Friday maybe higher unless ES pivot lost

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

• Friday uncertain, higher if pivot holds.
• ES pivot 1361.83.  Breaking under is bearish..
• Next week bias up technically.
• Monthly outlook: bias up.
• ES Fantasy Trader standing aside.

Recap

It's always gratifying to call the market correctly.  Last night the call was "Thursday higher unless bad Greek news".  Well the news was good and the market went higher.  End of story.  But what of Friday?  Read on for the exciting conclusion...

The technicals

The Dow: Today's 71 point gain almost completely retraced Tuesday's big dump.  From a candlestick point of view, we now have two thirds of a "three white soldiers" pattern.  If we can get another soldier to join the troops on Friday, that will be bullish indeed.  With rising indicators and a stochastic just barely finishing a bullish crossover, that's looking more than a bit likely.

The VIX:  I was also right about the VIX when I wrote "lower VIX Thursday".  We got a big gap-down star to end off 5.87% at 17.95.  With a stochastic just completing a bearish crossover and other indicators headed south, I'd say another down day isn't out of the question.

Market index futures: Just as I began writing this, all three futures were up slightly.  Then suddenly right at 1 AM, ES took a four point dive in less than five minutes.  And this was on huge volume (for this time of night) - 1100 contracts traded at 1:02 AM alone.  The only reason I can see is that this was when the results of the Greek bond swap were announced..  In any case, as of 1:09AM EST, ES is now down 0.11% having found support (so far) at 1364.50.

What's puzzling is that the Greek numbers were actually quite good - 85.8%.  Maybe this was just a "sell the news" reaction.  But CNBC already broadcast the 85% number this afternoon.  Or it could be a reaction like you sometimes see on Fed days when the market takes off in the direction opposite what you'd expect, only to reverse course a few minutes later.  Very odd.

As far as today's action went, it was pretty much the same story as the Dow, but even better, with ES recovering all of Tuesday's losses and a bit more.

ES daily pivot: Tonight the pivot jumped from 1349.42 to 1361.83.  Even with the 1 AM dip and the rise in the pivot, we still remain above it, albeit by only three points.  This now puts the pivot in play.  We really don't want to see ES break under the pivot.

Dollar index: You don't really need to look much beyond what I wrote late night: "dollar lower Thursday -> stocks higher."  It did, and they did.  Today gave us a big gap-down red candle for a 0.73% loss.  But with indicators still just coming off overbought, no recent support in sight, and the stochastic just finishing a bearish crossover, look for lower still on Friday.

Morningstar Market Fair Value Index: Yesterday the index ticked up to 0.94, a positive sign.


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

     And the winner is...

In closing, I note that the $TRAN transportation average today traded outside its recent declining RTC, posting a 1.42% gain.  Since this pretty much declares the downtrend over, this is quite a bullish development indeed.  In addition, the $RUT Russell 2000 average also traded outside its declining RTC today, a bullish setup.  And finally copper also took a positive turn today, making a bullish stochastic crossover.  There may well be gloom & doom on the horizon, but these three technical bellwethers are not showing it.

ES, 5 minute bars

Despite all this, I'm quite concerned about the sudden turn south in ES which is continuing to move lower as I write.  There's something funny going on here.  Given this odd turn of events, I don't feel good about calling the market higher, which I'd been getting ready to do.  On the other hand, unless ES continues below the pivot, it's not guaranteed we're going to close lower Friday.  So the best I can say tonight is Friday morning watch the ES 1361.83 level and the Dow pivot at 12,816.  Going decisively under either of these will be bad.  Otherwise, we stand a good chance to close higher Friday.


1:30 AM Update: ES seems to be recovering from its 1 AM hiccup, now at 1364.75.  Just look at this strange chart.  The fact that we hit 1363.25 (finding support at Thursday afternoon's lows) and then started recovering is encouraging and makes me a bit more confident that we might close higher Friday.  We'll just have to wait and see.

ES Fantasy Trader

My bet last night on a euro-driven rally paid off nicely today in the form of a decent 10.5 point gain.  Not bad for just under 11 hours work, eh?  Tonight we stand aside in view of the funny business going on with ES right now..

So the account now rises to $114,750 after 19 trades (14 wins, 5 losses) starting from $100,000 on 1/1.

SLD    10    ES    false    MAR12 Futures     1365.25    USD    GLOBEX    12:54:21   

BOT    10    ES    false    MAR12 Futures     1354.75    USD    GLOBEX    02:04:25