Monday Lower
The Night Owl Trader | Oct 14, 2013 01:11AM ET
The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Monday lower, low confidence.
- ES pivot 1690.75. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader remains long at 1695.00.
Recap
As I suspected last Thursday night the market wasn't quite out of gas, having enough left in the tank to propel the Dow up another 111 points on Friday. We now attempt to disentangle the Washington political circus from the technicals in the charts tonight and see where Monday's semi-holiday might be going.
The technicals (daily)
The Dow: Friday's healthy advance gave us a bullish trigger on the descending RTC exit, officially closing last month's downtrend. The two white soldiers pattern is also bullish and indicators continue marching towards overbought but are not there yet. In purely technical terms, this chart looks bullish.
The VIX: Last Thursday I wrote that the VIX had "plenty of room to run lower on Friday". And that's just what it did, down another 4.61%. That move left us with a bearish trigger on exiting the previous rising RTC. The indicators continue to fall off overbought but are not yet near oversold so this chart continues to look bearish.
Market index futures: Tonight all three futures are significantly lower at 12:25 AM EDT with ES down by 0.72%. Last weeks big gains were enough to move ES out of its descending RTC for a bullish trigger and while the indicators are higher, they're still not even overbought yet. Thhe overnight gapped down on the open on news of yet another an impasse down in Clown Town but even that only erased Friday's gains, not Thursday's. And ES has been slowly drifting higher all evening. Still, I think the odds of moving back to Friday's close of 1699 on Monday are slim.
ES daily pivot: Tonight the pivot jumps from 1673.58 to 1690.75. This gain combined with ES's overnight fall put us below the new pivot right at midnight, so this indicator is now bearish.
Dollar index: After last Tuesday's big gap up, the dollar spent the rest of the week putting in reversal candles - but not reversing. Friday's was an inverted hammer that did manage to close down 0.08%, but there's a lot of retracing left to do. With indicators near overbought now, I'd say continued downside is a possibility on Monday..
Euro: On Friday the euro confirmed Thursday's doji and closed up at 1.3565. That move also just gave us a bullish stochastic crossover. With the overnight trading higher again, I'd say the euro looks good to close Monday higher.
Transportation: The trans continues to mimic the Dow though Friday's 0.56% advance was a bit lower than the Dow's 0.73%. Still with no resistance til 6675, this chart looks bullish.
Technically, last Thursday and Friday's big moves in the market look quite bullish, but I think they have to be taken with a grain of salt since they were largely due to nothing more than "hope" than the Clowns in Washington would come to some sort of agreement on the debt ceiling. With that hope now apparently dashed and the Head Clown's position being "I'm not budging" (a direct quote), it's back to reality for Mr. Market.
The charts that closed Friday all look pretty bullish but the Sunday overnight real-time data is bearish, so I'm afraid I'm going to have to go with that. Unless some sort of major piece of good news comes out on Monday, like maybe the Emperor and all of Congress announcing they're resigning in shame, it's looking like Monday lower.
ES Fantasy Trader
Once again patience proved to be a virtue. After taking some not inconsiderable heat on this latest trade, last week's closing rally propelled us (finally) into a profit position small though it may have been. I decided at that point not to tempt fate any further and got out while the getting was good. For the time being, that seems to have been a prudent decision. But I'll take a 1.25 point win over a 20 point loss any day.
Portfolio stats: the account rises to $110,625 after 17 trades (13 for 17 total, 7 for7 longs, 6 for 10 short) starting from $100,000 on 1/1/13. Tonight we .stand aside. I don't like nights like this when there's a big gap right off the open. It calls into question whether or not we'll see retracement or follow-through. I'll just sit this one out.
SLD 10 false ES DEC13 Futures 1696.25 USD GLOBEX OCT 11 12:53:21
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