Thursday stock market forecast

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

• Thursday uncertain.
• ES pivot 1916.92.  Holding above is bullish.
• Friday bias lower technically.
• Monthly outlook: bias higher.
• YM futures trader: no trade.

Recap

Huh - well that was certainly odd.  I called Wednesday lower and indeed the Dow plummeted right out the gate.  But right about the time I was congratulating myself on being so prescient, a funny thing happened.  The market turned around and spent the rest of the day clawing its way back to break-even, ending with a 53 point gain of all things.  Go figure.  The resulting candle was interesting so let's take a closer look;.

The technicals

The Dow:  On Wednesday the Dow put in a classic tall green hammer, good for a 0.32% gain. That still leaves the indicators overbought but it short-circuited what looked like a slam dunk bearish stochastic crossover. So in the space of one day this chart has gone from looking bearish to a bullish reversal.

The VIX: Adding to the bullish sentiment is the VIX . This chart fooled me too because I thought it looked ready to go higher on Wednesday. And while it did initially gap up Wednesday morning it spent the rest of the day moving lower to finish with a 1.24% decline on a tall red spinning top in dark dark cloud cover position. Indicators remain oversold and the stochastic is still looking like it has just completed a bullish crossover. The candles tell a different story though and it's looking to me more like there's more downside available here on Thursday.

Market index futures: Tonight, all three futures are barely higher at 12:11 AM EST with ES up 0.01%. So much for the inside bearish harami that ES posted on Tuesday. This has never been one of the best reversal signs and indeed it wasn't again on Wednesday as ES put in a tall classic hammer to retrace most of Tuesday's losses and finish right back up to 1930.25. Indicators remain overbought but the stochastic is now threaded out and has lost its predictive power The new overnight looked like it was wanting to move higher but now seems to be running out of gas, leaving some doubt about Thursday.

ES daily pivot: Tonight the ES daily pivot falls from 1922.58 to 1916.92.  That leaves ES above its new pivot so this indicator flips back to bullish.

Dollar index:   The dollar had its own reversals on Wednesday falling 0.02% after a big initial pop. The resulting candle is a fat hanging man and with indicators now considerably overbought this chart looks bearish to me.

Euro:  I also didn't think that the euro was going to post any gains on Wednesday. That ended up being correct as it finished just a bit lower down to 1.1019. But the candle was a long legged doji star and the indicators have now started rising off of extreme oversold levels. We also have a stochastic that has just formed a new bullish crossover, so with support now established right in this neighborhood it looks possible at least that the euro moves higher on Thursday.

Transportation:  But finally we have a bit of bearish divergence in that the trans dropped 0.47% on a day that the dog and 0.32%. The chart was a tall doji star looking like two thirds of a morning star but the indicators remain overbought and the stochastic is still poised for a bearish crossover. All of that makes this chart too confused for me to call for Thursday.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    9      5       5           0       0.643    1433
February   8      3       3           3       0.786    1010


     And the winner is... 

With the market flopping around like a dead fish lately and four reversals in as many days, and candles that aren't panning out, it's hard to discern any particular short-term direction.  So I won't try.  I simply throw up my hands in disgust and proclaim Thursday uncertain..

YM Futures Trader

No trade tonight.