Tuesday looking higher

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

• Tuesday higher, high confidence.
• ES pivot 1273.50.  Holding above is bullish..
• Rest of week bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader went long at 1282.00.

Recap

Last night was a tough call.  I'm glad I paid attention to the VIX to temper my impression that a top might be in, since we did end up going up by 33 Dow points today.  I said "Monday may just give us yet another day like we've been seeing the past four sessions."  Now make that five.  Go for six maybe?  Let's see...

The technicals

Daily Dow

The Dow: With a range of just about half of Friday's, the symmetrical triangle I spoke of last night continued to develop today.  Check it out in this daily chart and see if you don't agree.  It's not perfect, but it's pretty good.

It looks like there's room for maybe one more day of action to compress this spring, and then boiing!  Remember, most often these things resolve in the direction of entry, and here that would be up.  It could happen Tuesday, and if not then, then on Wednesday.

Also, the High-Low index has come down off its highs from the end of the year and that is an encouraging sign too.

The VIX: The VIX actually gained a bit today but did it on a red candle that's actually a good dark cloud cover and that's a high reliability bearish reversal indicator.  A lower VIX should also help stocks on Tuesday.

Market index futures: For once we're getting some non-trivial upside in the overnight.  ES is up just over half a percent at 1:15 AM EST.  It looks like the ascending triangle that's been developing in ES for the last five days is finally starting to resolve to the upside.  ES has been trending up steadily since today's close.  My only concern is that we're right at a resistance line at 1282 now.  This is a level that has stymied the market for five straight days now.  However, Tuesday may just be the day of the breakthrough.

ES daily pivot: The pivot actually dropped a bit to 1273.50.  This puts us comfortably above the pivot which is a bullish sign.

Dollar index: The dollar seems to have peaked short term after two days of gap-up gains that left it quite overbought.  Today's decline should be followed by more on Tuesday, another positive signs for stocks.

Copper: Striking something of a bearish note, copper is now clearly in a downtrend on the daily charts.

Morningstar Market Fair Value Index: Today the index

History: According to The Stock Traders Almanac, Tuesday is basically flat.  Note that despite the widely publicized "January Effect", January is only the 6th best month for the Dow, and 5th best for The S&P.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll.  Starting today we're going to track the poll to see how well it performs.  Here's how things shake out so far:

Week   % Bullish  % Bearish  NightOwl SPX

1/3         46        21        +     1258

1/9         56        37        +     1278

The SPX number is the closing price of the S&P on the Friday before each new poll comes out.  The "NightOwl" column is how I voted.  Since the poll is for 30 days out, we'll run four weeks and see how well we did.  For the record, I voted bullish again this week, on the basis of my reading of the monthly SPX chart as well as on seasonality.

Today we note that while bullish sentiment has increased to 46%, interestingly, bearish sentiment has also increased to 37%. The spread is therefore narrower than last week.

     And the winner is...

All things considered, I'd say the bulls have it.  With Asia closing up strongly and the futures trending up significantly in the overnight, this market gives the impression of wanting to go higher.  So absent any new disasters from Europe (which seems to have mysteriously vanished from the news radar in the past few days) I'm going to say that Tuesday goes higher.

Note too that Rob Hanna's great Quantifiable Edges blog gives a historical statistical edge to our present situation.

ES Fantasy Trader

Portfolio stats: the account remains $100,125 after 2 trades (1 win, 1 loss).

Tonight we go long at 1282.00