Wednesday lower unless pivot crossed

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

• Wednesday lower unless ES breaks above pivot, low confidence..
• ES pivot 1395.92.  Holding under is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader stranding aside.

Recap

Wow - the Night Owl went for the gold last night but came away with the lead medal instead.  Virtually every technical idea I had about the market today was wrong.  We did not go down today, instead the Dow gained 51 points in another funny low-volume dome shaped session influenced by - who knows, Angela Merkel, some Fed member, whatever.  Clearly, something has changed over the last two days and I'm going to try and get to the bottom of it.

The technicals (daily)

The Dow: Yesterday's bearish shooting star was not confirmed today.  Oddly, we got something of an echo of that in a similar looking candle with an upper wick just touching the upper BB but a longer real body.  The indicators remain confused and with the rejection of yesterday's star, I'm not seeing the bearish case here anymore.

The VIX:  Support at 15.50 held today and the VIX gained 0.25%.  The stochastic is now quite oversold and looking ready to form a bullish crossover in the next few days.  So this is one point I did get right today and I'm expecting the VIX to move higher again on Wednesday.

Market index futures:Like everything else tonight, the futures are giving mixed messages.  NQ is up but ES and YM are down, with ES lower by 0.14% at 1:33 AM EDT.  I do see a developing pattern here though.  It's starting to resemble 6/29-7/5 where a big gain was not immediately followed by a leg down but rather a few more days of small momentum induced gains before falling.

ES daily pivot: Tonight the pivot rises again from 1391.00  to 1395.92.  The pivot action is really similar to last night, with the pivot rising just up over the current ES level for a bearish indication.  But that didn't work out too well today.

Dollar index: The dollar fell today by 0.07% but did it on a green candle.  Nevertheless, the current downtrend remains intact.  The indicators are confused on this chart and frankly, so am I.

Euro: After two days of doji's the euro in the overnight is forming, yes, yet another doji.  It just seems to be hanging on top of last Friday's big gain.  Just looking at this I want to say what goes up must come down.  Whether that will be on Wednesday isn't clear.

Transportation: The trans gained 0.20% today on a second shooting star on increased volume that once again failed to break above the 200 day MA.  This is still looking bearish to me.

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  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357

 30  7/23       33         42        -     1363

 31  7/30       43         22        +     1386 

 32  8/6        52         28        +     1391 

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 7/9 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 27 .  After an impressive start this year, my monthly calls have now been wrong for 9 weeks running.   For the record, I voted bullish again this week based on my reading of the SPX monthly and weekly charts.


Interestingly, bullish sentiment has now risen to the second highest level of the year.  Only the week of February 6 was greater.  Contrarian bearish?  After February 6th, the SPX went on to rise for six more weeks.



Accuracy (daily calls):

Month right  wrong  no call  conditional  batting   Dow
                                          average  points

April   7      9      2                    .438
May    10      7      3           2        .632  
June    8      6      6           1        .600     632
July   11      2      6           1        .857     917
August  3      1      1           0        .750      74
     And the winner is...

Well you know, the charts tonight are looking an awful lot like last night.  My call then was for lower and I got fooled badly.  But now I'm thinking I might have been really more just a day early than flat-out wrong.  Still, this market doesn't seem to be committed to turning over just yet.  So what I'm going to do is make a conditional call.

If ES stays below its pivot by the open Wednesday morning, then we're closing lower.  But if ES breaks above the pivot and holds there, we'll close higher.  This tactic would have worked nicely today and I think it's safer than just calling Wednesday lower, given the fact that with similar charts, that did not work today.

And do note that the recent pattern of cycles of five or six days up followed by five or six days down going back to June 13th now seems to be breaking down.  All the more reason to be cautious right now.

ES Fantasy Trader

Well they can't all be winners.  I bailed on this trade for an 11 point loss.  In retrospect, I exited too early rather than exercising the patience that generally serves me well.

Portfolio stats: the account falls to $174,875 after 56 trades (43 wins, 13 losses) starting from $100,000 on 1/1/12. Tonight, with the market looking just like it did last night and still smarting from today's loss, we're going to stand aside.  Fool me once, etc.

BOT    10    ES    false    SEP12 Futures     1401.50    USD    GLOBEX    11:44:41    

SLD    10    ES    false    SEP12 Futures     1390.50    USD    GLOBEX    00:51:32    

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.  Act accordingly.