Wednesday higher only if ES pivot holds

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

• Wednesday higher only if ES stays above pivot by mid-AM, else lower.
  
• ES pivot 1685.67.  Holding above is bullish.
• Rest of week bias higher technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader remains long at 1695.00.

Recap

Hey Mikey!  He likes it!  Go figure - Mr. Market apparently approves of the government shutdown (actually just a partial shutdown) with a nice 62 point bounce in the Dow on Tuesday.  And while we're talking about government shutdowns, why is it that the venal clowns on Capitol Hill continue to collect their paychecks for not doing their jobs, while thousands of ordinary citizens are now going without?  Something's not right here.  So upon that jolly note, let's move on to the charts once again.  But first...

Southwest Airlines Goes Down

Is this any way to run an airline?

I just heard from the credit card dispute department.  You may recall how the Night Owl got suckered into paying a business class fare for steerage class service on Southwest Airlines (LUV, 14.73 +0.17)  back in June.  When I asked them for a refund of the difference, their whole attitude was basically "tough luck, sucker".  Well it seems that karma has intervened and after reviewing the evidence I presented describing Southwest's deceptive advertising practices, the credit card company agreed with me and Southwest has now officially thrown in the towel on this whole unfortunate matter.  Night Owl 1, Southwest zilch, zero, nothing, nada.

The technicals (daily)

The Dow: After  a politically induced drop on Monday, the Dow rebounded on Tuesday with a bullish  inside harami worth 62 points.  While we remain inside the descending RTC, the indicators have now clearly bottomed and begun rising off oversold.  So this chart is now looking bullish.

The VIX: On Tuesday, the VIX dropped 6.39% on a highly unusual bearish kicking pattern.  It also came off its upper BB after just one day, as is its custom.  Indicators remain overbought but have now peaked so this one looks ready to move lower again on Wednesday.

Market index futures: Tonight all three futures are lower at 12:36 AM EDT with ES down by 0.16%.  After a strong showing Monday that caused a bullish RTC trigger the new candle is developing as a dark cloud cover.  Still, we have a freshly completed bullish stochastic crossover and rising indicators just now off oversold, so the general gestalt of this chart remains bullish.

ES daily pivot: Tonight the pivot jumps from 1674.00  to 1685.67.  With a slow drift lower in ES since Tuesday's close, that still leaves us above the new pivot, but just barely.  It's bullish, but only as long as ES can avoid falling through.

Dollar index: The dollar remains in a strange downtrend, putting in the third of three successively larger green candles that are moving steadily lower.. So the trend wins out and you have to imagine that there's more downside to come here.

Euro: The euro put in a giant inverted hammer on Tuesday in a failed attempt to escape the gravitational attraction of 1.3529.  That leaves us at the upper end of an almost two week long trading range now.  The indicators are kind of wandering around in no-man's land between oversold and overbought, so no guidance there.

Transportation: Dow Theorists take note - on a day the Dow was up 0.41%, the trans jumped 1.36% on Tuesday with a jolly green marubozu that popped right out of a descending RTC for a good bullish setup.  The stochastic also formed a bullish crossover and the indicators have now clearly bottomed at oversold.  So everything is pointing to more upside here on 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

 38  9/16       40         28        +      +   1688

 39 9/23        52         36        +      +   1710  

 40 9/30        39         43        +      -   1692

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 for the fourth week in a row we were both wrong.  Therefore we continue the year with an accuracy of 17  for 36, or 47%.   The poll as a whole drops to 14 for 32 or 42% - it continues to be a tough year for the poll so far.

This week, for the fourth time this year we find that I diverge from the majority.  While they have now shifted to bearish, I remain bullish.  We'll see.

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    0      0      1           0        0.000      0

     And the winner is...

The first week of October is historically pretty weak, however we currently have a bit of positive momentum going in tonight's charts.  That said, the futures do seem to be guiding lower.  Therefore, I'm going to make a conditional call - if ES can stay above its pivot by mid-morning Wednesday, we'll close higher, if not, then 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.