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- Friday lower, medium confidence.
- ES pivot 1307.08. Holding above is bullish.
- Next week bias higher technically.
- Monthly outlook: bias up.
- ES Fantasy Trader short at 1310.50.
It looks to me like we're in "climb the wall of worry" mode, and that's not necessarily a bad thing Last night I thought we still had a bit more room to advance and that's just what we got on Thursday with a 45 point gain in the Dow. Can we squeeze one more day out of this rally? Let's see.
The technicals
The Dow: Today's high of 12,626 brought us almost exactly to the upper BB of 12,644. This is often a reversal indicator. In addition, I note that the Dow formed a bullish stochastic crossover from a high level today, something you don't see too often. When it does happen, it's actually more often a bearish sign than not. We had three of these last year. In all three cases, the market was lower within two days.
The VIX: I thought we'd be seeing a lower VIX today and that's just what happened, with the VIX gapping down to 19.87. This is significant because it's the first sub-20 close we've had since last July 25th. That said, the VIX also touched its lower BB today. The VIX is very good about respecting this level and generally starts back up again within a day or two, and that's bad for stocks.
Market index futures: Once again, the futures are running higher, but just a bit. ES is up a scant 0.02% at 1:25 AM EST. However, the trend had been up since 10:30 PM. Two good solid green candles in a row plus a second close above 1300 are good signs.
ES daily pivot: Rose from 1297.67 to 1307.08 tonight. But this evening's trend actually puts us further from the new pivot than we were before,a bullish sign.
Dollar index: The dollar continued lower today but on a gap down doji that took it exactly to the bottom of its recent rising RTC back to last November. This at least suggests the possibility of a reversal on Friday which would be bad for stocks.
Copper: Continued to climb its upper bB today and is starting to look a bit overextended, with indicators looking quite overbought. I'd not be surprised to see a decline here in a day or two.
Morningstar Market Fair Value Index: Yesterday the index rose for the second time in a row to 0.93, something that hasn't happened since September 1st, 2010. Recall that then, the market had just come off a bottom three days earlier and then went off to a two and a half month rally.
History: According to The Stock Traders Almanac, tomorrow, options expiration day, is down big time 10 of the last 13 years.
And the winner is...
The feeling I'm getting is that we're overdue for a pullback of at least a day or two and Friday is when it just might happen. So although the futures are not guiding lower at the moment, I note that J-Trader is going short and I agree. So I'll call for a lower close Friday. And if we don't go lower tomorrow, I expect lower on Monday even more.
ES Fantasy Trader
After spending the past several days just watching, tonight we go short at 1310.50.
Portfolio stats: the account remains $97,375 after 4 trades (2 wins, 2 losses)
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