More of the same

Yesterday I had a vague feeling we might close lower today and that's just what happened, with the Dow losing 17 points. The intraday chart might look good, with the Dow erasing most of its early losses in a strong afternoon rally, but unfortunately, this created a hanging man candle and that is a classic bearish indicator.

However, we need some confirmation of the hanging man to call a top. Right now we're not getting much in the way of that from the futures with the ES and YM both up just 0.08% and the NQ actually down by 0.02% at 1:05 AM EDT. The ES had actually been rising all evening until exactly midnight when it abruptly revered course. Why? Who knows.

Our other favorite indicator, the VIX meanwhile is bumping along its support level around 17 and really seems to be unable to gain any traction. This is surprising considering the amount of bad news floating around right now: continuing war in Libya, a new earthquake in Japan, new oinking noises from the PIGS, and the threat of a government shutdown tomorrow night (although personally I view that as a piece of good news).

If all of that can't drive this market down more than today's 0.14% loss, it's difficult to make the bear case for tomorrow, hanging man or no hanging man.

Meanwhile oil continues it speculation-driven march to the stratosphere, closely replaying the insane summer run-up from 2008. Based on where we are now compared to then, it will take another 9 weeks before we hit the blow-off top at $147. I don't know what's so magical about that level, but it was the peak in 2008 and it will be significant resistance this time around. And I have no doubt we're going there again.

So that's the other piece of bad news. The market doesn't seem to care that oil has topped $111. We're now in one of these modes now where bad news just doesn't matter. In the space of less than a month, we've gone from a completely news driven market to a completely news-ignoring market. It never ceases to amaze me how that happens.

And I think that once again, the pivot will decide tomorrow's fate. We closed at 12,409 today; the pivot was 12,421. Tomorrow the pivot should be a bit higher. If we can break above that early in the session, then I think we close higher. OTOH, if we bounce off it and go lower, then the whole day will end lower. Watch the early morning trading after the usual initial noise burst subsides (I'll be sleeping) and see if that isn't what happens.

In the meantime, we're in just about the same place we were yesterday: limited downside to the VIX preventing much of a rise in stocks, and strong support at 12,390 (which was tested today but ultimately held) preventing much of a decline. So I'm looking for action constrained in the 12,390 to 12,450 range (yesterday's high) tomorrow.  My best personal guess is that we're going higher tomorrow.  That's all she wrote.

No trades today.