Tuesday higher

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

• Tuesday higher, low confidence..
• ES pivot 1438.75.  Breaking above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader standing aside.

Recap

I really hate to start a new month on a down note, but I was clearly wrong in guessing that the market would be down today.  As I said, I was going out on a limb and sometimes when you do that, you end up on the ground.  In this case, I was done in by BTE ISM numbers, something that honestly surprised me.  But trading is like baseball - you don't need to be right 100% of the time to still be considered pretty good.  So let's try to hit a home run this time.  Or at least get on base.

The technicals (daily)

The Dow: I was really kicking myself this morning as I had taken out some SDS last Friday in anticipation of a lower market today.  But by the afternoon I was able to give my foot a rest as the Dow gave back half its earlier gains and my SDS was just barely in the red.  But the resulting 78 point advance took us out of the Dow's descending RTC for a bullish setup, RSI continues to rise from oversold, and the stochastic has now completed a bullish crossover.  More upside seems possible here.

The VIX:  The VIX fooled me too.  It popped out of its symmetrical triangle as I expected, but the wrong way, gaining 3.75% instead of going down.  It's also unusual for both the VIX and market to rise simultaneously.  But we now have a complete bearish stochastic crossover and a hanging man, so I'm going to guess again that the VIX goes lower on Tuesday.

Market index futures: Tonight the futures are barely up at 1:40 AM EDT with ES up by just 0.07%.  Today's gains in ES gave us a bullish RTC setup and the developing candle so far is enough to call a bullish trigger.  As long as ES can stay above 1424 on Tuesday, that is confirmed.

ES daily pivot: Tonight the pivot rises from 1425.58 to 1438.75.  With ES virtually unchanged so far tonight, we're now below the new number, so that's bearish.  But with ES now at 1438, it's just barely bearish and we're well positioned to attack the pivot.

Dollar index: The $ dropped 0.14% on a spindly dragonfly doji today, closing near yesterday's highs.  Like the trans (below) we have what looks like a developing RTC failure.  We exited the rising RTC but have not moved lower.  If we redefine the RTC by extending it to account for the high on 9/26, then we're still in a rising dollar trend, bad for stocks.  OTOH, the indicators are all quite overbought right now.  So this chart is just plain confused.

Euro: The euro seems to have found support in its 200 day MA at 1.2835.  After briefly testing it today, the big E moved higher and is continuing that trend in the overnight, now up to 1.2922.  This chart is making a little more sense - at least the RTC is working here.  We've now exited the descending RTC, the indicators are moving up off oversold and it looks like the euro should continue higher on Tuesday.

Transportation: Adding to all the indecision, today the trans delivered a doji that gained just 0.15% near the bottom of yesterday's red candle.  Unless we can get something going here, this will be a rare failure of the regression trend channel.  We exited the descending RTC three days ago but have been unable to move any higher since then.  That fact alone is worrisome.  Not to sound wishy-washy, but I will note that sometimes a chart can spend a few days consolidating after exiting an RTC before taking off.

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.  Here's the updated cumulative list for this year:

Wk.# Week   % Bullish  % Bearish  NightOwl SPX  Accuracy

  1  1/3        46         21        +     1258   1/1

  2  1/9        56         37        +     1278   2/2

  3  1/17       41         33        +     1289   3/3

  4  1/23       46         32        +     1315   4/4

  5  1/30       48         31        +     1316   5/5

  6  2/6        56         30        +     1345   6/6

  7  2/13       48         31        +     1343   7/7

  8  2/21       44         32        +     1361   8/8

  9  2/27       48         24        +     1366   9/9

 10  3/5        43         26        +     1370  10/10

 11  3/12       46         32        +     1371  11/11

 12  3/19       46         29        +     1404  11/12

 13  3/26       39         29        +     1397  11/13

 14  4/2        42         21        +     1408  11/14

 15  4/9        25         46        -     1398  12/15

 16  4/16       26         48        -     1370  13/16
 17  4/23       30         48        -     1379  14/17

 18  4/30       44         32        +     1403  14/18

 19  5/7        23         50        -     1350  15/19

 20  5/14       32         44        -     1353  16/20

 21  5/21       30         52        -     1295  16/21

 22  5/29       35         42        -     1318  16/22

 23  6/4        32         48        -     1278  16/23

 24  6/11       28         40        -     1326  16/24

 25  6/18       39         26        -     1343  16/25

 26  6/25       38         46        -     1335  16/26

 27  7/2        41         40        -     1362  16/27

 28  7/9        42         38        -     1355  16/28

 29  7/16       44         32        -     1357  16/29

 30  7/23       33         42        -     1363  16/30

 31  7/30       43         22        +     1386  17/31

 32  8/6        52         28        +     1391  18/32

 33  8/13       43         21        +     1406  19/33

 34  8/20       46         31        +     1418  20/34

 35  8/27       39         29        +     1411  21/35

 36  9/4        31         38        +     1407  22/36

 37  9/10       54         29        +     1438

 38  9/17       63         22        +     1466

 39  9/24       52         30        +     1460 

 40  10/1       39         39        -     1441

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.  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 my bullish call on 9/4 was right again, the S&P now being higher than then. I'm using the column "Accuracy" to track my calls.  So now I'm 22 for 36, or 61%.  For the record, I switched my vote to bearish this week for the first time since July, based on my reading of the SPX monthly and weekly charts.

And it looks like I had company, because bullish sentiment took a big hit this week while bearish rose to leave us in a dead tie, 39-39.  This marks the third week in a row that bullish sentiment has dropped and bearish has increased.

Accuracy (daily calls): 

Month    right  wrong  no call  conditional  batting   Dow
                                            average  points

April      7      9      2                    .438
May       10      7      3           2        .632  
June       8      6      6           1        .600     632
July      11      2      6           1        .857     917
August     8      6      8           1        .600     -78
September  8      6      5           0        .571     -19
October    0      1      0           0        .000     -78

Performance:

Here are my performance stats for the first nine months of 2012.  The first two columns are for my trading account.  The next, "ESFT", is the ES Fantasy Trader.  Following that I've now added the results for my IRA.  The last is the Dow, my reference benchmark that I try to beat or at least match.

 Date    Trading, Month  Tr. YTD  ESFT YTD   IRA YTD   Dow YTD

1/31/12       7.41%        7.41%   -0.50%     6.18%     3.41%

2/29/12       3.67%       11.35%    7.88%     9.02%     6.02%

3/31/12       1.76%       13.31%   29.88%    10.05%     8.16%
4/30/12       2.35%       15.97%   41.75%    10.90%     8.17%

5/31/12      -1.92%       14.23%   26.63%     4.91%     1.45%

6/30/12       4.33%       19.17%   40.38%     2.80%     5.44%

7/31/12       2.96%       22.69%   76.00%    10.98%     6.49%

8/31/12       2.75%       25.64%   66.25%    13.16%     7.17%

9/28/12       3.59%       30.15%   80.88%    15.37%     9.98%

 

     And the winner is...

We've got a very mixed picture tonight with every chart seeming to point in 10 different directions.  When this happens I have to decide who seems to be speaking the loudest and tonight it's the Dow, the VIX and the currencies, and what they're all saying is "market higher".  So tonight the NIght Owl going to fly back up into her tree and find another limb to go out on and call Tuesday higher.

ES Fantasy Trader

Portfolio stats: continuing a recent dry run the account remains at $180,875 after 65 trades (50 wins, 15 losses) starting from $100,000 on 1/1/12.  I'm now really glad I resisted the temptation to go short last night.  Unfortunately, we're in pretty much the same position tonight.  This time though I really want to go long, but I don't have enough confidence to pull the trigger.  So I'd rather sit on the sidelines until I get a bus coming along that's more clearly marked with a destination.

CUA (Commonly Used Acronyms)

BB - Bollinger Bands
DCB - Dead Cat Bounce
MA - Moving Average
RTC - Regression Trend Channel
YTD - Year To Date

Disclaimer: (My lawyer made me do it) This blog is not trading or investment advice, account management or direction.  All trades listed here are presented only as examples of the author's personal trading style.  Investing entails significant risk and trading entails even greater risks.  Act accordingly.