Tuesday could go lower

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

• Tuesday lower, low confidence.
• ES pivot 1364.00.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1360.25.

Recap

Unsinkable?

Today, for the tenth straight day we remained stuck in the 12,950-13,000 range in the Dow with just a 15 point loss on the day.  This is what I call a "rubber duckie" market.  You try to push him underwater in the tub, but he just bounces right back up to the surface.  On the other hand, then he just sits there - he can't fly up into the air.  What will it take to get us off of top-dead-center?  Read on...

The technicals

The Dow: Today the Dow gave us a hammer/hanging man type doji.  Without a trend, it's impossible to tell which.  About all I can gather from this chart is that there's more of the same on the way.  The only item of interest here is that the stochastic is exactly on the cusp of forming a bullish crossover.  This pattern does not look bearish, but it requires confirmation before declaring it bullish.  So we remain stuck in neutral here.

The VIX:  We saw a gap-up inverted hammer in the VIX today giving us a 4.4% gain.  But that's not the sort of candle that would lead you to expect follow-through.  Still, it did bring us out of the descending RTC breaking a five day downtrend.  My guess here is that while the VIX may not go higher on Tuesday, it very well might in another day or two.

Market index futures: At 1:28 AM EST we're seeing all three futures in the red with ES losing 0.27%.  Assuming it doesn't manage to recover, that will put ES in a new downtrend.  And importantly, the overnight action takes ES out of its rising RTC back to 2/1.  Assuming we don't recover on Tuesday, that will be a bearish trigger.  Interestingly, we're seeing some divergence here between ES (and the SPX) and the Dow.  The latter remains range-bound.  My theory is that we're starting to see a flight from risk to the dividend paying large caps.  This could be a signal that the downturn is at hand.

ES daily pivot: Tonight the pivot drops from 1370.25 to 1364.00.  Despite this, ES, which spent the day under the pivot, remains below that.  Unless ES can stage a meaningful attack on the pivot by mid-morning Friday, it's not looking good.

Dollar index: Last night I thought the dollar would be going lower soon and today it did, just a bit, hesitating on a doji down 0.12%.  It looks ready to go lower still, which would help out stocks.

Morningstar Market Fair Value Index: Well MS seems to have decided that the index remains at 0.96 after all.  We'll see what tomorrow brings.


History: According to The Stock Traders Almanac, Tuesday is historically just slightly bearish.

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 updated 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   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343  

  8  2/21       44         32        +     1361

  9  2/27       48         24        +     1366

 10  3/5        43         26        +     1370

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 2/6 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 6 for 6.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  The Ticker Sense bloggers continue to bat 1000.

It's worth noting that this week we actually saw both a decline in bullish sentiment and an increase in bearish sentiment - not the sort of thing you want if you're looking for a contrarian top sign.  The most interesting point here is that bullish sentiment is now at its lowest point so far this year.  If you believe that the Ticker Sense crowd is pretty good, then that might be an indication that the rally is nearing its end.  Nevertheless, I voted bullish once again.  Much as I'm thinking this rally is getting long in the tooth, I still don't see a reversal coming on the SPX monthly chart.

     And the winner is...

Well, once again, I'm not feeling any strong sentiment either up or down.  There are some bullish signals in the charts, but also some bearish ones, and those seem to be getting stronger.  The rubber duckie may be about to spring a leak.  So I'm afraid tonight I'm going to have to side with the bears and call for a lower close Tuesday.  But I'm still not particularly confident about that and I'm definitely not looking for a major collapse on Tuesday.

ES Fantasy Trader

I don't know - my Owl intuition is giving me the feeling that a short might work out here, so tonight we go short at 1360.25.

The account remains at $101,500 after 17 trades (12 wins, 5 losses) starting from $100,000 on 1/1.