Tuesday uncertain

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

• Tuesday uncertain.
  
• ES pivot 1664.25.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside.

Recap

Monday was a good example of why you don't call a reversal based solely on a doji, or even an army of dojis like we saw last night.  My call to go with the futures proved to be correct and the Dow finished up a nice 141 points.  But in this business you're only as good as your next call, so let's turn our attention to Tuesday.

The technicals (daily)

The Dow: On Monday the Dow posted its biggest gain in over a month.  This tall green marubozu was enough to bring us back from the brink and recover the center of the rising RTC.  Meanwhile the indicators moved a bit higher into overbought territory, but are not yet signaling a reversal.

The VIX:  Last night the VIX was being a bit ambiguous and the results on Monday were the same.  We got a 1.39% drop, but the hammer-style candle came on the upper end of Friday's and traded outside the descending RTC for a bullish setup.  The indicators continued lower into oversold and the stochastic is starting to flatten out for a bullish crossover.  It still looks like we're getting ready for a move higher and the signs tonight are a bit stronger than last night.

Market index futures: Tonight all three futures are modestly higher at 12:45 AM EDT with ES up by 0.07%.  ES had a very good day indeed Monday, with a big green marubozu that kept us inside the rising RTC and broke right through resistance at 1676.  Indicators are now becoming quite overbought, but we've seen that movie before.  The market has shown an ability this year to remain overbought for long periods without retrenching.  There is now no resistance til 1680 and then the upper BB at 1684.75.

ES daily pivot: Tonight the pivot jumps from 1652.08  to 1664.25.   Even with that big gain and not much happening with ES in the overnight, we're still comfortably above the new pivot, so once again, this indicator remains positive.

Dollar index: On Monday the dollar gave us some direction by dropping a big 0.45% and slamming right through its 200 day MA.  With a completed bearish stochastic crossover, a bearish RTC exit, and indicators still overbought but having peaked, it's four strikes and yer out.  Look for more downside on Tuesday..

Euro: Last night I postulated "a possible move higher on Monday" for the euro and it delivered, with a big gain that gave us a two white soldiers, a bullish descending RTC exit and indicators rising off oversold.  So despite two solid advances, I think the euro still has room to run from here.  And the overnight pin action seems to be confirming that, at least so far.

Transportation: The trans outperformed nicely on Monday, up 1.40% on a green marubozu.  That keeps the rising RTC going while driving the indicators more into overbought.  However, with no resistance til 6490 and the upper BB not until 6522, this locomotive still has some room to run 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 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   16/31  13/28

 32  8/5        46         27        +      +   1710   16/32  13/29

 33  8/12       32         41        -      -   1691   17/33  14/30

 34  8/19       23         54        -      -   1656

 35  8/26       23         50        -      -   1664 

 36  9/3        21         54        -      -   1633

 37  9/9        35         30        +      +   1655

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 bearish four weeks ago, so once again we finally both right.  Therefore we continue the year with an accuracy of 17  for 33, or 52%, back to a bit positive.   The poll as a whole rises to 14 for 30 or 47% - still contrarian territory.

This week I remained with the majority by shifting my vote to bullish, something we've not seen since the week of August 5th.  Although October is historically a dreadful month, this year we've seen a bunch of correcting happening a bit earlier than usual, so perhaps the downturn has already happened.  With things beginning to look ready for a turn-around on both the weekly and monthly charts, I'm back to bullish for the monthly outlook. 

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    11      3      6           2        0.813    687
September  4      0      0           0        1.000    270

     And the winner is...

All of the dojis we were seeing last night were effectively canceled on Monday, indicating that the current uptrend remains in force.  However, it is common for big one-day gains to be followed by a pause, something we've been seeing quite often this year in particular.  There's also a greater than usual amount of headline risk in the air surrounding Syria right now.

So while the bullish forces I've seen the paste few nights remain in place (though they're weakening a bit) I don't think the bears are ready to roar just yet.  In fact we could see Mr. Market take a rest and throw us another doji.  Therefore, logic dictates calling Tuesday uncertain.

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.