April's Strength Ends On Down Note As Dow Falls
The Night Owl Trader | May 02, 2016 01:49AM ET
The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Monday depends on ES pivot.
- ES pivot 2060.25. Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- YM futures trader: no trade.
The supposedly good month of April ended on a decidedly down note last Friday with the Dow down again another 57 points. We now being a new week and a new month as we move on to the merry month of May. Shall we sell and go away? Only the charts can tell.
The technicals
The Dow: On Friday the Dow put in a classic hammer candle. With indicators now well into oversold, this is a reversal sign worth watching. But one must remember that this candle requires confirmation.
The VIX: I wasn't ready to call the VIX lower last Friday and good thing too as it rose another 3.15%. But here's an interesintg candle: it put in a tall inverted hammer that pierced the upper BB. That's always the third rail of the VIX as it rarely spends much time above its upper BB. With indicators now overbought it's looking good for a move lower here any time now.
Market index futures: Tonight, all three futures are just slightly lower at 1:06 AM EDT with ES down just a single tick. ES followed Thursday's dump with another loss on Friday confirming the breakdown from the 2084 area. The candle is a fat sort of hammer and the indicators are now oversold but this isn't a really good reversal sign, especially with ES showing no inclination to rally in the Sunday overnight.
ES daily pivot: Tonight the ES daily pivot falls from 2077.33 to 2060.25. That puts ES back below its new pivot so this indicator turns bearish again.
Dollar Index: Wow - I was badly wrong about the dollar last Friday. I thought the inverted hammer and lower BB touch meant a move higher was near. Instead on Friday, it crashed another 0.71% on a big gap-down red marubozu that traded entirely way below its lower BB leaving this chart in negative exponential freefall. We haven't seen these levels since the start of January 2015. Indicators are now oversold though not even extremely so. And with no support in sight, there's no way to call this chart higher for Monday.
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Euro: At least I was right about the euro when I wrote "I see no sign of a downturn here on Friday." It indeed took a big jump almost up to its upper BB to close at 1.14650, its best close since last October 14th. That leaves the indicators overbought and with the upper BB nearby, the euro may find it tough to advance more on Monday.
Transportation: Last Thursday night I wrote "There's nothing positive about this chart tonight." And boy was that ever the case as the trans gapped down a big 1.19% on Friday greatly underperforming the Dow on a move that came real close to their 200 day MA. Indicators are now finally oversold but even after two bad days it's still premature to call a reversal here.
We do see some reversal signs on the charts tonight but I never like relying on the Friday charts all that much after a whole weekend. With ES hanging about just below its new pivot it seems like a good time for a conditional call: if ES can manage to break above its pivot by mid-morning Monday, we'll close higher. But if it remains below, or attempts a breakout that fails before mid-morning, then we close lower. The first day of most months is historically positive, so we might see some gains in the end after all.
YM Futures Trader
No trade tonight..
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