Tuesday possibly lower

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

• Tuesday lower, low confidence.
• ES pivot 1401.83.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes short at 1402.00.

Recap

Last night I suggested that we might go higher today and so we did, although I have to point out something interesting.  The S&P gained 0.4% and the Naz jumped 0.75% while the Dow advanced a mere 0.05%.  When I see divergences like this, it's time for the Night Owl to do a head swivel and pay extra attention.  Read on...

The technicals

The Dow: The Dow put in a symmetrical doji today, give or take, to follow Friday's inverted hammer.  That's two consecutive reversal indicators.  And the Dow is clearly having trouble with the 13,250 resistance zone.  And the indicators are all starting to come alive from their highly overbought levels, with the stochastic just completing a bearish crossover.  This all suggests a down day Tuesday, albeit still eminently within the ongoing rising RTC.

The VIX:  The all-important VIX has been ping-ponging around in a range of 14-16 lately.  Today it gained 3.94% to close right on its long-term support line of 15 with a hanging man type candle, although there's not really a trend in place.  Meanwhile, its indicators have now all bottomed at oversold levels implying that there's more upside to come, which is bad for stocks especially given that we didn't see a lower close in the markets today.

Market index futures: At 12:45 AM EDT, all three futures are again back in the red, at least a little.  ES is down 0.09% after putting in a third straight decent green candle today.  The new candle developing is developing as a star drooping off the close of today's bar.  Of course, all year long so far these sorts of reversal warnings haven't counted for much without confirmation, and ES hasn't been able to put together more than one down day in a row since March 6th.  So this is something to watch, but we can't really pull the dive alarm on this basis alone.

ES daily pivot: Tonight the pivot rises once again from 1397.67 to 1401.83.  With ES dipping ever so slightly since the close, we're now less than a point away from this new number.  I'm thinking there's now a good chance ES could drive under the pivot before the open on Tuesday, which would be a negative for stocks.

Dollar index: Last night I wrote "this chart is looking for a lower dollar again on Monday".  And so it was once again, with the dollar giving up another 0.46%.  And in doing so it gave us a bearish three black crows pattern suggesting even more losses to come, which would again be good for stocks.  Supporting this notion is the stochastic, still descending from overbought levels.

Morningstar Market Fair Value Index: No update appeared on the MS web site today.


History: According to The Stock Traders Almanac, Tuesday is historically a bit more bullish than Monday.

Sentiment: Once again it's time for the latest 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   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366

 10  3/5        43         26        +     1370

 11  3/12       46         32        +     1371

 12  3/19       46         29        +     1404

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 2/21 was correct, the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 8 for 8.  And of course that means that since I voted with the majority back then, the poll as a whole was also correct that week.  Once again the Ticker Sense bloggers continue to bat 1000.  And once again, I voted bullish this week.  I'm still not seeing any technical reversal indicators on the monthly SPX chart.

This week we note that while bearish sentiment dipped 3 points,  bullish sentiment remained the same as last week.  Still not the sort of extreme readings that might signal a reversal.

     And the winner is...

More mixed messages.  Both the Dow and SPX charts are quite oversold, yet the candle pattern on the SPX looks a lot healthier than the Dow.  In fact, I again took out a DXD position (at 12.75).  I guess tonight the overall evidence just makes me feel Tuesday is more likely to go lower than higher.  I really hate making these counter-trend calls, but I just have to calls 'em like I sees 'em.  Unless and until we drop out of a few rising RTC's, the overall trend will remain up.

ES Fantasy Trader

Tonight we go short at 1402.00 at 12:58 AM.  I'm planning on a short short, as it were.  I'll be exiting this one on Tuesday, win, lose or draw.

In the meantime, the account remains at $116,625 after 22 trades (16 wins, 6 losses) starting from $100,000 on 1/1.