Thursday stock market forecast

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

• Thursday higher only if ES breaks above its pivot, else lower.
• ES pivot 1883.17.  Holding below is bearish..
• Friday  bias uncertain technically.
• Monthly outlook: bias higher.
• YM futures trader: still long at 16,434 .

Recap

Dammit, Janet!

Dammit, Janet!  Wednesday's Fed announcement, as expected, did not include any more interest rate hikes, but it also didn't rule them out for March and that's all it took to send Mr. Market into a 222 Dow point depression.  I have absolutely no idea what they're thinking over there in Fed-land but it seems fairly divorced from the reality of a low inflation environment where things aren't really so hot and in most of the rest of the world are downright ugly.  It's starting to look like a Rocky Horror.

OK, Janet, you got your rate hike last month and showed everybody who's boss.  Now it's time to just declare victory and go home.  The market is clearly signaling that the American economy is not ready for more of this nonsense just yet.  And on that jolly note, let's see where Thursday is headed as January winds down.

The technicals

The Dow:  Things were looking good Wednesday morning after a rally on Tuesday with further advances right up until the 2 PM Fed announcement. Then it was all downhill from there. The resulting candle was mostly bearish engulfing that sent momentum lower just short of overbought. The overall impression here is bearish but I will note that the last four days we have alternated between gains and losses so on that basis you might think that Thursday would be higher.

The VIX:  I scrolled all the way back to the beginning of 2011 to find another day with a perfect doji star as big as the one the VIX put in on Wednesday, without success. The result was a gain of all of 2.71% centered exactly in the middle of Tuesday's action. While the candle reflects indecision indicators continue to fall and are now very nearly oversold. Perhaps more importantly the stochastic looks like it is just about to form a bullish crossover. So all other things being equal it looks like we could just very well see a move higher here on Thursday.

Market index futures: Tonight, all three futures are higher at 12:16 AM EST with ES up  0.40%. Wednesday's action in ES gave us a red spinning top that traded entirely outside an admittedly short rising RTC for a bearish setup, sent momentum and OBV lower, and started the stochastic flattening out for a bearish crossover.  On the other hand, the new overnightdoesn't seem interested in moving lower at all as I write.

ES daily pivot: Tonight the ES daily pivot barely ticks up from 1882.33 to `1883.17. That leaves ES just below its new pivot so this indicaotr is now back to bearish.

Dollar index:   The dollar dropped 0.18% on Wednesday a small gap-down green inverted hammer that sent all the indicators continuing towards oversold though they're not there yet. The stochastic in particular is nowhere near forming a bullish crossover. After wandering pretty much aimlessly for a month the dollar is now near the lower end of this range so it's possible given the day's candle that we could see a move higher here on Thursday.

Euro:  After a small doji star on Tuesday the euro continued its advance by closing back up to 1.0918 on Wednesday on a decent green candle. But that left the indicators mixed with momentum and money flow falling but the stochastic continuing its bullish crossover. From a longer view, the euro is now exactly in the middle of a range that it has been stuck in going all the way back to beginning of December. The new overnight is moving lower a bit but in the absence of any bearish signs this chart is too difficult for me to call for Thursday.

Transportation:  The trans got hit like the Dow on Wednesday finishing the day down 0.88% on a dark cloud cover. Indicators are now mixed with momentum leading the way lower and the stochastic just about to form a bearish crossover. Overall this looks like there's more downside risk than upside potential from this point.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    8      4       5           0       0.67     1036


     And the winner is...

We've got dojis galore on the charts tonight and ES just about sitting on its new pivot.  Those are good conditions for a conditional call: if ES can break above its new pivot by mid-morning Thursday, we'll close higher.  If on the other hand it fails to break above by then, we close lower.

YM Futures Trader

Nothing new again here.