Tuesday Lower

• Tuesday lower, low confidence.
• ES pivot 1411.83. Holding below is bearish.
• Rest of week bias lower technically.
• Monthly outlook: bias uncertain.
• ES Fantasy Trader remaining short at 1396.00.

My call last night was "Monday lower if we break below the ES pivot at 1414.58 by mid-morning." And that's exactly what happened. ES gave up the pivot at 10:50 AM and that was that. Don't be fooled by the vain fake-out break-out attempt at 11:50 AM. The volume put the tell on that and by 12:40 PM it was all over with the Dow finishing the day down 60 points. Now let's look at the charts to see if we've got any pin action for Tuesday.

The technicals (daily)

The Dow: Last night I commented that the Dow seemed to be running out of gas. Today the tank ran dry and we lost 0.46% as resistance around the 13,050 level proved too tough to crack. And for collateral damage, we fell out of the rising RTC for a bearish setup, dropped the 13K psychological support level and crashed right through the 200 day MA at 12,996 for the second time in six days. That's three strikes, yer out. And the indicators are still all overbought, though they now appear to have topped (which in itself is bearish). This chart's not looking good.

The VIX: Last night I called for "higher again on Monday" so now I'm two for two as we gained 4.85% here today. Today's tall green marubozu suggests nothing but higher still and there's no resistance til the 200 day MA at 17.55. Also, the indicators are rising but not yet overbought so I'm going to go for the hat trick and call for higher again on Tuesday.

Market index futures: Tonight all three futures are down at 1: 04 AM EST with ES lower by 0.23%. Like the Dow, ES was unable to break a three day resistance line, here at 1420. The bulls appear to be exhausted form the effort and we're finally seeing the pullback I've been expecting for a couple of days now. The overnight declines are just enough to bring us to the edge of the rising RTC for a bearish setup but I'll note that this one has a fairly low Pearson's coefficient of just 0.889, so we might already have exited the trend. With declining indicators it sure looks like we're headed lower on Tuesday here.

ES daily pivot: Tonight the pivot drops from 1414.58 to 1411.83. With ES wandering lower in the overnight we remain a good eight points under the new pivot so that's a bearish sign.

Dollar index: On Monday the dollar gapped down 0.36% and landed on its lower BB with a bullish morning star. With oversold indicators I now believe that we have a chance for a dollar rebound on Tuesday but this sort of move requires confirmation.

Euro: In some impressive divergence, the euro on Monday posted a big gain closing at 1.3059 while our major averages all moved lower.The E is taking a breather in the overnight with the new candle forming as a spinning top suggesting we could see a move lower on Tuesday. That would mesh with my ideas for the dollar.

Transportation: And I got this one right too last night when I said "I'm looking for lower trans again on Monday" as the trans posted their biggest loss since November 14th falling 1.13%. And like the Dow, this was enough to drop us out of a rising RTC for a bearish setup and right through the 200 day MA. The bearish stochastic crossover is confirmed, the indicators remain overbought but have peaked, so all i all this chart's looking lower again..

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 (it's getting pretty long):


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 bearish call on 11/5 was just barely wrong, the S&P now being two points higher than then. I'm using the column "Accuracy" to track my calls. So now with just three weeks to go in 2012, I'm 27 for 45 or 60%.

The interesting thing this week is that we set a YTD record for bullish sentiment: 57%, while bearish sentiment tied the record low at 21%. Perhaps people are getting caught up in the Santa Claus ho-ho-ho seasonality. I sure can't understand it. Personally I voted Neutral, for the first time ever, mainly because 30 days from now will be the first day in 2013 and to my mind, whether we';re up or down depends entirely on whether or not we see a fiscal cliff resolution by then. And right now that's pretty much up in the air. With no way to predict that, I can't really vote either plus or minus.



Last night I was seeing a few storm clouds on the horizon. Tonight they appear to be gathering as most of the charts ar elooking bearish. And I'll note that the wonderful Rob Hanna is suggesting an edge to the downside now. So I'd say we could get some further declines tomorrow and I'm calling Tuesday lower.

ES Fantasy Trader

Portfolio stats: the account remains, for the time being, at $198,000 after 72 trades (57 wins, 15 losses) starting from $100,000 on 1/1/12. Tonight we remain short at 1396.00. This trade is running a bit longer than most but I believe that patience will eventually prevail.