Thursday may reverse higher

[For some reason, this post, which was completed at 2 AM Thursday morning, never appeared.  My apologies to my readers.]

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

• Thursday higher, low confidence.
• ES pivot 1350.33.  Holding above is bullish.
• Rest of week bias uncertain technically.
• Monthly outlook: bias down.
• ES Fantasy Trader remains long at 1365.00.

Recap

Well last night I said we'd go higher today if ES could manage to break above its pivot this morning.  It couldn't and so we didn't, with the Dow dropping an additional 97 points to extend the losing streak to six now  There's been some rather strange market action this week so far.  Let's see if we can make some sense of it.

The technicals

The Dow:Another day, another hanging man.  We now have a  whole army of three hanging men marching steadily downward.  I've never seen anything like this.  I just scanned back 10 years of Dow daily candles and there's nothing similar.  All I can say is that everything in place yesterday in still in place today only more so.  The only difference is that we've now finally reached the lower BB.  A reversal has to be coming Real Soon Now.

The VIX:  Closed just over 20 today on a gap-up spinning top right to the upper BB.  As I often mention, the VIX tends to bounce off the upper BB fairly quickly, rarely spending more than a day there.  And we have a complete bearish stochastic crossover now.  And highly overbought indicators.  If this one doesn't go lower Thursday, I'll eat my Hatlo hat.

Market index futures: At 1:52 AM EDT we've got NQ just about flat, YM up a hair, and ES up a respectable 0.24%.  This is looking to me like we're nearing the end of the downtrend.

ES daily pivot: Tonight the pivot drops from 1356.75 to 1350.33.  With this drop and ES rising since the close, we're now above the pivot for the first time in a while.  This is a positive sign.

Dollar index: Big gap-up here today, for a spinning top right at the upper BB.  If this one doesn't go lower on Thursday, I'll buy another hat and eat that too.  Of course, there was news today that the Chicoms are manipulating xxxxxxxx supporting the euro, so I suppose anything's possible now in currency-land.

Transportation: Big dump here today, right to the lower BB.  But that's not a reversal guarantee.  Overall, this chart's looking weak.


History: According to The Stock Traders Almanac, Thursday is historically fairly bullish for the Dow.

Accuracy:

Month right  wrong  no call

April   7      9      2
May     4      2      1
     And the winner is...

It's tempting to throw in the towel after so many days of negativity, but this downtrend is getting long in the tooth.  You really don't want to sell at these levels.  From here I believe there is clearly more short term upside potential than downside risk.  With the futures (finally) up in the overnight, and the VIX looking ready to go lower, I'm going to go way out on the limb and cautiously call Thursday higher.  We'll see.

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 still holding on to this long at 1365.00.  I briefly considered dumping this one but looking at the chart, if I was out of the market right now, I'd be buying this level, not selling it.  It's buy low, sell high, not the other way around.