Wednesday higher

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

• Wednesday higher, low confidence.
• ES pivot 1441.50.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Logic prevailed on Tuesday (I like it when that happens) and the market gained ground as I expected with the Dow rising another 0.87% as op-ex week grinds on.  So we move on now and trot out the charts as usual to see what Wednesday might hold in store.

The technicals (daily)

The Dow: Last night I wrote "the Dow may be headed for its upper BB at 13,315."  And bada-bing, we got that and more, with a close above the upper BB at 13,351.  Interestingly, this move did little to move the indicators further into overbought territory and the stochastic actually completed a bullish crossover from the center of its usual range - very unusual.  Anyway, this now leaves us at another resistance point but no real bearish indications on this chart.  I'd have to say more upside is still not out of the question here.

The VIX:  Yesterday's bearish engulfing pattern here paid off big on Tuesday with the VIX dumping 4.71% to finish right at its recent support just above 15.50.  And its stochastic was a mirror image of the Dow, forming a bearish crossover from its middle range.  This move is also a bearish RTC trigger, so I have to say more downside action here is likely.

Market index futures: Tonight all three futures are just a bit higher at 1:10 AM EST with ES up 0.03%.  Today's tall green marubozu took ES right through its upper BB at 1441 without forcing the indicators to very overbought levels.  There's no resistance now til 1457.  I'm not sure we're headed there directly, but I see nothing on this chart to suggest an immanent fall either.

ES daily pivot: Tonight the pivot jumps from 1427.25 to 1441.50.  Even with that big gain we're still above the pivot.  As long as that holds true, it remains bullish.

Dollar index: Yesterday's doji was not confirmed today as the dollar stayed in its descending RTC back to December 7th, dropping another 0.29%.  We also touched the lower BB intraday and the indicators are now highly oversold (RSI is 5.78).  The stochastic also appears to be trying to line up for a bullish crossover so while we might still see a bit more downside here, I'd say the odds are beginning to favor the bulls.

Euro: Meanwhile, the euro continues to charge ahead, remaining firmly in its rising RTC and riding its upper BB higher even as its indicators are nearly pegged at overbought (RSI = 98.48).  But with no bearish candle pattern and continued positive follow-though in the overnight, I'd have to wager that the euro's still not done going up.  There isn't even a reversal on the weekly chart where the upper BB is 1.3363, leaving plenty of room to run.

Transportation: I sure wasn't expecting an outsized up move here on Tuesday but the trans delivered a 1.61% pop that began at 5225 resistance and blasted right through their upper BB at 5278 to close at 5311.  The trans have now cleared all resistance all the way back to May and the next stop is 5342.  5225 meanwhile now becomes support and we seem to be totally ignoring the overbought indicators as we're right back into the rising RTC.  No bearish signs here.

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 (it's getting pretty long):

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  24/40

 41  10/8       52         34        +     1461  24/41

 42  10/15      41         32        -     1429  25/42

 43  10/22      38         41        -     1433  26/43

 44  10/29      36         43        -     1412  27/44

 45  11/5       44         33        -     1414  27/45

 46  11/12      38         46        -     1380  27/46

 47  11/19      52         34        +     1360  28/47

 48  11/26      48         26        +     1409

 49  12/3       57         21        N     1416 

 50  12/10      46         29        N     1418

 51  12/17      52         28        -     1414   

  

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 11/19 was right, the S&P now being  higher than then. I'm using the column "Accuracy" to track my calls.  So now with only one week to go in 2012, I'm 28 for 47 or 60%.

This week we see little change in sentiment, although I split from the crowd and changed my vote to bearish based on my readings of the SPX weekly and monthly charts;


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      5      8           0        .615     208
November   7      5      5           0        .583     135
December   5      1      1           5        .909     536

     And the winner is...

Wednesday and Thrusday are historically the second weakest days of this week, both being equally bearish (statement corrected from original publication).  I think the big up moves we've seen the past two days have been mostly on hopes of a fiscal cliff deal.  This would seem to put us in "buy the rumor" mode.  And when that happens, there's always a risk that they'll sell the news.  I still think that won't happen til the last second, though there's an outside chance of some agreement before Christmas, which means nothing til next Monday.  So having done a bunch of pricing-in, I'm beginning to wonder how much more of this the market is willing to do.  Nevertheless, I still see no real bearish patterns in the chart.  The logical move worked last night so I'm going to try it again and call Wednesday higher, but this time I'm not expecting any more triple digit gains.  We'll see.


ES Fantasy Trader

Portfolio stats:  the account remains at $188,750  after 73 trades (57 wins, 16 losses) starting from $100,000 on 1/1/12.  Tonight, we stand aside again - this time because we're sitting near some resistance and have already moved a bunch..