Tuesday, May 7, 2013

Tuesday higher only if ES pivot passed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Tuesday higher if ES pivot passed, else lower.
  • ES pivot 1612.00 Holding below is bearish.
  • Rest of week bias uncertain technically.
  • Monthly outlook: bias higher.
  • ES Fantasy Trader standing aside.

My closing comment in my "uncertain" call last night was that "a doji day is not out of the question."  And that is exactly what the Dow delivered, closing down just five points while the SPX gained all of three points.  So after two days of big gains, is this reversal sign the one that counts?  I love a mystery, so let's jump right in - and no fair skipping straight to the end.

The technicals (daily)

The Dow: The Dow gave us a tidy little star on Monday sitting at the top of the previous day's tall green marubozu.  We hit the upper BB again but closed off it.  Indicators remain overbought but not extremely so.  Still we remain very much in a rising RTC so it's important to avoid getting mesmerized by that star.  This one absolutely requires confirmation.  So let's just say I wouldn't be adding any longs at this point but I'm not going short yet either.

The VIXMore telling than the Dow's star is the 1.48% decline Monday on a bearish engulfing pattern.  The bearish stochastic crossover I mentioned last night did in fact play out and the VIX has no support now until 12, with a lower BB way down at 10.92.  So I'd say we've got more room to run lower again here on Tuesday.

Market index futures: Tonight all three futures are lower at 2:39 AM EDT with ES down by 0.12%.  Recall that last night I was unwilling to call ES out because of its bullish stochastic crossover, and we were in fact rewarded with some additional gains on Monday, closing on the upper BB for the second day in a row.  For the moment, things are looking a bit less optimistic and some of the gas seems to be escaping this balloon.  We remain overbought and I note that OBV has now hit 16.4M, its highest reading of the year.  We're due for at least one day lower soon.

ES daily pivot: Tonight the pivot rises from 1604.08  to 1612.00 even.  This time the gain was enough to put the pivot back above ES, which after a brief attempt to surface around 1 AM, ultimately gave up and dropped right back below at 2 AM - a bearish sign.

Dollar index: The dollar extended its gains Monday, rising 0.22% even as the SPX rose too breaking its usual inverse correlation.  The bullish stochastic crossover worked to perfection here, the indicators are rising (it isn't surprising) and there's no sign of a reversal here yet..

Euro: Meanwhile, all's quiet in euroland after trading back down to 1.3081 on Monday for a dark cloud cover.  The overnight seems to be confirming that, having just bounced off its daily pivot - always a bearish sign.  And a lower euro would sync with my call for a higher dollar on Tuesday.

Transportation: Here's a divergence as the trans continue to outpace the Dow, up a significant 1.277% on Monday while the Dow went nowhere.  The bullish stochastic crossover played out exactly on cue here too and with a new rising RTC defined along with indicators not yet overbought, I'd say this chart continues to look bullish.

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
 13/18       41         37        +      +   1561   8/12
 13  3/25       31         38        +      -   1557   8/13
 14  4/1        38         38        +      x   1569   9/14
 15  4/8        32         50        -      -   1553   9/15
 16  4/15       33         50        +      -   1589
 17  4/22       19         63        -      -   1555
 18  4/29       33         58        -      -   1582 
 19  5/6        50         31        +      +   1614  

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 bearish four weeks ago, so that was wrong.  However, the poll as a whole also voted bearish, so we continue the year with an accuracy of 9  for 15, or 60%.   The poll as a whole remains at 8  for 14 or 57%.

This week gave us an almost predictable big drop in bearish sentiment, falling from 58 all the way back to 31% while bullish rose from 33 to 50%.  In this case, I joined the majority in switching my vote.  I can't speak to why everyone else made their decisions, but when I look at the SPX weekly and monthly charts, all of the bearish chart patterns I had been seeing have now been erased.

Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

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      7      5      5           3        0.667    328

May        0      0      1           3        1.000      0

     And the winner is...

Tonight we've got some mixed charts - the trans and VIX looking bullish, the futures not so much, and the Dow on the fence.  As I write though, ES seems to be playing footsie with the pivot (not to be confused with FTSE).  So in view of all of this, I've got to go back to the conditional call: if ES can break above its pivot and stay there by mid-morning Tuesday, we close higher.  If ES bounces off the pivot or simply holds below, we close lower.

ES Fantasy Trader

Portfolio stats: the account remains at $107,750 after 11 trades (9 for 11 total, 4 for 4 longs, 5 for 7 short) starting from $100,000 on 1/1/13.  Tonight we stand aside again in view of the conditional call.

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