The Contrarian Contrarian

Last Thursday night, I said we'd go higher on Friday and that's just what we got, with a nice 57 point gain to close at 12,342 in the Dow.

Technicals

So what's next? Let's look at the daily Dow chart here because that seems to be the most compelling right now. This is actually looking quite bullish to me. Friday's gain took use decisivly out of the descending regression trend channel going back to the peak on April 8th. And it also provided a bullish confirmation of the hammer candle formed on Thursday. And finally, all of the indicators are in oversold territory and have executed a bullish hook, signifying that they have bottomed.  We see the same story on the daily ES futures chart.  However, ES is actually down by 0.2% at the moment, although it's still early in the evening (8:50 PM EDT).

In any event, note that historically the day after Tax Day is bullish. The Stock Trader's Alamanc was right on the money with a bullish history for Friday. They say that tomorrow is also a good day.

The contrarian contrarian

So what's up with the "contrarian contrarian"? Well it seems to me that everything I've been reading on the web or seeing on the news lately is full of pundits claiming that there's a massive overload of bullish sentiment and that from a contrarian standpoint, this means the market is ready to go down. Well let's take this contrarian thing one step further: if all the analysts are bearish because everyone is bullish, should I then not become bullish because of their bearishness? OK, this is about where my brain starts to hurt, but you have to admit, the daily chart doesn't look bearish in the least right now.

On the other hand, the weekly Dow chart is not looking nearly as good. In fact, on the weekly Dow, we have a doji followed by a hanging man on increasing negative volume. And all the weekly indicators are overbought. Also, the weekly VIX is now down hard against a support level going back a year now around 15.25. Unless it somehow manages to break under that (and I don't think it will), the VIX has nowhere to go but up, and that's bearish for stocks.

Oil

Also oil has now regained the 110 "alarm level" after two big down days at the start of last week. I don't think oil is nearly through with its run up. I remain convinced that this is 100% speculation driven, not supply and demand. I give it another two months. That coincides quite nicely with the peak in 2008, which came at the end of June.  This will also put the squeeze on stocks.

So right now I'm thinking that tomorrow, Monday, is going to be up, but the rest of the week is in doubt.

Performance

I'm not really doing as well as I'd like at this point. My performance has been hurt by the fact that it seems that all of the members of my low price/high yield portfolio (which is part of my trading account) suddenly decided to do secondaries in the last few months, tanking their stock prices. Still I am up 5% year to date, which is just over 27% annually. That's not too bad, although the Dow is now up 6.6% and that's the benchmark I try to beat. And for the week, I was down 0.16%, or a bit worse than the Dow.

Another thing that's limiting my results is that I've been raising cash lately. I think this year I'm going to "sell in May and go away". I didn't do that last year and subsequently regretted it.  Right now the monthly chart is looking even weaker to me than the weekly, with a hanging man followed by what is at the moment a doji.  We'll see.