The end is near!

No, not the end of the world, but the end of the recent sell-off on Wall St.  Last night I was reluctant to go out on a limb for today because I couldn't get a real good read on the charts and because I felt that the market was being largely driven by short term economic news.  I guess the results we saw today proved no one else had a very good handle on which way the market was going either.  The Dow was down 42, the Nasdaq was up a few points and the S&P was essentially flat.

What I find interesting about the Dow in the last few days is the volume.  Volume on Wednesday, the day of the Dump, was actually lower than on Tuesday, when we had a decent advance.  And today's volume at 156M shares was lower still.  This suggests that the sellers are getting tired.  Also note that the Morningstar Market Fair Value indicator dropped today back to 1.0, fair value, for the first time since May 26th.  So it's looking like some of the froth that existed at Dow 12,569 a few days ago has been wrung out at Dow 12,249.

Also, today's trading formed a hammer.  However, I'm a bit cautious about this one and want to see some positive action tomorrow before calling this latest decline over.  This hammer may or may not be a bottom.  I want some confirmation.  Note that at least the Dow has some support at 12,200, a spot that was tested today and held.

Turning to the futures, ES, NQ, and YM are all lower at 1 AM EDT, but only by a bit over 0.1%.  And that's been in a kind of directionless meandering over the course of the evening.  As I write this, ES is actually headed higher.  So we get a bit of guidance, but only to tell us that another big drop tomorrow is unlikely.

Oil, meanwhile is back up over $100, amid allegations that some Swedish oil tanker baron is manipulating the futures market, news that should come as a complete surprise to absolutely no one.  But as long as oil and the market remain positively correlated, this is bullish for stocks.

And last but not least, the VIX today hit a high of 18.72, right at the upper end of its monthly range, before falling back to close just over 18.  And its short stochastic is now at the level from which the VIX has gone lower on its last two peaks.  All this suggests that if the VIX isn't going lower tomorrow, it at least has more downside than upside potential at this point.

So put it all together and I'm going to guess that any further market downside tomorrow will be limited.  Note that we're now pretty far extended from the Dow daily pivot at 12,380.  We remain, of course, firmly entrenched in the descending RTC channel that goes back to the start of May, so it's too early to call for a trend change, but I would not be surprised to see at least a small advance tomorrow, particularly if the non-farm payrolls and unemployment numbers come in better than expected (though I'm not counting on that).