Looking for one more up day

Yesterday I wrote

"there's more room for stocks to run tomorrow. "

and run they did indeed today, to the tune of a nice 84 point advance in the Dow to close at 12,170. This puts us back into the center of the consolidation range from earlier this month with no resistance now until the 12,220 - 12,250 area.

We also remain in the upper half of the new ascending RTC that began on the 16th. And we're also back inside the longer term RTC (the rising red line) going all the way back to last June. Meanwhile notice how the indicators have all risen considerably off their oversold lows of a week ago but are not quite yet reading overbought.  Soon, but not now.

In addition, all three futures are up around a third of a percent at this hour (1:20 AM EDT) and have been trending up fairly steadily since around 8:30 this evening. And thankfully there's no new catastrophes on the world stage this evening, though that can obviously change at any time. The market seems to be ignoring the continuing rise in oil prices (though I think that may be in for a decline tomorrow) and the news out of Libya tonight seemed to be more about how much money this is costing us than how angry everyone there is at the US. (A million bucks for one cruise missile? Memo to self, buy stock in whoever makes these things).

Finally, the VIX continued its decline, closing at 18 even. The VIX indicators are starting to look oversold (and more oversold than the Dow indicators look overbought), but its lower Bollinger band isn't until 15.5, a number which also represents support going back almost a year. So I'm thinking the VIX has at least one, possibly two more days to go lower, implying that we're in for at least one more day higher in the market tomorrow. This is also historically a good market day.  That's all she wrote.

Trades

No trades today. I played hooky this afternoon from the market and took advantage of an early spring cold snap to get in one last afternoon of skiing.

I'm looking at gold again as a longer term play. Despite a good week this week, I think gold is going lower in the near term. I'll be waiting for a buying opportunity there. In the meantime, Ford just motored away from me today gaining over 5% while I was left standing in the dust at the side of the road. Sometimes that just happens.  One of my rules is not to chase, so I didn't.

And still no explanation for that sudden mysterious 16% jump in OMEX yesterday. It only closed 4 cents lower today which makes me believe that something good must be brewing over there, since none of yesterday's buyers were willing to jump ship today.  Very mysterious.

Important resistance cleared

Watching the market intraday this morning, I thought my prediction of a lower close was going to come true.  Until about 11:30 when things started to picked up and we closed at 12,086 for a 67 point gain.  I had pinned my hopes on the VIX finding support at its 40 day MA, but of course that didn't happen.  The VIX just dumped right through that level though and the Dow, after some hesitation at the 12,050 resistance around lunch time, just kept on rising.  Anyway, I'm never sad to be wrong about a bearish call.

I find today's results significant because we have now entirely erased the Japanese earthquake market crater and are now back to the bottom of a trading range that lasted from February 23rd to March 9th. Now that the market has broken two important levels ( the VIX support and Dow resistance) and totally ignored the continuing instability in the Middle East along with a resumption of rising oil prices, I'm thinking there's more room for stocks to run tomorrow.  The next two days are historically bullish anyway, according to The Stock Traders Almanac.  And the weekly chart is shaping up even more bullish than the daily chart.  We'll see.

Trades

Today I looked for a new entry point to get back into Ford, but couldn't find one. Instead I bought some Intel (INTC) at 20.33. But my biggest surprise was OMEX, which suddenly took off around 10:15 AM and finished the day with an almost 16% gain. What's really odd is that I couldn't find any news about it anywhere or any reason for the move, which was its largest gain in over a year. Did they suddenly discover a new shipwreck loaded with gold and silver coins?  Who knows.  But I was sure glad I added to my position when the market was on sale last week.  It paid off nicely today.

Gains unlikely tomorrow

Yesterday I wrote

"the market may take a breather tomorrow. It now has support at 12,000 and resistance at 12,049. So I'm looking for a small range day tomorrow, with resumed upside later on this week."

and sure enough, that's exactly what we got today. The high for the day was 12,051 and the low was 12,003, ending with a scant 18 point loss. But today I'm going to put up a chart of the daily VIX rather than the Dow. There's not much we can learn from the Dow chart today - just a small spinning top sitting at the top of a mountain of three big green candles. The VIX chart is a lot more interesting today.

Today's small range and low volume action indicates renewed uncertainty in the market. The VIX may provide some clues to tomorrow's direction

Notice how we did indeed move lower in the VIX today, pretty much as you'd expect. However, today's drop was quite small compared to yesterday. And it stopped right on the 40 day moving average. This level has been providing support to the VIX for months now. In addition, the RSI and momentum indicators took a little hook up today. And the stochastic is entering oversold territory. Finally, the VIX is now right back in the middle of a region it has spent a lot of time in for a month now.

Based on this, I would not be surprised to see the VIX move higher tomorrow. Higher VIX implies lower stocks.

Supporting this is the fact that all three futures, ES, NQ, and YM are down right now (1:15 AM EDT) by 0.17%, 0.23% and 0.16% respectively. And ES broke below its daily pivot at 7:30 this evening. I note also that while the Dow did close over 12,000, the S&P was unable to recapture 1300 today.

Furthermore, while the news wire is fairly quiet this evening, crude oil futures are back on the rise again in the overnight. So all in all, I'm not looking for any advances in the market tomorrow and I would not be surprised to see us close back under 12,000 again.

Numbers to watch tomorrow

12,000 - psychological support

11,992 - this level is not only today's daily pivot, but also the 40 day MA. Below this is bearish

11,985 - minor support from back in January. 

11,938 - the 25% Fibonacci retracement of the last three days' gains.

And on the other side,

12,050 - the pre-earthquake crash level, now resistance. Above this is bullish.

Trades

Today I got stopped out of my Ford trade at break even.  I'll be trying to get back in again soon at a lower level.

Perhaps a pause

Yesterday I was fairly sure we were going higher today, but I didn't really think we'd see the monster 178 point pop we got in the Dow. But I'll still take it :-) So there's a bunch of interesting stuff going on in today's daily Dow chart.  Check it out.

First of all, we reclaimed the 12,000 mark and crossed back up over the 40 day MA (at 11,989). Even more importantly, I think, is that we crossed up above the daily pivot at 11,854 and held. All of these points are bullish. In fact, today's intraday chart looked like a mirror image of the awful action last week. 90% of the entire day's action was over in the first two minutes of trading, only this time it was to the upside.

Notice also how the RTC works. Look at the steep descending RTC. Yesterday we broke out the right edge of that. That was the bullish setup. Todays gain was the confirming bullish trigger.However, look at the volume - much lower than yesterday.

Next, take a look at the Fibonacci retracement levels I've drawn in going from the high on February 18th to the low last week. I've never been a huge fan of Fibonacci because I don't really understand why it should work, but it sure seems to. Notice how today's high, 12,078, almost exactly hit the 0.618 Fibonacci retracement level. That's going to be an important number to watch tomorrow.

Then there's our friend the VIX. It gapped down in a big way today, down nearly 16% to close at 20.61. In so doing, it fell right through both its 200 day MA and its daily pivot. It is now back in the middle of its Bollinger band range, and the area where it has spent much of the last month. It definitely still has room to go lower.

Moving on to the futures, all three of ES, NQ, and YM are down at the moment (1:20 AM EDT) by about a quarter of a percent.

And finally there's the news, or rather the lack thereof. On this evening's news wire, I note that neither Libya nor Japan appear in the top stories on the wire at this hour.

So let's wrap it up. On the plus side, we have positive chart action that broke through important resistance levels, a bullish trigger from the RTC, positive VIX action (positive for stocks, that is), and positive "no news is good news" action on the international front.

On the minus side we have slightly negative action from the futures and declining volume. My net take on this is that after such a large three day run, and the big move up today, the market may take a breather tomorrow. It now has support at 12,000 and resistance at 12,049. So I'm looking for a small range day tomorrow, with resumed upside later on this week.

Trades

Last Thursday and Friday, I took advantage of the sale the market threw to pick up a little more OMEX, ARR, and CIM. Those all proved to be good moves. In a stupid move, I bought some Citibank (C) at 4.53. It closed today at 4.43 after news of the upcoming reverse split.

I don't normally mention my IRA here, but I also bought some O (Realty Income Corp) at 31.72 as a longer term investment there.

Threading the needle

Lately, it seems as if we're walking through a veritable market minefield of various catastrophes and calamities, any one of which has the potential to send the market bus careening off a cliff.

The latest one is the bizarre new Mideast war on Libya. We are told that the object is not to get rid of Col. Khadaffi. This is sort of like Babe Ruth stepping up to the plate and instead of pointing to a spot out in left field, he announces that the object isn't to win the game, he's just there to play some ball. I'm just wondering, if the object isn't to get rid of the esteemed dictator, then what the heck's going on? The current course of dropping bombs on antiaircraft guns looks like all it will do is prolong an already uncertain civil war.  As far as I'm concerned, either go long or go home.

And as far as I can tell, the opposition consists largely of young guys riding around in beat up Toyota pickups and shooting their AK's into the air. They don't inspire a whole lot of confidence in a quick and decisive victory.

On the positive side, it appears that the Japanese have successfully averted nuclear Armageddon by reconnecting their reactors to electric power. From what I read, if it can be believed, reactors nos. 1 and 2 are now reconnected and doing OK, nos. 5 and 6 have been successfully shut down, and only nos. 3 and 4 are still in question. In any case, this catastrophe seems to be rapidly falling over the event horizon as it is not the headline story in any of the news sites I've visited this weekend.

So given all this uncertainty, the only indicator we have as of Sunday evening for where we might be headed tomorrow is the futures. And somewhat to my surprise it's actually not looking too bad right now (8:30 PM EDT). All three futures are up about a third of a percent. Given this and the considerable retreat of the VIX last Friday from extremely overbought readings, I am right now cautiously optimistic for stocks tomorrow. This of course assumes that Col. K. doesn't do something stupid like setting all of his oil wells on fire or something.

In any case, the Dow chart above shows that we have exited the descending RTC channel and that in itself is a bullish trigger.  Also, note how all of the indicators have hooked upward from highly oversold levels.  Also bullish.

Performance

It's been a rough month for me. I am actually down four weeks in a row now, something that hasn't happened since I can't remember when. Minus 0.17%, 1.32%, 1.36%, and last week 1.68%. Ouch! However, these are unrealized losses and I'm still up 3.47% year to date, compared to the Dow's 2.42%. I've been hampered in my ability to play the short side on a swing basis because of all of the volatility in the market. When 90% of the day's movement happens in the first minute of trading, it's kind of tough to capitalize on it.