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- Friday lower, low confidence.
- ES pivot 1552.67. Holding below is bearish.
- Next week bias lower technically.
- Monthly outlook: bias higher.
- ES Fantasy Trader standing aside.
Well I had the right idea in changing my initial negative call for Thursday to a conditional one, but unfortunately ES did not behave very well Thursday morning. It basically just meandered all over the place, crossing its pivot more than a dozen times before ending the day up 6.29 points. It is perhaps a testament to its ongoing strength that the market managed to post the gains it did in the face of some rather mediocre charts last night. But will that extend into Friday? Let's take a look.
The technicals (daily)
The Dow: On Thursday the Dow managed to retrace half of Wednesday's losses in a move that was considerably better than a DCB. And while Wednesday's big dump provided a bearish RTC setup, Thursday's recovery canceled it, bringing us just barely back inside the channel. However, after touching its upper BB for the past two days, today's failed attempt to regain the 14,650 level has something of a bearish feel to it. Nevertheless, there's some support around 14,544 so I suspect any downside from here might be limited.
The VIX: The VIX did move higher intraday on Thursday, notably touching its upper BB for the second day in a row before retreating to close down 2.25%, The upward move did not surprise me - the subsequent retreat did. But now that it's done, I repeat my mantra that the VIX rarely stays at its upper BB more than two days running. Now that we've seen that, more downside is possible on Friday. Note too that we remain near the top of the VIX's recent trading range, so there's some magnetic attraction lower here too.
Market index futures:Tonight all three futures are lower at 1:11 AM EDT with ES down by 0.24%. Thursday's retracement of Wednesday's losses was less than convincing and also not quite enough to avoid a bearish RTC trigger. The decline in the overnight seems to be confirming that. So with indicators continuing their march down towards oversold this chart goes back to bearish.
ES daily pivot: Tonight the pivot dips from 1553.42 to 1552.67.After playing tag with the pivot all day long, ES is now just two points below the new number and trending lower, a bearish sign.
Dollar index: The dollar dropped a slight 0.08% on Thursday but that belies the size of the red candle, which opened with a big gap up and eventually broke above the upper BB before falling back to close lower. This sort of failed rally attempt in the face of indicators that continue to decline makes it looks like once again more downside is still possible Friday..
Euro: I nailed this one, writing last night "the euro just may mount a test of the MA (at 1.2879) on Thursday." The test arrived and the euro passed with flying colors, busting straight through the MA to close at 1.2944. The overnight is now meandering about the top of Thursday's close, slightly lower. Considering that most big one day gains in the euro lately have been followed by givebacks, I wouldn't be too surprised to see either a star or a small decline on Friday.
Transportation: And on Thursday the trans put in a hammer, albeit a fairly small one. Nevertheless, the fact that the impressive downward momentum of the past three days was arrested speaks to the bull case. So while we remain inside a descending RTC, it is so steep it won't take much to generate a bullish setup, specifically a close above 6028 on Friday. With indicators now officially oversold and the stochastic beginning to form the hook preceding a bullish crossover, a move higher from here is not out of the question.
Accuracy (daily calls):
Month right wrong no call conditional batting Dow
January 5 7 6 3 0.533 -101
February 3 4 5 6 0.692 131
March 5 7 5 2 0.500 121
April 0 1 1 0 0.000 0
And the winner is...
Friday is the one historically weak day in an otherwise bullish first week of April. And with a bearish cast to most of the charts tonight, I'm not feeling the love. Oh and that one-day up/down thing just keeps right on going, so since Thursday was up, Friday should be down. And don't forget that we got some less than stellar jobs numbers on Thursday and with more of that coming out on Friday, a weak showing is likely to put a damper on the market. So all in all, I think I'm just going to have to call Friday lower.
ES Fantasy Trader
Portfolio stats: the account remains at $94,000 after 9 trades (7 for 9 total, 3 for 3 longs, 4 for 6 short) starting from $100,000 on 1/1/13. Tonight we stand aside just because I hesitate to put on a short in the face of the sort of upward momentum we've seen all year long so far.