Thursday, March 29, 2012

Thursday higher if pivot crossed

The Hoot 
Actionable ideas for the busy trader delivered daily right up front
  • Thursday possibly a bit higher, low confidence.
  • ES pivot 1401.50Breaking above is bullish.
  • Friday bias uncertain, technically.
  • Monthly outlook: bias up.
  • ES Fantasy Trader standing aside.

Last night I was having trouble picking a direction for today so I just said "I think for the next few days we're going to consolidate around the 13,100-13,300 area".  Well today the Dow gave us a range from 13,069 to 13,213, closing at 13,126.  So I'd say that was a reasonable guess.The question now is, having closed near the lower end of the range, will we go higher on Thursday?  The answer's not blowing in the wind, but it may be lurking in the charts.

The technicals

Dow hourly
The Dow: Tonight I'm presenting a chart I don't bring up very often, but I think it has the most insight as to where we may be going on Thursday: the Dow hourly chart.  (The thick black horizontal lines are the previous day range bars; the other panels from top to bottom are volume, stochastic, CCI, RSI, and momentum).

I have added the descending RTC here that began at 3 PM yesterday.  Note how we got a classical hammer in the 2 PM bar (3rd from the right).  That was followed by a green candle that took us outside the RTC - that's a bullish setup.  And the 4 PM bar was entirely outside the RTC - that's the bullish trigger.

Supporting this is the RTC which went oversold at 11 AM, bottomed at 1 PM, and then turned upward.  Also, the last three volume bars are increasing.  To me, this is a pretty good indication that the Dow may be wanting to go higher Thursday.

The VIX:  Today the VIX actually dropped 0.77% on a very tall gravestone doji that took it out the top of its recent trading range but ultimately came right back to finish at 15.47.  The futures showed a similar pattern.  This has the look of a breakout attempt that was cut short.  The indicators are confused here, and so am I, with momentum and RSI now moving lower but the stochastic just making a bullish crossover.  Unless the VIX can manage a breakout of this 13 day range, we're more likely to see it move lower than higher from here, which would be good for stocks.

Market index futures: At 12:53 AM EDT, all three futures a just barely in the green with ES up just 0.04% after basically wandering aimlessly in the overnight.  There is some comfort, I suppose, that after today's red candle, we're not moving any lower now.  There does seem to be a shallow ascent going on from 10 PM.  We'll be curious to see if this continues into the wee hours.

ES daily pivot: Tonight the pivot tumbles from 1410.75 to 1401.50.  With ES just drifting since the close, that now puts us just one point below.  We'll want to see ES break above this line by the open on Thursday.  Failing to do that would be bearish.

Dollar index: Last night I thought the dollar looked ready to go higher and it did today, though only by 0.1% and on a long asymmetrical star, almost a shooting star.  It's not clear though that this signifies another reversal.  The indicators are all still quite oversold and the stochastic just made a bullish crossover today, suggesting a higher dollar again on Thursday, which would be bad again for stocks.

Morningstar Market Fair Value Index: Yesterday the index dropped from 0.98 to 0.97.  To be still above the 0.96 level that provided resistance for so long is positive.

History: According to The Stock Traders Almanac, Thursday is historically neutral for the Dow but distinctly bearish for the S&P..

     And the winner is...

I'm not seeing any real signs that we're due to go higher on Thursday, but I am seeing signs that the declines of the past two days may be close to played out.  Today's tall ES star completely retraced Monday's big gain intraday, suggesting that the bears were unable to hold the low ground.  Meanwhile, there's just two days left to the week, the month, and the quarter.  Some people are looking for window dressing to occur, driving stocks higher, while others expect portfolio rebalancing to drive them lower.

It's all just too confusing for me right now so I'm going to stick to my same range call I made yesterday.  Until we close out this week, I'm expecting the Dow to stay inside the area of 13,100-13,250.  Based entirely on the action on hourly Dow chart though, I will go waaay out on a limb and hazard a guess that we might actually see a positive close Thursday.  The ES pivot will be key - we need to break above 1401.50 and stay there, otherwise all bets are off.

ES Fantasy Trader

Portfolio stats: the account remains at $129,375, after 25 trades (19 wins, 6 losses) starting from $100,000 on 1/1.  With an identifiable edge still not present either way tonight, once again we are not trading.

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