Friday stock market forecast

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

• Friday higher.
• ES pivot 1860.16.  Holding above is bullish.
• Next week bias uncertain technically.
• Monthly outlook: bias lower.
• YM futures trader: no change.

Recap

The signs were certainly there last night that a reversal might be at hand but with the unprecedented bearish momentum so far this year I was unwilling to commit to that and wimped out by calling Thursday uncertain.  As it turns out the Dow finally did manage to stop falling with a decent 116 point gain.  Now the question becomes, is this just a bear market rally or a capitulation bottom.  Let's look at the charts for some answers and see where Friday is headed.

The technicals

The Dow:  Last night I noted a major hammer in the Dow and that was indeed confirmed on Thursday though it was with a lumpy indeterminate candle.  But the indicators are still rising and still just barely oversold so from the looks of it, this is encouraging for Friday.

The VIX:  Last  night I also noted that the VIX seemed to be forming an evening star and that was confirmed on Thursday with a 3.26% drop.  The indicators remain in No-Man's Land, closer to overbought than oversold, so it's difficult to call this one for Friday.  But FWIW, the candle pattern is bearish.

Market index futures: Tonight, all three futures are higher at 12:46 AM EST with ES up 0.85%. On Thursday ES put in a small green spinning top back up to 1861, its third reversal candle in as many days.  However, we're getting some nice follow-through in the new overnight and with indicators all continuing to rise off of oversold I'd not be surprised to see more gains on Friday.

ES daily pivot: Tonight the ES daily pivot rises from 1845.91 to 1860.16. That still leaves ES above its new pivot so this indicator continues bullish tonight.

Dollar index:   The dollar did basically nothing for the second day in a row as it continues to consolidate around the 66 handle on the $USDUPX.  But we now have a fresh bearish stochastic crossover going and falling indicators that are still just overbought so it looks like the next move will be lower on Friday.

Euro:  The euro on the other hand is clearly sagging, making it three down in a row on Thursday.  And the new overnight continues lower so with indicators all off overbought and falling, it looks like more downside is not out of the question here on Friday.

Transportation:  And finally on Thursday the trans confirmed Wednesday's doji for a nice morning star pattern and a nearly 1% pop.  This also brought the indicators right to the edge of oversold on their way higher and exited a month-long descending RTC for a bullish setup.  So that all makes this chart look positive for Friday.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    7      3       3           0       0.700   1107


     And the winner is...

Tonight we're seeing a fair number of bullish signs in the charts.  Can the market actually finally make it two up in a row?  The market has been so badly beaten down all month I'm afraid to even suggest it but everything seems to be lining up that way so I'm just going to go out on a limb and call Friday higher.  That's all she wrote.  See you again Sunday night!

YM Futures Trader

We made back a bit on Thursday so no change here again.

Thursday stock market forecast

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

• Thursday uncertain.
• ES pivot 1845.92.  Holding above is bullish.
• Friday bias uncertain technically.
• Monthly outlook: bias lower.
• YM futures trader: VZ not a swing trade buy.

Recap

Dow daily, 2008

Dow daily, 2016

OK, so we all know what happened on Wednesday - it was Stockopalypse Now.  I've been resisting the temptation to compare this to 2008 because everyone's been saying how this isn't 2008  Then I got one of those emails from one of my brokers today about how it was important to stay the course and not to panic, etc.  The last time I got one of those was in, yes, 2008.  So let's take a good look at the bogeyman 2008.  Here he is, on the left.

OK, and then here's today's action on the right. (Click to enlarge, as they say).  Take a look at the action of October 2008 compared to January 2016.  The similarities are striking, I'd say.

OK, so in the meantime, let's see where the world is going on Thursday, before it comes to a sudden and awful end.

The technicals

The Dow:  The Dow's monthly low close of last August was 15,666 (interesting how that 666 keeps coming up, isn't it?  666 was also the SPX low in 2009).  On Wednesday we retested that low, successfully as it turns out.  The resulting candle was a fat hammer, the biggest we've seen this year so far, and on heavier than normal volume.  If you don't believe the Dow will hit zero in April then you must believe there comes a point when all the margin calls have been satisified, all the scaredy cats have fled, and all the shorts have shorted all they dare.  I don't know if Wednesday was capitulation, but the headlines in the paper and on the TV news were all about the stock market.  And that's always a good sign the bottom is near.  Of course when we get into these sorts of death spirals, we have to see confirmation so I can't call it just yet.

The VIX:  I was thinking the VIX might go lower on Wednesday, but instead it gained nearly 6% on a giant lopsided long-legged doji star that tested its upper BB before falling back. Once again the upper BB proved to be the third rail of the VIX. With two thirds of a bearish evening star now in place I'm thinking this could be a sign that the VIX moves lower on Thursday.

Market index futures: Tonight, all three futures are higher at 12:34 AM EST with ES up 0.08%. Mr. Market must have had an excellent lunch on Wednesday because shortly after 12:30 PM the market began reversing its ugly declines of the morning with ES ending the day on a very tall classic hammer. This candle also marked the second day trading outside the year-long descending RTC and that qualifies as a bullish trigger. Whether or not that actually means anything remains to be seen. However we note that the new overnight is trading non-trivially higher. Also the indicators all continue slowly but steadily rising off of oversold and that eventually has to count for something.

ES daily pivot: Tonight the ES daily pivot rises again from 1878.92 to 1845.92.  That again places ES back above its new pivot so this indicator continues its flip-flopping, this time back to bullish.

Dollar index:   Last night the dollar disconfirmed Tuesday's dark cloud cover by gaining 0.14% on a small doji star. Indicators remain overbought but the action over the past week has been herky jerky and therefore I just can't come up with a valid reason to call it one way or the other tonight.

Euro:  And it's pretty much the same story with the euro which seems to be stuck lately in a congestion range between the area of 1.086 and 1.096. The indicators are pretty much all just moving sideways so they are no help. And the bottom line here is that I am not touching this chart either tonight.

Transportation:  In something of an odd bullish divergence of sorts, on Wednesday the trans lost only 0.48% in other words three times better than the performance of the Dow. The resulting candle was a very long-legged doji star on increased volume. Indicators remain oversold so the next move could just possibly be higher although given the performance year to date this requires confirmation.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    7      3       2           0       0.700   1107



     And the winner is...

Tonight we have a successful retest of the August lows and big hammers on teh charts, usually good reversal signs.  But the prevailing sentiment has been just so awful for so long lately that I'm leery of calling the market higher.  I'd say we're overdue for a reversal but none of the reversal signs has been panning out all year so far.  We're also not close enough to the ES pivot to make a conditional call so I guess all that leaves is Thursday uncertain. 

YM Futures Trader

Ugh.  Don't even ask.

Wednesday stock market forecast

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

• Wednesday lower.
• ES pivot 1878.92.  Holding below is bearish.
• Rest of  week bias uncertain technically.
• Monthly outlook: bias lower.
• YM Futures Trader: still long at 16,434.

Recap

After calling Tuesday higher I was pleased to see the Dow pop right out the gate as opposed to so many days this year when it took an immediate dump instead. But then I began to worry as it spent most of the rest of the day just falling lower again as the bears reasserted themselves. It looked like my call for a higher close was going down the drain until it was saved at the last minute by a late afternoon rally to finish with a 28 point gain. Meager as it is I'll take it. So having dodged that bullet let's move ahead to Wednesday and see where that will be going.

The technicals

The Dow:  On Tuesday the Dow formed a textbook perfect long-legged doji star near the lower end of last Friday's big dump. This small game was nonetheless good to finally lift the indicators off of oversold as they continue to drift slowly higher. The stochastic is now threaded out at oversold and has no predictive power. So what we're left with is a reversal warning but considering the way things have been going all this year so far I will require some confirmation first.

The VIX:  Last night I said the VIX lookedf likely to go lower on Tuesday and that's exactly what it did, dropping 3.59% back down to a still relatively elevated 26.05 on a green inverted hammer. However that was enough to send all the indicators finally on their way off of overbought levels towards oversold. And also what looked like an incipient bullish strochastic crossover from a high level was cancelled and now it's looking more like a bearish crossover. The overall impression is that there still room to run lower here however that's far from a given considering the craziness we've seen all year so far. So I'm just going to defer on this chart tonight.

Market index futures: Tonight, all three futures are sharply lower at 12:19 AM EST with ES down a massive1.47%. On Tuesday ES put in a lopsided long-legged doji star nearly retracing both last Friday's highs and lows at one point intraday. The net result was little change and the indicators are now wondering about just off of oversold. The stochastic which looked like it was forming a bullish crossover has now threaded out and thus has no predictive power. In addition, OBV continues to fall as it has for the last four days now hitting -5 million. This is the sort of reversal warning that requires confirmation and at least with ES we can get that in the overnight. But right now there is no confirmation as ES is just continuing lower once again. It now appears intent on retesting for the third time the September lows. If that fails it will move on to the August lows around 1857. However with this chart more oversold than overbought I question whether there is much more downside available here. Nevertheless right now this chart is not looking very healthy at all.

12:15 AM update: ES has now broken down through August daily closing support at 1857, disconfirming the doji. All that remains is the August intraday low at 1824.25 and we're not that far from that. If that goes, we're in uncharted territory - that's the lowest level this contract has hit since it began trading.


ES daily pivot: Tonight the ES daily pivot dips from 1881.75 to 1878.92. That still leaves ES well below its new pivot so this indicator flips right back to bearish.

Dollar index:   Last night the dollar looked too tough for me to call despite something of a fat hammer candle. It did try to rally on Tuesday with a nice early gap up, however it spent the rest of the day retracing that before finishing virtually unchanged for a tall red candle. That left all the indicators quite overbought with the stochastic starting to narrow around for a bearish crossover. This is just about a dark cloud cover so the overall impression here is negative for Wednesday.

Euro:  Last night I thought the euro might go lower on Tuesday but instead it did manage a small advance to close back up to 1.0839. However it did it on a narrow hanging man at the upper end of the last week's trading. But that was enough to send the indicators moving higher again though they have not yet reached overbought. The overall action here looks fairly nervous and the new overnight isn't really going anywhere either so tonight I am not going to touch this chart. Sorry.

Transportation:  Like the Dow, the trans continued lower on Tuesday in a bit of barish divergence losing another 0.48%. That now makes it three reversal warnings in a row, this one on a classic red spinning top. But these sorts of candles seem to mean very little these days. Oddly enough all the indicators continue rising from their oversold levels of a week ago with the one exception of OBV which continues fall and having now reached crazy low level of -10 million. The pace of the decline does seems to be slackening but it is still impossible to call a reversal on this chart. The selling has to end sooner or later but at this point I'm just not sure when that might be. Moving all the way out to the monthly chart shows absolutely no support here all the way down until the 6186 level which was set all the way back in the middle of 2013! That is not very encouraging.  The trans are following the same path as the Dow and at the current month-long rate of change, are due to hit zero in mid-April of this year.  That's right, in three months we can all pack up and go home.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    6      3       2           0       0.667    858


     And the winner is...

Tonight it's just looking like more of the same old same old - oil and China, China and oil with no end in sight.  This one unfortunately is pretty clear: Wednesday lower.

YM Futures Trader

No change tonight.

Tuesday stock market forecast

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

• Tuesday higher.
• ES pivot 1881.75.  Holding above is bullish.
• Rest of  week bias uncertain technically.
• Monthly outlook: bias lower.
• YM Futures Trader: still long at 16,434.

Recap

It's a good thing I called the market lower last Friday because it not only gave up all of Thursday's gains but continued lower with a vengeance for a 391 point drop in the Dow as the month-long cascade continued unabated for whatever reason. Whether it was options expiration, the price of oil, or geopolitics, who knows. Now we're left with the difficult situation of starting a new week on a Tuesday with 3 day-old charts but let's take a look anyway and make the best of it as we resume our daily forecasts.

The technicals

The Dow:  In a pattern that has become all too familiar this year, on Friday the Dow began the day with a massive dump right out the gate and then spent the rest of the day just wandering around the lower edges of that trying to recover but to no avail. The net result was another ugly tall red candle, this one just catching support at the September lows around 15,993. Oddly enough indicators have actually been rising for a week though they still remain oversold. But when this monster sell off ends is anybody's guess at this point. There's no bullish signs on this chart and like I said last week at its current rate of selling the Dow is due to hit zero in April and that's not too far away.

The VIX:  After giving some signs last Thursday with a small red spinning top that it might soon return to Earth, instead on Friday the VIX put in another big gap-up candle to gain nearly 13% in action that busted right through its upper BB. That also sent the indicators rising again to just shy of overbought and also formed a bullish stochastic crossover from a high level. Those are often good for another day or two of higher prices however the VIX also rarely spends much more than a day or two above its upper BB. Overall this inverted hammer though has more of a bearish appearance than anything so I give better than even odds that the VIX goes lower on Tuesday.

Market index futures: Tonight, all three futures are higher at 12:49 AM EST with ES up 0.88%. Last Friday ES took it on the chin making zero headway above Thursday's nice move higher and simply continuing it's depressing month-long sell off as the day wore on. In the process it gave up recent support around 1883 before finally testing the August and September lows. Interestingly that test was a success and if we can manage to move higher from here that would mean a triple bottom which is itself a bullish sign. Also interestingly like a few other charts indicators have now been actually rising for a week here. We are also actually trading outside this month-long descending RTC for a bullish setup. And even more interesting is the fact that in the new Monday overnight ES is trading non-trivially higher. That gives one at least a mild expectation that perhaps this time we can call a short-term bottom.

ES daily pivot: Tonight the ES daily pivot dives again from 1904.33 to 1881.75.  And that, plus a strong overnight move in ES is finally enough to put it bck above its new pivot so this indicator turns back to bullish.

Dollar index:   Lately the dollar has been looking like it wants to go higher but never seems to be able to, as for two days in a row it has put in green candles but each one with lower highs than the day before. Indicators remain quite overbought and the stochastic has started to come round for a bearish crossover. So I'm taking Friday's green hammer with a grain of salt and simply not touching this chart tonight.

Euro:  And the euro is undergoing similar weird gyrations on its daily chart. On Friday it put in a very tall inverted hammer as it tried to continue a two day winning streak but seems to expended all of its energy settling for a close at 1.0924. Interestingly the new Monday overnight is moving distinctly lower and forming a nice dark cloud cover as well. With indicators now falling and a bearish stochastic crossover in place I'd say it's looking good that the euro goes lower on Tuesday.

Transportation:  Like everything else, on Friday the trans got hammered hard losing another 1.63% on a red hammer. This makes the second reversal candle in a row and the indicators have actually been rising for a week now though they remain oversold. Whether this means a reversal is at hand or not is anybody's guess at this point, though given how crazy the action's been all year long so far., who knows. I had to go back to the monthly chart to see how low the trans have gone in just three months and the answer is the last time we were at these levels was October of 2013. That is a lot of wealth destruction my friends. The trans continue to ride the monthly BB lower and have also formed a monthly bearish stochastic crossover. That is simply an awful indicator.

Accuracy: 

Month    right  wrong  no call  conditional  batting   Dow
                                             average  points
January    5      3       2           0       0.625    830

     And the winner is...

The first trading day on this four-day week is historically bullish.  We also now have a successful test of both the August and September lows on the books for the SPX.  And the SPX Hi-Lo indicator hit zero last Friday for the first time since last November 13th, and the next day after that began a five day rally.  And the Chinese sellers did not show up Monday evening for their usual 8:15 PM dump for a change.  And finally, all the futures are moving significantly higher in the Monday overnight so I'm going to just call Tuesday higher.

YM Futures Trader

Nothing new here, we remain long at 16,434 in anticipation of further gains.