Tuesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Tuesday lower, low confidence.
• ES pivot 1346.83.  Holding below is bearish..
• Rest of week bias lower technically.
• Monthly outlook: bias down.
• ES Fantasy Trader going short at 1343.50.

Recap

Today gave us a pretty blah low-volume day in which the Dow followed its recent pattern of putting in U-shaped sessions.  After taking a dump out the gate, we proceeded to sawtooth our way back up to end with just a 36 point loss.

The technicals

The Dow: Monday's candle was a hammer, but it will definitely require confirmation given that the indicators are all less than halfway down from overbought, implying that we've still got a ways to go before a turn-around.  So there might still be more downside here.  Also note that the Dow didn't come close to testing its support at 12,650 today.

The VIX:  Ah, you can always count on the VIX to surprise you.  Last night I was figuring we'd see a gap-down open followed by retracement.  Instead the VIX gapped up on the open and then spent the rest of the day oscillating but never retracing the gap, to finish up by 5.15%.  This leaves us with a bearish looking red candle sitting at the top of Friday's tall red candle- most unusual.  And that's at odds with the indicators that are still oversold, though have now clearly bottomed.  I'm going to go with the indicators here and guess that the VIX may go higher again on Tuesday, and that's bad for stocks.  The oversold futures and star there too support this idea.

Market index futures: Tonight once again all three futures are lower with ES down a non-trivial 0.41%% at 1:18 AM EDT.  Today's decline gave us a dragonfly doji, but this is a reversal sign that requires confirmation and it looks like we're just not getting it in the overnight so far as ES just continues lower.  The indicators are all now firmly in declining mode and there's only a modicum of support at 1338.

ES daily pivot: And tonight the pivot falls again from 1352.67 to 1346.83.  And just like last night, ES has fallen away from the pivot so we remain under the new number, a bearish sign.

Dollar index: The dollar put in a small star today after Friday's huge run up that took us clear through the upper BB.  This is perhaps to be expected.  While the indicators are still not overbought, the star is at least a blinking yellow caution light.  This chart could go either way on Tuesday.  There's not much guidance from the euro, which is wandering aimlessly in the overnight after rising much of Monday afternoon.  It does appear to have a bias lower though.

Transportation: Last night I said of this chart "more downside to come."  And that's what happened today with a 0.31% loss.  The important thing here is that this small red candle provided a bearish trigger after trading entirely outside the last rising RTC.  And the indicators support this, remaining overbought despite having peaked two days ago.  So look for more downside again here on Tuesday.

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  

 26  6/25       38         46        -     1335

 27  7/2        41         40        -     1362

 28  7/9        42         38        -     1355

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 24 .  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 going into the second half of the year the poll's accuracy drops to 67% YTD.

This week we see very little change from last week.  The bull-bear spread widened from one point to four points and the poll is now just slightly bullish, though for the record I voted bearish once again.  The SPX had a pretty impressive run in June, but I'm afraid right now it's looking like it's over.

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    4      0      1           0       1.000     216
     And the winner is...

With more disappointing news from China tonight, this time on imports, and charts that now seem to be established in a downtrend with no reversal signs in sight, a rising TLT and Dr. Copper just completing a bearish crossover, I'm going to have to hand it to the bears again and call for a lower close Tuesday.

ES Fantasy Trader

Portfolio stats: the account remains at $149,625 after 49 trades (38 wins, 11 losses) starting from $100,000 on 1/1/12. Tonight we go short at 1343.50.  Follow 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.