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- Friday uncertain.
- ES pivot 2260.83. Holding above is bullish..
- Next week bias lower technically.
- Monthly outlook: bias higher.
- YM futures trader: no trade tonight.
So the Dow continues its generally alternating down/up/down action with a 63 point drop on Thursday. The market in general was looking lower to me last night so at least I was right about that. What's mostly notable about Thursday's action was the giant lower shadow of the Dow's candle, which just touched its lower BB resulting in a big hanging man/hammer - you can't really tell since there's no trend in effect at the moment. In any case, we now move on to Friday as we close out the second week of January and look forward to finally getting rid of Obama next week.
The technicals
The VIX: The VIX finally managed a meager 2.5% gain on Thursday, snapping a seven day losing streak on a tall lopsided doji star. Does this mark the start of a rally> It's hard to say since we've seen this level for five days in a row now. It's more like just another day of wait & see. Overall though I still think the VIX has more upside potential than downside risk from here.
Market index futures: Tonight, all three futures are slightly higher at 12:51 AM EST with ES up 0.09%.
ES daily pivot: Tonight the ES daily pivot falls again from 2175.50 to 2260.83. But that was enough to finally put ES back above its new pivot so this indicator now changes back to bullish.
Accuracy:
average points
January 4 2 2 0 0.667 133
 |
| Dow, daily |
Sometimes it pays to back out a bit, in this case to the weekly Dow chart. Here we clearly see the 20K wall that has stymied the Dow for a month now as well as the fact that it's looking quite overbought. And in fact some of the indicators have already begun moving lower: RSI, money flow, OBV, and the stochastic are all headed lower. This is all at least a bit bearish.
I also note what looks like a descending triangle forming in ES and that could lead to a break lower next week.The thing is though that there's still a bit of room to move higher before that happens and ES is in fact a bit higher as I write this. I'm also bothered by that long tail in the Dow (and even more in the SPX for that matter) on Thursday. That doesn't look like classic bearish continuation to me.
So bottom line, this one is too tough for me. That just leaves the call of Friday uncertain. That's all she wrote. See you again Sunday night.
YM Futures Trader
No trade tonight.
Posts
Two interesting excerpts from Jeff Hirsch (editor Stock Trader's Almanac): 1) “Overall the market has been more positive, on average, on the Friday before MLK day and weaker the Tuesday after. Though trading is rather mixed with a relatively even split of ups and downs on the day before and the day after. This mixed and choppy performance is possibly due to the fact that MLK day can either land in options expiration week or the week after. Both weeks have been rather volatile and weak since 1999.”
ReplyDelete2) “Despite New Year bullishness from our early January indicators and our expectation for full-month January Barometer gains that will support our modestly bullish 2017 Forecast, a mid-January break in equities is looking increasingly likely. Since 1996 this January break has been more pronounced and more consistent. This trade, last featured in the Commodity Trader’s Almanac 2013, is beginning to set up nicely right now.
The stock market has demonstrated a tendency to retreat after the first of the New Year, especially when there has been a strong fourth quarter gain. Once the New Year begins we often see a profit taking correction. Investors tend to sell stocks to lock in profits in order to defer taxes from capital gains after the New Year begins. Even though the best time to be long the overall equity markets lasts from October through late April, this January break can certainly give short-term, nimble traders a nice return. With stocks struggling to move higher this week this trade is setting up a little later this year."
Have a nice weekend.