Tuesday could go higher

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

• Tuesday higher, low confidence.  Bull-bear ratio is 6:0.
• ES pivot 1249.67.  Falling under would be bearish..
• Rest of week bias uncertain, rebound possible by Friday.
• Monthly outlook: bias up on technicals
• ES Fantasy Trader went long at 1252.25.

Recap

My call for a higher Monday was looking good out the gate this morning... then it was looking stupid.. until in the end I was redeemed with an 85 point gain in the Dow.  It wasn't much but I'll take it, especially after having been wrong two days in a row.  I was particularly pleased to read a report on Ticker Sense today to the effect that there are "two prominent technical analysts who say it is too difficult to predict the market direction".  Huh - no kidding.  Welcome to my nightmare.


But just like the Post Office, we can let neither gloom of Greece nor Roman rain deter us from our daily rounds.  So now let's cast the runes and see what Tuesday might hold in store.

The technicals

The Dow: Today's close at 12,068 means that we held not only the important psychological 12K level but the 200 day MA at 11,975 too.  There's also an ascending triangle forming here and that's usually quite bullish.  With that, plus two levels of support just below us and indicators that are now rising off oversold levels, I see no reason to give anything but +1 bulls here.

The VIX: As I thought last night, the VIX did indeed move lower today - a bit.  After moving by gaps for four straight sessions, it has barely budged in the last three.  And just as there's an ascending triangle now in the Dow, here we have a descending triangle.  With indicators coming down off overbought levels and a stochastic that has finished its bearish crossover, I'd think we're not done yet with declines in the VIX, so that would be +1 bulls.

VIX futures: Futures also edged lower today and look if anything even more overbought than the VIX itself.  I'd say they've still got some good downside ahead so that's another +1 bulls.

Market index futures: All three are, as last night, again in the red at 1:10 AM EST.  I take back what I said last night - what we've got going here now looks more like an ascending triangle (just like the Dow) than a symmetrical triangle, so that's even more bullish.  On the other hand, the stochastic is now about to execute a bearish crossover.  The other indicators are mixed.  There's a definite lack of clarity to this chart.  It really could break either way, so I'm not going to give any points here tonight - that's the first time I've done this.

ES daily pivot: is now 1249.67.  Note that we've been slowly drifting lower since 6 PM and are now quite close to the pivot, less than 2 points above.  That makes the pivot critical for Tuesday.  I'm just waiting to see if we're going to bounce off or fall through.  The decline seems to be stopping with the 1:20 AM candle but we'll wait a bit longer. 1:35 AM update: looks like ES veered away from the pivot like a mosquito from DEET.  This is promising, so I'm going to give it +1 bulls.  But still keep an eye out for any retests before the open on Tuesday.

Dollar index: I'm seeing lots of symmetrical triangles lately and this is another one.  The expected resolution here would be higher but the dollar indicators are already highly oversold and look poised to go lower.  With these sorts of mixed messages, I don't feel good about calling it either way so no points.

Oil: Contrary to my expectation last night, oil made an advance today that broke it out of its range going back to October 25th.  Indicators remain quite oversold but we've not yet reached either the upper BB or the looming 200 day MA.  If I had to guess, I'd say oil will try to reach those before putting in a top, so that would be +1 bulls.

Copper: Has been busy forming an ascending triangle for the last three days now.  That's about all I can gather from this chart along with some rising indicators, but that's enough to vote +1 bulls.

Morningstar Market Fair Value Index: On Friday the index remained unchanged at 0.90 so no points here.

History: According to The Stock Traders Almanac,tomorrow is just marginally positive but not enough to vote any points here.

Sentiment: Once again it's Monday, so the new Ticker Sense Blogger Sentiment Poll  came out today.  Last  week bullish sentiment advanced big time to an outsized 67% while the bears retreated to just 15%.  However, today there was a reversion to the mean with the bulls retreating to 40% and bears advancing to 30%.

Last week I wrote "if next week's poll becomes any more bullish, I might have to reconsider my position.".  Obviously that didn't happen and for the record, I voted bullish again now for the fifth week in a row, still on the basis of my reading of the monthly Dow chart and traditionally bullish fourth quarter seasonality.  But I can't award any points for a 40-30 sentiment ratio.

     And the winner is...

Surprisingly, considering how ambivalent things seem to be in general, it's the bulls by a shut-out with a bull-bear ratio of 6:0.  The overarching gestalt lately seems to be one of underlying resilience, especially given the continued rumblings from Greece and now Italy.  One can easily imagine a prime minister's resignation causing the Dow to plummet just a few months ago, but it just doesn't seem to be having as much effect today.

Maybe people are just getting tired of this farce - I certainly know I am.  But in any case, I'm going way out on the limb tonight and calling Tuesday higher, with the usual caveat about truly bad news trumping the technicals.

ES Fantasy Trader

Today we took a tiny profit of 0.5 points, but hey, a win is a win especially after having been down on this trade last Friday.  Portfolio stats: the account is now $172,750 after 34 trades (25 wins, 9 losses) since inception on 8/18 with $100K.

SLD    10    ES    false    DEC11 Futures     1255.50    USD    GLOBEX    15:48:16

BOT    10    ES    false    DEC11 Futures     1255.00    USD    GLOBEX    NOV 4 01:53:06

Tonight we go long at 1252.25.
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