Actionable ideas for the busy trader delivered daily right up front
- Friday little change expected, low confidence.
- ES pivot 1390.75. Holding under is bearish.
- Next week bias higher, technically.
- Monthly outlook: bias up.
- ES Fantasy Trader standing aside.
Are you a One Percenter?
From The Big Picture blog, this is a quick read of a few eye-opening statistics that paint a grim picture of the average American. Check it out.
Recap
Well we got more downside today, basically what I was expecting. Now let's see when this downturn might end.
The technicals
The Dow: Today the Dow shed another 78 points to continue a now three day stairstep decline. The good news is that this was enough to bring the indicators to oversold levels. And the stochastic is in position to execute a bullish crossover in the next day or two. Also, the support at the 13K level held up. So while there's no reversal of the downtrend in the candles (which look fairly close to a three black crows pattern), the worst of this decline may be over.
The VIX: Today the VIX gapped up for a 2.91% gain, but did it on a stubby shooting star, a fairly good reversal pattern. Its indicators are also nearing overbought levels. In addition, the futures today formed a dark cloud cover, suggesting lower on Friday. This all would seem to portend higher stocks if not tomorrow, then early next week.
Market index futures: At 1:44 AM EDT all three futures are up with ES gaining 0.13%. ES gave us a long red candle today, with a long lower shadow. The fact that we're now trading up from today's close rather than continuing lower is encouraging. Also, the stochastic is now nearing it inflection point where it lines up for a bullish crossover. And finally, OBV has turned up again after four straight days of declines.
ES daily pivot: Tonight the pivot takes a step down from 1399.17 to 1390.75. Unfortunately, after rising most of the evening, ES turned south right at midnight and we've just now crossed below the pivot. Unless ES can manage to retake the pivot before the open, it's not looking good for Friday.
Dollar index: After a doji yesterday, the dollar today gave us a narrow gap-up star. However, its stochastic also executed a bullish crossover, so this indecision might be resolved in a higher dollar on Friday, bad for stocks. Also, the euro is quite overbought right now and its stochastic just finished a bearish crossover, suggesting a lower euro (and therefore a higher dollar).
Morningstar Market Fair Value Index: Despite the recent losses in the market, yesterday the index remained at 0.97, near its high for the year. I consider that it is not going lower to be a good sign.
History: According to The Stock Traders Almanac, Friday is historically quite bearish for the Dow (though bullish for the S&P)..
And the winner is...
So tonight we've got a scenario setting up of a reversal that's coming soon, but doesn't quite seem to be at hand. So I'd say Friday will be a bottoming day, possibly in the form of a doji, but in any case clearing the way for a move higher early next week.
ES Fantasy Trader
Last night's short paid off nicely. We covered at 10:53 AM for an 11.25 point profit. With no real discernible edge tonight, we're going to stand aside again.
The account now rises to $124,625, after 24 trades (18 wins, 6 losses) starting from $100,000 on 1/1.
BOT 10 ES false JUN12 Futures 1384.75 USD GLOBEX 10:52:50
SLD 10 ES false JUN12 Futures 1396.00 USD GLOBEX 00:37:12 
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