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- Friday lower, low confidence.
- ES pivot 1580.25. Holding below is bearish.
- Next week bias uncertain technically.
- Monthly outlook: bias lower.
- ES Fantasy Trader standing aside.
A mid-afternoon swoon was not enough to keep my call for a higher close from coming true as the Dow finished Thursday with a modest 25 point advance. We even made it through an entire day without any machine-induced panics, unlike yesterday's bad case of bot-ulism. Well the CBOE seemed to be having some trouble getting in gear but that was apparently just run of the mill system bugs. So let's move right on to Friday and see what new surprises the charts have in store for us.
The technicals (daily)
The Dow: Although the Dow finished in the green it did it with a bearish looking inverted hammer. It still keeps us in the rising RTC but RSI turned lower and the stochastic climbed some more on Thursday. This isn't yet a convincing bearish reversal sign, but it is at least a flashing caution light.
The VIX: And adding to the general malaise, the VIX on Thursday produced a perfect long-legged doji, closing up just 0.01 points on the day. And this star traded outside the steep descending RTC for a bullish setup. The stochastic here is also getting into position for a bullish setup so I'd expect a higher VIX soon, and quite possibly as early as Friday.
Market index futures: Tonight all three futures are lower at 1:01 AM EDT with ES down by 0.21%. Solid gains on Thursday kept ES in it rising RTC and we nearly hit the upper BB at 1591 intraday. But the overnight is moving lower, RSI is now overbought, OBV has turned lower, and the stochastic is just about to form a bearish crossover. This chart is definitely looking toppy to me tonight.
ES daily pivot: Tonight the pivot rises from 1574.58 to 1580.25..It wasn't a big gain, but combined with ES's move lower in the overnight so far, we are now below the new pivot - not by much but still a bearish sign.
Dollar index: Last night the dollar was looking a bit confused and Thursday bore that out. We lost 0.22% but did it on a tall gap-down green candle. That was enough to exit the rising RTC in a convincing fashion for a bearish setup and drive RSI officially overbought.. It also gave us a newly completed bearish stochastic crossover, so I'd say things are looking lower for the buck on Friday..
Euro: And another long-legged doji on Thursday, this time with the euro closing virtually unchanged. This kept it inside a descending RTC, however the overnight is trading higher and has now exited the RTC for a bullish setup. RSI has also bottomed at oversold. The stochastic remains lying on the floor in a heap but the other signs seem to suggest more upside for the euro on Friday.
Transportation: The trans seemed to run out of gas a bit on Thursday, managing to eke out just a 0.08% gain with an odd half-spinning top, half inverted hammer thingie. It remains in the rising RTC but it also caused RSI to peak at overbought ad moved the stochastic closer to forming a bearish crossover, possibly in a day or two.
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 7 3 5 2 0.750 446
And the winner is...
It's not a screaming bear alarm tonight, but rather an army of dojis all popping out at once and that's enough to give one pause. I'll also note that the market has begun oscillating again in swing trader-friendly fashion after spending most of the year so far in overextended trends that refused to break. And we are right now at the peak of one of those cycles. The last two were on 4/2 and 4/12, so we're about due. I'm really sort of on the fence tonight about this but the preponderance of evidence seems to suggest we're about ready to roll over, so I'm going to vote for a lower close Friday.
ES Fantasy Trader
Portfolio stats: the account now rises to $107,750 after 11 trades (9 for 11 total, 4 for 4 longs, 5 for 7 short) starting from $100,000 on 1/1/13. Tonight we stand aside again - I'm just not feeling the love.