Last night I was unsure of today's market but was ultimately convinced we'd go higher on the basis of the Dow's candlesticks. A two day pattern of a hammer followed by a bullish engulfing pattern is a very good indicator that higher prices will follow and that was just what happened, with a 45 point advance today.
Now we have to ask about tomorrow. There's no guidance from the futures tonight at 1 AM EDT; they're all essentially flat on the evening. We do have a clue from the VIX though. It fell today right to its long term support at 15.5. This suggests it may have a hard time going lower, though it did manage just that late last month. Even then, I see a lot more upside potential in the VIX than further downside. But since there's no VIX reversal just yet, I hesitate to call the market lower tomorrow on that basis.
Oil, however is up a bit in the overnight and with oil now in sync with the market, that would suggest a bullish bias for Friday. And the RTC system suggests a positive outlook too, since today's green candle was entirely outside the descending trend channel. That is the trigger following yesterday's bullish setup.
So all in all, I'm looking for slightly higher tomorrow, with gains limited by the limited downside left in the VIX. The indicators are still oversold, providing at least some momentum to send us higher one more day. A failure to go higher tomorrow would imply a lower close on Monday too. Tomorrow's number to watch is 12,524, today's daily pivot. We'll want to stay above this number. Watch for support to kick in at that level.
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