Wednesday uncertain, bias higher

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

• Wednesday uncertain pending Fed minutes but bias is higher, .
  
• ES pivot 1649.42..  Holding below is bearish.
• Rest of week bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Once again, I'm glad I called Tuesday as "uncertain".  With the Dow ending down less than 8 points while the SPX ended higher by 0.38%, that's about as uncertain as it gets.  And I'll also note that I suspected we might get a bottoming day on Tuesday.  While it takes at least two days to confirm a bottom, Tuesday certainly had that feel to it.  Let's look into this in a bit more detail to see what we can scope out for Wednesday.

The technicals (daily)

The Dow: The Dow's 0.05% drop on Tuesday belies its candle - very nearly a tall bullish gravestone doji a la inverted hammer.  With RSI and the stochastic now both extremely oversold, it increases my belief that a reversal is coming soon.  Note too that momentum bottomed three days ago and has been rising ever since.

The VIX:  Last night I mentioned that the VIX was due to move lower by virtue of having hung around its upper BB too long.  And by golly it did jut that on Tuesday, down 1.26%.  Not only that, it gave us a tall hanging man, following Monday's spinning top.  And as a bonus, we got a stochastic on the verge of a bearish crossover.  So the odds now favor a move lower here on Wednesday.

Market index futures: Tonight all three futures are lower at 12:45 AM EDT with ES down by 0.17%.  On Tuesday, ES gave us a bullish piercing pattern that very nearly retraced all of Monday's losses.  And that was enough to give us a bullish stochastic crossover.  However, the overnight trade doesn't seem to be confirming any of that.  The fact that the indicators continue to be oversold suggests that ES may be basing in the 1647 area with resistance developing around 1652, suggesting some sideways action to come.

ES daily pivot: Tonight the pivot inches up from 1648.08  to 1649.42.  After threading about the old number Tuesday night, we finally broke below and are now a couple of points under the new pivot, so this indicator becomes bearish.

Dollar index: The dollar gapped down 0.40% on Tuesday with a hammer whose tail just touched the lower BB.  With a stochastic moving into position for a bullish crossover and a big gap wanting filling, this is looking like a prescription for higher on Wednesday..

Euro: Last night I wrote that there was "a symmetrical triangle developing, which would suggest the next move will be higher."  ANd so it was, with the euro posting big gains on Tuesday to finish above its upper BB at 1.3421.  With that triangle now resolved, the upper BB hit, the euro at resistance, indicators overbought and the stochastic very close to forming a bearish crossover, logic now indicates that the next move will be lower.  In the overnight so far, the euro is wandering aimlessly, basically flat.  Its failure to continue higher at this point supports the idea of a move lower.

Transportation: Once again we got some divergence in the trans, this time of the bullish flavor as we gained 0.90% to the Dow's 0.05% decline.  This also confirmed yesterday's bullish stick sandwich and took us out of the descending RTC for a bullish setup.  Indicators have now all bottomed at oversold making it look like more upside is on the way.  Also note that support has now held at 6330 for four days in a row now.

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   16/29  13/26

 30  7/22       42         19        +      +   1692   16/30  13/27

 31  7/29       39         17        +      +   1692 

 32  8/5        46         27        +      +   1710 

 33  8/12       32         41        -      -   1691

 34  8/19       23         54        -      -   1656

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 wrong.  Therefore we continue the year with an accuracy of 16  for 30, or 53%.   The poll as a whole drops to 13 for 27 or 48% but remains in coin-flipping territory as far as accuracy goes.
This week we find that bearish sentiment has now increased to the third highest level of the year, following a spate at the end of April when it, in retrospect was definitely the wrong time to be bearish.  So this might be another contrarian bullish sign, though I'll admit I remained in the bear camp this week based on some negative looking weekly and monthly candles on the SPX chart.


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     9      0      4           1        1.000    635

     And the winner is...

This Wednesday is, for some reason, historically bullish.  However, in this case we've got Fed minutes coming out and it is my policy to automatically call any day like that as uncertain given that Fed news generally trumps all manner of technicals.  For what it's worth, I'm seeing signs now that the market may be wanting to go higher on Wednesday, assuming the Fed doesn't torpedo that idea.  I note that the SPX Hi-Lo index popped all the way back to 100 on Tuesday and the AD line hit its highest level since July 11th, both bullish signs.

So bottom line is this: Wednesday uncertain, pending Fed minutes, technical bias is higher.

ES Fantasy Trader

Portfolio stats: the account remains at $108,500 after 15 trades (11 for 15  total, 6 for 6 longs, 5 for 9 short) starting from $100,000 on 1/1/13.  Tonight we continue to stand aside, waiting on a new trend to start.