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- Thursday higher, medium confidence.
- ES pivot 1309.33. Holding under is bearish.
- Friday bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes long at 1323.00.
Today was one of those perfect storm days, or more like anti-storm, when a bunch of diverse pieces of good economic news converged with historical precedents to help rescue the market from what technically looked to be setting up as a down day. So we learn that while TA really does work, contrary to the sneering assertions of some people on the web, it doesn't always work. But we just pick up the pieces and move on.
Oh and a quick performance note: I finished January with a monthly gain of 7.41%.
The technicals
The Dow: Today's action clearly demonstrates why one should wait for confirmation of dojis and stars. They only indicate indecision, not reversals per se. And the decision was made to the upside today. This 84 point move was important because it kept us inside the rising RTC from December 28th and averted a bearish setup. In addition, the stochastic just executed a bullish crossover. I hear people fretting about "low volume" but honestly, it's been lately right in the range we've been seeing since last October.
I think the Dow is now well-positioned to move higher. If you look at the last time it closed rising to these levels (12,716), back on January 20th, the indicators are now much less overbought, indicating more room to run.
The VIX: Last night the word I used for the VIX was perplexing. Today gave us a bit more clarity, in that the VIX moved back under 20 for a 4.58% drop. And its indicators are now looking to have peaked at overbought levels, making me think now that the VIX might move lower on Thursday, and that would be good for stocks.
Market index futures: The regression trend channel technique has been working well lately. Yesterday we saw ES trade outside a short descending RTC, a bullish setup. Today we traded entirely outside and that was the trigger. And in the overnight, ES is moving higher, along with its pals NQ and YM, with ES leading the way, uo a quarter of a percent at 1:10 AM EST. I note too that ES completed a bullish stochastic crossover, always an excellent indicator and OBV hooked upward yesterday. What's not to like?
ES daily pivot: As a result of today's gains, rose from 1309.33 to 1316.83 tonight. But despite this jump, we remain six points above the pivot, not a bad spot to be at.
Dollar index: I thought the dollar would move higher today and it did - but from a gap down open, so despite putting up a green candle, it still ended lower on the day. The dollar's being affected a lot by the euro due to the latest developments in Europe, so I wouldn't rely on this chart too much right now.
Morningstar Market Fair Value Index: Don't know what's up with this thing. Today MS is showing two different numbers on their graph for this index, so who knows.
History: According to The Stock Traders Almanac, Thursday is historically not quite as good as today was but still bullish nonetheless.
And the winner is...
After getting a positive resolution to the recent spate of stars and dojis, I'd say we're in for still more upside on Thursday. But as I mentioned earlier this week, I'm starting to get nervous. Being up over 8% personally in just over a month so far this year, this can't last. I like to think I'm a good trader, but I'm not a 96% annual return trader.
I note that the Dow's weekly money flow has just turned lower this week after rising pretty steadily since last August. OBV is also nearing levels associated with a top. I'm beginning to think a pullback may be in the works later this month, but just not tomorrow. That's all, she wrote.
ES Fantasy Trader
Today our long finally came in and we took a profit of 13.75 points. I held on to this trade even though I thought we might go lower today because I figured that if today was indeed lower, we'd be setting up for a reversal by the end of the week. As it turns out today went higher and this trade made some money.
Tonight, we go long at 1323.00 at 1:11 AM.
Portfolio stats: the account is now $106,125 after 7 trades (5 wins, 2 losses) starting from $100K on 1/1.
SLD 10 ES false MAR12 Futures 1325.50 USD GLOBEX 13:37:17
BOT 10 ES false MAR12 Futures 1311.75 USD GLOBEX JAN 31 01:42:35
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