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- Friday uncertain, ES pivot is key.
- ES pivot 1270.25. Breaking under is bearish.
- Next week bias higher technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
Last night I called the market lower and I suppose I was right, if you can call a 3 point decline in the Dow as confirmation. This market is sort of spinning its wheels in the mud right now. It won't go down but it's not making any headway either. Is there a tow truck in the house? Let's figure it out.
The technicals
The Dow: OK, yesterday we got a hanging man, a reversal indicator. Today we got no reversal but did get a dragonfly doji, another reversal indicator. You don't see this too often, but when you do get two reversal indicators following a run up, the eventual resolution is most often to the downside.
The VIX: The VIX put in a second solid red candle today in a classic bearish continuation pattern. Its indicators have all come off overbought levels too. With no support until 20.70, today's close at 21.48 still leaves some room to run lower. And as I've often observed, a lower VIX tends to predict higher stocks in a day or two at the most.
Market index futures: Wow, three days of reversal indicators and still no reversal. An inverted hammer, a hanging man, and a long-legged doji. What's holding this market up? This evening we find a very similar picture to last night around this time (1:10 AM EST): all three futures down with ES lower by 0.27%. OBV declining again tonight is another bearish indicator. Also, the SPX High Low indicator remains quite elevated, having topped 90 for an unusual 11 straight sessions.
ES daily pivot: The new pivot is now 1270.25 and we dropped below it just before 11 PM. ES tried to retrace but that level is now providing resistance. This sort of action is bearish.
Dollar index: I haven't mentioned this lately but today was interesting. The dollar took a big gap up to the exact top of its recent range and very close to its upper BB. There seems to be more chance of it going lower over the next few days than continuing higher. That would be good for stocks.
Morningstar Market Fair Value Index: Yesterday the index not surprisingly held steady at 0.89.
History: According to The Stock Traders Almanac,Friday has a slightly negative historical bias.
And the winner is...
Once again, hard to say. Just like last night we have two distinct conflicting messages with both the Dow and ES charts looking ready to roll over but the VIX wanting to push the market higher. We also have unemployment numbers coming out on Friday and if they're BTE, then that could help push the market higher, in other words a replay of today. And that's my best guess. I think we're due for lower at some point soon but I'm not seeing any real pressure in that direction right now.
1:30 AM Update: ES just broke above the pivot. I can't stay up all night watching this, but if we're still above before the open on Friday and get good economic news, we might very well go higher despite all the overbought indicators. It's also possible that any gains will reverse later in the day on week ending profit taking.
So I'm just going to call for another doji day on Friday. I don't see a big decline happening. Boring for swing traders, great for day traders. That's all she wrote.
ES Fantasy Trader
Today we took a small one point loss to close out our first trade of the year. I decided just before noon that the trade was beginning to move the wrong way and I didn't want my profit to turn into a loss, especially with the first trade of the year. That turned out to be a good idea since ES continued to climb the rest of the day. Portfolio stats: the account is now $100,125 after 2 trades (1 win, 1 loss).
Tonight we're standing aside. I see no real reason to put on a trade in either direction until we get out of this ongoing narrow range doji situation.
SLD 10 ES false MAR12 Futures 1270.25 USD GLOBEX 02:05:50
BOT 10 ES false MAR12 Futures 1271.25 USD GLOBEX 12:32:30 
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