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- Thursday lower, medium confidence.
- ES pivot 1346.08 . Holding under is bearis..
- Friday bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader holding long at 1356.25.
Hah, serves me right for putting so much faith in the Chicoms and the futures last night. I was so sure we'd be going higher today. The Dow actually did post a nice gain today - for all of five minutes. Then it was all downhill from there, finishing down 97 points. Tonight the Night Owl is eating humble crow. Oh well, no point worrying about what's done and over. Let's move on to Thursday.
The technicals
The Dow: There's two ways of looking at today's loss. Way one is that we're now at the bottom of a four day trading channel that is more likely to move higher than lower on Thursday. Way two is that those four days show a gradual downward drift that's due to continue Thursday. Right now, the indicators seem to support continued downside.
I note here also that the SPX Hi-Low index has now spent three days pegged at 100. These runs tend to end with a market decline. Last week, the index was at 100 for four days, the 6th through the 9th. On the 10th, we had a big drop.
The VIX: Today's 8.19% jump in the VIX put a crinkle in yesterday's bearish stochastic crossover. However, it did take us back up to the upper BB. 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. This implies higher stocks to come.
Market index futures: All three are running significantly negative tonight, with ES down a half percent at 1:35 AM EST. That in itself is a bad sign. In addition, this downturn appears to signal a negative resolution to the recent indecision in ES. The bearish exit of the rising RTC now seems to be playing out. The only good news here is that this pullback is now bringing us close to oversold levels from which an advance might resume.
ES daily pivot: Remained almost unchanged, advancing to 1346.08 tonight. However, we've been below the pivot most of the day and remain 10 points under in the overnight, not a good sign.
Dollar index: The dollar gained some more ground today but is still neither overbought nor near its upper BB. I see nothing here suggesting that there isn't more upside left for Thursday, a bad sign for stocks.
Morningstar Market Fair Value Index: Yesterday the index remained at 0.94 for the third day in a row. This is an indication of a lack of weakness in the markets.
History: According to The Stock Traders Almanac, Thursday is historically rather bearish.
And the winner is...
With mixed technicals, the VIX back above 20 and renewed uncertainty over Europe, it's very difficult to make an informed call tonight. But I'm detecting some general malaise in the market right now and my general hunch is that we're in for a lower close Thursday. To hedge my long positions, I picked up some DXD again this afternoon at 13.87.
ES Fantasy Trader
Tonight we're holding on to last night's ill-advised long. I'm giving this the benefit of the doubt for one more night. If it doesn't pan out on Thursday then it's done. In the meantime, t.he account remains $112,625 after 13 trades (10 wins, 3 losses) starting from $100,000 on 1/1.
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