Friday, July 8, 2011

One more up day possible

My call last night for a higher close today proved to be correct, with the Dow gaining another 93 points.  Today's close at 12,719 leaves us just 62 points shy of the May 10th high, and not much further from the YTD high on May 2nd.  Tonight I'm going to base my call entirely on the candlestick pattern, since I'm just not feeling the love from either the futures (which are basically flat at 1:45 AM EDT) or the VIX (which is acting oddly today).

That leaves us with a recent daily chart starting on June 27th with five big solid green candles, one small doji of indecision and then two more green candles, smaller but still solid, indicating that the indecision was resolved to the upside.  There is not even the hint of a reversal pattern here and volume increased today over yesterday, so I'm going to have to say that we still have room to run at least another 50 points higher tomorrow.

The indicators are all still in "oversold broken" territory, so there's nothing to see there.  J'Trader's Market Analysis system went short today.  I think that might be a day early, but we'll see.  I could be wrong, and Lord knows I am often enough, but I just don't see the selling pressure yet.

Oh, one more thought - there are some big jobs numbers coming out tomorrow and the buzz on the Street is that they're going to come in BTE.  I don't know how they decide this, but these rumors seem to be right more often than not.  So that could also provide a boost to tomorrow's results.  That's all she wrote.

Thursday, July 7, 2011

Indecision resolved to the up side, more gains possible

Yesterday, I wrote that the market should be going lower today. The 56 point gain in the Dow we got instead proves once again why you should never use the word "should" when talking about the market. In my defense, I will point out that I was concerned that the futures were not echoing what looked like bearish chart patterns. Turns out I should have (oops - there I go again) had more faith in the futures.

One call I did get right was the VIX, which also went higher today, though not by much. Anyway, if you look at the Dow chart, you see Monday's big run-up followed by yesterday's doji indicating indecision. The decision was made today, and it's up. And having broken out over the resistance highs from the last two days, it appears that there there is no further resistance until 12,760, another 150 points from here.

And the futures are up once again this evening at 1 AM EDT, only tonight they're up even more than last night at this hour, with ES up over half a percent, a strong showing for this hour. I learned that lesson last night - I'm not going to vote against the futures tonight.

We're apparently now in one of these phases where the indicators all get broken at oversold levels and lose their predictive power. Sometimes this can go on for days. Back in March, we stayed oversold for two whole weeks before pulling back.

I checked on J-Trader's Market Analysis and note that he has canceled his short signal too, so I guess I wasn't the only one who got fooled here. Sometimes it just all boils down to, you can't fight the tape, the trend is your friend [insert favorite market cliche here] so my best guess is that we're going higher again tomorrow.

Wednesday, July 6, 2011

More mixed signals

Yesterday I was thinking today would go lower and indeed it did, though admittedly not by much.  And the Nasdaq actually managed to go higher, but it often marches to the beat of its own drummer, so I don't really follow it.

Now here's what's odd.  It's 1:15 AM EDT right now and all three futures are up.  ES is up 0.17%, NQ is up 0.22% and YM is up 0.15%.  Why is this odd?  Because today the Dow put in a small doji at the top of last Friday's tall green candle.  It almost looks like day 2 of an evening star.  And the Dow's indicators are all topping at overbought levels.

What's more, I was right about the VIX today too.  Remember those two hammers from last week.  Well they pounded the VIX higher today, leaving its own indicators looking like they have bottomed.  The VIX certainly seems poised to go higher still tomorrow, implying lower stocks.  And J-Trader's system is sticking to its guns on its now two day old short call.

Returning to the Dow again, today's close made two days we hit the 12,570 level - a resistance line we tried to break, unsuccessfully, twice in May.  And a quick look at the daily dollar chart looks like it's getting ready to go higher tomorrow too, implying lower stocks.

It looks for all the world like this market should be going lower tomorrow.  In fact, I even took out a position in SDS today to hedge against that.  So I don't get it - with all these warning bells going off, why are the futures higher tonight?  I always hate to go against the futures, but right now I have to go with the charts and say tomorrow is looking bearish.  It will be most interesting to see how this plays out.

Tuesday, July 5, 2011

Profit taking possible Tuesday

I hope you all had a pleasant 4th of July and a nice break from the markets.  But now it's time to get back to work.  After last week's monster advance, I'd be tempted to go short at time point just on the principle of not being too greedy if nothing else.  Indeed, J-Trader's timing system (that I mentioned in my previous post) has apparently issued a short signal.

So let's start off with one of my favorite charts, the VIX. In this daily chart, you can see how the VIX hit its lower Bollinger band three days ago and has been dribbling down it ever since. It's now formed two consecutive hammers, and as we know, two hammers are better than one. With its indicators all oversold and having bounced off its recent 15.5 support area, I'd say the VIX looks more likely to go higher than lower at this point. Higher VIX implies lower stocks. If not tomorrow, then the next day.

Meanwhile, the Dow daily chart is definitely in overbought territory now and its short stochastic looks ready to execute a bearish crossover. Its momentum has also peaked and is headed lower. The Dow's daily pivot at 12,528 has also moved much closer to the last close at 12,583. A break below the pivot tomorrow would definitely be bearish. We could conceivably open below it for that matter.

Finally, not much guidance from the futures at 1 AM EDT. NQ and YM are up a bit and ES is down just 0.15%. Notably, the ES pivot is now 1332.25 and we just bounced off that level in the last five 5-minute candles. A break under this level before the open Tuesday morning will also be bearish.

This being a holiday-shortened week in which I think many of the big players will be on vacation, it's possible anything could happen, but right now things aren't looking too positive. Though I hesitate to actually put on my short hat just yet, I'm reaching for it and I'd definitely be looking to take any short-term profits tomorrow . In any case, I wouldn't be looking to be a buyer at these levels.

Monday, July 4, 2011

Happy Independence Day

Happy 4th of July!

Today we celebrate Independence Day and the founding of America, a land that for all its faults, is still the envy of the world.