Tuesday, July 17, 2012

Tuesday higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher, low confidence
  • ES pivot 1347.67.  Holding above is bullish..
  • Rest of week bias higher technically.
  • Monthly outlook: bias down.
  • ES Fantasy Trader standing aside.

Much was made about the Dow's 50 point decline in the news today with headlines like "Dow now down 7 of last 8".  But the charts tell a different story, one we will recount below.

The technicals (daily charts)

The Dow: Yes, the Dow was down today, and while it wasn't quite a doji as I thought, it also didn't give back all of Friday's big gains.  Basically, the pattern this year of small retracements after big gains continued to hold.  Today's candle was fairly indeterminate, not quite spinning top, not quite hanging man, not quite dark cloud cover.  I can't really get too excited about it.  I think the indicators are more telling and they're still on their march upward from oversold, so that's a positive sign.

The VIX:  Today the VIX put in an unusual inside hammer.  Although this was a red candle, the VIX gained 2.21% on the day.  And the low of the day was actually higher than yesterday, showing the reluctance of the VIX to pay a visit to the lower BB.  Indeed, it now seems to have some decent support at 16.50.  With the futures now oversold, I'd say the VIX has a chance of putting in a green candle on Tuesday.

Market index futures: All three futures are up significantly at 1:30 AM EDT with ES gaining 0.45%.  Today's small red candle at the top of Friday's big gain was typical of the pin action we've been seeing after these kinds of moves lately.  What's encouraging is the turn around in the overnight giving us a bullish engulfing pattern in the new developing daily candle.  I understand it's risky to read candles that aren't fully cooked, but at the moment, it's all I've got to go on.  In any case, the indicators are all quite bullish now, well on their way from oversold to overbought.  The stochastic bullish crossover that occurred last Thursday completed nicely and proceeds apace.  ES has also now cleared a minor resistance level at 1351, so overall, I'm liking this chart.

ES daily pivot: Tonight the pivot rises from 1344.58 to 1347.67.  Even at that, with the spike in ES at 9:15 this evening, we're even further above the pivot than before - a good sign.

Dollar index: The dollar decoupled from the market once again, making me question this metric, once again.  In fact, today's 0.31% was larger than Friday's, yet the market was down anyway.  For what it's worth, the dollar seems to have more downside left in it.  Whether this translates to higher stocks on Tuesday is now open to question.

Transportation: The trans were down today too, but with a loss double that of the Dow.  This was enough to send RSI off its upward course, though the stochastic still looks in good shape.  This pattern reminds me of something we saw in April, where a big gain was followed by a small loss.  The next day (4/16) was a green candle that was lower than the day before.

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  16/23
 24  6/11       28         40        -     1326  16/24
 25  6/18       39         26        -     1343  16/25
 26  6/25       38         46        -     1335
 27  7/2        41         40        -     1362
 28  7/9        42         38        -     1355
 29  7/16       44         32        -     1357

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 6/11 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 25 .  After an impressive start this year, my monthly calls have now been wrong for six weeks running.  Meanwhile the poll's accuracy rises a bit to 68% YTD.  For the record, I voted bearish once again.

This week the poll was characterized by a slight increase in bullish sentiment coupled with a larger drop in bearish sentiment.  While the bull-bear gap widened for the third week in a row, both numbers are still not at YTD extremes, so I'm not sure we can draw any conclusions from this.  I'll admit I'm a bit surprised at the way bullish sentiment has been increasing (and bearish decreasing) for the last four weeks though.  Note too that bullish sentiment is actually two points higher now than it was on April 2nd, just before a very ugly week.  Just something to keep in mind.

Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points trade

April   7      9      2                    .438
May    10      7      3           2        .632
June    8      6      6           1        .600     632   +$330

July    6      0      4           0       1.000     503

     And the winner is...

Given that today played out as expected and that the markets did not give back major portions of Friday's gains, I'm encouraged that the underlying strength in the charts may come to the fore on Tuesday particularly in view of the rumors surrounding what The Bernank may have to say about the economy (how do people know this?).  I know that the trans are looking a bit weak and the VIX is rather indeterminate but we've got some decent gains in the futures in the overnight so I'm going to go ahead and call for a higher close Tuesday.

ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $160,625 after 51 trades (40 wins, 11 losses) starting from $100,000 on 1/1/12. Tonight, although ES is up I'm afraid we got to the bus stop just in time to see its tail lights receding in the distance.  ES took a sudden spike earlier this evening while I was doing Other Stuff and I'm concerned that that may have been it.  There are nights where the market runs higher the next day but all the gains in ES have already happened.  So reluctantly, even though I believe we're going higher Tuesday, I must stand aside and forgo the nightly ES trade once again.  At least we know that there'll always be another bus coming around soon.   Reminder: I post these trades live on Twitter @nightowltrader.

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.



  1. Michele-

    My overall posture is mildly bullish longterm (multi-month), and agnostic in shorter timeframes. I thank you so much for keeping an eye on the Transports for us. They don't lead intraday, but they often (usually) lead in daily and weekly timeframes.

    Today’s loss of ca .70% by $TRAN, its closing below the 10 and 20 day SMAs, its generating a classic MACD (12,26,9) confirmed SELL signal (confirmed by price being under the above MAs), its generating a Williams-36 recent SELL signal.. these are of concern to me.

    The arcana of banking I don't pretend to understand. But transporting stuff, mining-materials, these are comprehensible. These should either lead the market, or be synchronous with it. Weakness in any of these three, SPY, XLB, or $TRAN causes me to be concerned about the intermed. term. I would prefer to see any up move include all three in unison, and hopefully the latter two showing RS.

    btw, I've been impressed w how decisively "uncertain" your analysis has been these past few days. There's a big difference between being "vague" and being "uncertain". With the TREND meter over your left wing up there showing trendless, and markets forming dojis and other markers of indecision, a wait and see posture has cost nothing and has actually spared angst.

    And it's always good to spare angst, yes?

    1. Thank you very much for adding your perspective on this. I'm still not quite to the point of being intermediate-term bullish, but I think I'm getting there pretty soon.

      I'm with you on banking, and that's why I never talk about it - I just don't get it. And you're absolutely right - there is never any harm in just waiting. I used to think I had to put on at least one trade a day or I wasn't a "trader". Now I know better - and I'm making more money than I did back then too.


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