Wednesday higher

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

• Wednesday higher, high confidence.
• ES pivot 1345.83 .  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1356.25.

Recap

Let's look at the last seven sessions: hanging man, star, hanging man, doji, a dump, a retracement of the dump, dragonfly doji - a veritable rogue's gallery of reversal indicators pointing to a pullback.  But the market still refuses to roll over.  How long can this go on?  Let's see...

The technicals

The Dow: My call for a negative bias on the day was working pretty well until some good news on Greece and BTE economic numbers help propel the Dow back to finish just in the green, up 4 points in a late day rally.  It's almost like a spring - every day for seven sessions now, whenever the bears try to push it down, boing, it just pops back up.  The net effect of today's action was simply to bring the indicators down a notch out of overbought territory.  We're now out of the rising RTC, but I have a feeling that we may not be seeing the decline you'd expect on that, at least not just yet.

Daily VIX

The VIX:  Last night I thought the VIX might be going lower, but the VIX had other ideas, gaining instead 2.63%.  But look at the daily chart - you don't even have to be a technician to see that this chart has no idea where it wants to go, taking stabs lower one day and then higher the very next.  The only thing here that makes any sense is the bearish crossover on the stochastic (bottom panel), now complete.  This is usually a good predictor of a lower VIX, implying higher stocks.

Market index futures: After running essentially flat after the close, the futures suddenly took a big pop on news that China is going to expand investment in Europe.  All three futures are now up significantly at 1:07 AM with ES leading the way, up 0.61%.  And that's enough to bust us through the resistance level at 1350 that I mentioned yesterday.  This now sets the stage for an assault on the 1365 area, last year's SPX highs.

ES daily pivot: Fell just a bit from 1348.00 to 1345.83 tonight.  The big China rally at 9:20 PM propelled ES through the pivot and the new value puts us even higher above it, a positive sign for Wednesday. 

Dollar index: I guess the evening star must have been hiddne by clouds, because today the dollar gapped up 0.82% instead of falling.  However, the euro's gain in the overnight will surely push th dollar lower Wednesday, which will also help the market.

Morningstar Market Fair Value Index: After hitting 0.96 last week, the index dropped to 0.94 on Friday where it remained yesterday.  The failure of the index to go any lower is positive for the market.


History: According to The Stock Traders Almanac, Wednesday is historically quite bullish.

Sentiment: It's the start of a new week so once again it's time for the TickerSense Blogger Sentiment Poll.  We continue to track the poll to see how well it performs.  Here's the cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1   1/3        46         21        +    1258    1/1

  2   1/9        56         37        +    1278    2/2

  3   1/17       41         33        +    1289    3/3

  4   1/23       46         32        +    1315    4/4

  5   1/30       48         31        +    1316

  6   2/6        56         30        +    1345

  7   2/13       48         31        +    1343

Again, 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, after the first four weeks we're able to see how well we did.  This week we see that my bullish call on 1/23 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 4 for 4.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  So far, the contrarian "majority is always wrong" theory still isn't looking too good at all.  Apparently the Ticker Sense bloggers seem to have a lot of, uh, sense.

And I note that while the bullish sentiment is dropped 8 points back to 48%, bearish sentiment continues to remain essentially unchanged after five straight weeks.  So once again we're still not seeing the sort of decline in bearish sentiment that would lead to a contrarian bearish call.  And also once again I voted positive this week.

     And the winner is...

The Night Owl gives four hoots to China for making my job easy tonight.  Until tonight's news, we were pretty much looking at more of the same sort of wishy-washy uncertain doji action that has plagued us for days now in the absence of any good reasons to go either up or down.  Tonight the Chicoms gave us a reason to go up.  So I'm going on record that Wednesday closes higher.

ES Fantasy Trader

Last night we stood aside so the account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.  Tonight we go long at 1356.25.  I'm afraid I didn't get a good entry but what can you do.  I can't sit in frotn of my screen 24/7 waiting for a sudden big move.  I'm guessing there will still be enough upside once we get underway Wednesday to push ES up some more.