Wednesday, February 13, 2013

Wednesday higher

  • Wednesday higher, low confidence.
  • ES pivot 1514.58.  Holding above is bullish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

Last night I was tempted to call Tuesday higher but finally decided not to partly because I had called Monday higher and was wrong.  I guess I was just a day early as the Dow gained 47 points to recapture the 14K level.  To quote Gen. Burkhalter, "What is the meaning of this?"  We now interrogate the charts for answers.

The technicals (daily)

The Dow: Yesterday I posted my vision of an ascending triangle and observed it was within a day or two of breaking.  We got the break Tuesday with a close of 14,019 just above the top horizontal line I drew at 14,010.  Some may scoff at this as not being too significant, but if you draw a smaller triangle, one going only back five days instead of eight, the breakout line is at 13,990.  Either way, today's 47 point move isn't bad, considering the range narrowing we've seen recently.  And oddly enough, we're still not overbought.  RSI in fact went down today, now at 51.  If this is indeed the breakout, and I'm going to guess it is, then we're going to take a look at the 2007 highs in short order - we're not that far away now.

The VIXLast night I wrote "I'm not really seeing any bullish impulse here" and indeed there weren't as the VIX dropped another 2.32% Tuesday, breaking its short-term support.  Next support is at 12.41 and being as we remain in a descending RTC with indicators still not oversold, I see no reason we can't revisit that level.  If that falls, then we're going to the lower BB, now down to 12.03.  This, of course, is all good for stocks.

Market index futures: Tonight all three futures are higher at 1:16 AM EST with ES up by 0.07%.  With another green candle on Tuesday, ES remains solidly inside a rising RTC that now goes back to January 8th.  We're getting quite overbought, but the indicators have been none too reliable all year so far here.  We're been overbought more often than not but continue to go higher.  Fed money, sector rotation, PPT, whatever the reason, I'm still not seeing a top here.

ES daily pivot: Tonight the pivot inches up from 1513.25  to 1514.58.  We were higher before and remain higher now, so that's bullish.  And, at least at the moment, ES is showing no particular interest in checking out the new level, so that's all bullish.

Dollar index:On Tuesday the dollar confirmed Monday's evening star with a 0.28% drop that caused the indicators to peak at overbought and just gave us a bearish stochastic crossover. It also left us on the edge of the rising RTC for a bearish setup.  I'd say the dollar's moving lower again on Wednesday.

Euro: And the euro chart seems to confirm that with a decent gain on Tuesday that took it almost to the edge of its descending RTC, causing its indicators to bottom on oversold and gave us a bullish stochastic crossover.  That all looks good for more euro upside on Wednesday.

Transportation:I was hesitating on the trans last night because of yesterday's doji, but instead of confirmation Tuesday, they gave us - another doji and another tiny loss of 0.04%.  But that has the effect of nudging us closer to the edge of the rising RTC and bringing the indicators off overbought.  With resistance at 5912 proving to be tough, the trans may be headed lower soon, but once again, it's still too early to call a top 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.

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
  5  1/28       44         26        +      +   1503
  6  2/5        40         36        +      +   1513
  7  2/11       43         25        +      +   1518
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 correct.   We therefore continue the year with an accuracy of 2 for 3, or 67%. 

Interestingly, bearish sentiment took a big drop this week while bullish only gained three points as a number of participants apparently moved to the sidelines.  One might be tempted to view this as contrarian bearish, but note that bearish sentiment dropped to 15% in week 3, and yet here we are in week 7,  46 SPX points higher.

Accuracy (daily calls): 

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   2      1      2           3        0.833    176

     And the winner is...

The picture isn't totally clarified tonight, but the weight of evidence seems to be in the bulls' favor - the futures, the pivot, the currencies, the VIX - all looking positive.  The Dow in particular is looking especially strong right here. 
The worst thing I can see is that the trans may be taking a break, but that's hardly conclusive evidence of an imminent top.  So unless Mr. Market finds something in Comrade Stalibama's State of the Soviet address tonight he doesn't like come morning, I see no real reason why we can't go higher Wednesday.  Traders of the world, unite!  Forward!

ES Fantasy Trader

Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we just continue to stand aside.  I really want to go long here, but with those nagging overbought indicators, I'm just a bit reluctant.

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