Further gains possible tomorrow

Yesterday's post was titled "Now looking for higher" and that's just what we got today. Admittedly a 7.4 point gain in the Dow isn't exactly the big score, but it represents a victory for the bulls nonetheless.

And President Nerobama made a speech on TV this afternoon. In case you missed it, I can summarize it real fast: "blah blah blah". That was good for about a 10 point drop in the Dow, but it regained all that and more after he quit (quit speaking, that is).

Moving right along, today's daily chart is not of the Dow but of the VIX. I've been using the VIX lately to guide my market forecasts and it's been working pretty well. Note in this chart how the VIX has been drifting lower over the past two weeks. And the past two days have been interesting. Yesterday it gapped up but ended up putting in a red candle and today we got the exact opposite - a gap down that ended up as a green candle.  That's a real tug-o-war.

But note how today's open, at 16.2 was lower than any point since February 18th. The VIX support at this lower 16's level seems to be softening. If the VIX cannot muster a gain tomorrow, I think it's likely to go lower, to its baseline support at 15.44. That's a level that goes back a whole year. One might even note the lower Bollinger band at 13.74, though I don't think a trip down that far is in the offing any time soon.

Also, the VIX indicators, which just a few days ago were indicating oversold, are now out of that region. By contrast, all of the Dow indicators are now in oversold territory. We also saw another test of the 12,20 level today and once again, it held. The Dow ended up forming a doji indicating corresponding indecision and a loss of downward momentum after yesterday's big drop.

Oil meanwhile sank into the 105's today before recovering but only back to the low 107 area in the overnight.

Finally, the futures are all up at this hour (1:15 AM EDT), and although admittedly only by a small fraction, the trend has been up since around 9:30 PM.

So overall, I'm liking the prospects for another gain tomorrow. With the VIX still unable to find the gas pedal and the Dow having dropped into oversold territory, I think we've got more upside potential than downside risk at this point.  That's all, she wrote.

Trades

I got back into my MGN silver play at 2.86 today.