Friday, March 16, 2012

Friday could go a bit higher

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Friday higher, low confidence.
  • ES pivot 1392.75.  Holding above is bullish.
  • Next week bias uncertain technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader goes long at 1395.25.

What did they call me?
Last night I suspected we'd go higher today if the ES pivot held.  It did and we did, with the Dow tacking on another 59 points extending its winning streak to seven straight sessions.  Can we go for eight?  Let's sort it all out.

The technicals

The Dow: Today's close at 13,253 brings us so high I had to back out to the monthly chart to find the last time we were up here.  It was way back in January of 2008, when the Great Recession was just getting underway.  The last time we climbed up to this level was even earlier: May 2007.  And speaking of streaks, the Dow is working on six straight months of gains, something we haven't seen since 2006.

The important point here is that we've now just about completely cleared out the backlog of sellers who rode the market to the bottom in 2009 after buying in on the way down and swore that they'd get out if they ever got back to even.  From here, there's no real resistance until 14,000, and then the all-time high of 14,198 set in October 2007.  Even the current monthly upper BB is at 13,525, leaving us another 250 points of upside possible.

On a daily basis though, the RSI, stochastic and OBV have reached overbought levels, but money flow is still in pretty good shape - rising but not overly high.  We have hit the daily upper BB at 13,202 though.  But unlike the VIX, the Dow is known to sometimes just crawl right up the BB when it's in rally mode, and we certainly still seem to be in rally mode.  And we remain firmly inside the rising RTC of March 7th.  So no reversal signs here just yet.

The VIX:  Last night it looked like the VIX might go higher today and it did, slightly, adding 0.72%.  But it also made a nice doji in the process.  Does this signal a reversal/  Well the VIX futures also rose today but did so on a red candle, so I'd say it's not out of the question that the VIX may be stalling out here, despite its oversold indicators.

Market index futures: At 1:11 AM EDT we've got all three futures in the red, just barely.  ES is lower by 0.09%.  This seems to be following the recent stair step pattern of gains one day followed by a pause the next.  At this point the indicators are all stuck at overbought levels and have thus lost their predictive power.  That leaves us with an ES still solidly inside its rising RTC and a tiny little developing candle.  Not much to go on tonight.  At least there's no indication of a big dump on the way.

ES daily pivot: Tonight the pivot rises again, but just a bit from 1389.08 to 1392.75.  Since ES has been essentially flat in the overnight, we're now closer to the pivot than before.  Remaining above is still bullish, but with just a 2.5 point cushion, we'll need to watch this number Friday morning.

Dollar index: The dollar bounced off its upper BB today as I figured, ad exited it most recent rising RTC in the process.  There's nothing on this chart to suggest anything but a lower dollar Friday, which would be good for stocks.

Morningstar Market Fair Value Index: Yesterday the index remained at 0.97, tying its highest level of the year so far.  If we can break above this that will definitely be a bullish sign. 
History: According to The Stock Traders Almanac, Friday's triple witching day is historically quite bullish although the Dow has been down three of the last five years.

     And the winner is...

Friday is tough to call because of the triple witching.  But there's little in the charts to suggest a reversal is at hand right now, so on that basis I'm going to call Friday's close higher, though probably not by a lot.

ES Fantasy Trader

Tonight we go long at 1395.25, less out of conviction that we're going higher than belief that we're not going lower.

For now the account remains at $114,750 after 21 trades (15 wins, 6 losses) starting from $100,000 on 1/1.

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