Looking for lower

Yesterday, I couldn't decide if the market was going to go up or down today. As it turns out, the market wasn't able to decide either. First the Dow went up, then it went down, finally ending higher by just a single point. In the process it created a long tall doji with a lower high and higher low than yesterday. Clearly today did nothing to wring the indecision out of the market. What it did do was bring the indicators a bit further off their overbought levels.

But the really interesting chart today was not the Dow, it was oil. Check out this daily chart of the June futures. You see here that oil had been in a pretty steady uptrend since the end of March. Until today. What's remarkable about this chart is not just that oil (finally) went lower, but that it put in a bearish engulfing pattern doing it. Today's red candle completely covering the span of yesterday's range is quite a bearish sign at least in the short term and I would expect to see oil go lower tomorrow.

Indeed after closing at 110.57 today, oil has been continuing lower in the overnight, hitting 109 just now at 1 AM EDT. This is also important because it puts oil back below the 110 level that Jim Cramer was getting so exercised over on his TV show last Friday (yes, I watch Cramer). I can only view this as being positive for stocks.

That said, the Dow's performance in recent days leaves a lot to be desired. The assault on the 12,450 level fizzled, and with today's close at 12,381, the 12,390 support level is now in serious question. In addition, all three futures are lower this evening by about half a percent. That is a significant level of decline that we can't ignore.

The VIX meanwhile closed at 16.6, the lower end of its recent daily ranges and just above its strong support level around 15.5. Thus the VIX continues to have more upside potential than downside. And notably, today's drop in the VIX was not accompanied by higher stock prices.

So all in all, I'm rather more bearish right now than I was last night and would not be surprised to see the market go lower tomorrow.

Trades

My two silver mining trades, MGN and GPL, after doing nicely yesterday, both got stopped out just above break-even today. Silver itself had its largest drop since February 24th and put in a bearish engulfing pattern that looked a lot like today's oil chart. I'll be watching to get back in at a lower level.

Meanwhile, I am now up to 33% in cash.  I'll discuss my reasons for this in a later post.