Short term bullish, though Friday in question

Wednesday night I wrote "tomorrow the market will be up".  Not bad for a wild guess, eh?  The jobless numbers came in better than expected, but I think the real cause for today's move is simply that today, for the first time in a while, all of the moles in our Whack-a-Crisis game kept their heads down.

Today, Thursday, the Dow handed us a 423 point gain, all but making back yesterday's 500 point loss.  Which wiped out the previous day's 400 point gain.  Which canceled the previous day's 600 point drop.  Etc., etc.  For eight sessions in a row now we have alternated between gains and losses, the last four being huge swings.

Gleaning market cues from TNA

TNA daily

So according to this, tomorrow should be a big down day, right?  Who knows.  Tonight I want to take a look at the daily chart of TNA, the Direxion Daily Small Cap Bull 3X leveraged ETF.  I'm doing this because this is what they trade over in J-Trader's blog (see link in sidebar) where there was some discussion today about some possible downside from here.

Anyway, this chart starts with the shelf around the beginning of August and shows the sickening downhill plunge from there.   The straight lines are the regression trend channel.  This has a Pearson's coefficient of 0.995, about as high as it gets.  As long as we trade inside that channel, the downtrend is in effect.

So the fact that today, TNA traded entirely outside the channel is a bullish setup.  Continuing to stay outside this tomorrow would be a bullish trigger.  And because the channel is so steep, it would take a drop to 32.67 (from today's close of 44.15) to cancel the bullish setup.  In my book, that's a reach, even given the crazy volatility of late.

I'm liking the candle TNA put in today too.  This bullish piercing pattern shows that the bulls effectively wrested control of the stock from the bears today.  The wick on top was formed at the end of the day when the day traders all headed for the exits at 3:45.  In fact the entire Dow lost over 100 points in those final 15 minutes today.

Moving to the TNA weekly chart, it's looking just as strong.  All of those indicators are oversold and volume shows an exponential spike characteristic of capitulation.

The only bear case I can make for TNA today is that today's up volume was lower than yesterday's downside.

Adding to the upside case is the Morningstar  Market Fair Value indicator which today fell to an amazing 0.66, a number not seen since October 2008, at the height of the Lehman crisis.  This seems to be telling us that stocks are very undervalued now and have more upside potential than down.  Note that the all-time low for this indicator is 0.55, in November 2008.  We're not that far from there now.

The VIX

The VIX is still crazy high, but today it closed at 39, down over 9%.  More important, the VIX has been hitting lower highs for the past four sessions, even during the two big down days this week so far.  It looks to me like the VIX is ready to go lower.  Lower VIX, higer stocks.  But - the last time I thought the VIX was going lower, it went higher.  So I'm not really positive on this one.

The futures

That's the good news.  But all three market futures are down by a significant 1% at 1 AM EDT.  Now looking at ES, it  now seems to be in a trading range with some fairly strong resistance around 1170 and corresponding support around 1110-1120.  So this is the bearish case tonight.  Just looking at ES, I suppose tomorrow could be down after all.  And with the crazy world situation lately, I'm sure there are many traders who do not want to stay in the market over the weekend.  I'd feel more comfortable if tomorrow wasn't Friday.

Also, the current price at 1156 is getting pretty close to Friday's daily pivot at 1151.83.  Watch this number closely Friday morning.  Falling through that will be bearish.

The bottom line

I see two scenarios right now.  Earlier today, I was going to say that unless that another mole sticks his head up tomorrow (and personally I'm betting on that pesky French mole) I was going to take another wild guess, go waaay out on a limb and claim that we're in for more upside.  At least the first half of the day.  Then we'd see them sell them off into the close.  Scenario number two is just another big down day for no real reason, like we've been seeing for the past four days in a row.

Things are so insane right now, I'm afraid I don't really have any good way to make a rational prediction for what might happen tomorrow, especially with the VIX still so high.  So I'm going to take a pass tonight.  I'm still not trading right now anyway, so it's pretty much all academic anyway.  I wish my crystal ball wasn't so murky.  We're living in strange times.