Tuesday lower

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

• Tuesday lower, low confidence.
  
• ES pivot 1801.92.  Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias higher.
• ES Fantasy Trader standing aside

Recap

Last night I called Monday uncertain, and it was indeed that as the Dow wandered around indecisively most of the day - until about 3 PM when it took off decisively to the downside for a 78 point loss.  So where does this leave us for Tuesday?  Perhaps the charts will be more conclusive tonight than last.

The technicals (daily)

The Dow: While I was hesitant to assign too much importance to last Friday's half-day inverted hammer, Monday's comparatively large drop is of more concern and it knocks us out of the rising RTC for a bearish setup and confirms a bearish stochastic crossover.  With indicators remaining overbought, this chart now looks bearish.

The VIX:  I didn't think the VIX had enough gas in the tank to manage the 3.87% gap-up it put in on Monday.  But that also put it above its upper BB and like I always say, the VIX rarely spends more than a day or two at such levels before pulling back.  However, Monday's candle was not a reversal sign and the indicators are not yet overbought, so a bit more upside is possible.  Keep in mind though that we've got some resistance in the form of the 200 day MA right above at 14.37.  When the VIX tip-toes up to the MA, it often has trouble passing it.

Market index futures: Tonight the futures are mixed at 12:33 AM EST with ES up by 0.03% but YM down 0.07%.  Monday's drop in ES was bearish engulfing i a big way and also a bearish RTC trigger.  RSI has now peaked at overbought and we now have a bearish stochastic crossover.  So everything is looking lower from here.

ES daily pivot: Tonight the pivot falls from 1806.42  to 1801.92.  Even with that drop we remain below the new pivot so this indicator continues bearish.

Dollar index: I was very wrong indeed last night as the dollar put in a big 0.35% gap up on Monday in a move that was good for a bullish stochastic crossover and a bullish RTC setup.  However, the pattern is forming as a bearish evening star and the dollar often quickly fills big one-day gaps, so I'm more inclined to think it's going lower Tuesday.

Euro: And of course I was also wrong on the euro which put an abrupt end to its rising RTC on Monday for a bearish setup along with a bearish stochastic crossover.  The overnight is pretty flat  so far but the signs are now pointing lower for Tuesday.  Of course that guarantees that either this or my dollar call will be wrong but I can't help that.  Looking at the individual charts, that's just how they look to me.

Transportation: In a bit of bullish divergence the trans actually gained 0.25% on a day when all three major averages were lower.  But the candle was something of an inverted hammer.  On the other hand we're still in a rising RTC.  Overall, this is a tough chart pattern, but  we've got two reversal candles and overbought indicators, so I'm going to take a guess that this one may be going lower on Tuesday.

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    7      5      8           2        0.643    674
November   6      6      2           1        0.538    123
December   0      0      1           0        0.000      0

     And the winner is...

Despite a positive showing from the trans on Monday, everything else is looking rather bearish tonight so logic dictates a call of Tuesday lower.  I'll be happy to be proven wrong as I'm always net long.

ES Fantasy Trader

Portfolio stats: the account remains at $110,625 after 17 trades (13 for 17  total, 7 for7 longs, 6 for 10 short) starting from $100,000 on 1/1/13.  Tonight we stand aside.again.