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- Tuesday lower, low confidence.
- ES pivot 1338.50. Breaking under is bearish.
- Rest of week bias lower technically.
- Monthly outlook: bias down.
- ES Fantasy Trader goes short at 1338.75..
The market was mixed today with the Nasdaq up nicely, the SPX up a bit and the Dow down a bit. But since my call was for the Dow, that's a miss. Oddly enough, my DIA trade for the day (buy the open, sell the close) was a winner anyway. Go figure. Anyway, it was all pretty much a re-run of exactly a week ago when the Dow ended lower after a news-inspired rally in ES the night before. I guess it was a case of "buy the news, sell the news". We now resume the search for clues as to whether they'll be buying or selling on Tuesday.
The Dow: Today's 0.2% drop formed a little hanging man at the top of Friday's big green candle and peeled away from the upper BB. Also, RSI and momentum have peaked at overbought levels. Last night I expected some Greece-fueled limited upside today adding "At some point, the recently overbought nature of the market will reassert itself and we'll go lower.". That moment may now be at hand.
The VIX: The VIX took a huge 13.22% plunge today which I found somewhat surprising given the limited moves in the market as a whole. Normally, I'd have expected more market upside to accompany this sort of VIX action. In any event, we now have a classic bearish three black crows pattern here. Unfortunately, that last crow today flew right through the lower BB. And the VIX usually spends no more than one or two days around its lower BB before heading higher again and that would be bad for stocks. Now that I think of it, this drop in the VIX may simply reflect a lot of people sitting on their hands in advance of the Fed this week.
Market index futures: Today ES put in a pretty clear hanging man that just touched the upper BB. And the indicators are all overbought. In fact RSI and momentum have already started coming back down, portending lower on Tuesday. At 1:20 AM EDT, we still have a mixed market with NQ up a bit and both ES and YM down. ES is lower by 0.15% and has been trending down since 10:40 PM. today's ES candle formed a gap-up hanging man right on the upper BB suggesting at least the chance of a continued move lower Tuesday.
ES daily pivot: Tonight the pivot moves up from 1333.50 to 1338.50. This gain leaves ES precariously close to the pivot., just a point and a half above. While remaining above is bullish, we need to watch this level for signs of breaking under in the morning.
Dollar index: Today the dollar exited a descending RTC from the first of this month for a bullish setup. Its indicators are also all quite oversold and its stochastic just formed a bullish crossover. Everything seems to be lining up here for a move higher on Tuesday, potentially bad for stocks.
Transportation:Here's another interesting divergence. While the Dow actually lost 0.2% today, the trans jumped nearly 2%, advancing clear to their upper BB. While this tall green candle is not a reversal indicator, the upper BB can be nominal resistance. With overbought indicators now, I have to wonder how much short term upside is left here.
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
23 6/4 32 48 - 1278
24 6/11 28 40 - 1326
25 6/18 39 26 - 1343
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 5/21 was wrong, the S&P now being higher than then. I'm using the column "Accuracy" to track my calls. So now I'm 16 for21 . 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 almost half the year gone the poll's accuracy drops back to 76% YTD, still pretty good.
This week we finally got a reversal in sentiment with the bulls outnumbering the bears for the first time since April 30, and by a non-trivial 13 points. This also marked the first time all year that I voted against the majority with a continued bearish call. I'm afraid I just don't see the enthusiams for the 30 day market at this point. The monthyl SPX has just exited a rising RTC, its indicators are all still jsut coming off overbought, and the stochastic just finis I guess we'll see who was right in a month.hed a bearish crossover in April.
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 4 3 4 1 .625 +52 +$98
And the winner is...
It may be a bit early, but I'm seeing some signs that we've run into some resistance here in the form of several different BB's all at the same time as well as reversal candlestick patterns. The Dow in particular acted especially weak today making me think that we could be in for at least one day of lower prices, so I'll go out on a limb and call for a lower close Tuesday. I'll be buying DOG on the open.
ES Fantasy Trader
Portfolio stats: the account remains at $129,250 after 43 trades (33 wins, 10 losses) starting from $100,000 on 1/1 Tonight we finally enter a new trade, going short at 1338.75.
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.