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- Tuesday higher, medium confidence.
- ES pivot 1272.17. Holding above is bullish..
- Rest of week bias uncertain technically.
- Monthly outlook: bias down.
- ES Fantasy Trader goes long at 1276.50..
It was looking pretty gloomy until a post-lunch rally brought the Dow briefly into positive territory for the day, but they knocked 'em back down into the close thus saving my bearish call. The S&P admittedly did squeeze out a tiny gain, but my calls are based on the Dow, so that's what counts.
The technicals
The Dow: Although the Dow lost 17 points today, the action wasn't all that bad. That late afternoon fade fizzled and was unable to move us below the earlier lows. The net result was a tomahawk pattern. Don't bother looking it up, it's my own invention. A tomahawk is simply a hammer with a short upper wick sticking out. It is a bullish reversal indicator and a sign the bulls may be getting ready to go on the warpath. I am encouraged too by the fact that there was essentially no follow-through lower after piercing the 200 day MA on Friday.
The pattern in the S&P is similar, but with a doji star. Recall that last night I said that 5 out of the last 6 times when the S&P broke under the 200 day MA, the next day was lower. The fact that that did not happen today is noteworthy.
The VIX: Way back last Saturday I wrote "the VIX rarely spends more than a day or two above its upper BB before retreating". Well there you have it - after popping to nearly 28 intraday today, the VIX retreated and closed down 2.03% on a Franken-candle that was part doji, part harami, part spinning top. Add in a stochastic that just made a bearish crossover and that spells lower VIX on Tuesday, good for stocks.
Market index futures: Tonight all three futures are solidly in the green for a change, with ES up 0.41% at 1:13 AM EDT. Of particular interest is that ES did not tank following Friday's break under the 200 day MA, giving us instead a long doji on the day. And the overnight action is quite bullish, having taken us right back over the 200 MA at 1276.82. Clearly the futures traders are liking the news out of Europe today. I'm not sure that the announcement that you're going to have a conference call is worth a half percent move in the futures but what the heck, I'll take it.
ES daily pivot: Tonight the pivot takes another big step down from 1285.00 to 1272.17. But that combined with a rising ES in the overnight broke us cleanly above the new number right at midnight. And ES has continued to drift higher to this point, so that's a positive sign.
Dollar index: And also last Saturday I wrote "the dollar has more downside coming". And indeed, today the dollar dropped 0.38% on the dark cloud cover payoff. And significantly, it traded entirely outside the rising RTC for a bearish trigger. This portends lower again and is also good for stocks on Tuesday.
Transportation: Today the trans extended their losses from Friday , closing down another 1.31% following the 200 MA break. But this served to reach the lower BB, and enter oversold territory on a hammer. It's not a great reversal indicator, but the odds are definitely starting to lean that way. On 5/18, the trans also broke under the 200 day MA from a similar position, and the next day was up big time.
TLT: Today, the TLT had its first losing day in four sessions, dropping 0.79% to form a bearish harami cross. Not only that, but the indicators started coming off highly overbought levels and the stochastic just formed a bearish crossover. Remember what I said on Saturday about the TLT going exponential? This chart is just begging to go lower and that would be good for stocks.
History: According to The Stock Traders Almanac, Tuesday is historically slightly bearish.
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 13/16
17 4/23 30 48 - 1379 14/17
17 4/23 30 48 - 1379 14/17
18 4/30 44 32 + 1403 14/18
19 5/7 23 50 - 1350 15/19
20 5/14 32 44 - 1353
21 5/21 30 52 - 1295
22 5/29 35 42 - 1318
23 6/4 32 48 - 1278
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 4/30 was right, the S&P now being lower than then. I'm using the column "Accuracy" to track my calls. So now I'm 15 for 19. And of course that means that since I voted with the majority back then, the poll as a whole was also wrong that week. So with over one third of the year gone the poll's accuracy edges up to 79% YTD. Still pretty good.
This week we see a small drop in bullish sentiment combined with a corresponding increase in bearish sentiment causing the spread to increase to 16 points. So there are still no extreme readings here that might cause us to be contrarian bullish. For my part, I voted bearish for the fifth week in a row. However, I am now beginning to see at least a glimmer of light at the end of the tunnel (and hopefully it isn't the headlight of an oncoming train). I'm thinking the monthly SPX chart may start giving a bullish indication in a month or so.
Accuracy (daily calls):
Month right wrong no call conditional batting average
April 7 9 2 .438
May 10 7 3 2 .632
June 2 0 0 0 1.000
And the winner is...
Tonight the stars seem to be aligning in favor of the bulls. With some good bullish signs in the charts plus positive news from Europe today, I'm ready to call Tuesday's close higher.
ES Fantasy Trader
Portfolio stats: the account remains at $134,000 after 40 trades (31 wins, 9 losses) starting from $100,000 on 1/1. Tonight we go long at 1276.50.
CUA (Commonly Used Acronyms)
BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date
Posts
Hi Michele,
ReplyDeleteIt was a bit unusual of you to go long so early in the evening. I wonder if you felt you had to get on the train sooner than later?
In any case, I've been thinking that calling a higher/lower close is a bit tangential to your trading bets really (since you establish position the day before you are making a call for).
If one were to trade your higher/lower close calls, then one could simply take an appropriate position at open and close at market close. I wonder how that will fair. The current stats you have just says right/wrong and not how many points one would make as a result of those calls. Should be interesting to track I suppose.
Thanks much for the tweets/blog.
An admirer.
Exactly. I've had several occasions recently where the big moves happened earlier in the evening and by the time I got around to looking for an entry around 1 or 2 AM, most of the move was already over. Tonight's earlier entry seems to be paying off - so far at least.
DeleteYou have an interesting idea regarding my daily call tracking. I've given this some thought so here's what I'm going to do. Starting now, when I make a bullish call, I will also place a market order for DIA at the open. When I make a bearish call, I'll place an order for DOG. I'll close the position at 4 PM and track the profit or loss. It should be most interesting. Thanks for reading!