Wednesday higher if ES breaks above pivot

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

• Wednesday higher only if ES breaks above pivot and stays there, else lower..
  
• ES pivot 1656.00 .  Breaking above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains long at 1695.00.

Recap

Hmm - so we continue marching lower while Emperor Nero and his pals continue to fiddle in Washington - for no real apparent reason other than irrational fear.  In fact, the Night Owl is starting to detect a whiff of panic in the streets.  Is this a good time to buy or should we head for the hills?  The charts, as always will tell.

The technicals (daily)

The Dow: How now Dow - wow!  A 160 point drop ended Tuesday as the Dow closed well under its lower BB and within shooting range of its 200 day MA at 14,720.  That is the make-or-break line right now.  We either bounce off or die.  The indicators are all useless and stuck on oversold.  In a scene of deja vu all over again, the last time we hit the 200 day MA was back on December 28th in anticipation of the dreaded sequestration calamity.  And then like now, we were coincidentally right at the lower BB.  After a one-day dip below the Dow took off on a five month bull tear.  Right now we've declined a lot more than we had back in December.  I know it's crazy to try and catch the falling knife, but things are starting to look bottomy right about now.

The VIX:  On Tuesday the VIX said bah to Monday's reversal candle and jumped another 4.79% higher to close at 20.34 and well above its upper BB.  In fact we're now back to the highs of the year set back in June.  Only this time we've been overbought for a lot longer than back then.  I know I've been wrong twice in a row now, but this VIX is just begging to move lower.  At the risk of sounding Chicken Little-ish about it, I'd get ready for the VIX to fall.

Market index futures: Tonight all three futures are higher for a change at 12:43 AM EDT with ES up by a respectable 0.33%.  Tuesday's big red candle broke support at 1656 and  took ES well below its lower BB at the same level.  But with all that, the indicators are still not quite down to oversold.  While it is encouraging to see ES rebounding in the overnight, we remain in a downtrend.

ES daily pivot: Tonight the pivot tumbles from 1671.25  to 1656.00 even.  That fall coupled with the rise in ES overnight now puts it just below the new pivot.  It is in fact mounting an attack on it as I write, with the last three five-minute bars just touching the pivot.  So it's definitely in play tonight.  Breaking above would be bullish.  A bounce off though would signal continued bearishness.

Dollar index: The dollar just continues to get jerked around in random directions.  Monday saw an inverted hammer and that was itself inverted for a regular hammer on Tuesday.  We did trade outside the descending RTC for a bullish trigger and the indicators look to be coming off oversold so technically, we could see a move higher here on Wednesday.  But overall, it's all about the politics, baby..

Euro: The euro on the other hand is in something of a holding pattern right around the 1.3576 level with two spinning tops in two days and another one forming in the new overnight.  I'd have to hazard a guess that we're just in for more sideways action here.

Transportation: And finally on Monday the trans accelerated their losses with this chart starting to look like it's going exponential in the down direction - generally a good sign that a reversal is near.  We also closed below the lower BB and the stochastic is now at a level from which a bullish crossover can begin.  While there's no immediate reversal sign here, it looks like one will arrive in the next few days if not Wednesday.

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   17/34  14/31

 35  8/26       23         50        -      -   1664   17/35  14/32

 36  9/3        21         54        -      -   1633   17/36  14/33

 37  9/9        35         30        +      +   1655   18/37  15/34

 38  9/16       40         28        +      +   1688

 39 9/23        52         36        +      +   1710  

 40 9/30        39         43        +      -   1692

 41 10/7        30         33        +      -   1691

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 finally both right.  Therefore we continue the year with an accuracy of 18  for 37, or 49%.   The poll as a whole rises to 15 for 34 or 44% - it continues to be a tough year for the poll so far.

This week we see that oddly enough both bullish and bearish sentiment have decreased as more people head for the sidelines, no doubt confused by the ongoing idiocy in Washington.  And who can blame them?  Filtering out that noise, I still think that on purely technical terms, the market is looking higher for November.  And in that opinion I diverge from the majority for the second time in two weeks.

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  8      3      3           3        0.800    485
October    1      0      3           1        1.000    136

     And the winner is...

Tuesday had something of the feel of a mini-washout to me.  The SPX Hi-Lo index hit 66 on Tuesday, a level seen only four times in the last six months.  While that doesn't guarantee a reversal, it increases the probability of one.  The NYSE A/D line is also getting rather overextended to the downside just as the VIX is to the upside.    And tonight the market finally has some news to base a rally on, about Janet Yellin to be the next Fed head.  And as I write this, ES has just broken over its pivot, a bullish sign.  Therefore I'm going to make this a conditional call: if ES can stay above its pivot by mid-morning Wednesday, we close higher.  But if it can't hang on and drops back below it, we close lower.

ES Fantasy Trader

Portfolio stats: the account remains at $110,000 after 16 trades (12 for 16  total, 6 for 6 longs, 6 for 10 short) starting from $100,000 on 1/1/13.  Tonight we remain at 1695.00.