Thursday lower

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

• Thursday lower, low confidence.
  
• ES pivot 1540.25.  Holding below is bearish.
• Friday bias lower technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going short at 1538.25.

Recap

My play last night was to not get too excited over the record high Dow close and just to treat it as another technical day - and that worked out quite nicely as the Dow finished up another 42 points.  But with four up in a row into uncharted (literally) territory, can we make it five of a kind?  Faites vos jeux, rien ne vas plus!  At the risk of mixing our gambling metaphors, let's see if the little ball stops on red or black on Thursday.

The technicals (daily)

The Dow: The Dow continued it ascent into the stratosphere on Wednesday with another green candle and now gives us a bullish three white soldiers pattern that continues to crawl along the upper BB.  And volume has been increasing for the past three days.  However, we're now quite overbought and the stochastic may be getting ready to set up a bearish crossover.  On the other hand, we had a similar situation for most of January and that did nothing but go straight up.  But we remain inside the rising RTC and I have to say I still don't see any sign of a pullback on this chart.

The VIX:  Here's an unusual divergence, as the VIX actually rose 0.37% while the Dow and SPX gained too.  That's unusual.  Although the gain was small, it formed a bullish engulfing pattern against Tuesday's morning star and closed back above support of 13.50.  With indicators now as oversold as the last few times the VIX has bottomed and the futures posting similar gains, we could definitely see more upside from the VIX on Thursday.

Market index futures: Tonight all three futures are mixed at 1:05 AM EST with ES down by 0.05%, NQ up 0.04% and YM dead flat.. Unlike the past two nights, this is looking like a bit of uncertainty.  And that's reflected in Wednesday's candle, which was a short evening star that traded outside the rising RTC for a bearish setup.  The new candle is forming as a bearish engulfing pattern consuming the star and confirming the signal.  We also now have a bearish crossover from the stochastic, just barely.   So all in all, this chart is looking much weaker than last night.

ES daily pivot: Tonight the pivot rises again from 1534.75  to 1540.25.  This bump combined with ES drifting lower in the overnight now leaves us below the new pivot, so that becomes a bearish sign.

Dollar index:The dollar remains firmly inside it rising RTC as Wednesday's 0.44% gain broke a three day slide and completed a bullish three candle morning star pattern.  So despite overbought indicators, we could see the dollar continue to move higher.

Euro: And as the dollar rose the euro fell on Wednesday, keeping it inside its descending RTC.  While it is rising in the overnight that's off a gap down earlier this evening, so it's not clear that the euro is really interested in moving higher just yet.  The day-to-day moves of the euro have been sort of herky-jerky lately anyway.

Transportation:Here's another divergence, with the trans dropping 0.42% even as the Dow advanced 0.30% on Wednesday.  And they gave us a red inverted hammer.  And the indicators are getting more overbought, and the stochastic is about to make a bearish crossover.  I'm now thinking that there's a good chance of this chart going lower on Thursday.


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      2      1      1           0        0.667    130

     And the winner is...

Tonight it's sort of looking like Mr. Market is running out of steam.  There are some bearish signs starting to pop up, especially in the futures and the VIX, enough in fact to make me call Thursday lower.  I also took out a position in SPXS as a hedge on Wednesday afternoon.

ES Fantasy Trader

Portfolio stats: the account remains $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're going short at 1538.25.  I think if this trade isn't successful on Thursday, it stands a chance of coming through on Friday.

Wednesday higher

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

• Wednesday higher, low confidence.
  
• ES pivot 1534.75.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Ding!  Finally, we've taken out the previous record high of the Dow when it hit 14,198.10 back in 2007.  And we didn't just nibble at it.  Tuesday's close of 14,254 was  impressive.  Now of course, the question everyone is asking is, does this move signal a breakout or a pullback. Rather than getting into emotional arguments about this or treating Tuesday as some exception to usual market dynamics, let's run the charts and look for the usual technical signs.

The technicals (daily)

The Dow: OK, so Tuesday's big green marubozu not only shattered the all-time high for the Dow, but also busted above the upper BB.  It also canceled out three day's worth of dojis.  And even this big move did not bring us into overbought territory (though we're close).  In fact, there are no bearish signs on this chart tonight.  The only note of caution I'd bring up is that as the Dow has been steadily rising for the past four days, volume has been declining.  Tuesday's volume was just slightly higher than Monday's, but the highest volume of the past eight days has been on the only two days that were down.  Hmmm...

The VIX:  Last night I wrote that I was "now calling for a lower VIX again on Tuesday."  So bingo - got that one right as the VIX  gapped down 3.78% for a classic morning star.  The VIX also closed right on a support line at 13.48.  But with the indicators still not yet oversold and the stochastic still not forming a bullish crossover, it is premature to call the VIX higher just yet.

Market index futures:Tonight all three futures are once again higher at 1:23 AM EST with ES up by 0;13%.  Like the Dow, ES just busted through its upper BB on Tuesday.  And lookee here - remember what I wrote last night?  "I note that we'd have to close above 1537 on Tuesday to avoid a bearish setup."  Well guess what - ES closed at 1537.00 on the dot.  I was somewhat skeptical that ES could do it, but it did.  And with an intraday high of 1542.75, I'd say the bearish setup is, somewhat surprisingly, averted.

Tonight we;re in a similar position.  ES continues to move higher, now at 1539.25, climbing its upper BB.  And now I'll note that it will have to close above 1549 on Wednesday to avert a bearish setup.  Doable?  Who knows.  I'm not going to gainsay this market right now.  But with the indicators now becoming quite overbought (RSI now 95.59) I'd be cautious about piling on any longs at this level.  Still, I don't see the pullback happening on Wednesday.

ES daily pivot: Tonight the pivot jumps from 1520.00  to 1534.75.  But we were so far above the old number that we remain four points above the new pivot, so that remains a bullish sign.

Dollar index:The dollar gapped down on Tuesday for a 0.13% loss on a small spinning top.  While it remains in a rising RTC, the indicators have been coming down off extreme overbought levels for a few days now, so more downside is possible here on Wednesday.

Euro: Then the euro moved higher as expected on Tuesday, but with a green spinning top.  However this is not being confirmed in the overnight so far as the new candle is moving higher, now up 0.18% to 1.3066.  It also brings the euro out of its descending RTC back to 2/13 for a bullish setup.  And the indicators continue moving up off oversold, and we remain above the pivot.  So it's looking good for continued higher here on Wednesday.

Transportation: And finally, the trans outperformed the Dow, piling on another 1.52% to simply blast right through their upper BB at 6086.  But volume was lower than Monday, we're now into overbought territory, and the stochastic is starting to flatten out for a bearish crossover.  But I don't think any of that will matter until the end of this week.  For the time being, the trans may actually have some more room to run here.


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      1      1      1           0        0.500     88

     And the winner is...

My call last night was based on the performance of the futures and the currencies.  Everything that was true then remains in effect tonight.  You'd think that if taking out the 2007 highs was going to trigger profit-taking or short-selling, we'd already be seeing indications of that in the futures, but we're not.  So with the trans outperforming, copper catching a bounce, the TLT moving lower, the Italian elections having faded back into obscurity, the non-sequesitur leaving Comrade Stalibama with egg on his face, Hugo Chavez having gone to that great Comintern in the sky (and good riddence) and the VIX back in the toilet, the logical call is for Wednesday higher.

ES Fantasy Trader


Portfolio stats: the account remains $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again in the absence of a clear reversal sign.

Tuesday higher

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

• Tuesday higher, low confidence.
  
• ES pivot 1520.08.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Things were looking good for my call for a lower close on Monday - until lunch time.  Then Mr. Market decided he wanted to take a look at those 2007 highs after all and the Dow clambered to a 38 point gain on the day.  So we inch ever closer to that magic 14,198 level.  Will Tuesday be the day?  The day I get one right, that is?  We bring out the fine-toothed comb to give the charts a restyle and find out.

The technicals (daily)

The Dow: Once again we're in a sort of trader's Twilight Zone wher we get day after day of dojis, all warning of potential reversals while we continue to drift higher.  Today was no exception, as yet another hanging man drove us to within 70 points of the all-time highs.  What was different on Monday was that we closed just barely under the upper BB and traded entirely outside th rising RTC for a bearish trigger.  The stochastic is also getting ready to form  a bearish crossover.  So I'm going to say a reversal is coming sometime this week.  If not Tuesday, then more likely on Wednesday.

The VIX:  So much for the symmetrical triangle.  It broke as expected on Monday but down instead of up as the VIX took an 8.79% dump right back to the lower end of its recent range.  With two red candles in a row and indicators continuing to decline, I'm switching my stance and now calling for a lower VIX again on Tuesday.

Market index futures:Tonight all three futures are just barely higher at 1:29 AM EST with ES up just 0.03%.  On Monday ES rose by a substantial 0.68% to close just short of last month's highs at 1529.  That was enough to keep us inside a steeply rising RTC.  At this point the indicators are still not overbought but I note that we'd have to close above 1537 on Tuesday to avoid a bearish setup.  I suppose that's doable, but after today's relatively large gain, I'm not sure where the additional push is going to come from.  One theory that comes to mind is that Tuesday could be a topping day.  The overnight action so far at least is demonstrating little interest in moving lower.

ES daily pivot: Tonight the pivot inches up from 1511.67  to 1520.08.  We were above before and even with a fairly flat evening, remain above the new pivot by a good six points.  And ES seems to be uninterested in challenging the pivot as I write, so that's all a positive sign for Tuesday.

Dollar index:At least I got this one right.  The dollar indeed moved lower on Monday, losing 0.13% in the $USDUPX.  But I think that's only the beginning of the gap-filling.  Today's move completes the classic three bar bearish evening star and with indicators still overbought but already starting to decline, I'd say the dollar has more room to run lower Tuesday

Euro: I also called for a lower euro on Monday, which would be quite unusual.  But that ended up being pretty close.  The euro did rise, but only  bit moving from 1.3028 to 1.3040 on the day.  But the resulting candle was a definite hammer and the overnight action is confirming that, with a 0.10% gain so far.  With indicators still oversold, I'd say a higher euro is likely Tuesday.  And that would at least sync with my call for a lower dollar.

Transportation:After two wishy-washy days when the trans couldn't decide if they wanted to shift into forward or reverse, they finally stepped on the gas on Monday to gain a full percent, stopping just under their upper BB and handily clearing last month's 6019 resistance line.  But even this still wasn't enough to send them to overbought levels, though we're getting close.  With Monday's bullish move, no resistance left, and no other reversal signs in sight, you'd have to expect at least a bit more upside here 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

  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

  8  2/19       21         43        -      -   1520

  9  2/25       30         52        -      -   1516

 10  3/4        29         39        -      -   1518 

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 I voted bullish four weeks ago, so both I and the majority were again correct.   We therefore continue the year with an accuracy of 5 for 6, or 83%. 

The big news this week is that while bullish sentiment was virtually unchanged, bearish sentiment dropped substantially.,  We now have a rare situation where "neutral" is the second most popular vote, at 32%.  I'm not quite sure why bearish sentiment would drop without a corresponding increase in bullish.  Perhaps people are waiting to see what happens when we hit the 2007 highs - either a breakout or a pullback.  I'm voting for the latter, having voted negative three weeks in a row now.  Stay tuned.


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      0      1      1           0        0.000    -38

     And the winner is...

Tonight there are mildly bullish signs from the futures and the currencies.  But we're also quite close to the all-time record highs of 2007 and I think that will provide some resistance.  So Tuesday could be a topping day but I still expect the market to close up, so I'm calling Tuesday higher.

ES Fantasy Trader


Portfolio stats: the account remains $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again in the absence of a clear reversal sign.

Monday lower

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

• Monday lower, low confidence.
  
• ES pivot 1511.67.  Holding below is bearish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Well an early morning plunge and a late morning dip made it look like my call for a lower close Friday would be vindicated but it was not to be as the Dow finished up, admittedly only by 35 points but up nonetheless.  Now let's figure out where we're headed on Monday.

The technicals (daily)

The Dow: While Friday's 0.25% gain doesn't seem like much, it gave us a classic hanging man.  This follows an inverted hammer for two dojis in a row.    It also just wasn't quite enough to keep us in the rising RTC, so that's a bearish setup.  We're still not quite overbought though, so this is only a vague warning of a move lower, particularly since the upper BB has now risen to 14,115.  I still think the Dow is going to want to have a look at its record 2007 highs, but I'm not convinced that will be on Monday.

The VIX:  After a hammer last Thurday the VIX put in an inverted hammer on Friday to finish little-changed down just 0.97%.  The striking feature here is a developing symmetrical triangle.  Since the long-term trend is higher, the expectation is for the break to be higher too.  If this holds true (and it's not a sure thing) then I'd be looking for a higher VIX within a day or two since this triangle is nearly complete.

Market index futures:Tonight all three futures are lower at 1: 03AM EST with ES down by a not insubstantial 0.43%.  Friday's candle was a tall hanging man that followed Thursday's spinning top - two reversal warnings in a row.  And the new candle forming now is trading outside the rising RTC for a bearish setup.  And the stochastic is getting close to executing a bearish crossover.  Overall, this chart is looking bearish for Monday.

ES daily pivot: Tonight the pivot dips from 1515.50  to 1511.67.  With a gradual drift lower all evening long, we broke under the old pivot around 6 PM and remain below the new pivot - a bearish sign.

Dollar index:On Friday the dollar gave us the mother of all evening stars with a giant 0.43% gap up that just about touched the upper BB intraday.  Although we remain inside a rising RTC, with indicators now slowly coming off overbought, it looks like the dollar may very well try to fill in this gap on Monday.  I'm watching for a move lower here. .

Euro: Meanwhile the euro remains in its own two week long descending RTC after a far red spinning top on Friday.  This move also broke support at 1.3054.  Next support isn't til 1.2978 and with the euro just now bouncing off its daily pivot in a failed attempt to mover higher, I wouldn't be surprised to see it moving lower on Monday.  And note that it would be unusual for both the dollar and the euro to move lower on the same day.  So one of these guesses is probably wrong.  All I can go by is how the charts look to me.  This will be interesting to see.

Transportation:And to top off the charts, here's a bit of divergence.  ON Friday the Dow rose 0.25% but the trans dropped 0.14%.  Same pattern though - inverted hammer, then a hanging man.  This does make me think that a retracement of last Wednesday's big gains is in the cards.


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      0      1      0           0        0.000    -35

     And the winner is...

With no major economic news slated for Monday and the whole sequester thing looking more like a non-sequesitur (and yes, I just invented that) and some bearish signs popping up in the charts tonight, I'm simply going to call Monday lower.

ES Fantasy Trader

Portfolio stats: the account remains $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside and I'll tell you why.  ES is already down a substantial 0.43% in the overnight.  As a result of this, it's actually looking bullish on the hourly chart and in fact has begun rising since right around midnight.  I think this bus has already left the station.  I'd hate to go short, have the market close lower, and end up losing money anyway.

Friday lower

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

• Friday lower, low confidence...
  
• ES pivot 1508.33.  Holding below is bearish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Darn - if Thursday's session had ended just two minutes earlier, my call for a higher close would have been correct but unfortunately, something spooked Mr. Market in the closing minutes and we ended down 21 points.  What does this mean for Friday?  Let's take a quick look at the charts.

The technicals (daily)

The Dow: The net effect of this sell-off was to give us a big inverted hammer of a candle, one whose tail pierced the upper BB.  Sitting at the top of Wednesday's big run-up, this is looking a bit bearish to me

The VIX:  I missed the VIX on Thursday too - it rose 5.3% on a green hammer.   However, the indicators continue to move lower, so this chart is mixed - no good call here.

Market index futures:Tonight the futures are mixed at 1:32 AM EST with ES down by 0.12%, YM down 0.02% but NQ up 0.05%,  The indicators are still rising off oversold but with Thursday's red spinning top and the new candle forming below that, this chart is now looking somewhat bearish.

ES daily pivot: Tonight the pivot inches up from 1508.33  to 1515.50.  With ES kind of drifting about in the overnight, this gain now puts us below the new pivot, a bearish sign.

Dollar index:The dollar just popped right back up to its resistance at 56.40 on Thursday to remain in a month-long uptrend.  This canceled what looked like a developing downtrend the last two days and could set the stage for even higher on Friday.

Euro: I missed this one too - the euro did not move higher on Thursday, it completely retraced all of Wednesday's gains and formed a mean-looking bearish engulfing pattern in the process.  The overnight is actually up 0.15% but sitting below the pivot as we are, I'm not too sure how much follow-through there will be into Friday,  So despite oversold indicators, I'm feeling cautious about a rising euro for Friday.

Transportation:And finally, another doji in the trans, which did manage a 0.07% gain on Thursday, hitting their upper BB like the Dow.   After Wednesday's monster move, this seems to suggest that we may be getting ready to retrace on Friday.


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

     And the winner is...

Hmm - a tough one.  With the sequester now officially about to start, it's not clear how the market will react.  So far, it hasn't had much of an effect at all, but that was the rumor.  Now it's news.  And the charts have taken a turn for the bearish this evening.  Add to that the fact that the first day of March, unlike most months, is historically weak and I'm afraid I'm going to have to call for Friday lower.

ES Fantasy Trader


I think we had the right idea going long last night but I lost my nerve and bailed out too early around lunch time on Thursday.  The result was still a win, but only half a point.  Oh well.  At least I got out before the afternoon sell-off.

Portfolio stats: the account now rises to $99,375 after 7 trades (6 for 7 total, 3 for 3 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight with the headline risk around the sequester, we're just going to watch from the sidelines.

SLD    10    false    ES    MAR13 Futures     1518.00    USD    GLOBEX    12:24:59
BOT    10    false    ES    MAR13 Futures     1517.50     USD    GLOBEX    01:22:14
 

Thursday higher

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

• Thursday higher, low confidence...
  
• ES pivot 1508.33.  Holding above is bullish.
• Friday bias higher technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader going long at 1517.50..

Recap

Well so much for the sequester and the Italian elections, I guess eh?  It took all of two days to erase Monday's big dump and then some.  In fact, after appearing to break down out of February's trading range, we've now suddenly broken out to the upside.  My conditional call played out nicely as ES  never seriously threatened its pivot Wednesday morning and once the market opened it was just up up and away.  Will the raging bull keep charging on Thursday?  Let's wave a red flag in front of the charts to find out.

The technicals (daily)

The Dow: After Monday's extraordinary move down on Monday, we have now made an extraordinary move up, going from the lower BB to the upper in just two days.  And today's close at 14,075 also cleared 14K again as well as the resistance at 14,012.  It also broke out of the descending RTC for a bullish trigger and completed the bullish stochastic crossover.  But even after two big up days, the indicators are still nowhere near overbought, so it looks like the Dow sitll has room to run higher from here.

The VIX:  And the VIX, which on Monday crashed through its 200 day MA going up, crashed right back down through it on Wednesday, ending up very nearly where it began the week.  And with a bearish stochastic crossover, the 200 MA behind us, overbought indicators, and three consecutive lower closes, the momentum seems to be to the downside for the VIX.  And that is of course good for stocks.

Market index futures:Tonight all three futures are higher at 1:11 AM EST with ES up by 0.12%.  ES put in a big green marubozu on Wednesday to totally retrace all of Monday's losses and bring us convincingly out of the descending RTC for a bullish setup.  The overnight seems to be continuing that with no sign of wanting to retrace the gain.  That notion is supported by the indicators which are close to oversold and by the stochastic which just completed a bullish crossover.  With no resistance now until 1527, this chart is looking good.

ES daily pivot: Tonight the pivot jumps from 1491.00  to 1508.33.  We were way above the pivot all day Wednesday and remain comfortably above the new number, so this is definitely bullish.

Dollar index: On Wednesday the dollar completed a bearish evening star by dropping 0.33%. .That was enough to finally bring the indicators down from extreme overbought so it looks like there's still lower to come here.

Euro: Meanwhile, the euro confirmed Tuesday's doji with a nice green marubozu.  And the developing overnight candle is continuing that with a 0.11% gap up so far.  With the euro still oversold and just coming off its lower BB, there definitely seems to be a lot of room to run higher here.

Transportation:And finally, while the Dow gained 1.26% Wednesday, the trans put in a turbo-supercharged nitro-fueled 2.91% explosion for their biggest gain since March 2012.  And with a now-complete bullish stochastic crossover, declining RTC exit and indicators having bottomed, it looks like the trans still have the gas to move higher again.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      5           6        0.750    152

     And the winner is...

Overall tonight the charts are looking rather bullish.  My only concern is the tendency of the market often to take a break following big one day moves up.  And also both the last day of February and the first day of March are historically weak.  But there seems to be a lot of positive pressure driving things right now so the logical call is for Thursday higher.  I've not expecting another triple digit day, but I'd be surprised to see a big loss on Thursday.

ES Fantasy Trader


Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're going long at 1517.50.

Wednesday higher if ES pivot holds

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

• Wednesday higher if ES pivot holds, else lower....
  
• ES pivot 1491.00.  Holding above is bullish..
• Rest of week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Hah - last night I was wanting to call Tuesday higher but got scared away out of fear of more news/rumors out of Italy.  Well on Tuesday Italy just fell off the world map and the Dow climbed 116 points.  Oh well - nothing ventured, nothing lost.  Now let's see if we can make some money on Wednesday by staring intently at the charts.


The technicals (daily)

The Dow: Last night I was thinking that Monday's sell-off was overblown and I guess when Mr. Market woke up this morning he agreed, sending the Dow up 116 to retrace half of Monday's losses.,  That was enough to eke out a bullish stochastic crossover and just send us out of the latest descending RTC for a bullish setup.  So the confused and confusing action continues as we bob along between bullish and bearish.  The last four days have been down, up, down, up.  In fact we haven't had a run of more than two days in the same direction in over a month now, since January 25th.  However, having now gotten a bullish stochastic crossover, the first since December 28th, this chart looks like it might be ready to move higher.

The VIX:  The VIX came back to earth today, falling 11.16% after Monday's monster pop and proving once again what I always say - that the VIX rarely spends more than a day or two above its upper BB.  I kind of outsmarted myself by pointing to the summer of 2011 when the VIX just kept going up, but this is not the summer of 2011.  Tuesday's fall was stopped only by the 200 day MA, on the dot at 16.87.  But with the VIX once again overbought and a fresh bearish stochastic crossover in place, I'm wagering on more downside here on Wednesday.

Market index futures:Tonight all three futures are barely lower at 1:35 AM EST with ES down by 0.08%. Tuesday's ES candle had the flavor of a DCB with somewhat muted gains in comparison to the Dow.  But it was enough to throw the new developing candle out of the descending RTC we're in for a bullish setup.  If ES closes above 1487 on Wednesday, that will confirm the setup.  Any lower returns us to the RTC.

ES, 5 minutes

ES daily pivot: Tonight the pivot inches up from 1497.83  to 1491.00 even.  With ES essentially flat in the overnight so far, this now puts us just above the new pivot.  As I write, ES has made three attempts to break under, all of which have been rejected.  Just look at this chart and see how the pivot acts as support.  The pivot is the black line.  Note how since midnight, ES has touched this line  no fewer than ten times in 5 minute bars, just in 90 minutes, but has not gone one single tick below.  Pretty strange stuff, eh kids?  Remaining above would be bullish.

Dollar index:The dollar continued its climb on Tuesday putting in a spindly gap-up doji .that at least warns of the possibility of a move lower on Wednesday.  That idea is supported by highly overbought indicators, with RSI now over 98 for the past three days in a row.

Euro: And like the dollar, the euro put in a doji of its own on Tuesday, this one gapping down to keep it in a descending RTC.  And the euro is correspondingly oversold.  So far the overnight action seems to be confirming the doji, with the euro now up a healthy 0.15% and breaking above its daily pivot as I write.  This says higher euro to me.

Transportation:The trans put in a small morning star on Tuesday just above support at 5787 and their stochastic is about to execute a bullish crossover, so I'd not be surprised to see a move higher here on Wednesday.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      5           5        0.727    152

     And the winner is...

So tonight we have pretty much an absence of any bearish pin action on Tuesday following Monday's rout.  Then we've got ES bumping along its pivot.  As I write, each successive 5 minute bar keeps trying to break under but keeps getting rejected.  Call it the bots, the PPT, the banksters or the phase of the moon, but someone or something is propping up ES at 1491.00 tonight.  So I'm going to make a conditional call: if ES stays above its pivot by mid-morning Wednesday, we close higher.  If we break under convincingly, then we close lower.

ES Fantasy Trader


Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again.  With no real trend in sight, I'm just not willing to pull the trigger.

Tuesday uncertain

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

• Tuesday uncertain...
  
• ES pivot 1497.83.  Holding below is bearish..
• Rest week bias uncertain technically.
• Monthly outlook: bias lower.
• ES Fantasy Trader standing aside.

Recap

Mama mia!  Who would have thought Mr. Market cared so much about the elections in Italia?  After all, Italian governments seem to have all the fleeting longevity of a Higgs boson.  (For the record, it's 61 new governments since WWII, but who's counting).  So for this the Dow craters 216 points?  Oh yes well there's also the "sequester", another pseudo-crisis coming soon as a complete surprise to absolutely no one.  I don't get it.  Wait, let me check my calendar - gee, no, i'ts not April 1st yet.  Just more crazy stock market antics I guess.  No wonder I had to call Monday uncertain.  Ah well, let's see what the charts foretell for Tuesday - if the new Italian government lasts that long, that is.

The technicals (daily)

The Dow: What a strange day.  It started off OK - until 10 o'clock, then it was all downhill from there with a nasty waterfall into the close.  So this giant red candle not only retraced all of Friday's gains (and more), and brought us right back into the descending RTC but it also gave up 14K and  punched straight through the lower BB at 13,823.  It also broke out of the month-long trading range we'd been stuck in.  And even all this didn't bring us to oversold levels.  Not a very pretty picture going into Tuesday.

The VIX:  But if the Dow was bad, the VIX was just plain ugly, with a spectacular 34% skyrocket.  This was the Godzilla of marubozus.  We opened at 13.69, then broke the pivot at 14.45, then whizzed past the upper BB at 16.66 and finally smashed through the 200 day MA at 16.90 without batting an eye, stopping only because the bell rang at 4 PM.  Holy moly, it's like it's the summer of 2011 all over again.  Now I like to say that the VIX rarely spends more than a day or two above its upper BB, but there is an exception to this rule, and that's when the VIX has one of these explosive spikes.  In these cases, it's entirely possible that it can go even higher.  But gosh, this one day move is so astounding, I just have to wonder.  It also brought the stochastic to the edge of a bearish crossover.  But the 200 MA cross is the bad part here.  When the VIX does that, it tends not to fall back below for a while.  So I'm guessing we could spend some time at these levels before falling back.

Market index futures:Tonight all three futures are actually slightly higher at 1:03 AM EST with ES up by 0.03%.  Like the other charts, ES had a big move lower Monday, but found support at its lower BB at 1486.90.  This keeps us in a descending RTC but doesn't yet bring us to oversold levels.  The overnight action has the feel of a DCB.  If that continues, we could see some small gains on Tuesday.

ES daily pivot: Tonight the pivot plunges from 1510.50  to 1497.83.  With ES little changed in the overnight, we remain well below the new pivot, so that's bearish.

Dollar index:The dollar looked like it wanted to go lower, gapping down at the open on Monday but when it was all said and done, it posted a 0.24% gain to remain above its 200 day MA and defy its now highly overbought indicators.  And there's nothing here to suggest a reversal coming.

Euro: Unlike the other charts, on Monday the euro didn't move in a straight line, instead putting in a wide-ranging red spinning top that nonetheless kept it inside its latest descending RTC.  And it's not gapping even lower in the overnight, down to 1.3062 as it continues dribbling down its lower BB.  So there's nothing here to suggest a  move higher.

Transportation:On Monday the trans fell even harder than the Dow, tanking 2.16% in a wide-ranging move that nearly touched both BB's, closing just above the lower one.  This loss also left us close to oversold and put the stochastic into position to begin forming a bullish crossover, though further downside isnt' out of the question here.  Support and the lower BB are just below us at 5778.

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

  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

  7  2/11       43         25        +      +   1518

  8  2/19       21         43        -      -   1520

  9  2/25       30         52        -      -   1516 

  

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 I voted bullish four weeks ago, so both I and the majority were again correct.   We therefore continue the year with an accuracy of 4 for 5, or 80%. 

This week saw a bunch of people come off the sidelines as both bearish and bullish sentiment increased by exactly the same amount.  That still leaves me in with the majority looking for a lower SPX in 30 days.


Accuracy (daily calls):

Month     right wrong  no call  conditional  batting   Dow
                                             average  points

January    5      7      6           3        0.533   -101
February   3      3      4           5        0.727    152

     And the winner is...

It's very hard to make a technical forecast in a market where the charts have gotten all distorted over some news item.  My feeling is that the Italian job is somewhat overblown, since we don't even know the real results yet.  But I guess that's what "sell the rumor" is all about.  The other thing is that often after big one day dumps a DCB is to be expected.  I think this is looking more likely based on the overnight ES action so far.  We're also at the lower BB and very near oversold.

So technically I think we're due for a move higher on Tuesday.  However, with the big pop the VIX took on Monday and with this Italian business still unsettled and the looming sequester pseudo-crisis, the best I can do is call Tuesday uncertain.  I may just do some day trading of ES on Tuesday.  It seems like a better bet than trying to swing trade these crazy moves.

ES Fantasy Trader

Portfolio stats: the account remains at $99,125 after 6 trades (5 for 6 total, 2 for 2 longs, 3 for 4 short) starting from $100,000 on 1/1/13.  Tonight we're standing aside again amid the uncertainty of Monday's move.