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- Tuesday higher, low confidence.
- ES pivot 1520.08. Holding above is bullish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Things were looking good for my call for a lower close on Monday - until lunch time. Then Mr. Market decided he wanted to take a look at those 2007 highs after all and the Dow clambered to a 38 point gain on the day. So we inch ever closer to that magic 14,198 level. Will Tuesday be the day? The day I get one right, that is? We bring out the fine-toothed comb to give the charts a restyle and find out.
The technicals (daily)
The Dow: Once again we're in a sort of trader's Twilight Zone wher we get day after day of dojis, all warning of potential reversals while we continue to drift higher. Today was no exception, as yet another hanging man drove us to within 70 points of the all-time highs. What was different on Monday was that we closed just barely under the upper BB and traded entirely outside th rising RTC for a bearish trigger. The stochastic is also getting ready to form a bearish crossover. So I'm going to say a reversal is coming sometime this week. If not Tuesday, then more likely on Wednesday.
The VIX: So much for the symmetrical triangle. It broke as expected on Monday but down instead of up as the VIX took an 8.79% dump right back to the lower end of its recent range. With two red candles in a row and indicators continuing to decline, I'm switching my stance and now calling for a lower VIX again on Tuesday.
Market index futures:Tonight all three futures are just barely higher at 1:29 AM EST with ES up just 0.03%. On Monday ES rose by a substantial 0.68% to close just short of last month's highs at 1529. That was enough to keep us inside a steeply rising RTC. At this point the indicators are still not overbought but I note that we'd have to close above 1537 on Tuesday to avoid a bearish setup. I suppose that's doable, but after today's relatively large gain, I'm not sure where the additional push is going to come from. One theory that comes to mind is that Tuesday could be a topping day. The overnight action so far at least is demonstrating little interest in moving lower.
ES daily pivot: Tonight the pivot inches up from 1511.67 to 1520.08. We were above before and even with a fairly flat evening, remain above the new pivot by a good six points. And ES seems to be uninterested in challenging the pivot as I write, so that's all a positive sign for Tuesday.
Dollar index:At least I got this one right. The dollar indeed moved lower on Monday, losing 0.13% in the $USDUPX. But I think that's only the beginning of the gap-filling. Today's move completes the classic three bar bearish evening star and with indicators still overbought but already starting to decline, I'd say the dollar has more room to run lower Tuesday
Euro: I also called for a lower euro on Monday, which would be quite unusual. But that ended up being pretty close. The euro did rise, but only bit moving from 1.3028 to 1.3040 on the day. But the resulting candle was a definite hammer and the overnight action is confirming that, with a 0.10% gain so far. With indicators still oversold, I'd say a higher euro is likely Tuesday. And that would at least sync with my call for a lower dollar.
Transportation:After two wishy-washy days when the trans couldn't decide if they wanted to shift into forward or reverse, they finally stepped on the gas on Monday to gain a full percent, stopping just under their upper BB and handily clearing last month's 6019 resistance line. But even this still wasn't enough to send them to overbought levels, though we're getting close. With Monday's bullish move, no resistance left, and no other reversal signs in sight, you'd have to expect at least a bit more upside here on Tuesday
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 5/6
7 2/11 43 25 + + 1518
8 2/19 21 43 - - 1520
9 2/25 30 52 - - 1516
10 3/4 29 39 - - 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 again correct. We therefore continue the year with an accuracy of 5 for 6, or 83%.
The big news this week is that while bullish sentiment was virtually unchanged, bearish sentiment dropped substantially., We now have a rare situation where "neutral" is the second most popular vote, at 32%. I'm not quite sure why bearish sentiment would drop without a corresponding increase in bullish. Perhaps people are waiting to see what happens when we hit the 2007 highs - either a breakout or a pullback. I'm voting for the latter, having voted negative three weeks in a row now. Stay tuned.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 3 4 5 6 0.692 131
March 0 1 1 0 0.000 -38
And the winner is...
Tonight there are mildly bullish signs from the futures and the currencies. But we're also quite close to the all-time record highs of 2007 and I think that will provide some resistance. So Tuesday could be a topping day but I still expect the market to close up, so I'm calling Tuesday higher.
ES Fantasy Trader
Portfolio stats: the account remains $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13. Tonight we're standing aside again in the absence of a clear reversal sign.