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- Wednesday lower, low confidence.
- ES pivot 1562.58. . Holding below is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
Looks like last night's logic prevailed as the positive looking charts rewarded us on Tuesday with a 60 point gain for the Dow, and finally broke that record streak of alternating up and down days at an amazing 17 in a row. So can we build on this or will the bears reassert themselves on Wednesday. We consult the charts for inspiration.
The technicals (daily)
The Dow: On Tuesday the Dow ground steadily higher most of the day to close right on its upper BB at 14,673 after a brief excursion even higher. But we're still not overbought on the indicators and the bullish stochastic crossover I mentioned last night is now complete. Today's close also broke last week's resistance at 14,662 so this chart remains bullish tonight.
The VIX: Meanwhile the VIX fell again, dropping 2.65% right back down to its support level around 12.75. The indicators are middling, the inverted hammer isn't the best reversal indicator and the stochastic is still a few days away from a bullish crossover. I'd call the VIX lower again but for the support line. It's not clear how much more downside is available here.
Market index futures:Tonight all three futures are lower at 12:42 AM EDT with ES down by 0.06%. On Tuesday ES gave us a gap-up spinning top that pierced its upper BB intraday, failing to crack resistance at 1565. The developing overnight candle is a dark cloud cover though the stochastic isn't really near forming a bearish crossover and the indicators are kind of wandering about between overbought and oversold. So the overall impression is weakly bearish, and certainly not as good looking as it was last night.
ES daily pivot: Tonight the pivot inches up from 1555.00 to 1562.58. This move combined with a sagging ES now puts us below the new pivot, just barely, but still a bearish sign.
Dollar index: The dollar on Tuesday completed its trip from upper to lower BB with a gap down 0.55% loss that drove RSI oversold and flattened out the stochastic at a low level. The stubby inverted hammer at least warns of a possible reversal higher, but requires confirmation..
Euro: And as the dollar hit its lower BB, on Tuesday the euro hit its upper BB with a fifth consecutive gain. But that may be the end of the line as RSI is now quite overbought, the stochastic looks ready for a bearish crossover and the overnight is trading down 0.10% so far. A move lower here would square with my guess for a higher dollar on Wednesday.
Transportation: The trans have been working well as a leading indicator lately and on Tuesday they dropped 0.31% even as the Dow rose 0.41%. But we remain in a rising RTC, have a recently completed bullish stochastic crossover and rising indicators. The only bearish sign here is Tuesday's stubby red spinning top, but that requires confirmation.
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 6/7
8 2/19 21 43 - - 1520 6/8
9 2/25 30 52 - - 1516 6/9
10 3/4 29 39 - - 1518 6/10
11 3/11 41 26 + + 1551 7/11
12 3/18 41 37 + + 1561
13 3/25 31 38 + - 1557
14 4/1 38 38 + x 1569
15 4/8 32 50 - - 1553
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 7 for 11, or 64%.
This week we find a small drop in bullish sentiment but a big jump in bearish as a number of participants switched over to bearish, me included. I can't speak to everybody else, but I'm seeing some strong resistance on the weekly SPX chart and a developing dragonfly doji on the monthly. Both of those are becoming increasingly overbought too.
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 5 7 5 2 0.500 121
April 3 1 1 0 0.750 149
And the winner is...
Tonight we've got a bunch of vaguely bearish signs on the charts but most of them require confirmation. Adding to the mix are Fed minutes due out on Wednesday. My personal expectation is that the market may not be too happy with that. And even though the conservative route would be to call Wednesday uncertain, I do think there are enough bearish signs tonight to call for a lower close Wednesday.
ES Fantasy Trader
Portfolio stats: the account remains at $94,000 after 9 trades (7 for 9 total, 3 for 3 longs, 4 for 6 short) starting from $100,000 on 1/1/13. Tonight we stand aside yet again because of the uncertainty revolving around the Fed minutes. I know, if it's not one thing, it's another.