The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Monday higher.
- ES pivot 1911.92. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- YM futures trader: no trade.
I called last Friday uncertain on the basis of some conflicted charts Thursday night and the fact that it was options expiration. In retrospect that was a good call because the Dow ended the day down all of 21 points while the SPX finished basically unchanged and the Nasdaq was up all of 17 points. With that out of the way, we now enter the last full week of February and go straight to the charts to see where we may be headed.
The technicals
The Dow: While the Dow did not move much on Friday it did put in a tall hammer-type candle - or was it a hanging man? In either case it confirmed Thursday's dark cloud cover with a move lower. It also caused indicators to flatten out just before reaching overbought and curved the stochastic around in preparation for a bearish crossover. Overall the impression here is bearish for Monday.
The VIX: The VIX is always one of the most important charts to look at and on Friday it put in a tall bearish engulfing pattern to continue a now week-long descending RTC. That was enough to drive the indicators well into oversold territory and start the stochastic curving around for a bullish crossover - but we're not there yet. The VIX now has support around 19.82 so it is possible that Monday could be a bottoming day.
Market index futures: Tonight, all three futures are higher at 12:14 AM EST with ES up 0.55%. Last Friday ES exited its strong recent rising RTC for a bearish setup on a skinny red hammer. The loss was minimal but the indicators remain quite overbought and the stochastic is in prime position for a bearish crossover. However the new Sunday overnight is putting in a very strong bullish engulfing pattern with a non-trivial advance calling into question whether ES is actually going to move lower on Monday. I'd not be surprised to see it advance instead.
ES daily pivot: Tonight the ES daily pivot falls from 1920.42 to 1911.92. And ES remains above its new pivot so this indicator continues bullish.
Dollar index: After spending two fruitless days attacking its 200-day MA , on Friday the dollar made one more vain attempt before giving up the ghost entirely and plunging 0.37% on a massive bearish engulfing pattern. That was enough to stop the advance of the indicators just before hitting overbought as well as causing the stochastic to flatten out just short of a bearish crossover. Overall this chart looks nothing but bearish tonight.
Euro: And also on Friday the euro managed to arrest its week-long descent with a move back up to 1.1142. That exited its descending RTC for a bullish setup and caused the indicators to reverse course after having just recently hit oversold. However the new overnight does not appear to be confirming this reversal warning and is in fact continuing lower in a non-trivial fashion calling into question whether the euro has the mojo to start a rally for the last week of February.
Transportation: After putting in a dark cloud cover on Thursday, on Friday the trans put in a tall skinny hammer that was good for a mere 0.02% gain. However that was also enough to send the indicators start moving lower off of overbought and leave the stochastic primed for a bearish crossover. We also got a bearish setup on an exit of the most recent rising RTC so that leaves the overall impression here as bearish.
Tonight all the charts are looking fairly bearish with the two notable exceptions of the VIX and the futures. But I think the bearish reversal signs aren't strong enough just yet to outweigh the positive influence of the latter so I'm going to go out on a medium-size limb and call Monday higher. Note though that the end of February is historically quite weak so I'm not planning on going long anywhere this week.
YM Futures Trader
Damn - I missed the big evening move in ES while busy doing other stuff so we'll just leave it alone tonight.