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- Friday higher, low confidence.
- ES pivot 1501.92. Holding above is bullish..
- Next week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader going long at 1505.25.
The market continued lower on Thursday but the damage was relatively muted compared to Wednesday. Is this a sign of a bounce on Friday? Let's check the charts.
The technicals (daily)
The Dow: The Dow lost 47 points on Thursday while putting in a hammer whose tail just about touched the lower BB. I have found that to be a good sign that a reversal is coming in a day or two, cf. 12/31/12, 11/15/12, and 7/24/12 to name three.
The VIX: And while the Dow put in a hammer, the VIX put in an inverted hammer whose peak was way above its upper BB as it drove further into overbought territory. I find this to be a good indicator of a move lower within a day or two. Like I always say, the VIX rarely stays at its upper BB longer than a day or two. Thursday marked day two.
Market index futures:Tonight all three futures are higher at 1:05 AM EST with ES up by 0.28%. Like the Dow, ES gave us a hammer today and the stochastic moved into position to generate a bullish crossover. The hourly chart is also looking more favorable right now.
ES daily pivot: Tonight the pivot drops from 1514.50 to 1501.92. This drop combined with ES trending higher switched us back above the pivot right at midnight, so that now becomes bullish.
Dollar index:And like the other charts, the dollar also gave us a clear doji, this one a classic hanging man that gapped way up over its upper BB and above its 200 day MA. It's also now quite extended from its pivot so there are definite signs here pointing to a lower dollar for Friday. .
Euro: I'm sure glad I decided to wait for confirmation before calling this chart higher last night as the euro had a second big down day n Thursday with a tall red marubozu that took it down below its lower BB at 1.3219. But now the overnight is giving me the signal I was looking for, with a nice 0.31% gap-up bounce off the lows. This bodes well for a higher euro on Friday.
Transportation:The trans chart pretty much mimicked the Dow on Thursday so the same comments apply. Additionally, the trans finished at a support level of 5675. There's some chance here of a move higher of Friday.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 2 3 3 5 0.667 32
And the winner is...
Tonight, for the first time in a while I'm seeing numerous technical signs of a reversal - hammers and hanging men galore at or beyond various BB's. Also, this Friday is historically bullish and with no major economic news coming out to torpedo my call, I'm going out on a limb and saying that Friday's closing higher.
ES Fantasy Trader
Portfolio stats: the account remains at $98,750 after 5 trades (4 for 5 total, 1 1 longs, 3 for 4 short) starting from $100,000 on 1/1/13. Tonight we're going to take a flyer and go long at 1505.25.