Tuesday uncertain, bias higher

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

• Tuesday uncertain, bias higher
• ES pivot 1426.00.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Wow, it sure looked like my call for a higher close was going to look pretty foolish today with the Dow sinking ever lower all morning and through lunch time - until a late day rally appeared to save the day.  OK, so the close was only 2 points higher but that sure beats 100+ points lower.  Whatever the cause, I'll take it.  Now let's move on to Tuesday as we beat the charts into submission until they tell us what we want to hear.

The technicals (daily)

The Dow: I'm not quite sure what that late day rally was on about - I was out running errands at the time.  But it was enough to create a deep doji star, almost a dragonfly doji.  Either way, it's a pretty good bullish reversal indicator.  We did poke through the lower BB intraday but recovered.  However, the indicators are still only halfway from overbought to oversold and we're now sitting right on the edge of a long running rising RTC all the way back to June 4th.  Technically we closed outside it yesterday for a bearish setup and today's trade was entirely outside for a bearish trigger.  However, given that it's a weekly RTC, I'm willing to give it a pass for a day or two to see if the Dow can manage to bounce back.  We'll want to see a close above 13,380 on Tuesday to cancel this bearish signal.

The VIX:  Of all the charts tonight, the VIX has the clearest picture: a 2.58% drop on a classic dark cloud cover that just touched the 200 day MA before backing off.  It's also our second day on the upper BB and the VIX rarely spends more than that before declining.  I'd have to say the VIX is moving lower on Tuesday.

Market index futures: Tonight all three futures are down at 1:09 AM EDT with ES lower by 0.12%.  After yesterday's big dump, ES today gave us a small DCB-style green hammer, pretty much what I was expecting.  However, the stochastic still hasn't moved into position for a bullish crossover and the overnight action isn't showing much enthusiasm at this point, possibly on fallout from the last (thank God) presidential debate.

ES daily pivot: Tonight the pivot rises from 13433.67 to 1426.00 even.  And even though ES is currently down a bit, this means that we're now above the new pivot, a positive sign.

Dollar index: Today the dollar gave us a rare, almost textbook perfect  three candle pattern known as side-by-side white lines.  This is a high reliability bullish continuation pattern and is confirmed by rising indicators and a lack of any near-term resistance for the $.  I'd have to say this chart looks set to move higher again.

Euro: The euro stopped its two day slide today with an unusual gain on a day that the dollar also moved up.  The new candle forming in the overnight is a red gap-up spinning top indicating a possibility that the euro may move lower on Tuesday.  However, this candle is now outside the descending RTC for a bullish setup and the stochastic seems to be narrowing to set up a bullish crossover from a high level.  That all makes this chart too hard to call.

Transportation: Unlike the Dow, the trans continued lower today, but like the Dow they gave us a reversal candle in the form of a decent hammer.  But also like the Dow, the indicators are still descending from overbought so we'll want some confirmation of this hammer before calling the trans higher.

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  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438  23/37

 38  9/17       63         22        +     1466  23/38

 39  9/24       52         30        +     1460  23/39

 40  10/1       39         39        -     1441 

 41  10/8       52         34        +     1461

 42  10/15      41         32        -     1429

 43  10/22      38         41        -     1433

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 bullish call on 9/24 was wrong again, the S&P now being lower than then. I'm using the column "Accuracy" to track my calls.  So now with 9 weeks to go in 2012, I'm 23 for 39  or 59%.


For the record, I voted bearish again on this weeks poll.  I note that the weekly SPX chart exited its rising RTC going back to June for a bearish setup last week.  So far this week we're still outside.  Unless the SPX can trade above 1460 by Friday that will be a bearish trigger.  And moving out to the SPX monthly, so far the current candle has also dropped out of its rising RTC for a bearish setup there.  I just can't be bullish in the face of that kind of statistics.


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     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    8      4      4           0        .667     219

     And the winner is...

Hmmm - the market seems to be trying to set up a rally but is being a bit uncoordinated about it.  On the plus side, the VIX, the trans, and the ES pivot are looking positive.  Also bellwether IBM seems to be bottoming here.  On the other hand, the dollar, and copper are looking negative.  Meanwhile, the Dow and the trans are looking like possible reversal candidates that require confirmation.

On the other hand, Rob Hanna, who I respect greatly, put up some convincing numbers of a coming rally.  On the other other hand, J-Trader is part short, part cash.  All of which just leaves me scratching my head tonight like the "before" picture in a Head & Shoulders ad.  I'd like to call it long but I think it's a bit premature.  On still yet another hand, I can't see going short at these levels either so I'll just have to settle for calling Tuesday uncertain but I'll throw in a bias higher.  I think we'll have more clarity for Wednesday.


ES Fantasy Trader

Portfolio stats: with no trade last night the account remains at $193,875 after 68 trades (53 wins, 15 losses) starting from $100,000 on 1/1/12.  Tonight we stand aside amid so much uncertainty - no edge here, nothing to see, move along..

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.