Thursday possibly lower

The Hoot 
Actionable ideas for the busy trader delivered daily right up front

• Thursday lower, low confidence.
• ES pivot 1270.17.  Holding under is bearish.
• Friday bias higher technically.
• Monthly outlook: bias up.
• ES Fantasy Trader going short at 1270.25

Recap

Last night we were getting some mixed messages  with the Dow looking played out but the VIX looking set to go lower, implying higher stocks.  After some debate, I came down on the bear side and was wrong, as the Dow finished by gaining 21 points.  Turns out the VIX, as is so often the case was the better predictor.  Though admittedly, it was a pretty small range day for all the major averages.  And unfortunately, that kind of action doesn't provide much guidance for the following day.  Let's pick through what meager scraps we can find for clues.

But first, for those of you following my saga on the impending death of Kodak, dramatic new developments today with the WSJ reporting that bankruptcy right around the corner for this beleaguered company.  EK immediately dropped from 65 cents to close at 47 cents.  Things aren't looking good.  All the gruesome details in the post here.

The technicals

The Dow: Today's small gain created a classic hanging man and that is a good reversal indicator.  In addition, the Dow remains quite overbought and OBV is running quite high, all bearish signs. However, we do have some fair support at 12,300 and we've just passed an inflection point in the 200 day MA which has (funally) begun to rise again, a good sign.

The VIX: Following yesterday's small doji, the VIX today resolved the symmetrical triangle I pointed out in the down direction with a big bearish engulfing pattern.  Along with a stochastic that just made a bearish crossover, this sure seems to be guiding lower.

Market index futures: All three are running negative in the overnight with ES down 0.18% at 2:10 AM EST.  Today's ES candle formed a cross between a hanging man and a dragonfly doji.  No matter, both are bearish reversal signs.  OBV has also peaked and is declining in the overnight - I find that to be a good indicator of lower prices to come.

ES daily pivot: Drops tonight from 1274.08 to 1270.17.  Notice how ES traded up from its morning lows just about up to today's pivot, but never broke though.  That's a bearish sign.  But now we're trading right around the new pivot.  In fact no fewer than 9 five minute bars have touched this number between midnight at 2:10 AM.

Morningstar Market Fair Value Index: Yesterday the index bumped up from 0.87 to 0.89, a positive sign.

History: According to The Stock Traders Almanac,Thursday is the weakest day of the week.

     And the winner is...

Arrgh - the Night Owl is pulling her hair, uh, feathers out.  Once again we have both the Dow and the VIX seemingly poised to go lower.  This is quite an unusual situation.  I ought to do a correlation of the next day after the VIX goes down but the Dow goes up.

In any event, I am going to claim that the VIX situation will help temper any declines as well as bolster the argument for a rally by Friday, but the Dow will likely go lower on Thursday.  These mixed message days are really tough nuts to crack. 

I should add that with employment and jobless numbers coming out on Thursday, that could easily drive us higher if they're BTE, and it would not surprise me if they were. We'll see. 


ES Fantasy Trader

Today we took a teensy profit of 1.25 points 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 acocunt is now $100,625 after 1 trade (1 win, 0 losses).

SLD 10 ES false MAR12 Futures 1269.25 USD GLOBEX 01:56:47

BOT 10 ES false MAR12 Futures 1268.50 USD GLOBEX 11:57:52