Wednesday uncertain, bias lower

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

• Wednesday uncertain, bias lower.
• ES pivot 1441.92.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

Well it sure looks like in trying to outsmart the market I only ended up outsmarting myself.  The Dow did not go up today, instead it plunged 110 points to end on the lows of the day.  Ugh.  Time now to regroup and see if we can do better for tomorrow.

The technicals (daily)

The Dow: I always hate to use the phrase "should have" here but tonight it fits.  I should have paid more attention to the indicators last night and less to chart patterns that really required confirmation.  Confirmation which we did not get today.  In fact, the Dow dropped out of its rising RTC for a bearish setup and completed a bearish stochastic crossover.  With no support now until 13,400 this chart is looking decidedly negative.

The VIX:  Yesterday's gap-up doji was obliterated today as the VIX gained a hefty 8.34% on a green marubozu that took it just about to its recent resistance at 16.44.  It also completed a bullish stochastic crossover.  That said, the VIX is now just below its upper BB at 16.75.  .As I usually note, the VIX rarely spends more than a day or two at that level before retreating.  It will occasionally climb the upper BB for a number of days, but that mostly happens when the BB is rising.  And right now it's falling.  My best guess here is that we'll hit 16.75 on Wednesday and then move lower.

Market index futures: Tonight all three futures are mixed at 1:27 AM EDT with ES lower by 0.03%, YM down 0.13% but NQ up 0.05%.  Today's big drop in ES brought us about halfway to oversold on the indicators and also gave us a bearish RTC trigger.  However, the developing candle looks like a hammer which could be a reversal indicator, although I recognize that it is dangerous to read too much into half-cooked candles.

ES daily pivot: Tonight the pivot takes a big drop from 1451.50  to 1441.92.  This still leaves ES below the pivot, but by a lot less now than before.  We'll want to see ES break above the new number by morning, otherwise we remain bearish.

Dollar index: Today the dollar gained 0.56% rising right up to its recent resistance at 55.16 on the $USDUPX.  This move also gave us a bullish crossover suggesting continued upside if the $ can break resistance on Wednesday.

Euro: The blinkin' euro really faked me out by rising strongly last evening and then tanking right at 3 AM, shortly after I had gone to bed.  One hour earlier and I wouldn't have made a bullish call for this currency.In any case, today's loss brings us close to the euro's 200 day MA at 1.2832.  But there is also a support line just above that at 1.2850.  That was tested successfully earlier this evening.  If this pattern holds up, then there's a good chance the euro could find a bottom here and move higher on Wednesday.  But that's a really difficult call.

Transportation: The trans was at a crossroads yesterday.  Recall I pointed out the 50% Fib retracement.  That line proved too hard to beat and today the trans dropped like a rock, losing 1.14% and falling right out of a six day rising RTC.  This move also gave us a bearish stochastic crossover and caused a top in RSI at overbought.  The trans are clearly looking lower again on Wednesday.

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

 39  9/24       52         30        +     1460 

 40  10/1       39         39        -     1441 

 41  10/8       52         34        +     1461

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 9/10 was right again, the S&P now being higher than then. I'm using the column "Accuracy" to track my calls.  So now I'm 23 for 37  or 62%.

For the record, I switched my vote back to bullish this, based on my reading of the SPX monthly and weekly charts.  And it appears I had company, as the bullish reading jumped 13 points while the bearish reading sank five.  This puts us pretty much back in the same position we were in last month.  This particular forecast should be interesting, since one month from now we will (finally) have the elections behind us.  It will be interesting to see how the markets react.  If last week's debate is any guide, a Romney victory will be good for stocks, while a win by Emperor Nerobama will send the market lower.



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    3      3      1           0        .500     -99


     And the winner is...

I'll admit that after being badly wrong today I'm a little gun-shy tonight.  But we're at a crossroads here right now anyway.  While the charts are all looking bearish right now, a lot of them are also right up against or very close to support or resistance lines that they could bounce off of.  That makes it likely that Wednesday could be a turn-around day.  Given that, I'm simply going to call Wednesday uncertain, but with a bias lower.

However, if ES manages to break above 1441.92 in the morning, that greatly  increases the odds of a higher close.  Sorry to be so wishy-washy but that's the best I can do tonight.  Maybe tomorrow I'll go get some Windex for my crystal ball..


ES Fantasy Trader

Portfolio stats: the account remains at $182,500 after 66 trades (51 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight, we stand aside given the general uncertainty of things.

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.