Monday stock market forecast

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

• Monday higher.
• ES pivot 2090.08.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• Single stock trader: VZ still not a swing trade buy.

Recap

I have to admit I'm a bit surprised by Friday's action in the market. I figured for sure there would be a strong reaction one way or the other after the jobs numbers came out. But instead what we got was a tiny move higher in the Dow and an even smaller move lower in the SPX . All in all it was a big nothing. Let's take a look now to see if we can't get a bit more direction as to where this coming week is headed.
The technicals

The Dow:  After a fat spinning top reversal candle last Wednesday and a doji star immediately following on Thursday it's no wonder I called Friday uncertain. And as it turned out what we got was another reversal candle, this one a green hanging man. Indicators remain just barely overbought and the Dow itself is just hanging by a thread on the very edge of its latest rising RTC. The rest of the indicators though have begun moving lower so it's not at all clear which way this one's going on Monday.

The VIX:  Last Friday made it 12 in a row that the VIX has been stuck in a consolidation range. This time it fell nearly 5% after Thursday's inverted hammer that just touched its 200-day MA. And it gave us a second inverted hammer. It also just squeaked out a bearish stochastic crossover. So that gives us two contradictory reversal warnings with one higher, one lower but given recent history my guess is that there's only a small bit of downside left available, perhaps down to 14

Market index futures: Tonight, all three futures are higher at 12:23 AM EST with ES up 0.10%. ES has been having trouble getting it together for the last three days. We had a fat spinning top on Wednesday followed by a doji star somewhat lower on Thursday followed by another doji lower again on Friday. With four days of lower highs and lower lows it's not looking so hot. Indicators are now off of overbought but still a long way from oversold. The new overnight is also sitting right on the edge of the latest month-long rising RTC so it is now do or die time for ES. At the moment the Sunday overnight looks only mildly  encouraging but we'll have to see what happens on Monday. I'm not convinced.


ES daily pivot: Tonight the ES daily pivot falls  from 2094.25 to 2090.08.  .That now leaves ES above its new pivot so this indicator flips back to bullish.

Dollar index: I didn't call the dollar last Thursday night for Friday and it's just as well because I sure wasn't expecting a gigantic 1.23% gap-up rocket all the way back to its upper BB at 66.46. (Recall that this is on the $USDUPX, not the $DXY since those cheapskates at eSignal want to charge me extra for the latter) and even this giant pop was only enough to send the indicators barely overbought. And the stochastic is nowhere near even starting to put in a bearish crossover. What we do have is a an inverted hammer and a giant yawning gap that begs filling so we'll be watching this one to see if the dollar does any retracing a time soon as it seems ripe for that right now.

Euro:  And of course similarly, on Friday the euro took another big leg down, this time to close at 1.0 750 breaking support all the way back to the middle of July. It also just touched its lower BB but we are now clearly in a month-long downtrend here and although the indicators have now gone oversold, again there is really no sign at the moment is that the euro could close higher on Monday.

Transportation:  On Friday the trans outperformed the Dow with a 0.75 percent gain that sent the indicators overbought and brought the trans right back to resistance at 8241. Still, that was enough to break out of their latest short descending RTC so with a confirmed reversal candle and all the indicators rising, there are really no bearish signs on this chart tonight.

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    7      7       5           1       0.533    538
November   1      1       2           1       0.667   -161

     And the winner is...

There are a few positive signs in the charts tonight, particularly with the VIX which seems like it could fall a bit more and the futures which seem to be forming a bullish stochastic crossover at the moment.  So I'm going to go way out on a limb and call Monday higher.

Single Stock Trader

It seems like ages since I called a swing trade buy for Verizon. And indeed on Friday it just kept going lower with a gap-down red hammer for a nearly 1% loss to make it five lower in a row. That also left it right on the edge of its rising RTC and indicators continue to fall from overbought towards oversold but they aren't there yet. At least the stochastic has finally begun to curve around for a bullish crossover but it's not there yet either. So what we have here is a reversal warning but one which requires confirmation so this stock is still not a swing trade buy.