Tuesday, February 26, 2013

Tuesday uncertain

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday uncertain...
  • ES pivot 1497.83.  Holding below is bearish..
  • Rest week bias uncertain technically.
  • Monthly outlook: bias lower.
  • ES Fantasy Trader standing aside.

Mama mia!  Who would have thought Mr. Market cared so much about the elections in Italia?  After all, Italian governments seem to have all the fleeting longevity of a Higgs boson.  (For the record, it's 61 new governments since WWII, but who's counting).  So for this the Dow craters 216 points?  Oh yes well there's also the "sequester", another pseudo-crisis coming soon as a complete surprise to absolutely no one.  I don't get it.  Wait, let me check my calendar - gee, no, i'ts not April 1st yet.  Just more crazy stock market antics I guess.  No wonder I had to call Monday uncertain.  Ah well, let's see what the charts foretell for Tuesday - if the new Italian government lasts that long, that is.

The technicals (daily)

The Dow: What a strange day.  It started off OK - until 10 o'clock, then it was all downhill from there with a nasty waterfall into the close.  So this giant red candle not only retraced all of Friday's gains (and more), and brought us right back into the descending RTC but it also gave up 14K and  punched straight through the lower BB at 13,823.  It also broke out of the month-long trading range we'd been stuck in.  And even all this didn't bring us to oversold levels.  Not a very pretty picture going into Tuesday.

The VIXBut if the Dow was bad, the VIX was just plain ugly, with a spectacular 34% skyrocket.  This was the Godzilla of marubozus.  We opened at 13.69, then broke the pivot at 14.45, then whizzed past the upper BB at 16.66 and finally smashed through the 200 day MA at 16.90 without batting an eye, stopping only because the bell rang at 4 PM.  Holy moly, it's like it's the summer of 2011 all over again.  Now I like to say that the VIX rarely spends more than a day or two above its upper BB, but there is an exception to this rule, and that's when the VIX has one of these explosive spikes.  In these cases, it's entirely possible that it can go even higher.  But gosh, this one day move is so astounding, I just have to wonder.  It also brought the stochastic to the edge of a bearish crossover.  But the 200 MA cross is the bad part here.  When the VIX does that, it tends not to fall back below for a while.  So I'm guessing we could spend some time at these levels before falling back.

Market index futures:Tonight all three futures are actually slightly higher at 1:03 AM EST with ES up by 0.03%.  Like the other charts, ES had a big move lower Monday, but found support at its lower BB at 1486.90.  This keeps us in a descending RTC but doesn't yet bring us to oversold levels.  The overnight action has the feel of a DCB.  If that continues, we could see some small gains on Tuesday.

ES daily pivot: Tonight the pivot plunges from 1510.50  to 1497.83.  With ES little changed in the overnight, we remain well below the new pivot, so that's bearish.

Dollar index:The dollar looked like it wanted to go lower, gapping down at the open on Monday but when it was all said and done, it posted a 0.24% gain to remain above its 200 day MA and defy its now highly overbought indicators.  And there's nothing here to suggest a reversal coming.

Euro: Unlike the other charts, on Monday the euro didn't move in a straight line, instead putting in a wide-ranging red spinning top that nonetheless kept it inside its latest descending RTC.  And it's not gapping even lower in the overnight, down to 1.3062 as it continues dribbling down its lower BB.  So there's nothing here to suggest a  move higher.

Transportation:On Monday the trans fell even harder than the Dow, tanking 2.16% in a wide-ranging move that nearly touched both BB's, closing just above the lower one.  This loss also left us close to oversold and put the stochastic into position to begin forming a bullish crossover, though further downside isnt' out of the question here.  Support and the lower BB are just below us at 5778.

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.

Wk.# Week   % Bullish  % Bearish  NightOwl Poll SPX  Accuracy

  1  12/31      40         48        -      -   1402   0/1
  2  1/7        47         30        +      +   1466   1/2
  3  1/14       52         15        +      +   1472   2/3
  4  1/22       50         21        +      +   1486   3/4
  5  1/28       44         26        +      +   1503   4/5
  6  2/5        40         36        +      +   1513
  7  2/11       43         25        +      +   1518
  8  2/19       21         43        -      -   1520
  9  2/25       30         52        -      -   1516 
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.  The "Poll" column is how the majority of participants 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 I voted bullish four weeks ago, so both I and the majority were again correct.   We therefore continue the year with an accuracy of 4 for 5, or 80%. 

This week saw a bunch of people come off the sidelines as both bearish and bullish sentiment increased by exactly the same amount.  That still leaves me in with the majority looking for a lower SPX in 30 days.

Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      4           5        0.727    152

     And the winner is...

It's very hard to make a technical forecast in a market where the charts have gotten all distorted over some news item.  My feeling is that the Italian job is somewhat overblown, since we don't even know the real results yet.  But I guess that's what "sell the rumor" is all about.  The other thing is that often after big one day dumps a DCB is to be expected.  I think this is looking more likely based on the overnight ES action so far.  We're also at the lower BB and very near oversold.

So technically I think we're due for a move higher on Tuesday.  However, with the big pop the VIX took on Monday and with this Italian business still unsettled and the looming sequester pseudo-crisis, the best I can do is call Tuesday uncertain.  I may just do some day trading of ES on Tuesday.  It seems like a better bet than trying to swing trade these crazy moves.

ES Fantasy Trader

Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again amid the uncertainty of Monday's move.

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