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- Thursday uncertain.
- ES pivot 1366.17. Holding under is bearish.
- Rest of week bias uncertain technically.
- Monthly outlook: bias up.
- ES Fantasy Trader goes short at 1359.25..
Last night I wrote "My guess though is that [Bernanke] is going to say something that Mr. Market won't like and that will send us lower." Well he did and it did, with the Dow dropping 53 points and relinquishing its admittedly tenuous hold on 13K.
The technicals
The Dow: Today's red candle brings us right back into the consolidation area of 12,940-13,000 we've been in since February 21st.. But the indicators have all finally woken up and are now starting to come off their overbought levels. And we also touched the upper BB at 13,057 today. And today formed a bearish engulfing pattern. And today's volume going down was much higher than yesterday's going up. To me, that all spells lower.
The VIX: The VIX gained 2.6% today on a classic bullish piercing pattern. Along with rising indicators, this portends a higher VIX on Thursday, implying lower stocks.
Market index futures: Tonight all three futures are in the red with ES leading the way lower down a non-trivial third of a percent. Today's red candle pretty much formed a bearish engulfing pattern and the lower numbers in the overnight tend to confirm it. There's also no support til 1355, five points below where we are at 2 AM EST.
ES daily pivot: The pivot dipped from 1369.92 to 1366.17 tonight. However, after breaking underneath this afternoon, ES has been holding below and is now drifting lower - not an encouraging sign.
Dollar index: After hitting its lower BB yesterday, the dollar scored its biggest gain since January 13th today, rising 0.63%. And we've got indicators coming off oversold levels including a stochastic that has just finished a bullish crossover. This all points to a higher dollar, and therefore lower stocks.
Morningstar Market Fair Value Index: The index graph on the MS web site is all screwed up - it's hard to tell just what the right number is - no nothing to see here tonight.
History: According to The Stock Traders Almanac, Thursday is historically fairly bullish, although the Dow has been down the last four of five years. And of course the first day of any month is generally bullish.
And the winner is...
Tonight, the charts pretty much are in agreement. While the market has admittedly had trouble putting together two losing sessions in a row lately, I'm thinking Thursday may be the day. I see enough bearish technicals to call for a lower close Thursday.
ES Fantasy Trader
Tonight we go short at 1359.25.
The account remains $107,875 after 16 trades (12 wins, 4 losses) starting from $100,000 on 1/1.
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