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- Friday lower, low confidence.
- ES pivot 1472.25. Holding above is bullish..
- Next week bias uncertain technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader remaining short at 1461.25.
Well it looks like the technicals were trumped on Thursday by some much better than expected housing numbers and so instead of drifting lower, the Dow popped for an 85 point gain after being up triple digits intraday. I'll be the first to admit this one took me completely by surprise. This kinda throws a monkey wrench into my market view and I'm now going to have to reassess. Let's see how today's action affected the charts and what that might mean for Friday.
The technicals (daily)
The Dow: On Thursday the Dow kicked to the curb the army of hanging men that had been marching along for four days now as it closed way above prior resistance of 13,535 to finish at 13,596. This brought us right back into the rising RTC but it also stopped at the next resistance line established last fall. With the indicators now useless and the upper BB not until 13,682, I guess there's no reason to believe we can't still go a little higher from here.
The VIX: To underscore how strange today was, the VIX actually went up 1.12% even as the market as a whole did too. That's quite unusual. It's also unusual to exit a descending RTC without moving higher and the VIX remains stuck in a range between 13.30 and 13.85. Today's close was right in the middle of that, so there's really no telling where the VIX is headed next.
Market index futures: Tonight all three futures are essentially flat at 1:31 AM EST with ES up by just one tick, NQ down 0.12% and YM unchanged. Like the Dow, ES put an end to four days of dojis with a big burst to the upside on Thursday that exited its descending RTC for a bullish setup. With today's SPX close at 1481, we're now back to levels last seen in the summer of 2007. I was expecting to get that but not until around June or July. With 1500 not that far away and it still being only January, I'm pretty sure the market is going to want to take a peek at that level again. Meanwhile we remain in a rising monthly RTC with bounds of 1533 on the top and 1355 on the lower end. My best guess is that we'll see some downside after reaching 1500.
ES daily pivot: Tonight the pivot jumps from 1464.83 to 1472.25.. We were above before and remain above the new number, but by a lot less now - just five points. Still, that is undeniably a bullish sign.
Dollar index: The dollar confirmed yesterday's evening star today by losing 0.18% bringing it right back near its recent support levels with an inverted hammer. There's no telling where this chart may go next. .
Euro: And like the dollar, the euro confirmed yesterday's spinning top with a big gain on Thursday that took it right back to its recent resistance at 1.3400. That leaves it in a range with a lower bound of 1.3300. With the overnight pretty much just treading water, I'd expect the next move here to be back down again.
Transportation:At least I was right to demand confirmation of yesterday's hanging man here as it was soundly trounced with a 0.66% gain to keep the trans solidly in their rising RTC. The indicators are all crazy overbought, but they've been overbought so long, they're broken now. It's like flying an ILS (instrument landing system) approach towards the runway. The object is to keep two needles centered. If say the vertical guidance one goes full deflection, you no longer have any idea if you're 20 feet too low or 200 feet too low. Right now, the indicators are full deflection, so they're useless. And the chart itself shows nothing but further upside.
Accuracy (daily calls):
And the winner is...
I've spent longer than usual tonight staring at these charts (and more) but I'm sorry to report that I'm just not seeing it. January op-ex Friday is historically a really bad day, but that says nothing about this Friday. Today's big gains pretty much canceled my week-long bearish thesis. One thing I do notice is that ES is in a stair-step pattern with big one day gains followed by a consolidation period of about a week. We've seen three of these now. If this pattern continues to hold, then we're looking at about five more days of vague, indecisive action. Accordingly I'm just going to have to call Friday uncertain.
ES Fantasy Trader
Portfolio stats: the account remains at $103,750 after one trade (1 for 1 total, zero for zero longs, 1 for 1 short). Tonight we remain short at 1461.25. We're now in heat-taking mode.