Tuesday, June 26, 2012

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence
  • ES pivot 1311.83.  Breaking over is bullish..
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader going long at 1310.00.

After yesterday's bounce, the downward momentum resumed today handing us a 138 point loss, the second triple digit down day in the last three.  Although technically we're not in a downtrend as I define it (three consecutive days in a row), it's close enough to define a new descending RTC, so I'm setting up the red arrow.

The technicals

The Dow: Today's close at 12,503 brings the 200 day MA back into play at 12,356.  That's easily within a one-day reach given the recent action.  In addition, the lower BB is still a long way away at 12,088 and the indicators are still not even oversold yet.  The one bright spot is that today's down volume, while above average, was still less than Friday's up volume.  But this chart still seems to suggest more downside ahead.

The VIX:  Today the VIX gapped up a big 12.53% to give us a doji star and a potential evening star developing.  We're also outside the last descending RTC so that's a bullish trigger, and the indicators are all just coming off oversold.  So we have something of a mixed message.  My idea is that the evening star may drive the VIX lower Tuesday, but watch for a rebound later in the week.

Market index futures: In something of a rerun of last Thursday evening's action after a big down day, all three futures are currently in the green at 1:50 AM EDT with ES up 0.17%.  And once again, the lack of continued downward follow-through in the overnight is encouraging.  It is particularly interesting that the stochastic is gearing up to form a bullish crossover, and the other indicators are very close to oversold.  I'd say a move higher from here is not out of the question for Tuesday.

ES daily pivot: Tonight the pivot takes a big step down from 1325.58 to 1311.83.  Combined with ES's slow drift higher, and we're really close to the new pivot - less than three points.  While holding under is bearish, we are at least within reasonable striking distance here, and a break above would definitely be bullish.

Dollar index: In a sort of mini-version of the VIX, the dollar gave us a small doji and a potential evening star.  This is already looking ripe for a move lower on Tuesday which would be good for stocks.

$TRAN daily
Transportation: This one is worth a chart.  Here we see how the trans have now been down, pretty steadily four days in a row.  Note how today we dipped below the 200 day MA (the dotted orange line) but recouped to close just barely under it.  We also fell off the left edge of the descending RTC, which can sometimes be bullish.  However note also that the indicators are all still continuing their fall from overbought and have not yet reached oversold.  Therefore, one must conclude that a turnaround is near but perhaps not quite at hand.  Nevertheless, this must make one at least hesitant to put on any new shorts here.  I'd at least consider getting out some long pants instead.

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
 18  4/30       44         32        +     1403  14/18
 19  5/7        23         50        -     1350  15/19
 20  5/14       32         44        -     1353  16/20
 21  5/21       30         52        -     1295  16/21
 22  5/29       35         42        -     1318  16/22
 23  6/4        32         48        -     1278
 24  6/11       28         40        -     1326
 25  6/18       39         26        -     1343  
 26  6/25       38         46        -     1335

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 5/29 was wrong (again), the S&P now being higher than then.  I'm using the column "Accuracy" to track my calls.  So now I'm 16 for 22 .  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 half the year gone now the poll's accuracy drops to 73% YTD, still pretty good.

What's interesting this week is that while the bullish sentiment barely budged, the bearish sentiment nearly doubled.  In fact, bearish sentiment is now at the second highest level of the year so far.  You might expect that to be contrarian bullish, but don't forget that with the year half over already, the poll has been right nearly three quarters of the time.  And for the record, I voted bearish once again for the eighth straight week.  Although the monthly SPX chart is currently showing a doji on a candle that's almost fully cooked, that is not a guaranteed reversal indicator and the stochastic, which works very well in these long time frames, is still less than halfway on its trip from overbought to oversold.  Given its current position, I'd say it should hit bottom around the end of July.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting average points trade
April   7      9      2                        .438
May    10      7      3           2            .632

June    6      5      5           1            .583        346   +$177

     And the winner is...

While the overall picture doesn't look particularly bright, I'm thinking that the sell-off today was overdone.  With the VIX and the dollar both suggesting the possibility of a reversal on Tuesday, I am going back out onto my limb and calling Tuesday higher.

ES Fantasy Trader

Last night's short worked out well for 14.5 points that left almost nothing on the table.  Portfolio stats: the account now rises to $134,000 after 46 trades (35 wins, 11 losses) starting from $100,000 on 1/1  Tonight we go long at 1310.00 with another early evening entry.  Reminder: you can track these trades live on Twitter @nightowltrader..

BOT    10    ES    false    SEP12 Futures     1305.75    USD    GLOBEX    12:25:20   
SLD    10    ES    false    SEP12 Futures     1320.25    USD    GLOBEX    01:40:04

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Deal with it.

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