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- 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 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.
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 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 12:25:20SLD 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.