Actionable ideas for the busy trader delivered daily right up front
- Tuesday higher, medium confidence.
- ES pivot 1359.50. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes long at 1365.00.
"The first quality that is needed is audacity."- Winston Churchill
It was a funny day on Monday. All the overnight brou-ha over the French and Greek elections ended up amounting to less than a hill of brie - rien du tout. The SPX and Naz were both up just a tad and the Dow did close down 30 points, confirming my call. Tonight we stir the tea leaves for our nightly look at the charts to figure out where Tuesday might go.
The Dow: The best that can be said for today's action is that the 13K support level held despite the bears' early effort to drive the Dow lower. The net result was a slightly misshapen red hammer. Not quite classic, but close enough for me. Especially given how the past four days of losses have driven the indicators all the way from overbought to oversold. Still this is not yet a rousing reversal warning. We'd want to see one day higher before declaring this downtrend over.
The VIX: Ah, more funny candles. The VIX actually lost 1.15% on a red candle lying largely above Friday's. But that's the classic dark cloud cover position, a powerful reversal indicator. The futures have an even more dramatic version of this. Add in overbought VIX indicators and you've got the stage set for a lower VIX Tuesday, implying higher stocks.
Market index futures: The market continues its mixed ways in the overnight, with NQ up a bit while ES and YM are down a bit at 1:27 AM EDT, ES being just a point lower. ES today put in a hammerish green candle, not quite meeting the classical definition, but the family resemblance is there. The tail pierced the lower BB before pulling back up. The last few days have driven all the indicators down to oversold levels and the stochastic is gearing up for a bullish crossover in the next day or two. All of these are positive signs.
ES daily pivot: Tonight the pivot actually drops from 1371.00 to 1359.50. Even without ES drifting ever so slightly higher in the wee hours, this puts us once again above the pivot, a bullish sign. Pivot power - a tip of the Hatlo hat the the legendary Dr. Brett Steenbarger for opening my eyes to this invaluable market tell.
Dollar index: Last night I wrote "A long bet on the dollar Monday would seem like a reasonable idea". And so it was, with the buck gaining 0.16% today and forming 2/3 of a bearish evening star in the process on a gap up doji. This, combined with indicators all well into overbought territory would seem to signal a lower dollar on Tuesday, good for stocks. The euro chart supports this, with the euro having put in a big hammer today.
Transportation: Last night this chart looked ready to provide further downside. Instead, the trans actually gained 0.34% on a spinning top that held the 5225 support line I mentioned. I view this as a positive sign. Also, three of my Fave Five indicators have now turned upward, another good sign. And the stochastic is gearing up to start a bullish crossover in a day or two.
History: According to The Stock Traders Almanac, Tuesday is historically as bullish as Monday was bearish\, so that's nice.
Sentiment: Once again it's time for the latest weekly 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 9/9
10 3/5 43 26 + 1370 10/10
11 3/12 46 32 + 1371 11/11
12 3/19 46 29 + 1404 11/12
13 3/26 39 29 + 1397 11/13
14 4/2 42 21 + 1408 11/14
15 4/9 25 46 - 1398 12/15
16 4/16 26 48 - 1370
17 4/23 30 48 - 1379
17 4/23 30 48 - 1379
18 4/30 44 32 + 1403
19 5/7 23 50 - 1350
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 bearish call on 4/9 was right, the S&P now being lower than then. I'm using the column "Accuracy" to track my calls. So now I'm 12 for 15. 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 the poll's accuracy rises to 80% YTD.
This week I'm switching my vote back to bearish on the 30 day outlook. And I apparently have plenty of company as half of the other poll particpants seem to agree with me now. It's the sharpest reversal in sentiment of the year so far, with bullish sentiment being chopped in half in just one week.
And why? I can't speak for everyone else but here's what I'm looking at. April put in a classic hanging man that failed to exceed the highs of March. And May so far is trading largely below the body of the hanging man, providing bearish confirmation. Add to that a stochastic just forming a bearish crossover. The stochastic is very good on the monthly charts and not to be ignored. these are all bad signs.
Month right wrong no callApril 7 9 2
May 3 1 1
And the winner is...
Whereas last night was looking lower, tonight I feel better about calling for a higher close Tuesday. The charts and indicators are showing some classic direction changing patterns that suggest at least a day or two of higher prices. In any event, I don't think Tuesday is the day to sell in May.
ES Fantasy Trader
Last night's long trade was admittedly some pretty risky business but sometimes audacity is its own reward. And so we were rewarded this morning with a nice 15 point profit on a day when the market ended down. I ended up leaving a bit on the table, but hey, it never pays to be an oinker.
Portfolio stats: the account rises to $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1 Tonight we're going long again at 1365.00. If this trade isn't profitable Tuesday, I believe it will be by Wednesday.
Reminder - you can now follow these entries and exits live on Twitter @nightowltrader. And let me note that I always buy on the ask and sell on the bid to make things more fair. This way there's no question that the trade would have executed for real. But also don't forget that because ES often moves quickly, the price may have changed in the time it takes me to type in the Twitter post. Also keep in mind that these trades run with no stops and no preset targets.
SLD 10 ES false JUN12 Futures 1364.50 USD GLOBEX 11:15:19
BOT 10 ES false JUN12 Futures 1349.50 USD GLOBEX 00:47:52