More gains possible Friday

Well the indecision reflected in yesterday's doji was resolved today in no uncertain terms with an awesome 152 point gain in the Dow on increased volume.  I clearly erred by taking my XIV play off the table yesterday.  Today it gained more than I realized the day before.  Oh well.

I guess I let my thinking be influenced by the previous run of short rallies we had back in May and early June where they'd get cut short just when things started looking good.  I'm still net long, so I did make some decent money today.  I bought a bit of Ford (F) at 13.23 this afternoon; it ended at 13.33.  We'll see how far I can drive this one.

Anyway, today's rally brought us to 12,724 which happens to be a resistance level from earlier this month.  If we can clear that, then the next stop is the upper Bollinger band at 12,879 and then the 12,990 region representing the YTD high at the start of May.  So there's some decent room to run between today's close and the next resistance.  Can we get there?

The ES futures tonight would seem to suggest so.  All three market futures are up nearly a quarter percent at 1:40 AM EDT.  ES at 1346 is now well above its daily pivot of 1333.67 and it has no resistance until 1353.  It's beginning to show overbought on RSI, but that always seems to cut in early.  There's no topping sign from either momentum, money flow, or the short stochastic just yet.

Finally, the VIX sliced down through its 200 day MA today like buttah and its indicators are still not at oversold levels.  The most recent two times this happened, it went lower still the next day.  And it's still only in the middle of its Bollinger bands.  Since I'm out of my XIV trade, I'm now going to wait for the VIX to bottom, then I'll take a TVIX position.  That should be sometime early next week.

But until then, I'm keeping my long hat on.  J-Trader's system is also holding long tonight and it's been turning in quite a stellar performance lately.

Failure to follow through worrisome

Last night I was thinking that we'd get more upside action today largely based on the technicals.  Today's 15 point drop in the Dow formed a spinning top indicating indecision in the market.  The failure to follow through today on yesterday's big gains has me worried.

I've gone back to 2008 in the Dow looking for instances where a big up day was followed by a tiny range day.  Most often, the next day is also a small range day.  The fact that we are nowhere near the upper Bollinger band of the Dow is somewhat encouraging.  And the indicators are also all somewhere in the middle of their cycle from oversold to overbought.  So there's nothing particularly bearish there.

Turning to the VIX, we see that it took a gap down day but ended by putting in a green candle, close to its 200 day MA.  Since the VIX is now in the middle of its Bollinger bands, I decided to take my profits on my XIV play this afternoon.  I know I'm risking leaving money on the table, but I'd rather do that than see my profits evaporate should the VIX turn higher tomorrow.  And we've seen it do that from a similar position a number of times this year so far.

Meanwhile, both ES and YM are higher by about 0.2% tonight at 1 AM EDT, but NQ is off by about the same amount.  So all in all, the crystal ball is a bit cloudy tonight.  There are some more jobs numbers coming out tomorrow morning and they may move the market.  J-Trader seems to believe that this may be just a consolidation and is remaining 100% long even though the issue he tracks, TNA, declined 0.63% today.

I'm not so sure.  I think once again the pivots will be key.  ES just now broke over its new daily pivot at 1323.42.  We will need to stay above this number to send the market higher tomorrow.  Similarly, the Dow closed at 12,572, just over its own pivot of 12,527.  Tomorrow's pivot should be higher.  Watch for any cross below that as a bearish signal.My best guess is that we'll see another small range day in the Dow, possibly weakly bullish.  But that assumes no real negative jobs numbers come out.  We'll just have to wait and see.

Let it ride

Yesterday I called for a higher close today and boy we sure got it, to the tune of a monster 202 point jump in the Dow.  The technicals all worked to perfection, Colin Twiggs' money flow hit a bull's eye, J-Trader's Buy/Sell model buy call was spot on, and my XIV trade panned out nicely with a 5.4% gain today.

And I don't think it's over yet.  Even after today's big gain, the indicators are still only just coming off oversold levels.  We're now well above both the Dow daily pivot at 12,386 and the ES daily pivot which for Wednesday is 1315.25.  Today ES ended outside its July 8th descending regression trend channel and that's a bullish setup.  With another 0.15% gain right now at 1:45 AM EDT, that will be a bullish trigger unless we fall below 1308, something that's not looking too likely right now.

And the VIX dove 8.3% today with a gap-down red candle, completing a bearish shooting star.  That is a powerful reversal pattern.  I think the VIX still has lower to go on Wednesday.  It's just now coming off highly overbought levels and it has no meaningful support until its 200 day MA at 18.44.  Today's drop also brings the VIX out of its ascending RTC which is a bearish trigger.  Lower VIX, higher stocks.  I intend to let my XIV trade (which profits from a drop in the VIX) ride tomorrow.

Finally, I note that J-Trader "expects more upside" on Wednesday and I completely agree.  His system has been working amazingly well in a choppy environment.   So tonight I'm seeing lots of reasons to hold 'em and no reasons to fold 'em.  That's all she wrote.

Gains likely Tuesday

Last night I said we might see some higher action today, but I was concerned about the futures being lower.  I also noted that any gains today hinged on the ES pivot and the Dow pivot.  As it turns out, we never got near either one and the results were predictable with the Dow losing 95 points.

So with the Dow in yo-yo mode, alternating between up and down for the last five sessions, which way tomorrow (Tuesday)?

Let's take a look at the Dow daily chart, but tonight it's not mine. Here is the chart from Colin Twiggs' Trading Diary weekly email newsletter (click the chart for a larger version). The interesting thing about this chart is his "Twiggs Money Flow" oscillator, which is his own version of money flow.

While I use money flow as one of the indicators on my charts, I find that Mr. Twiggs' oscillator is much more informative. And tonight it bounced off the 0% level. While it is still early to call tomorrow higher on that basis alone, this version of MF seems to be announcing at least the possibility.

You can learn more about this at http://www.incrediblecharts.com.  This site is well worth a look and Twiggs' newsletter is great - I highly recommend it.  Many thanks to Mr. Twiggs for kindly allowing me to reprint this chart here.

Another bullish sign is that despite today's losses, the Dow has now exited the July 7th descending regression trend channel. In addition, J-Trader's Buy/Sell model gave another buy signal today and is now 100% long.

Meanwhile, all three market futures (ES, NQ, and YM) are up at 1:20 AM by about a third of a percent and have actually been trending higher since 1 o'clock this afternoon. In addition, ES at 1304.25 is now above its new daily pivot of 1302.17. And both the ES daily RSI and momentum have now bottomed from oversold levels and hooked upwards. Those are all bullish signs.

Finally we come to the VIX, which today put in something between en evening star and a gravestone doji, both of which are bearish reversal patterns. And this candle just missed touching the VIX's upper Bollinger band.  Lower VIX, higher stocks.

So all in all, I'm not seeing much in the way of warning signs for tomorrow and I am seeing enough positive indications to have me putting on my long hat. I don't know if this will start a new trend, but at least things are looking up for Tuesday.

Playing the VIX

I talk a lot about the VIX here. Well I recently discovered that you can play the VIX just like a stock using TVIX, VelocityShares Daily 2x VIX Short Term ETN and its inverse, XIV VelocityShares Daily Inverse VIX Short Term ETN.

TVIX ("Trade the VIX") tracks the movement of the VIX and XIV ("VIX" spelled backwards, get it?) tracks the inverse of the VIX. If you believe the VIX is going up, you can buy TVIX. If you think it's going lower, buy XIV. Today I picked up some XIV at the end of the day at 16.10.  We'll see if this trade pans out tomorrow.

Monday higher possible, rest of week uncertain

Last Thursday night, I was weakly bearish on the market for Friday.  Turns out the Dow posted a 43 point gain after wandering around the flat line most of the day.  So I was wrong and J-Trader was right by sticking with his buy signal from the day before.

Now we're at an interesting juncture.  Friday's gain came on significantly increased volume and the Dow is now rather oversold.  The VIX also fell on Friday for the first time in five sessions and its indicators have now peaked from overbought levels.  The VIX looks ready to go lower still tomorrow (Monday) which would imply higher stocks.

However, the weekly Dow chart doesn't look good at all.  In fact, it's almost the opposite of the daily chart.  On the weekly, the indicators are looking overbought and last week's big loss formed a nasty looking bearish engulfing pattern.

So all in all, I'd say that an advance might be possible tomorrow but the rest of the week's not looking so hot.  For that matter, all three market futures are actually lower right now by nearly half a percent.  That's the main negative point I'm seeing right now and it's worth keeping in mind.

Key numbers to watch on Monday: 1310.33, the ES daily pivot.  At 1:30 AM EDT we're sitting just below that at 1309.50.  If we can break above this before the open, that strengthens the outlook for the day considerably.  If not, look for a lower close.  Friday's Dow daily pivot was 12,478 (I don't have Monday's number yet but it should be pretty close to this).  We closed just barely above that at 12,480.  If the Dow opens up and stays above its pivot, again that would be bullish.  It's not guaranteed by any means though.  We'll see.

Rally possible next week, not necessarily tomorrow

Slim Pickens riding the bomb in Dr. Strangelove

 Yeeee hah!

As I read the latest shenanigans emanating from Washington regarding the debt ceiling, I am reminded of nothing so much as Slim Pickens riding his atomic bomb to oblivion in Dr. Strangelove.

This headlong rush to national suicide by what embarrassingly passes for our government these days is nothing short of appalling. And if the reports are to be believed, we now have the spectacle of Emperor Nerobama, the Empty Suit, walking out on negotiations today, late no doubt for his daily fiddle lesson. Note to all involved, both the Demicans and the Republicrats: grow up.

I am fed up with this and just about at the point where I simply want to sit entirely in cash until Doomsday on August 2nd. There is no way to make money in this sort of toxic, psychotic market environment.

That said, last night I was weakly bullish on today. It was looking pretty good for a while there, but the day ended up being a carbon copy of yesterday, with early gains evaporating, ending with a 54 point loss for the Dow. If there's anything positive about this, it's that it brought us closed to oversold than yesterday, with the short stochastic in particular very close to bottoming.

The VIX meanwhile is close to its recent upper range, though its upper Bollinger band at 22.93 is still over 2 points away. It's starting to look oversold, but there's no reversal pattern in the candles just yet.

And the dollar put in a doji suggesting the possibility that it might go higher tomorrow, which would be bearish for stocks.

On the other hand,  the pace of the decline in ES has been decelerating over the past three days and appears to be stopping right at the 50% Fibonacci retracement from the June bottom to the early July top.  This suggests a technical bottoming process in progress.

Finally, I note with great interest that J-Trader's buy/sell model has now given a "strong buy signal". His time frame appears to be on the order of a few days to two weeks. I'm a little surprised, but I'm not going to argue with that, given his trading record since I've been following it.

It does look like we're nearly oversold levels from which a rally is certainly possible, but I don't see the reversal on my charts for tomorrow. Maybe on Monday. But with the current insanity in the market, I guess anything's possible. As I said before, I'm getting ready to head for the exits if the clowns in Washington can't start acting like grown ups real soon.  It's just shameful.

Indecisive, but weakly bullish for Thursday

Yesterday's post was titled "Rally possible on Wednesday" and that's just what we got today.  It wasn't pretty though, with all the gains over by 10:30 AM and the rest of the day dribbling downhill.  But it was still good for 45 Dow points and I'll take 'em any way I can get 'em.

Tonight's call is a little harder.  We're between Bollinger bands and have no real clear guidance from the candlesticks right now.  One positive note is that the Dow respected its daily pivot at 12,544 this afternoon.  In addition, our friend the VIX was unable to make any headway above yesterday's high and ended making another hammer.  Also, the VIX indicators are now even more overbought than yesterday.  And the Dow indicators are approaching oversold levels, though not quite there yet.

The dollar meanwhile did indeed go lower today, as I called for last night.  While it too is in the middle of its Bollinger bands, its short stochastic suggests it still has room to fall some more tomorrow.  All of these factors are bullish for stocks, but not overwhelmingly so.

And while all three market futures are lower right now at 1:45 AM EDT, the ES indicators are now oversold.  We're at one of these points where the ES pivot will be critical tomorrow.  It's now at 1315.75, a bit more than 7 points above the current level.  If ES can break above that level in the rest of the overnight, or in early trading on Thursday, then we have a good chance to close higher.  Otherwise, look for lower.Same goes for the Dow daily pivot.

Interestingly, J-Trader's Buy/Sell model came close to going long this afternoon but not quite.  That pretty much sums up my feelings about the market for tomorrow.  I've still got my long hat on, but only because I can't find a real good reason to remove it right now.

Rally possible on Wednesday

Well for a while there I thought my call for a lower close today was going to go awry, but Ireland came to the rescue and they knocked 'em down into the close and saved my call for a down day.

So now what? I think the clue to tomorrow is in today's chart du jour: the daily VIX. After another gap up day that took us over the 200 MA, the VIX finished at 19.87 after topping just over 20 to form a hanging man. That is a reversal signal. Interestingly, I heard some talking head on CNBC a few days ago say that the market wasn't going higher until the VIX hit 20.  Today it hit 20 and backed off.

Supporting the idea of a lower VIX is its RSI, which entered overbought territory today. The RSI on the VIX is a pretty reliable indicator. Once it turns red, the VIX goes lower either the next day or the day after. Lower VIX, higher stocks.

I also note that J-Trader's buy-sell system issued a short cover today. J-Trader clearly has the hot hand lately and I'm loathe to call for a downside continuation in the face of this.

Then we note that the dollar index put in a classic dark cloud cover today, with all its indicators it overbought levels implying that it's going lower tomorrow. And we know that lately, lower dollar equals higher stocks.

Finally, all three market futures (ES, NQ, and YM) are up nearly a third of a percent at 1:20 AM EDT. And ES in particular is now above its daily pivot, now at 1309.75. Admittedly that happened because the pivot went lower, not because ES went higher. However, any time ES is above its pivot, that number becomes support.

The red trend arrow remains in place until I actually see a reversal, but the upshot is that I'm taking off my short hat and reaching for my long hat for tomorrow.

Sell-off not done yet

Last night was one of those no-brainer calls.  The market telegraphed today's 151 point plunge from a mile away.  And you know what?  It's not done yet.  All of the factors that were in play last night are still there: oversold indicators that have (finally) peaked, a hanging man confirmed by a long red candle, lower futures, renewed rumblings out of Europe about Greece, or now it's Italy, heck it's Greetaly, mama mia, rhe whole deal.

And the VIX, which I did not mention last night, has come alive, with a big gap up green candle to close at 18.39, bumping right up against its 200 day MA.  That puts it right in the middle of its Bollinger bands and with its indicators all still just coming off highly oversold levels, it's still got plenty of room to run.  Higher VIX, lower stocks.

I don't know where this one is stopping but I'm pretty sure the market tomorrow is going lower again.  I took out some SDS again today to hedge my long positions.

Going lower on Monday

Well my forecast last Thursday night for Friday proved wrong, although I still don't think there was much of a clue in the technicals that night to Friday's 62 point Dow decline.

But tonight, the picture seems a lot clearer.  With the both the Dow and the ES putting in hanging man candles last Friday and the Dow falling out of its 8 day long ascending regression trend channel, and all three futures down by around half a percent right now at 1:30 AM EDT, ES having fallen below its daily pivot, now at 1346.75, and J-Trader's system still holding a short signal, it's looking like a pretty good bet that we're going lower tomorrow.  Also, the indicators have now peaked and fallen out of the "overbought broken" status.  This indicates a trend end too.

One more up day possible

My call last night for a higher close today proved to be correct, with the Dow gaining another 93 points.  Today's close at 12,719 leaves us just 62 points shy of the May 10th high, and not much further from the YTD high on May 2nd.  Tonight I'm going to base my call entirely on the candlestick pattern, since I'm just not feeling the love from either the futures (which are basically flat at 1:45 AM EDT) or the VIX (which is acting oddly today).

That leaves us with a recent daily chart starting on June 27th with five big solid green candles, one small doji of indecision and then two more green candles, smaller but still solid, indicating that the indecision was resolved to the upside.  There is not even the hint of a reversal pattern here and volume increased today over yesterday, so I'm going to have to say that we still have room to run at least another 50 points higher tomorrow.

The indicators are all still in "oversold broken" territory, so there's nothing to see there.  J'Trader's Market Analysis system went short today.  I think that might be a day early, but we'll see.  I could be wrong, and Lord knows I am often enough, but I just don't see the selling pressure yet.

Oh, one more thought - there are some big jobs numbers coming out tomorrow and the buzz on the Street is that they're going to come in BTE.  I don't know how they decide this, but these rumors seem to be right more often than not.  So that could also provide a boost to tomorrow's results.  That's all she wrote.

Indecision resolved to the up side, more gains possible

Yesterday, I wrote that the market should be going lower today. The 56 point gain in the Dow we got instead proves once again why you should never use the word "should" when talking about the market. In my defense, I will point out that I was concerned that the futures were not echoing what looked like bearish chart patterns. Turns out I should have (oops - there I go again) had more faith in the futures.

One call I did get right was the VIX, which also went higher today, though not by much. Anyway, if you look at the Dow chart, you see Monday's big run-up followed by yesterday's doji indicating indecision. The decision was made today, and it's up. And having broken out over the resistance highs from the last two days, it appears that there there is no further resistance until 12,760, another 150 points from here.

And the futures are up once again this evening at 1 AM EDT, only tonight they're up even more than last night at this hour, with ES up over half a percent, a strong showing for this hour. I learned that lesson last night - I'm not going to vote against the futures tonight.

We're apparently now in one of these phases where the indicators all get broken at oversold levels and lose their predictive power. Sometimes this can go on for days. Back in March, we stayed oversold for two whole weeks before pulling back.

I checked on J-Trader's Market Analysis and note that he has canceled his short signal too, so I guess I wasn't the only one who got fooled here. Sometimes it just all boils down to, you can't fight the tape, the trend is your friend [insert favorite market cliche here] so my best guess is that we're going higher again tomorrow.

More mixed signals

Yesterday I was thinking today would go lower and indeed it did, though admittedly not by much.  And the Nasdaq actually managed to go higher, but it often marches to the beat of its own drummer, so I don't really follow it.

Now here's what's odd.  It's 1:15 AM EDT right now and all three futures are up.  ES is up 0.17%, NQ is up 0.22% and YM is up 0.15%.  Why is this odd?  Because today the Dow put in a small doji at the top of last Friday's tall green candle.  It almost looks like day 2 of an evening star.  And the Dow's indicators are all topping at overbought levels.

What's more, I was right about the VIX today too.  Remember those two hammers from last week.  Well they pounded the VIX higher today, leaving its own indicators looking like they have bottomed.  The VIX certainly seems poised to go higher still tomorrow, implying lower stocks.  And J-Trader's system is sticking to its guns on its now two day old short call.

Returning to the Dow again, today's close made two days we hit the 12,570 level - a resistance line we tried to break, unsuccessfully, twice in May.  And a quick look at the daily dollar chart looks like it's getting ready to go higher tomorrow too, implying lower stocks.

It looks for all the world like this market should be going lower tomorrow.  In fact, I even took out a position in SDS today to hedge against that.  So I don't get it - with all these warning bells going off, why are the futures higher tonight?  I always hate to go against the futures, but right now I have to go with the charts and say tomorrow is looking bearish.  It will be most interesting to see how this plays out.

Profit taking possible Tuesday

I hope you all had a pleasant 4th of July and a nice break from the markets.  But now it's time to get back to work.  After last week's monster advance, I'd be tempted to go short at time point just on the principle of not being too greedy if nothing else.  Indeed, J-Trader's timing system (that I mentioned in my previous post) has apparently issued a short signal.

So let's start off with one of my favorite charts, the VIX. In this daily chart, you can see how the VIX hit its lower Bollinger band three days ago and has been dribbling down it ever since. It's now formed two consecutive hammers, and as we know, two hammers are better than one. With its indicators all oversold and having bounced off its recent 15.5 support area, I'd say the VIX looks more likely to go higher than lower at this point. Higher VIX implies lower stocks. If not tomorrow, then the next day.

Meanwhile, the Dow daily chart is definitely in overbought territory now and its short stochastic looks ready to execute a bearish crossover. Its momentum has also peaked and is headed lower. The Dow's daily pivot at 12,528 has also moved much closer to the last close at 12,583. A break below the pivot tomorrow would definitely be bearish. We could conceivably open below it for that matter.

Finally, not much guidance from the futures at 1 AM EDT. NQ and YM are up a bit and ES is down just 0.15%. Notably, the ES pivot is now 1332.25 and we just bounced off that level in the last five 5-minute candles. A break under this level before the open Tuesday morning will also be bearish.

This being a holiday-shortened week in which I think many of the big players will be on vacation, it's possible anything could happen, but right now things aren't looking too positive. Though I hesitate to actually put on my short hat just yet, I'm reaching for it and I'd definitely be looking to take any short-term profits tomorrow . In any case, I wouldn't be looking to be a buyer at these levels.

Happy Independence Day

Happy 4th of July!

Today we celebrate Independence Day and the founding of America, a land that for all its faults, is still the envy of the world.

A Trader's Library

It's the start of a long weekend, so I thought I'd share what I read every day to get a feel for the markets.  There's so much stuff out there, it's impossible for any one person to cover it all.  But here's what I've found useful, so head to the beach, load up your laptop or Eye-Pad, and enjoy!

http://www.marketwatch.com/  Marketwatch is a nice web site full of both news and interesting commentary.  It also has a very active user community that never fails to chime in on most any topic.  I find that reading the comments is often as useful as the articles, mostly for their contrarian value.

http://www.finviz.com/  Finviz is the Swiss Army knife of financial web sites.  Its main focus is on charts and numbers rather than news and commentary.  It's fast, free, and well laid out.  It also has a great stock screener.

http://seekingalpha.com/ Seeking Alpha is more for the serious trader than Marketwatch.  Lots of excellent news and commentary here too.  The user contributions tend to be more sophisticated than over on Marketwatch.

http://www.morningstar.com/ A relatively new addition to my reading list, Morningstar has an extensive site, most of which I haven't explored yet.  This is where I get the Morningstar Market Fair Value Indicator I often refer to in my posts.

In addition to these web sites, there are a few blogs I read:

http://quantifiableedges.blogspot.com/  Quantifiable Edges, by Rob Hanna is interesting.  Most every day, he does an analysis of what happened in the past when certain current market trends existed, carrying out the results of a hypothetical investment 10 days.  There's also a paid section (that I don't subscribe to).

http://humblestudentofthemarkets.blogspot.com  Cam Hui is the Humble Student of the Markets and publishes interesting macro-view commentary on market-related topics.  His blog is well-written, well-researched, and thought provoking.

 http://www.buysellmodel.com/ This is J-Trader's Market Analysis.  He recently was kind enough to contact me and bring this blog to my attention.  He has a quant system going that he makes freely available and posts daily updates.  I've just started following this one, but it looks pretty impressive so far.

This isn't reading, but I also generally have CNBC going on a separate monitor, usually with the sound down low.  I never make trading decisions based on the endless parade of talking heads that appear there, but I find it is a useful source for breaking news.  You can subscribe to a real-time news feed, but then you're stuck having to watch and evaluate every item that pops up to get any benefit from it.  CNBC does this work for you.

And finally, although this one is no longer published, it is the greatest gem in the blogosphere on the psychology of trading as far as I'm concerned.  I refer of course to the great Dr. Brett Steenbarger's http://traderfeed.blogspot.com/.  He was kind enough to leave it up when he took his services private last year.  Even though it's no longer current, I highly recommend it to anyone who trades the market, from beginner to expert.  There's something in here for everyone.

All of these sources are free.  I don't subscribe to any pay services, not particularly because they're any better or worse, but simply because there's already so much good free information out there, I would never have time to get around to anything more.

Disclaimer:  I have no affiliation with any of these information sources in any way other than as a regular reader.

The Dow comes through - can it last?

Last Sunday I was very wrong about my call for the week.  But I think I made up for it last night when I gave nine reasons why the Dow would go up today, and only two half-hearted reasons why it might go down.  Turns out 9 beats 2 every time with a whopping 168 point gain to start off July with a bang and cap off an impressive solid five day winning streak.  I started a new rising regression trend channel and it came up with a Pearson coefficient of 0.991, about the highest I've ever seen.  And that's reflected in the daily momentum, which now stands at 68.75.

And that's sort of a problem.  We don't like to see momentum get this high because at these levels it's an overbought indicator.  For that matter, RSI is now in overbought territory and the short stochastic is peaking and looking like it's about to execute a bearish crossover.

I'm going to take a longer view on the monthly chart later this weekend, but for now I will say that after this great run, my initial reaction is to be cautious for next week.  More details to follow.

Nine reasons why we can go higher on July 1st

One thing I like about the market is there's always something astonishing going on. Today it was the 154 point solid green candle the Dow put in. In just four days, we erased very nearly all of the losses from the entire month of June. Amazing.

So after such a big four day rally, can we still possibly go any higher? I get nervous saying it, but I think we still can, and here are no fewer than nine reasons why:

1. Today's gain was a solid green candle with no hint of indecision to it, not like a doji or other potential reversal indicators.

2. This week started off with a three white soldiers pattern and that's usually a very good rally indicator. Today's gain confirmed that.

3. Tuesday we exited the descending regression trend channel that's been bedeviling us since the start of May. That was a bullish trigger, and when that trigger was pulled, the bull ran like mad.

4. Tomorrow is July 1st. The first day of the month is historically bullish.

5. Today the Morningstar Market Fair Value Indicator, which has been gaining over the last few days went back over 1.0 for the first time since the beginning of June. That is not consistent with further market deterioration.

6. Both the Dow and ES are well above their daily pivot points, though not yet so far as to be overextended.

7. Just as the market put in a double bottom this week, the dollar put in a double top and broke under its confirmation line today. It shows no sign of turning tomorrow. Lower dollar, higher stocks.

8. The Dow weekly chart is still looking very strong.

9.  Volume has been increasing for the past three days, indicating we're not running out of buyers just yet.

And I've only got two contrary signs:

1. The VIX fell again today as I had expected and actually hit its lower Bollinger band before ending up forming a hammer. That is a potential reversal sign. Right now the VIX looks to have more chance of moving higher tomorrow than lower. Higher VIX, lower stocks. But remember, the market can lag a turn in the VIX by up to two days, so even a higher VIX tomorrow does not necessarily preclude further gains.

2. The ES indicators have now climbed into overbought territory.  But that can often go on for several days before the top is in, so that's not really 100% reliable at this point.

I guess we'll just have to see.

Still more gains possible

[Note - unfortunately, Blogspot went down last night just as I was about to publish this post. So here it is on Thursday morning instead of Wednesday night. Sorry.]

Sunday night I wrote that the outlook for this week was "very gloomy". Right now, that's getting my nomination for my worst call of the year, and it's only half over. We've been up three for three. And like Doublemint gum, today's 73 point gain in the Dow gave us two, two, two bullish signals in one. First, we broke above the 12,189 resistance level that formed the top of the double bottom formed this month. That's a classic bullish signal. And second, the long descending regression trend channel from May 2nd is now definitely broken.

In addition, the daily 200 MA (dotted orange line in the chart) is now flattening out as the gains from earlier this year fall over the event horizon. This makes it harder for any drops to hit it (now at 11,802). And while we did hit the upper Bollinger band today, the weekly Dow chart remains quite strong.

I actually think we still have room to run higher over the next two days, mostly based on the VIX. Yesterday the VIX put in a big hanging man. That was confirmed today with a long red candle providing a nearly 10% drop to close at 17.27. VIX now has no support until 15.5 and its lower Bollinger band isn't til 13.45. Its indicators are also all on their way lower.  Lower VIX, higher stocks.

A tale of two regressions

Last night I was so uncertain I didn't even attempt making a daily market call. Turns out the Dow went up another 145 points. Where it ended is important. This number, 12,189 (blue line) is exactly the highs from our earlier rally this month. It was also support for the April lows and even the early March consolidation we saw.

I see three things going on here. First is it looks a lot to me like we have put in a double bottom this month, and that is a bullish reversal indicator. It remains to be seen if we can break out above the 12,189 resistance line to confirm that.

Second and third are the two regression trend channels on this daily Dow chart. We exited the first, shorter one eight days ago. We saw the bullish setup, and then the trigger, and we have indeed since gone higher. Now look at the other longer RTC going from May 2nd. Today we closed convincingly above its right edge. That is a bullish setup. If we can close outside the channel tomorrow, that will be a bullish trigger. That makes two bullish technical signs.

Meanwhile the weekly chart is also still looking bullish with the RSI and stochastic both having bottomed off highly oversold levels. There's not much guidance from the VIX tonight, having fallen into the middle of its Bollinger band range.

The futures meanwhile have been sagging a bit into the overnight and are now down about 0.2% at 1:30 AM EDT. ES is at 1291.75 which puts it in striking distance of tomorrow's daily pivot of 1287. That's tonight's key number, if we do go lower into the night and bounce off the pivot, things are looking good for tomorrow. But if we go through the pivot, then watch out.

After two days of such large gains (and note the declining volume there), I'm not at all sure that we can sustain this momentum into tomorrow, but I'm thinking we have a good shot of ending the week higher. Note that the week ends on July 1st, and that is a historically bullish day.