most of the time these things exit in the same direction from which they were entered and in this case that would mean lower. But it's still early - this may be just another fake-out.
ES daily pivot: Tonight the ES daily pivot rises from 1948.42 to 1953.33. A weekend rally still leaves ES above its new pivot so this indicator continues bullish.
Dollar index: Last Thursday night I said that the dollar looked distinctly bearish after punching through its 200-day MA. Then on Friday it indeed lost another 0.26% leaving us with three black crows. The indicators continue falling but have not yet hit oversold, therefore it is still too early to call this chart higher on Monday.
Euro: And in typical mirror-image fashion, on Friday the euro continued higher disconfirming Thursday's green spinning top but with a hanging man. I was right not to commit to a reversal on Friday. This move also exited our latest descending RTC for a bullish setup. The indicators are all rising now but have not yet hit overbought and there's some bullish pin action in the overnight which makes it look quite possible that we will see further upside on Monday.
Transportation: Last Thursday night I said the trans looked higher again for Friday and that proved to be true with another 0.26% advance. But that happened on a hanging man and with the indicators now all overbought and the stochastic just about in position for a bearish crossover we have a reversal warning. But it's one which requires confirmation and therefore I cannot call the trans lower just yet.
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 10 2 3 2 0.857 2314 September 5 1 2 0 0.833 1290
And the winner is...
This is sure to be a tricky week on the Street. I will obviously be calling Wednesday as uncertain ahead of the Fed. That leaves Monday and Tuesday. I think we're just going to get more congestion until the air is cleared. In the meantime, technically, things look mildly bullish tonight so I'm just going to have to go with that and reluctantly call Monday higher. I'm not looking for a big pop though.
Single Stock Trader
Verizon finished Friday middle of the pack in the Dow with a $0.27 gain that nonetheless confirmed Thursday's lopsided spinning top. But like the Dow itself the indicators are now quite confused running randomly between oversold and overbought. Technically it looks higher for Monday but this is not a swing trade buy for me.