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- Thursday slightly higher, medium confidence.
- ES pivot 1327.67. Holding above is bullish..
- Friday bias higher technically.
- Monthly outlook: bias down.
- ES Fantasy Trader remains long at 1365.00.
“You have to fight self-deception. Human beings are experts at it. I do it, too.” - Jamie Dimon, June 2009Recap
For a while early on today it was looking like my call for a lower close was going to be wrong, but the Dow obliged by giving up all its early gains and then 33 points more for its 10th loss in 11 days. To quote noted stock gurus Devo, "Lord how long can this go on?" We go to work in our coal mine tonight to find out.
The Dow:Although the losing streak continues seemingly without end, I'm starting to notice a few signs of change. Today's tall gravestone doji had a feel of something of a bottom being put in. The indicators remain uselessly oversold but we are at least edging very close to the boundary of the RTC. In fact it will take a loss of more than another 90 points on Thursday to keep us inside this channel. Absent that we'll be getting a bullish setup. Now of course we could easily see that kind of loss - we've seen that and more recently, but I'm getting a feeling we're nearing a turning point here.
The VIX: The VIX closed right on its upper BB today at 22.27 for the third day in a row. That's about as long as the VIX ever spends at those levels. Today's 1.37% gain only increased my expectations of a lower VIX on Thursday and that would be bullish for stocks. We do remain firmly inside the rising RTC and there's on indication of a bearish stochastic crossover yet though, so it's not out of the question to see the VIX move higher one more day, but I think this move is near the end now.
Market index futures: Tonight all three futures are up by non-trivial amounts at 1:02 AM with ES leading the way, up 0.55%. This puts us exactly on the edge of the latest descending RTC. If we can just hold onto the current levels around 1330, we'll have a bullish setup by Thursday's close. The fact that we are already above today's regular open, after another bad day in ES creates a bullish engulfing pattern. The candle is admittedly not cooked yet, but this is a more encouraging sign than I've seen here in weeks. Rob Hanna's Quantifiable Edges blog today has a quantitative assessment of this phenomenon. And also note that RSI, momentum, and OBV have now all hooked up from very oversold levels. This reawakening of the indicators, or the Lazarus Effect, is always a strong sign of a reversal at hand.
ES daily pivot: Tonight the pivot falls yet again from 1333.58 to 1327.67. Combined with ES now being up smartly in the overnight, we've just crossed the pivot, always a positive sign.
Dollar index: Today the dollar gapped up to form a spinning top that is 2/3 of a bearish evening star. Momentum actually decreased a bit for the first time in 8 days. A lower dollar tomorrow would confirm the pattern and suggest even more downside here, which would be good for stocks.
Transportation: Today the trans gave back all of yesterday's gains plus a bit more but did it on a really tall inverted hammer that extended a support line at 5100. Two more days of this sort of action would provide a bullish RTC exit. As it is, this chart is at least showing some signs of a bottom being near. Interestingly, the copper chart put in the same pattern today.
History: According to The Stock Traders Almanac, Thursday is historically fairly bullish.
Month right wrong no call conditionalApril 7 9 2
May 6 4 1 1
And the winner is...
Tonight, I'm going out on a limb and calling Thursday higher. I'm finally seeing a bunch of reversal signs in the charts I follow and this losing streak is getting pretty old. This doesn't mean I'm expecting a big rally, but it does look to me that we'll at least see some green on Thursday.
ES Fantasy Trader
Portfolio stats: the account remains $150,125 after 35 trades (28 wins, 7 losses) starting from $100,000 on 1/1 Tonight we're once again still holding on to this long at 1365.00. We're just so oversold now I really hate to throw in the towel at this late stage in the game. There's nothing worse than throwing in the towel and taking a big loss at what turns out to be the bottom.