April 1st to go higher, no fooling

Yesterday I wrote that I thought the market would take a pause from the gains we'd seen the past few days and that's pretty much what happened today.  While I thought the Dow might end up a bit, it actually closed down just 31 points (though the Nasdaq did manage a small gain).

So that takes care of March.  Tomorrow is April 1st and I'm looking for the advance to resume.  According to The Stock Traders Alamanc, the Dow has been up 13 of the last 16 years on the first trading day in April.  And April as a whole is actually historically the strongest month of the year for the Dow.  And to top it all off, in pre-presidential election years, April gains are double, averaging 4.3%.

Technically, I see no reason why we can't go higher tomorrow.  The Dow took a stab at the 12,390 resistance level twice in the last two days and was rejected both times.  I've noticed that very often, the third time's the charm.  The indicators are all still in broken mode, looking overbought but out of predictive power.  Meanwhile the VIX put in  a hammer type candle today.  In fact it did that yesterday too.  Normally, I'd take that as a sign the VIX is ready to go higher.  However, the inability of the bears to cause a retreat when such signs seem to be in their favor indicates to me that fundamental economic forces are at work propping up prices.  Like the Fed and the tape, I don't want to be fighting that.

Finally, all three futures (ES, NQ, and YM) are up in the overnight at 1:10 AM EDT by 0.15% to 0.25%.  The ES remains in its rising regression trend channel.  The only negative I can see is that the Dow edged sideways out of its own RTC today, normally a bearish setup.  Whether this data point can trump the other signals remains to be seen, but my bets right now are for April 1st to go higher, and that's no fooling.

Another pause in the works

Yesterday I called for higher today and spoke of resistance at the 12,390 Dow level.  And that's just what we got.  After topping off at 12,383, the Dow pulled back a bit to close at 12,351.  The good news is that we handily cleared the 12,250 congestion level from earlier this month.  The bad news is that we're right back to the high reached on February 17th at which point the Dow's virtually continuous three month advance stalled.  However, we're not looking quite as overbought this time as back in February.  The indicators are of course all maxed out in overbought mode, but we've only been in that area for four days now, compared to nine the last time around.

Still, this level may be hard to breach.  It represents resistance going all the way back to early 2008, when the market was still in the early phases of its retreat from the all-time highs set in October 2007.  And historically the last day of March is not a good one for the Dow.

Turning to the VIX we see that although it was down today it has not yet reached its support level in the 16.50 neighborhood, implying that it has at least the potential to go lower still.  However, with the size of the gains from the last two days, I think the market may take another breather tomorrow, possibly registering a small gain.  I'm not looking for any major moves either up or down.  But I do think the advance will resume Friday, the first trading day of April.  In the meantime, the green swing trend arrow remains firmly in place.

Broken indicators portend higher

Last night I wasn't quite sure what to make of the mixed signals the market was giving.  The technical indicators were all showing quite overbought conditions but the futures were all up by fairly significant amounts.  Today's impressive 81 point gain in the Dow shows that the futures were correct and the indicators are now all broken.

There are many instance of this over the past year, where the indicators can all stay in oversold condition for days or weeks at a time while the market just continues higher.  We may be starting another such run now.  The fact that we closed above yesterday's high today at 12,279 and are now at the tippy top of the pre-Japan crash consolidation range is pretty bullish.

Tomorrow is historically not a good day in the market, but with the end of the month (and quarter) coming up, it's getting to be time for some window dressing.  The fact that the futures are once again up by over a third of a percent (the NQ is up nearly half a percent) this late at night (2 AM EDT) is encouraging for tomorrow.Today's close also keeps us within the rising regression trend channel begun at the trough of the Japan crisis on March 17th.  That's also bullish.

After we broke above the daily pivot at 10:20 AM today, it was all uphill from there.  Look for more of the same tomorrow.  From here there is no more meaningful resistance until Dow 12,390.

Absent any new disasters out of Libya, Japan, the PIGS, or any other new catastrophe, I'd be looking for higher stock prices tomorrow.

Outlook uncertain

Well, the 12,220-12,250 area I talked about as being resistance yesterday certainly acted that way today.  After looking like my call was going to be wrong most of the day, the Dow took a dive in the final half hour and redeemed me for a 23 point loss.  At this point I'd say that purely on a technical basis it looks like we're in for more of the same tomorrow, both from the Dow chart and the VIX chart.

But the futures are all up right now.  ES, NQ, and YM are up 0.36%, 0.44%, and 0.31% respectively at 2 AM EDT.  This is not the sort of behavior one would expect from a market that's looking to go lower.  And I really have to wonder about just what caused that sudden breakdown at 3:30 this afternoon.

I think the key tomorrow will be the daily pivot, which was 12,217 today.  Any action that stays below this number is bearish.  But if we can get above this level and then break above 12,250 then I'd definitely bet on a higher close.  But there's just enough uncertainty in the air that I'm not making a call tonight either way.  The indicators are saying one thing and the futures are saying another.  We'll just have to see what develops tomorrow.

Another pause

After last week's considerable gains, it's starting to look like we're running out of steam, at least in the short term, meaning the early part of the coming week. Today I bring you once again the daily VIX chart because it seems to have more predictive power at the moment than the Dow or S&P charts.

After six straight days of declines, the VIX has now traveled all the way from its upper Bollinger band to near the lower band. More importantly, on Friday it put in a very tall doji candle in the style of a hammer. Add to this the fact that all of the indicators are now in oversold territory and it looks like the VIX is poised to go higher tomorrow.

That would imply lower stock prices but I guess we'll just have to wait and see. The last few days of March are historically weak anyway and the futures are essentially flat right now. On top of that, on Friday the Dow closed at 12221, right at the top of the consolidation range from the beginning of March and that is now its resistance level. And finally, the Dow indicators are now all looking overbought.

So bottom line is that I'm not looking for much in the way of gains over the next couple of days and I would not be surprised to see tomorrow close lower.