The turnaround at hand

Hmm - well it looks like I was a day early on my call for a turnaround today, although the Nasdaq did actually manage to just barely turn positive.  But the half percent loss in the Dow means I blew it.  In retrospect, I think I should have paid more attention to the stochastic in the VIX yesterday.  Although it put in a hanging man, it wasn't just quite out of steam yet.  I believe it is now.  I also should have remembered my own observations on the VIX - it often leads the market by either one or two days.  In any case, yesterday's VIX hanging man was followed by a big bearish engulfing pattern today.  The two of those together is a very reliable indicator that the VIX will go lower tomorrow.

In any event, this evening we have some much better confirmation of expectations for higher tomorrow.  The ES today put in a doji after two straight days of losses and in this overnight it is now up a very significant 0.45%.  The NQ and YM are up similar amounts, at 1:15 AM EDT.  Also, although the Dow did close under its 12,530 support level today, it ended up forming a classic hammer.  That, coupled with oversold indicators, is a good revresal pattern.

Also, oil was up today (and is holding higher in the overnight) and for some odd reason, lately oil is in a positive correlation with the markets.

So much as I hate to follow a missed call with another call for the same thing (because if you keep doing that, eventually you'll be right) I have a lot more confidence in tomorrow closing higher than I did last night.  And to demonstrate that confidence, I took out a long position in ES at 1325.75.  (I actually did this yesterday, then took some nasty heat earlier today, but patience paid off in the end and I'm now in a profit position).