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- Thursday higher, low confidence.
- ES pivot 1349.42. Holding above is bullish..
- Rest of week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes long at 1354.75.
Last night I was expecting the market to go higher today, which it did, though admittedly a bit more than I thought. But hey, I'll take it (and did). Now let's try to figure out if we can recover some more ground Thursday.
The technicals
The Dow: I'd say today's 78 point advance in the Dow was a bit more than a dead cat bounce. More like only a mildly injured bounce. And volume on today's gain was higher than on yesterday's dump with both OBV and momentum suddenly turning positive. This really isn't the look of a chart ready to go lower.
The VIX: Today the VIX completed a near-textbook evening star, dropping 8.6%. With indicators now solidly overbought, it looks like a lower VIX Thursday, implying higher stocks.
Market index futures: At 1:57 AM EST all three futures are up but just barely. ES is up just 0.07% after a solid green candle that retraced almost exactly half of yesterday's losses. That's definitely more than just a dead cat bounce. Just the fact that we're not going lower at this late hour seems to suggest an absence of selling pressure.
ES daily pivot: Tonight the index nudged up from 1348.75 to 1349.42. But thanks to a lift this evening, we're now even higher above the new number than before. Unless we break under the pivot, things are looking good.
Dollar index: Last night I wrote of the dollar, " we're more likely to see it go lower in the next day or two". And sure enough, it dropped 0.2% today leaving indicators hooking down from overbought levels and a stochastic just ever so close to making a bearish crossover. Conclusion: dollar lower Thursday -> stocks higher.
Morningstar Market Fair Value Index: As expected, yesterday the index took a dump to 0.93. But I wouldn't read too much into that. Sudden large movements in the market tend to distort all sorts of indicators, so let's let the dust settle a bit before we try to make something of this.
History: According to The Stock Traders Almanac, Thursday is bearish, the weakest day of the week..
And the winner is...
Thursday's going to depend greatly on, once again, news about Greece. Technically, I'm seeing more positives tonight than negatives, so on that basis alone I'll call for a higher close Thursday, but keep in mind that it will take just one story in the FT that Mr. Market doesn't like and down we'll go.
ES Fantasy Trader
Tonight I'm taking on a somewhat speculative long position, betting that the people driving the euro higher at 2 AM know something I don't. So we're in at 1354.75.
Meantime, the account remains $109,500 after 18 trades (13 wins, 5 losses) starting from $100,000 on 1/1.
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