Monday higher

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

• Monday higher.
• ES pivot 1923.25.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias lower.
• Single stock trader: VZ still not a swing trade buy.

Recap

Last Thursday night you may recall that I made a conditional call for Friday claiming that the market would close higher if ES managed to stay or rise above its new pivot by the middle of the morning. Well it ended up taking a little longer than that and it wasn't until 12:40 PM that ES made that decisive break through its pivot after which it did indeed close higher. But it didn't quite meet the criteria for the conditional call so we count that as a miss. Still the general idea was sound as the move above the pivot did result in a higher close. Now let's considered the charts as we continue on to the first full day first full week of October.
The technicals

The Dow:  Wow - that sure was interesting! Last Thursday night I was hesitant to call the Dow lower on Friday and good thing too because it ended up gaining 200 points. That completely disconfirmed Thursday's doji star and sent all the indicators continuing on their way towards overbought but they're not there yet. The stochastic similarly has yet to even near the conditions for a bearish crossover. However the candle was a gigantic green hanging man. I'm not quite sure what to make of that long lower shadow that nearly touched the lower BB at 15,978. So we have a conflict here tonight - a reversal warning candle but three out of four recent up days establishing a new rising RTC. Which one gets confirmed on Monday? I have no idea. Once again, we require confirmation.


The VIX:  And by the same logic I wouldn't call the VIX higher on Friday either which was also good because it fell over 7% on a tall red bearish engulfing pattern to remain inside a new descending RTC of its own. Indicators continue falling but have not yet hit oversold and the stochastic is not quite in position to start forming a bullish crossover. We are also very close to the magic 20 handle and with the lower BB at 19.31 I wouldn't be surprised to see the VIX test that level on Monday.

Market index futures: Tonight, all three futures are higher at 12:50AM EDT with ES up 0.12%. Like all the other charts last Friday ES put in some decent gains but on a tall hanging man candle. That makes it three up in a row for three white crows. The indicators continue to rise but have not yet hit overbought. Interestingly, in the overnight we see that OBV has started falling for the first time in a week. My guess would be that we could be in for something of a pause or a pullback here on Monday were it not for the fact that ES continues to rise in the Sunday overnight.

ES daily pivot: Tonight the ES daily pivot rises again from 1912.17 to 1923.25.  ES remains well above its new pivot so this indicator continues bullish.

Dollar index:  I was right about the dollar last Thursday night when I said it was going to go lower on Friday because it lost 0.37% on a giant hanging man of its own just as we've seen in so many other charts tonight. This one actually tested its 200-day MA before recovering. This also had the effect of causing the stochastic to turn around for a bullish crossover from a high level. Those are often good for a move higher in the next day or two so that leaves us with mixed messages on this chart tonight. We have a bearish reversal warning but some bullish looking indicators so there's just no calling this.

Euro:  On the other hand I was wrong, very wrong about the euro last Friday as it did indeed confirm the spinning top that I discounted Thursday night by putting in a second giant green spinning top, one that hit 1.1331 before falling back to close at 1.1241. It also busted right through its 200-day MA but for all that action it remains in a wide consolidation zone that's been going on for 2 weeks now with no definitive break one way or the other. With the overnight losing just a bit there is really no clear direction here for the euro on Monday.

Transportation:  And finally the trans continued their own advance on Friday after with a pattern that looks very much like the Dow. They put in four nice days of gains after bouncing off their lower BB last week, but they also gave us a tall hanging man with a very long lower shadow. That is a clear reversal warning but one which requires confirmation on Monday so we can't make a call here tonight either.

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    10      2       3           2       0.857   2314
September  7      4       8           1       0.667   1404
October    0      2       0           0       0.000    -13

     And the winner is...

Just about every chart has the same thing going tonight - a tall hammer/hanging man reversal warning.  However, that always requires confirmation.  I also have the feeling that the tall tail in all these candles was news-driven on Friday.  If we discount it, then we get some solid green continuation candles.  And with the VIX not looking anywhere near ready yet to move higher again and the overnight futures guiding higher, what the heck, I'll just go way out on a limb and call Monday higher.

Single Stock Trader

Last Thursday night I still wasn't ready to commit to Verizon as a swing trade buy for Friday that's a good thing too because it was one of only two stocks that lost ground in the Dow on Friday. But it did it on an interesting gap-down green hammer. Indicators simply continue bumping along the bottom at oversold so with the Dow dribbling down its lower BB we at least now have a reversal warning. But we still remain inside a descending RTC so this is a warning that requires confirmation. However, I think we are now an nearing a point where Verizon could be a swing trade buy.