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- Friday uncertain, doji possible.
- ES pivot 1348.75. Holding under is bearish..
- Next week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
Sigh - sometimes you just can't win for losing. Two days ago I said the market would go up, so it went down. Last night I said the market would go down today... so it went up. Arrgh! This is starting to remind me of a mini version of last summer. Remember when we had four days in a row of triple digit yo-yo action? We're basically stuck in a consolidation pattern where it's tough to call each individual day. But for some unknown reason, I keep trying. Fortunately, the market is like baseball - you can strike out the majority of the time and still be considered pretty good. Tonight, I'll take another swing at it.
The technicals
The Dow: What a difference a day makes. Last night the daily Dow was looking pretty gloomy. Today's 123 point pop changes the picture and brings us right back to the top of the recent 12,800-12,900 trading range. From a candlestick point of view, we've got a bullish engulfing pattern, which is usually works pretty well. And the indicators have all hooked back upwards before ever reaching oversold levels. The stochastic in particular is very close to making a bullish crossover. On the downside, every time we've been at the 12,900 area since the 7th, the next day has gone lower. There's no resistance until the upper BB at 12,957. The only question is how to get there.
The VIX: Remember last night when I said "You have to go back to last August's insanity to find an instance where the VIX did not turn lower right after hitting the upper BB."? Well today the VIX dumped 9%, putting in a big red candle that formed a classic bearish engulfing pattern, one of the strongest bearish reversal patterns around. I found several instances of a bearish engulfing pattern off the upper BB over the past two years and in every one, the VIX was lower the next day. The VIX correctly predicted today's market gains, and from the looks of it, it will go lower on Friday.
Market index futures: At 1:15 AM all three futures are essentially flat. ES is down just a half point. But unlike in the Dow, today's big green candle decisively took ES out of its recent trading channel. And its stochastic just barely formed a bullish crossover. And taking the longer view on the weekly chart, the uptrend is still very much intact.
ES daily pivot: Tonight rose from 1346.08 to 1348.75. With ES meandering aimlessly in the overnight, this is still bullish but a bit less so.
Dollar index:The dollar chart looks like the VIX - another bearish engulfing pattern, strongly suggesting more dollar downside on Friday, which would be good for stocks.
Morningstar Market Fair Value Index: After spending three days stuck on 0.94 (which I noted was a positive sign), yesterday the index ticked up to 0.95, also encouraging.
History: According to The Stock Traders Almanac, Friday is historically quite bearish, with the Dow down 16 of the last 20, possibly because traders don't want to be invested over the long weekend..
And the winner is...
Although the charts all seem to suggest more upside possible Friday, I'm just not feeling it. My problem now is that I think we ran too hard on Thursday and therefore need a day or two to regroup. And there also seems to be little enthusiasm in the overnight futures. Therefore I'm going to call for a small-range doji day on Friday - no big moves either up or down ahead of the holiday weekend, though history suggests a downward bias.
ES Fantasy Trader
Today I decided to get while the getting was good and dumped my long from two days ago for a quarter point profit. At least that was better than selling yesterday at a considerable loss. So now the account goes to $112,750 after 14 trades (11 wins, 3 losses) starting from $100,000 on 1/1.
Tonight without a definitive edge, we simply stand aside.
SLD 10 ES false MAR12 Futures 1356.50 USD GLOBEX 14:34:21
BOT 10 ES false MAR12 Futures 1,356.250 USD GLOBEX FEB 15 00:47:54 
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