Friday maybe a bit higher

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

• Friday higher, low confidence.
• ES pivot 1321.92.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias up.
• ES Fantasy Trader goes long at 1322.50.

Recap

Last night I thought we'd be going higher today.  While the SPX and Naz did indeed close up, the Dow lost 11 points.  Since that's the index I'm following, I guess I count this call as wrong, although on these types of small range doji days, where we close is almost random.  If the market had closed 15 minutes earlier, I would have been right.  Anyway, let's see what Friday might hold in store.

The technicals

The Dow: Sigh, another doji warning of uncertainty today.  The good news is that we are still pretty far from being overbought, and the stochastic just finished its bullish crossover today.   And even losing 11 points, the Dow remains within the rising RTC, so no bearish setup there.

The VIX:  The VIX finally did something sensible today - it declined on a red candle, closing at 17.98, the lowest close since last July 22nd, just before that ugly summer swoon.  Interestingly, the Dow is now almost exactly back to the same level as on that day also.  The big difference is that back then we were considerably overbought, but that's not the case today.

The VIX right now on the other hand is in fact overbought and its stochastic has just finished a bearish crossover, portending lower on Friday, and that's good for stocks.  The VIX remains firmly in a downtrend that began last November, as fear is slowly getting wrung out of the market.

Market index futures: Like the market as a whole today, the futures in the overnight are mixed with NQ rising, but YM and ES down.  ES is off, but just barely, down 0.04% at 1:55 AM EST.  Like the Dow, we got a doji here today.  In this case I like to look at the indicators and they're still climbing off oversold levels.  We also still have at least a bit of room to rise before the next resistance at 1328.

ES daily pivot: Rose from 1316.83 to 1321.92 tonight.  This took ES under the pivot right at midnight, but it then rallied back through it and is now above again, though only about a point.  Nonetheless, as long as we can hold above the pivot, that's positive.

Dollar index: The dollar's sort of been bouncing around in a 55-55.40 range recently.  We finished today in the middle of that range.  It's still difficult to tell where it's going next from this chart.  There's basically nothing to see here, move along.

Morningstar Market Fair Value Index: Some days this indicator doesn't mean all that much, but tonight I point out that yesterday the index hit 0.95, the first time we've seen this number in an uptrend going all the way back to Sept. 9, 2010.  And the market continued up for over two months from there back then.


History: According to The Stock Traders Almanac, Friday is historically bearish.

     And the winner is...

Overall, and despite my growing unease, I'm going to give the bulls one more chance for a higher close on Friday.  I just don't see a lot of downward pressure on this market, and lately an absence of sellers has meant a slow but steady move higher.  But once again, I'm not looking for any big moves either way on Friday.  Until I see some good reversal indicators on the charts, I see no reason to be short-term bearish.  Next week though may be a different story.

ES Fantasy Trader

Today it started looking to me like enough was enough, so I bailed and took a tiny profit of one quarter point while the taking was good.  Just as well, because ES continued lower from there.  Tonight we give it another try, going long at 1322.50 at 1:58 AM.

Portfolio stats: the account is now $106,250 after 8 trades (6 wins, 2 losses) starting from $100K on 1/1.

SLD    10    ES    false    MAR12 Futures     1323.25    USD    GLOBEX    11:25:49   

BOT    10    ES    false    MAR12 Futures     1323.00    USD    GLOBEX    01:10:35