Well what do you know about that. Last night I wrote about waiting for Godot, and today he finally showed up, in the form of a 75 point advance for the Dow, thus snapping the daily losing streak at six.
Unfortunately, I think it's premature to start popping the champagne corks. Today's rally still leaves us right along the left edge of the descending regression trend channel. At this rate, the Dow will hit its 200 day moving average on June 21st, at 11,808. Those numbers are only seven sessions and 316 points away from today.
Can we go higher tomorrow? Technically yes. All of the Dow daily indicators are still quite oversold and point to more upside potential than downside risk. And we now have a bullish three day "morning star" candlestick pattern that usually is highly reliable.
However, the VIX is now at the lower end of the narrow range it's been stuck in for the last six days and all three futures, ES, NQ, and YM are lower at 1:30 AM EDT. ES in particular is back under its daily pivot, which for tomorrow is 1285.58. If we can't get back over this number, we're going to close lower again. And ES right now is down by a third of a percent, and that is not a trivial number at this hour of the night.
Meanwhile the Morningstar Fair Value Index dropped again today to 0.97, making four days now that it has been below 1.0. That is a bearish indicator. I just don't see a lot of gas in the tank to power the market higher tomorrow. Given the amount of fear still in the market and the fact that tomorrow is Friday, I think people may use today's rally to do some selling tomorrow in anticipation of worse times ahead.
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