A pause possible Tuesday but weekly gain looking good

OK, last night I called today's Bulls vs. Bears game a clear win for the bulls.  And so it was, with a 214 point gain in the Dow.  While not as big as last week's Dow gains, I actually prefer to see this sort of day than that schizophrenic sort of action we got last week.

The regression trend channel method worked perfectly.  Last Thursday was the setup, leaving the channel, Friday was the trigger, trading entirely outside it, and today was the payoff.  Actually, there were so many factors in favor of the bulls last night, it wasn't hard to predict today's results.

Tonight though, things get a bit trickier.  First, there is nothing in the Dow daily chart to suggest that we've hit a wall or anything.  Today's solid green candle simply suggests continuation.  We also passed through the 11,450 resistance level, just, closing at 11,483.  And from here, there's no resistance until 11,614.  That's tonight's bull case.

The futures 

The bear case comes from the market futures which are all trading lower at 1:30 AM EDT.  ES in particular is down nearly half a percent.  And if you remember, last night I said that ES had no resistance until 1200?  Well guess where we peaked today?  1201.75, just before the close.  It's been headed lower ever since, now at 1192.75.  And that's the part that's got me a bit worried.

It's possible that the buying energy that went into the last three sessions is becoming exhausted and we may find it tough to advance further tomorrow (Tuesday).

The VIX

The VIX fell again today and has now filled the upside gap it formed last week.  Its close today at 31.87 leaves it right at a support level.  VIX no go lower, stocks no go higher.

And speaking of the VIX, I'd like to mention a new blog I'm now following: http://vixandmore.blogspot.com/.  I talk about the VIX a lot here, so this one is a natural for me.  Well worth taking a look for the aspiring Vixologist, I'd say.

The bottom line

We're now entering the Twilight Zone (cue spooky music), that spot about halfway between the Bollinger bands where forecasting becomes more difficult than at the extremes.  I've been saying for a few days now over on J-Trader's blog that TNA will hit 50 by Wednesday.  Today's close of 48.84 puts it within easy striking distance of that number.  However, now I've got two theories.  One, it may decline a bit tomorrow before coming back Wednesday, or my preferred view at the moment, it will hit 50 intraday Tuesday and then retreat.

Overall, the weekly Dow chart is looking better than the daily right now.  If I had to guess, I'd say the week will end up, but I'm undecided about tomorrow.  A lot may depend on the outcome of the upcoming love fest between Angela Merkel and Nicky Sarkozy.  So I'm taking my long hat off but still holding onto it.