Thursday stock market forecast

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

• Thursday higher.
• ES pivot 1989.42.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias higher.
• Single stock trader: VZ still not a swing trade buy.

Recap

After three days of small range moves the Dow finally made a break on Wednesday at it was to the downside with a 157 point loss. This finally gives us an interesting candle to work with so let's take a look at the charts and see which way Thursday might go.

The technicals

The Dow:  On Wednesday the Dow made a brief attempt to move higher out of the gate but it was all for naught as after the first 15 minutes it spent the rest of the day moving lower to finish with a close to marubozu candle good for a 0.92% decline. That threw it right out of its rising RTC for a bearish trigger, sent the indicators continuing off of overbought and confirmed yesterday's bearish stochastic crossover. So there's really nothing bullish all about this chart tonight.

The VIX:  Last night I said the VIX looked higher for Wednesday and indeed it was, gaining 2% on a long legged green spinning top. That finally took the indicators off of oversold and confirmed the recent bullish stochastic crossover. So despite the reversal candle my guess is that there's more upside to come here.

Market index futures: Tonight, all three futures are higher at 12:19 AM EDT with ES up 0.57%. On Wednesday ES followed up Tuesday's big dump with yet another move lower on a gap-down inverted hammer to close at 1984. That finally sent the indicators off of overbought moving lower. But oddly enough the new overnight seems to be staging a non-trivial rally despite the bearish trigger on a rising RTC exit. So I'm not so sure that I can call Thursday lower at this point.

ES daily pivot: Tonight the ES daily pivot falls again from 2000.00 to 1989.42.  That, plus an overnight rally is enough to put ES back above its new pivot so this indicator now turns bullish again.

Dollar index:  I was quite surprised by Wednesday's big 0.88% decline in the dollar on a tall gap-down marubozu that went right through its lower BB. I had figured with three reversal candles in a row and having hit its lower BB the dollar would go higher. But it was not to be and instead we're left with massively oversold indicators with RSI now down to 2.48 and a stochastic that has fallen off the bottom of my chart. There's no bullish reversal candle here and yet with everything else looking quite overextended I have to wonder if the dollar might not stage rally on Thursday.

Euro:  At least I had the sense to take a pass on the euro on Wednesday which is just as well because it had a big gain to close up at 1.1489, a move which punched right through its upper BB on a tall green marubozu. That leaves indicators all extremely overbought and the stochastic just in position for a bearish crossover. It looks like this finally may be it for the euro as the overnight seems to be wanted wanting to go lower. So my guess is that we could see a lower close on Thursday.

Transportation:  After a massive plunge on Tuesday the trans found a modicum of support on Wednesday in the form of a long-legged green spinning top signaling a reversal warning of sorts. However, the indicators are still nowhere near oversold and the stochastic continues in a full-blown bearish mode. Still, there is some question as to whether the downside might continue on Thursday. It's possible that we could be in for a relief rally as Tuesday's move looks a little overdone to me.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      6       4           1       0.563    627
February   6      4       5           3       0.692    183
March      7      6       5           4       0.647    976
April      3      8       7           0       0.273      1
May        6      5       5           2       0.615    581
June       8      6       3           4       0.706    552
July      10      1       5           4       0.938   1212
August    10      2       3           2       0.857   2314
September  7      4       8           1       0.667   1404
October    3      4       1           0       0.429    238

     And the winner is...

We have a number of reversal signs tonight, particularly in the VIX and the trans.  Ordinarily they're not enough to call a market reversal but with some pretty decent support from the futures I'm going to go a bit out on  limb and call Thursday higher.

Single Stock Trader

After three indecisive days finally on Wednesday Verizon broke to the down side losing $0.37 on a fairly tall red candle. That was enough to send the indicators off of overbought on their way towards oversold and also to complete a bearish stochastic crossover. So the recent uptrend is now clearly over and it looks like there's more downside on the way.