On the fence

My confidence last night about the market going higher today was rewarded by an 81 point advance in the Dow. The VIX came through for us in a big way today just as I expected. Always pay attention when you see a hanging man followed by a bearish engulfing pattern. As the VIX sank, the Dow rose.  And interestingly enough, the last two Dow candles were a mirror image of the VIX: a hammer followed by a bullish engulfing pattern.

But tonight's chart is the ES daily. The horizontal blue line is the important support/resistance level at 1338 representing the highs of February and early April, as well as the low of early May. After breaking below this line three days ago, we bounced right back up to it in one big pop today and that's exactly where we're sitting right now at 2 AM EDT. We were actually above this level earlier this evening and have been drifting lower since about 11 PM.

So that makes tonight's call a bit tough. Being as how the VIX has fallen back to its recent support level in the 16-16.25 area and how the ES is really sitting right on the fence, it's hard to say which way this will break tomorrow.

If we go by the descending regression trend channel you see in the chart, today's close took us outside the right-hand line and that is a bullish setup. If we can stay outside that point tomorrow, that will be a bullish trigger and I'll be looking for higher early next week. But given the difficulty the market has been having lately in putting together a winning streak of length greater than one, I'm a bit shy on making a call for higher tomorrow right now.  I'm doubly shy given the recent "fake out breakout" on the 6th.

But just for laughs, I'll say we're going higher (if only on the strength of the Dow chart pattern), though I'm not confident enough to take out a long ES position right now. BTW, my long ES from two days ago did quite well as a swing trade. I sold today at 1333.75 and caught eight points on that one.

Meanwhile, SLV is beginning to look attractive at 34.23.  The 0.618 Fibonacci retracement support held and the last four sessions give the impression that the bottom may be in.  But I'm not quite ready to pull that trigger just yet either.  Let's see what tomorrow brings.