Testing resistance - third time the charm?

Yesterday I took a wild guess that we'd be up today on the strength of the overnight futures. Turns out it was a pretty good guess with the Dow advancing a big 187 points. This was significant because today's close at 12,453 puts us right back to the 12,450 resistance level that has bedeviled the market all year with 13 failed attempts to breach it so far. But today's high of 12,475 was the highest we've hit yet.

Can we move higher tomorrow or will this attempt fail like all the others? I actually think we might have a shot at it, because unlike the other times, this time the indicators are not all in significantly overbought territory. Even with today's big gain, the indicators are now actually just coming out of oversold status. And it also took us convincingly out of the descending regression trend channel going back to April 8th.

But I'm putting up the daily ES chart today since at this hour (1 AM EDT) we have a new candle forming, and it's green, with ES now up a very decent 0.43% in the overnight. YM is up too and NQ is up nearly one percent. I've noticed that often resistance levels take three tries to penetrate and if we count February as number one, the beginning of this month as number two, then we're now going after this level for the third time.  And we now have to wonder if the third time will be the charm.

Meanwhile the VIX actually broke under its strong long term support intraday today, though it did close at 15.07 on a gap down green candle. Right now, the futures seem to be saying that the VIX is unlikely to recover this level tomorrow.

Meanwhile oil actually went back up today over $111, a fact that the market totally ignored. All of this seems to be pointing to higher prices for stocks again tomorrow.  We'll see.

Confused and confusing

Well, Sunday night I thought the market would be up Monday.  It went down.  Last night I thought it would be down today, so naturally it went up.  At this point I will state right up front, while I still have any hair left that I haven't yet pulled out, that I do not understand what the market is doing right now.  It just gets into that state sometimes.

There's no guidance at all from the VIX tonight, which fell right back into its recent consolidation range.  And I just don't know what to make of the recent up down up down in the Dow.  About the only indicator we have for tomorrow comes from the futures, with the ES, NQ, and YM being up by a healthy 0.55%, 0.69% and 0.34% respectively at 12:40 AM EDT.  The ES has recovered nearly all of its S&P induced losses from Monday and its RSI and stochastic look bullish.

Unfortunately, I was away from my desk with other commitments today and wasn't able to spend as much time watching the market as I usually do, so my best guess, and at this point it's only a guess, is that we may be going higher tomorrow, mostly based on the futures and the VIX.  We'll see.

No trades today.

Dropping the bomb

Today was one of those days you just cannot see coming from the charts.  Everything looked technically like it was set to go up today, at least a little.  When I got up this morning and looked at the charts, I thought that reactor in Japan must have exploded in a giant mushroom cloud overnight or something.  Instead it was S&P dropping their rating bomb on the market.  When all of the action is over in the first 90 seconds of trading like that, I don't see how you can make any money there.

Thankfully, the Dow recovered somewhat as the day went on and I finished being down "only" 0.75% instead of the 1.5% I had lost at the open. But that left us with a problematic candle.  Not quite a hammer, not quite a bearish engulfing pattern.  I've seen this a few times before and generally the next day is lower.  And indeed the futures are all lower now at 1 AM EDT by about a third of a percent.

The only thing I got right today was that the VIX indeed could go no lower and in fact gapped up at the open.  Even there though we ended up with this odd case of the VIX closing higher on a red candle.  In fact at 16.96, it is now smack back in the middle of its recent consolidation range.  But its indicators suggest more upside is possible at least in the short term.

Now that S&P put the kabosh on what should have been a developing upswing, I think another leg lower is not out of the question.  Note also that we closed below the 12,250 support level today and are now right back into the descending RTC channel from April 8th.  The next support is at 12,070, which is also the lower Bollinger band.  After that, there's no support until 11,615, the March 17th reactor/tsunami low.  I don't think we're going that low tomorrow, but it's not out of the question eventually.  In any event, I'm turning the swing trend arrow back to red.

I think part of the problem is that this is a holiday shortened week and also a school break.  I'm sure a lot of the Wall St. Byg Wygs are on vacation leaving the market to pretty much careen along on its own for a few days.  Right now the daily situation is too tough to call, but the weekly chart I mentioned yesterday is starting to look even worse. I have removed my long hat and I'm putting on my medium term short hat.  I'm definitely not liking the market for the next couple of weeks at least.

The Contrarian Contrarian

Last Thursday night, I said we'd go higher on Friday and that's just what we got, with a nice 57 point gain to close at 12,342 in the Dow.

Technicals

So what's next? Let's look at the daily Dow chart here because that seems to be the most compelling right now. This is actually looking quite bullish to me. Friday's gain took use decisivly out of the descending regression trend channel going back to the peak on April 8th. And it also provided a bullish confirmation of the hammer candle formed on Thursday. And finally, all of the indicators are in oversold territory and have executed a bullish hook, signifying that they have bottomed.  We see the same story on the daily ES futures chart.  However, ES is actually down by 0.2% at the moment, although it's still early in the evening (8:50 PM EDT).

In any event, note that historically the day after Tax Day is bullish. The Stock Trader's Alamanc was right on the money with a bullish history for Friday. They say that tomorrow is also a good day.

The contrarian contrarian

So what's up with the "contrarian contrarian"? Well it seems to me that everything I've been reading on the web or seeing on the news lately is full of pundits claiming that there's a massive overload of bullish sentiment and that from a contrarian standpoint, this means the market is ready to go down. Well let's take this contrarian thing one step further: if all the analysts are bearish because everyone is bullish, should I then not become bullish because of their bearishness? OK, this is about where my brain starts to hurt, but you have to admit, the daily chart doesn't look bearish in the least right now.

On the other hand, the weekly Dow chart is not looking nearly as good. In fact, on the weekly Dow, we have a doji followed by a hanging man on increasing negative volume. And all the weekly indicators are overbought. Also, the weekly VIX is now down hard against a support level going back a year now around 15.25. Unless it somehow manages to break under that (and I don't think it will), the VIX has nowhere to go but up, and that's bearish for stocks.

Oil

Also oil has now regained the 110 "alarm level" after two big down days at the start of last week. I don't think oil is nearly through with its run up. I remain convinced that this is 100% speculation driven, not supply and demand. I give it another two months. That coincides quite nicely with the peak in 2008, which came at the end of June.  This will also put the squeeze on stocks.

So right now I'm thinking that tomorrow, Monday, is going to be up, but the rest of the week is in doubt.

Performance

I'm not really doing as well as I'd like at this point. My performance has been hurt by the fact that it seems that all of the members of my low price/high yield portfolio (which is part of my trading account) suddenly decided to do secondaries in the last few months, tanking their stock prices. Still I am up 5% year to date, which is just over 27% annually. That's not too bad, although the Dow is now up 6.6% and that's the benchmark I try to beat. And for the week, I was down 0.16%, or a bit worse than the Dow.

Another thing that's limiting my results is that I've been raising cash lately. I think this year I'm going to "sell in May and go away". I didn't do that last year and subsequently regretted it.  Right now the monthly chart is looking even weaker to me than the weekly, with a hanging man followed by what is at the moment a doji.  We'll see.

Outlook mostly positive for tomorrow

Last night I wrote "Further gains possible tomorrow" and that's just what we got today, with the Dow's 14 point gain doubling the advance of the day before.  And right now, it's looking like there may be more upside in store for tomorrow.

Starting with the VIX, we see that it continuyes to eat away at it's supprot around 16.  After gapping up at the open, it just fell away to close at 16.27.  At this point, I'm thinking that it's year-long support level at 15.5 might not be that far out of reach.  A visit to that neighborhood will surely be positive for stocks.  Also noteworthy is that today's candle was a bearish engulfing pattern.  We saw what that did to the oil chart just a few days ago.

The Dow meanwhile put in a hammer pattern and closed at 12,285.  Once again the 12,250 support level was tested and once again it held.  You know the old saying, "That which does not kill me makes me stronger", well the more tests of this level we survive, the stronger that support becomes.  In addition, the Dow's short stochastic began a bullish crossover today and both the RSI and momentum hooked upwards, also bullish.

The story is pretty much the same in the ES futures indicators.  Turning to the ES regression trend channel, we see that three days of basically sideways action have brought us almost to the right edge of the descending channel.  One more day of this will be a bullish setup.  The only negative in the picture is the prices of the futures themselves.  All three are down right now (2 AM EDT), though only modestly from 0.1% to 0.16%.

And historically, The Stock Traders Almanac tells us that Tax Day, April 15th, is historically bullish with the Dow down only five times since 1981.  (OK, I know taxes aren't due til next Monday this year because of some holiday in DC, but I'm assuming the principle remains the same).

So basically all of the factors I talked about last night are still in play tonight, only more so.  This means that although I generally don't like going against what the futures are telling me late at night, I'm going to have to go with the technicals on the charts and make a guess that tomorrow will end out the week on an up note.


Trades

Today I took a small position in Alcoa (AA) at 16.49.  It's taken a beating over the last week and is looking quite oversold at this point.

Further gains possible tomorrow

Yesterday's post was titled "Now looking for higher" and that's just what we got today. Admittedly a 7.4 point gain in the Dow isn't exactly the big score, but it represents a victory for the bulls nonetheless.

And President Nerobama made a speech on TV this afternoon. In case you missed it, I can summarize it real fast: "blah blah blah". That was good for about a 10 point drop in the Dow, but it regained all that and more after he quit (quit speaking, that is).

Moving right along, today's daily chart is not of the Dow but of the VIX. I've been using the VIX lately to guide my market forecasts and it's been working pretty well. Note in this chart how the VIX has been drifting lower over the past two weeks. And the past two days have been interesting. Yesterday it gapped up but ended up putting in a red candle and today we got the exact opposite - a gap down that ended up as a green candle.  That's a real tug-o-war.

But note how today's open, at 16.2 was lower than any point since February 18th. The VIX support at this lower 16's level seems to be softening. If the VIX cannot muster a gain tomorrow, I think it's likely to go lower, to its baseline support at 15.44. That's a level that goes back a whole year. One might even note the lower Bollinger band at 13.74, though I don't think a trip down that far is in the offing any time soon.

Also, the VIX indicators, which just a few days ago were indicating oversold, are now out of that region. By contrast, all of the Dow indicators are now in oversold territory. We also saw another test of the 12,20 level today and once again, it held. The Dow ended up forming a doji indicating corresponding indecision and a loss of downward momentum after yesterday's big drop.

Oil meanwhile sank into the 105's today before recovering but only back to the low 107 area in the overnight.

Finally, the futures are all up at this hour (1:15 AM EDT), and although admittedly only by a small fraction, the trend has been up since around 9:30 PM.

So overall, I'm liking the prospects for another gain tomorrow. With the VIX still unable to find the gas pedal and the Dow having dropped into oversold territory, I think we've got more upside potential than downside risk at this point.  That's all, she wrote.

Trades

I got back into my MGN silver play at 2.86 today.

Now looking for higher

Last night's post was titled "Looking for lower" and boy we got lower today, to the tune of a 117 point dump in the Dow.  The good news is that today's close at 12,263 actually represents a successful test of the support level at 12,250.  In addition, the Dow indicators have now all gone from way overbought to the edge of the oversold area.

And go back to yesterday's post for my comments on oil.  Look again at the bearish engulfing pattern.  That is one of the most reliable candlestick patterns out there.  And sure enough, oil was down big today, falling below 107.

Now after today's big drop is it possible to still go lower tomorrow?  Sure, except for two things.  First, while the VIX gapped up at the open today, it ended up in fact putting in a red candle.  It remains stuck in the 16-18 region it's been stuck in for the last 10 sessions.  I don't see much fuel in the VIX chart pushing it higher right now.

And tonight all three futures are up by better than four tenths of a percent (at 1:30 AM EDT), and that is definitely non-trivial.  In fact, all of the indicators for the ES have now traveled completely from very overbought to very oversold, even more than the Dow indicators.  The RSI has actually bottomed and the short stochastic is ready to execute a bullish crossover.  And the ES bounced off its 40 day MA at 1307, also a bullish sign.

So there you have it: the specter of sky high oil prices draining cash from the economy abated (at least for now - I wouldn't be surprised to see the advance resume later this spring), at least some mumblings about a resolution to the Libya problem, no new sever damage from the latest Japan earthquake, the VIX stuck in the doldrums and the futures guiding higher.

Put it all together and whereas last night at this time I was moderately pessimistic, tonight I am moderately optimistic.  I'm still leaving the red trend arrow in place because we haven't seen an upturn yet, but I would not be surprised to see tomorrow close higher.

No trades today.

Looking for lower

Yesterday, I couldn't decide if the market was going to go up or down today. As it turns out, the market wasn't able to decide either. First the Dow went up, then it went down, finally ending higher by just a single point. In the process it created a long tall doji with a lower high and higher low than yesterday. Clearly today did nothing to wring the indecision out of the market. What it did do was bring the indicators a bit further off their overbought levels.

But the really interesting chart today was not the Dow, it was oil. Check out this daily chart of the June futures. You see here that oil had been in a pretty steady uptrend since the end of March. Until today. What's remarkable about this chart is not just that oil (finally) went lower, but that it put in a bearish engulfing pattern doing it. Today's red candle completely covering the span of yesterday's range is quite a bearish sign at least in the short term and I would expect to see oil go lower tomorrow.

Indeed after closing at 110.57 today, oil has been continuing lower in the overnight, hitting 109 just now at 1 AM EDT. This is also important because it puts oil back below the 110 level that Jim Cramer was getting so exercised over on his TV show last Friday (yes, I watch Cramer). I can only view this as being positive for stocks.

That said, the Dow's performance in recent days leaves a lot to be desired. The assault on the 12,450 level fizzled, and with today's close at 12,381, the 12,390 support level is now in serious question. In addition, all three futures are lower this evening by about half a percent. That is a significant level of decline that we can't ignore.

The VIX meanwhile closed at 16.6, the lower end of its recent daily ranges and just above its strong support level around 15.5. Thus the VIX continues to have more upside potential than downside. And notably, today's drop in the VIX was not accompanied by higher stock prices.

So all in all, I'm rather more bearish right now than I was last night and would not be surprised to see the market go lower tomorrow.

Trades

My two silver mining trades, MGN and GPL, after doing nicely yesterday, both got stopped out just above break-even today. Silver itself had its largest drop since February 24th and put in a bearish engulfing pattern that looked a lot like today's oil chart. I'll be watching to get back in at a lower level.

Meanwhile, I am now up to 33% in cash.  I'll discuss my reasons for this in a later post.

More mixed messages

I was wrong about Friday's action in the Dow.  We ended up with a 29 point decline which provides us with a bearish confirmation of the hanging man we saw Thursday.  On this basis, I'd say that we're going lower tomorrow.  Also, all of the daily indicators have peaked and are now headed lower, another bearish sign.

However, all three futures are actually up right now at 12:30 AM EDT with both the ES and YM up by 0.23%, and the NQ up 0.40%.  These are non-trivial numbers.  Also, the ES moved above its daily pivot which for Monday becomes 1326.  And the 12,390 support level on the Dow was tested on Friday but ultimately held.  And Friday's loss was on lower volume.

Also there is now news out of Libya that Col. Khadaffi has apparently agreed to a plan to end the fighting there (though I'll believe that when I see it).  That alone could account for the rising futures.  And oil, after a big run-up on Friday is actually down a bit in the overnight.

Meanwhile, the VIX on Friday jumped up to the top of its recent consolidation range to close at 17.87.  The 18 level is resistance for the VIX.  However, it still has more room to rise than to fall and that fact is bearish for stocks.

So there you have it - another night of mixed messages from the market.  I guess it all boils down to whether you want to believe the charts or the futures.  The charts suggest we're going lower tomorrow, the futures are guiding higher.  If the Libyan news proves true and oil goes lower, then we could move higher tomorrow.  But at this point, this is one of those times that's just too tough to call.  We'll just have to wait and see.

More of the same

Yesterday I had a vague feeling we might close lower today and that's just what happened, with the Dow losing 17 points. The intraday chart might look good, with the Dow erasing most of its early losses in a strong afternoon rally, but unfortunately, this created a hanging man candle and that is a classic bearish indicator.

However, we need some confirmation of the hanging man to call a top. Right now we're not getting much in the way of that from the futures with the ES and YM both up just 0.08% and the NQ actually down by 0.02% at 1:05 AM EDT. The ES had actually been rising all evening until exactly midnight when it abruptly revered course. Why? Who knows.

Our other favorite indicator, the VIX meanwhile is bumping along its support level around 17 and really seems to be unable to gain any traction. This is surprising considering the amount of bad news floating around right now: continuing war in Libya, a new earthquake in Japan, new oinking noises from the PIGS, and the threat of a government shutdown tomorrow night (although personally I view that as a piece of good news).

If all of that can't drive this market down more than today's 0.14% loss, it's difficult to make the bear case for tomorrow, hanging man or no hanging man.

Meanwhile oil continues it speculation-driven march to the stratosphere, closely replaying the insane summer run-up from 2008. Based on where we are now compared to then, it will take another 9 weeks before we hit the blow-off top at $147. I don't know what's so magical about that level, but it was the peak in 2008 and it will be significant resistance this time around. And I have no doubt we're going there again.

So that's the other piece of bad news. The market doesn't seem to care that oil has topped $111. We're now in one of these modes now where bad news just doesn't matter. In the space of less than a month, we've gone from a completely news driven market to a completely news-ignoring market. It never ceases to amaze me how that happens.

And I think that once again, the pivot will decide tomorrow's fate. We closed at 12,409 today; the pivot was 12,421. Tomorrow the pivot should be a bit higher. If we can break above that early in the session, then I think we close higher. OTOH, if we bounce off it and go lower, then the whole day will end lower. Watch the early morning trading after the usual initial noise burst subsides (I'll be sleeping) and see if that isn't what happens.

In the meantime, we're in just about the same place we were yesterday: limited downside to the VIX preventing much of a rise in stocks, and strong support at 12,390 (which was tested today but ultimately held) preventing much of a decline. So I'm looking for action constrained in the 12,390 to 12,450 range (yesterday's high) tomorrow.  My best personal guess is that we're going higher tomorrow.  That's all she wrote.

No trades today.

More range bound trading ahead

Yesterday I said I though we could go a little higher today and that's just what happened, with the Dow gaining 33 to close at 12,427.  In fact, nearly the entire day was above what is now the 12,390 support level and every day that goes by staying above that makes the support stronger.  And that number is right around the daily pivot (12,395) making it stronger still.  Also we note that the Dow volume has been increasing three days in a row now.  The fact that yesterday's doji resolved to the upside is also technically bullish.

Turning to the VIX, it tested its own support at 16.5 for the third time in four sessions, and it held, closing not much higher than that at 16.90 today.  This suggests that the VIX doesn't have much lower to go from here, implying that the short term upside for stocks may be limited.

Also on the downside, the futures are all running lower this evening at 1:20 AM EDT, off by 0.13% to 0.19%.  The negative bias was reinforced when the Bank of Japan news hit just after midnight Eastern.  And we are now exiting the historically bullish early part of April.

So overall, my feeling about tomorrow is about the same as it was last night for today.  Some mixed messages in the data and no strong forces guiding us in either direction.  To the contrary, we have a VIX indicating limited upside for stocks, and a strengthening support level at 12,390 indicating limited downside for stocks.

That all makes for another tough call.  My instinct right now says we may go a bit lower tomorrow but once again, I'm not looking for either large gains or declines.

Trades

Nothing in my trading account but today I unloaded my position in Clearwire (CLWR) that I held in my IRA for a small profit.  CLWR put in a hanging man today right at the top of its recent trading range after a big three day run-up.  It's looking ready to go lower tomorrow.

Crossroads again

Yesterday I had the feeling the Dow could go lower today and that's just what it did, giving up all of its intraday gains and then a bit more to close down just over 6 points.  In doing so it formed a doji, indicating indecision in the markets.  How will this resolve?  There's not much guidance from the VIX which continues to bump along the bottom at its support level around 17.  It formed a hanging man looking candle today but with so little trending going on there I don't really read anything into that.

I think that tonight we have three clues.

Clue 1: the futures, which are all higher by 0.2% to 0.3% at 1 AM.  We see that the ES in particular crossed over its daily pivot just before midnight and has been holding above it since then.

Clue 2:  the Dow closed today at 12,393 which means that what had been the February resistance is becoming support.

Clue 3: Indicators.  Although the stochastic and RSI remain broken in overbought territory, momentum and money flow have come down considerably off their recent highs.  Momentum has in fact turned positive and money flow has sunken to levels that suggest a bullish bias.

So that leaves us at sort of a crossroads.  The Dow doji suggests we could go either way tomorrow.  There are several indications that we might go higher but I don't see all that much gas in the tank to propel the move right now.  On the other hand, we have support after a fashion to block any moves lower.  So it's another tough call.  My bias says we're going higher, at least a little tomorrow, but I don't have much confidence in saying that.

Trades

Today I sold 100 shares of AOD out of the low price high yield portfolio, mostly for rebalancing, though AOD does seem to be a bit on the overbought side at the moment.  I then bought some MGN, Mines Management Inc., a silver play, at 2.96.   It closed today at 3.17.  Silver is just on fire and showing no signs of slowing down.  I've had a bunch of SLV in my IRA for years now and it has been the best performer in that portfolio.

I'm liking silver better than gold right now because it has attracted less attention.  I think it still has considerable upside.  You might want to check out this article http://seekingalpha.com/article/261413-jim-cramer-and-london-financial-times-now-touting-physical-silver?source=email_cramers_picks from Seeking Alpha recently making a strong case for the metal.

Maybe lower tomorrow, but Fed minutes will tell

Well the Dow daily pivot certainly was the key today. We opened just above it at 12,375 and aside from one brief dip below it at 2:30 PM, held above it all day. And importantly, we closed at 12,400, finally closing above the February high (the horizontal blue line in the chart).

This should signal the all-clear to advance further since there's no resistance now all the way back to the spring of 2008. But I'm not so sure. The pace of the rally from the depths of the Japan disaster has been slowing the past few days. And also note how volume has been declining for three days straight now even as the Dow has been climbing. And all three futures are lower at this hour (1:10 AM EDT) by 0.2 percent to a third of a percent for the NQ. And they've been trending lower since 7:30 this evening.

Meanwhile, the VIX is still trying to figure out where it's going. It rose today but did so on a red candle.  Although it has more room to go higher than it has to go lower from here, it doesn't really seem to have much steam behind it at these levels so there's not really much to learn from it tonight.

Oil meanwhile just continues to grind higher and basically seems to be replaying the spring of 2008 all over again.  If history repeats itself, we have about five more weeks of oil speculation before it tops out.  We'll see.

I'm inclined to say that the Dow could go lower tomorrow but since tomorrow is a day when the Fed minutes come out, there's no forecast tonight. I have no way of knowing what they're going to say, and what they say invariably drives the entire market regardless of whatever else may be going on at that time. So tonight is just going to be one of those watch and wait times.

The 8 Ball Says: Future Uncertain

Hmm - although the next three trading days in April are historically strong, I have my doubts about tomorrow.  On Friday, the Dow tried to crack the February high at 12,419 and was rejected.  As we've seen before, it often takes more than one try (and very often it takes three tries) to crack these kinds of resistance levels.  Also, the VIX closed at 17.4 on Friday and actually put in a green candle after bouncing off its support at 16.4.  And all three futures are lower right now (1:20 AM EDT), though not by much.  And more to the point, they're not really trending lower.  They're more sort of meandering about the chart.  And with no economic news coming out tomorrow, we won't have that to set the tone for the day.

So all in all, we're not getting any real strong signals in either direction which makes calling tomorrow somewhat problematic.  My best guess, and this is only a guess, is that we'll take another shot at the February highs and it will be rejected again.  But I'm not looking for any large moves tomorrow, either positive or negative.  In fact, we may be in for a few days of consolidation around these levels before the next push higher.  Nevertheless, the green swing trend arrow remains in place.

The key, as it is so often, will be the daily pivot.  On Friday it stood at 12,340.   We closed at 12,376.  Watch these two levels early tomorrow.  A break below the pivot will signal a lower close and vice-versa.

One item I did find interesting - on Friday afternoon, the bears did not knock 'em down into the close as  has been happening the past few days.  This is particularly interesting since one would expect the day traders to head for the exits before the weekend.  I'd call that something of a bullish sign.

BTW, how about my call last Thursday for Friday?  No April Fool's there - when you're right, you're right.

April 1st to go higher, no fooling

Yesterday I wrote that I thought the market would take a pause from the gains we'd seen the past few days and that's pretty much what happened today.  While I thought the Dow might end up a bit, it actually closed down just 31 points (though the Nasdaq did manage a small gain).

So that takes care of March.  Tomorrow is April 1st and I'm looking for the advance to resume.  According to The Stock Traders Alamanc, the Dow has been up 13 of the last 16 years on the first trading day in April.  And April as a whole is actually historically the strongest month of the year for the Dow.  And to top it all off, in pre-presidential election years, April gains are double, averaging 4.3%.

Technically, I see no reason why we can't go higher tomorrow.  The Dow took a stab at the 12,390 resistance level twice in the last two days and was rejected both times.  I've noticed that very often, the third time's the charm.  The indicators are all still in broken mode, looking overbought but out of predictive power.  Meanwhile the VIX put in  a hammer type candle today.  In fact it did that yesterday too.  Normally, I'd take that as a sign the VIX is ready to go higher.  However, the inability of the bears to cause a retreat when such signs seem to be in their favor indicates to me that fundamental economic forces are at work propping up prices.  Like the Fed and the tape, I don't want to be fighting that.

Finally, all three futures (ES, NQ, and YM) are up in the overnight at 1:10 AM EDT by 0.15% to 0.25%.  The ES remains in its rising regression trend channel.  The only negative I can see is that the Dow edged sideways out of its own RTC today, normally a bearish setup.  Whether this data point can trump the other signals remains to be seen, but my bets right now are for April 1st to go higher, and that's no fooling.

Another pause in the works

Yesterday I called for higher today and spoke of resistance at the 12,390 Dow level.  And that's just what we got.  After topping off at 12,383, the Dow pulled back a bit to close at 12,351.  The good news is that we handily cleared the 12,250 congestion level from earlier this month.  The bad news is that we're right back to the high reached on February 17th at which point the Dow's virtually continuous three month advance stalled.  However, we're not looking quite as overbought this time as back in February.  The indicators are of course all maxed out in overbought mode, but we've only been in that area for four days now, compared to nine the last time around.

Still, this level may be hard to breach.  It represents resistance going all the way back to early 2008, when the market was still in the early phases of its retreat from the all-time highs set in October 2007.  And historically the last day of March is not a good one for the Dow.

Turning to the VIX we see that although it was down today it has not yet reached its support level in the 16.50 neighborhood, implying that it has at least the potential to go lower still.  However, with the size of the gains from the last two days, I think the market may take another breather tomorrow, possibly registering a small gain.  I'm not looking for any major moves either up or down.  But I do think the advance will resume Friday, the first trading day of April.  In the meantime, the green swing trend arrow remains firmly in place.

Broken indicators portend higher

Last night I wasn't quite sure what to make of the mixed signals the market was giving.  The technical indicators were all showing quite overbought conditions but the futures were all up by fairly significant amounts.  Today's impressive 81 point gain in the Dow shows that the futures were correct and the indicators are now all broken.

There are many instance of this over the past year, where the indicators can all stay in oversold condition for days or weeks at a time while the market just continues higher.  We may be starting another such run now.  The fact that we closed above yesterday's high today at 12,279 and are now at the tippy top of the pre-Japan crash consolidation range is pretty bullish.

Tomorrow is historically not a good day in the market, but with the end of the month (and quarter) coming up, it's getting to be time for some window dressing.  The fact that the futures are once again up by over a third of a percent (the NQ is up nearly half a percent) this late at night (2 AM EDT) is encouraging for tomorrow.Today's close also keeps us within the rising regression trend channel begun at the trough of the Japan crisis on March 17th.  That's also bullish.

After we broke above the daily pivot at 10:20 AM today, it was all uphill from there.  Look for more of the same tomorrow.  From here there is no more meaningful resistance until Dow 12,390.

Absent any new disasters out of Libya, Japan, the PIGS, or any other new catastrophe, I'd be looking for higher stock prices tomorrow.

Outlook uncertain

Well, the 12,220-12,250 area I talked about as being resistance yesterday certainly acted that way today.  After looking like my call was going to be wrong most of the day, the Dow took a dive in the final half hour and redeemed me for a 23 point loss.  At this point I'd say that purely on a technical basis it looks like we're in for more of the same tomorrow, both from the Dow chart and the VIX chart.

But the futures are all up right now.  ES, NQ, and YM are up 0.36%, 0.44%, and 0.31% respectively at 2 AM EDT.  This is not the sort of behavior one would expect from a market that's looking to go lower.  And I really have to wonder about just what caused that sudden breakdown at 3:30 this afternoon.

I think the key tomorrow will be the daily pivot, which was 12,217 today.  Any action that stays below this number is bearish.  But if we can get above this level and then break above 12,250 then I'd definitely bet on a higher close.  But there's just enough uncertainty in the air that I'm not making a call tonight either way.  The indicators are saying one thing and the futures are saying another.  We'll just have to see what develops tomorrow.

Another pause

After last week's considerable gains, it's starting to look like we're running out of steam, at least in the short term, meaning the early part of the coming week. Today I bring you once again the daily VIX chart because it seems to have more predictive power at the moment than the Dow or S&P charts.

After six straight days of declines, the VIX has now traveled all the way from its upper Bollinger band to near the lower band. More importantly, on Friday it put in a very tall doji candle in the style of a hammer. Add to this the fact that all of the indicators are now in oversold territory and it looks like the VIX is poised to go higher tomorrow.

That would imply lower stock prices but I guess we'll just have to wait and see. The last few days of March are historically weak anyway and the futures are essentially flat right now. On top of that, on Friday the Dow closed at 12221, right at the top of the consolidation range from the beginning of March and that is now its resistance level. And finally, the Dow indicators are now all looking overbought.

So bottom line is that I'm not looking for much in the way of gains over the next couple of days and I would not be surprised to see tomorrow close lower.

Looking for one more up day

Yesterday I wrote

"there's more room for stocks to run tomorrow. "

and run they did indeed today, to the tune of a nice 84 point advance in the Dow to close at 12,170. This puts us back into the center of the consolidation range from earlier this month with no resistance now until the 12,220 - 12,250 area.

We also remain in the upper half of the new ascending RTC that began on the 16th. And we're also back inside the longer term RTC (the rising red line) going all the way back to last June. Meanwhile notice how the indicators have all risen considerably off their oversold lows of a week ago but are not quite yet reading overbought.  Soon, but not now.

In addition, all three futures are up around a third of a percent at this hour (1:20 AM EDT) and have been trending up fairly steadily since around 8:30 this evening. And thankfully there's no new catastrophes on the world stage this evening, though that can obviously change at any time. The market seems to be ignoring the continuing rise in oil prices (though I think that may be in for a decline tomorrow) and the news out of Libya tonight seemed to be more about how much money this is costing us than how angry everyone there is at the US. (A million bucks for one cruise missile? Memo to self, buy stock in whoever makes these things).

Finally, the VIX continued its decline, closing at 18 even. The VIX indicators are starting to look oversold (and more oversold than the Dow indicators look overbought), but its lower Bollinger band isn't until 15.5, a number which also represents support going back almost a year. So I'm thinking the VIX has at least one, possibly two more days to go lower, implying that we're in for at least one more day higher in the market tomorrow. This is also historically a good market day.  That's all she wrote.

Trades

No trades today. I played hooky this afternoon from the market and took advantage of an early spring cold snap to get in one last afternoon of skiing.

I'm looking at gold again as a longer term play. Despite a good week this week, I think gold is going lower in the near term. I'll be waiting for a buying opportunity there. In the meantime, Ford just motored away from me today gaining over 5% while I was left standing in the dust at the side of the road. Sometimes that just happens.  One of my rules is not to chase, so I didn't.

And still no explanation for that sudden mysterious 16% jump in OMEX yesterday. It only closed 4 cents lower today which makes me believe that something good must be brewing over there, since none of yesterday's buyers were willing to jump ship today.  Very mysterious.