The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Tuesday higher, low confidence.
- ES pivot 1886.92. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Recap
Well we finally got on the board for May with a correct call as the Dow gained 112 points on Monday for another record close. The headline risks of the Ukraine didn't amount to much so that crisis is averted for now. So we simply move on to Tuesday and follow wherever the charts may lead us.
The technicals
The Dow: On Monday the Dow remained well within a rising RTC and disconfirmed Friday's hanging man to finish at another record close, just barely reaching its upper BB. But even this big gain didn't quite push us to overbought. The question now is do we creep up the upper BB or bounce off? My guess is that after a big move like this, some consolidation is in order, particularly off the upper BB.
The VIX: Yesterday I asked if the VIX support level would hold and opined that "A bearish stochastic crossover and a VVIX lacking support both suggest "no" despite oversold indicators." Good suggestion, as the VIX gapped down 5.34% on Monday to just touch its lower BB right at a new support level of 12.23. The resultant hammer suggests some retracement may be coming on Tuesday though.
Market index futures: Last night, all three futures were higher at 12:11 AM EDT with ES up 0.09%. ES had a big day Monday finally breaking out of a nervous trading range that has plagued us and bedeviled me for over two weeks now. We managed to take out the March highs and nearly hit the upper BB. That also solidified the bullish stochastic crossover and broke money flow out of a slump that began at the start of May. Now while that all looks bullish, we are in fact bumping right up against the upper BB in the overnight and it's been declining for a few days now. These "roofing" upper BB's aren't too conducive to attempts to climb them so I'm not really sure how much upside is left here.
ES daily pivot: Last night, the ES daily pivot jumped from 1870.33 to 1886.92. Once again we remain above the new pivot so once again this indicator remains positive.
US Dollar Index: Sunday night I wrote that "Monday will see a pause in the dollar" and I'd say that exactly unchanged fits the bill. The failure of the dollar to advance along with indicators nearing overbought increases the odds of a drop to retrace some of last Friday's big gap up.
Euro: And on Monday the euro similarly went nowhere on a tiny star doji that only moved the indicators more oversold. We've now glanced off the lower BB so the next move seems to be more likely higher from here. We do need to get past the pivot at 1.3758 first though.
Transportation: The trans shifted into high gear on Monday, powering nearly 2% higher right through their upper BB and moving the indicators overbought. Recent history suggests the trans respect the upper BB so I'd look for a rest, possibly a doji, on Tuesday.
Accuracy:
Month right wrong no call conditional batting Dow
average points
January 5 10 6 0 0.333 64
February 5 2 2 1 0.750 107
March 12 3 6 0 0.800 431
April 9 3 5 0 0.750 482
May 1 3 3 0 0.250 -46
And the winner is...
While we've clearly developed a bit of bullish momentum recently, we're also now nearing some stopping points in the form of resistance levels and we have some reversal warnings in the form of dojis on the charts tonight. I think that we're near s short-term top but who knows whether it's Tuesday. Accordingly, and in the absence of any overtly bearish signs, I'm just going to call Tuesday higher, with the expectation of a much smaller move than Monday and possibly a doji day.
ES Fantasy Trader
Portfolio stats: the account remains at $111,625 after three trades in 2014, starting with $100,000. We are now 3 for 3 total, 2 for 2 long, 1 for 1 short. Tonight we stand aside.