Tuesday lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Tuesday lower, low confidence.
  
• ES pivot 1702.08.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains short at 1643.00.

Recap

Last night the market was feeling a bit tired, and it showed with some small losses on Monday.  But that puts us back into the same tricky spot we've been in a bunch of times this year so far - is this the start of the long-awaited pullback, or just another one in a long string of fake-out breakdowns?  As always, we look to the charts for answers - seems like as good a place as any to look.

The technicals (daily)

The Dow: Monday's  46 point drop confirmed last Friday's hanging man and solidified 16,658 as new resistance, a level that was never even threatened.  Note though that the bearish action on Monday felt somewhat muted with only just over half the Dow components actually declining.  We also remain in a rising RTC and the stochastic has yet to even start forming a bearish crossover.  There's also some support at 15,582 so if we do get further downside on Tuesday, I expect it to be limited.

The VIX:  In an unusual divergence, the VIX dropped 1.17% on Monday even as the Dow and SPX moved lower too, giving up the 12 handle to close on the lower BB for the second day in a row.  There's no support until 11.32 and the indicators have only now just gone oversold, so I'm now thinking there's still some room to run lower here since the VIX did not reverse on Monday as I had expected.  But the VIX is now quite low and would seem to have more upside potential than downside risk at these levels.

Market index futures: Tonight all three futures are lower at 1:15 AM EDT with ES down by 0.21%.  ES put in a perfect star on Monday to complement last Friday's hanging man.  The overnight so far is gapping down for a bearish RTC exit, RSI has now peaked at overbought and the stochastic is close to forming a bearish crossover.  So while it's always dicey relying on a half-baked candle, this chart is still looking bearish tonight, and more so than last night.

ES daily pivot: Tonight the pivot inches up from 1701.58  to 1702.08.  We broke under the old number around 6 PM and have been drifting vaguely lower since then to remain below the new pivot so that's a bearish sign.

Dollar index: While the dollar did move a bit lower on Monday, down 0.05%, support kicked in right at the 200 day MA to limit the damage.  Still, that hardly qualifies as a reversal warning, so I expect the buck to take another crack at the 200 MA on Tuesday.  It's make or break time for the dollar..

Euro: The euro put in a fat little spinning top on Monday to cancel Friday's bullish piercing line and close at 1.3288.  The overnight action has just exited the rising RTC for a bearish setup and broken below the daily pivot.  With indicators continuing their decline from overbought, I'd say the euro;s ready for more declines on Tuesday.

Transportation: Last night I pointed out a star on this chart and wrote that "{it] makes me think that lower is on the way here on Monday".  And so it was, with the trans losing 0.77%.  We've now bounced off the upper BB and have a mildly overbought RSI.  Still no warning from the stochastic though so this chart while looking bearish is not a screaming short.  OTOH, I'd not be going long here either.

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 Poll

  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   8/12

 13  3/25       31         38        +      -   1557   8/13    9/13

 14  4/1        38         38        +      x   1569   9/14    9/13

 15  4/8        32         50        -      -   1553   9/15    9/14

 16  4/15       33         50        +      -   1589   10/16   9/15

 17  4/22       19         63        -      -   1555   10/17   9/16

 18  4/29       33         58        -      -   1582   10/18   9/17

 19  5/6        50         31        +      +   1614   11/19  10/18

 20  5/13       37         37        +      x   1634   12/20  10/18

 21  5/20       50         25        +      +   1667   12/21  10/19

 22  5/28       37         33        +      +   1650   12/22  10/20

 23  6/3        29         38        -      -   1631   13/23  11/21

 24  6/10       38         38        +      x   1643   13/24  11/21

 25  6/17       32         40        +      -   1627   14/25  11/22

 26  6/24       13         46        -      -   1592   14/26  11/23

 27  7/1        25         42        -      -   1606   14/27  11/24

 28  7/8        42         29        +      +   1632   15/28  12/25

 29  7/15       48         22        +      +   1680

 30  7/22       42         19        +      +   1692 

 31  7/29       39         17        +      +   1692 

 32  8/5        46         27        +      +   1710 

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 both I and the majority of the poll voted bullish four weeks ago, so we were  both right.  Therefore we  continue the year with an accuracy of 15  for 28, or 54%.   The poll as a whole improves to 12 for 25 or 48% and remains in coin-flipping territory as far as accuracy goes.
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        3      4      6           4        0.636     85
June       6      5      6           0        0.545    543
July      10      2      4           4        0.875    486
August     3      0      0           0        1.000    204

     And the winner is...

Tonight, the balance of the charts continues to read bearish, though not excessively so.  Still, I believe logic dictates a call for lower Tuesday, though I'm not expecting a triple digit decline.

ES Fantasy Trader

Portfolio stats: the account remains at $115,000 even after 14 trades (11 for 14 total, 6 for 6 longs, 5 for 8 short) starting from $100,000 on 1/1/13.  Tonight we remain short at 1643.00.  We're in too deep to ditch this trade now.  I think it would be a mistake to dump it just when the market hits a record high.