So now what? I think the clue to tomorrow is in today's chart du jour: the daily VIX. After another gap up day that took us over the 200 MA, the VIX finished at 19.87 after topping just over 20 to form a hanging man. That is a reversal signal. Interestingly, I heard some talking head on CNBC a few days ago say that the market wasn't going higher until the VIX hit 20. Today it hit 20 and backed off.
Supporting the idea of a lower VIX is its RSI, which entered overbought territory today. The RSI on the VIX is a pretty reliable indicator. Once it turns red, the VIX goes lower either the next day or the day after. Lower VIX, higher stocks.
I also note that J-Trader's buy-sell system issued a short cover today. J-Trader clearly has the hot hand lately and I'm loathe to call for a downside continuation in the face of this.
Then we note that the dollar index put in a classic dark cloud cover today, with all its indicators it overbought levels implying that it's going lower tomorrow. And we know that lately, lower dollar equals higher stocks.
Finally, all three market futures (ES, NQ, and YM) are up nearly a third of a percent at 1:20 AM EDT. And ES in particular is now above its daily pivot, now at 1309.75. Admittedly that happened because the pivot went lower, not because ES went higher. However, any time ES is above its pivot, that number becomes support.
The red trend arrow remains in place until I actually see a reversal, but the upshot is that I'm taking off my short hat and reaching for my long hat for tomorrow.
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Hey Michele,
ReplyDeleteThanks for your daily mentions of my system. I feel honored to have made your blog. :) Even though I have the system to tell me what to do, I still enjoy reading your commentary. I agree with you (as do the futures), it's time for a little rally. Perhaps it will be enough to stop out some of the weak shorts before heading lower.
Overall, I'm still bullish though and I'm looking forward to the next buy signal. Take care.
Thanks for the kind words. I do think we're in for another push higher in the next few days, I'm just not sure if it will be tomorrow (Thursday).
ReplyDeleteAnd thanks for sharing your system - it does seem to be doing quite well indeed.