Dow On 5 Day Losing Streak. Will It Ever Go Higher?
The Night Owl Trader | Feb 12, 2016 12:51AM ET
The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Friday higher only if ES remains above its pivot, else lower.
- ES pivot 1824.75. Holding above is bullish.
- Next week bias uncertain technically.
- Monthly outlook: bias lower.
- YM futures trader: still long at 16,434 .
Recap
Huh - I figured as much. On Wednesday Auntie Janet threw the market under the bus, sending the Dow down 100 points. And on Thursday she backed it up and did it again, this time for 256 more points. Janet Yellen, please do me a favor - shut up! So with the Dow now on a five day losing streak, will it ever go higher? Let's sift through the debris for any clues as to when the pain might end,
The technicals
The Dow: The best thing that can be said for the Dow is that on Thursday it conducted a successful retest of last August's lows. The resulting red candle is sitting right on the lower BB at 15,645. Indicators remain oversold as we remain in a week-long descending RTC. The stochastic is finally starting to flatten around for bullish crossover but a reversal is still not a sure thing at this point.
The VIX: On Thursday the VIX defied the technicals by jumping back p seven percent, right back to its upper BB. So much for the bearish evening star/whatever. The VIX is now back to year-long highs complete with extremely overbought indicators and a stochastic on the verge of a bearish crossover. What is it with this chart? Just what the heck does it take to send this index lower? For the record, VVIX put in a big red bearish evening star but it looks like nothing can get this VIX lower lately.
Market index futures: Tonight, all three futures are higher at 12:39 AM EST with ES up 0.18%. It's now been six full days since ES last managed to close higher. What the heck? Is the world really coming to an end in 2016? Thursday gave us a big ft red spinning top that tested its lower BB. I had to back my SPX chart to the monthly level to find the last time we were here - it was exactly two years ago - February 2014. If anyone has any doubt that the bull market is dead, you can forget it now. Both the Dow and SPX have now traded outside their monthly rising RTCS's for two months running and that means the trend (going back to 2009) is over, to a 95% confidence. I just don't get the talking heads on TV who claim otherwise.
ES daily pivot: Tonight the ES daily pivot falls again from 1854.33 to 1824.75. That is finally enough to put ES above its new pivot so this indicator turns bullish.
Dollar Index: Last night's reversal candle wasn't enough to save the dollar and I was right to wait for confirmation because we didn't let it on Thursday with the buck off another 0.33%. This time it was on a gap-down doji star. the last time we saw one of these, the dollar was higher the next day and we're now sufficiently oversold for me to think that that is a good possibility for Friday.
Get The News You Want
Euro: The euro meanwhile continued partying like it's 1999 on Thursday as it ground higher back to 1.33200, 8its best close since last October 21st, remaining in a strong rising RTC. The new overnight is taking something of a breather but it's too soon to call the euro lower just yet.
Transportation: Last night I wrote that "the general impression is bearish" here and on Thursday down we went, giving up 1.44% to confirm the inverted hammer with - yes, a real hammer. That move left hte indicators all confused, and me too. I have no idea which track the trans will switch to on Friday.
Earlier this week I claimed that we were due for an up day this week. Well looks like it's now or never. The SPX Hi-Lo indicator hit 2.06 on Thursday, quite low enough for a reversal. In addition, the futures are finally showing a decent advance in the overnight and also for a change, Janet Yellen will hopefully keep her trap shut for a day. We also have a successful retest of the August lows in the Dow as well as a bunch of reversal candles on charts that are at extreme oversold levels.
Unfortunately, ES seems to be giving up its gains as I write and with the VIX still near 30 snd Mr. Market in one of his states, it's just too risky for me to call Friday outright bullish so I'm just going to try another conditional call: if ES can manage to remain above its new pivot by mid-morning Friday, we'll close higher. If it falls through the pivot though, we close lower.
That's all she wrote. With another Monday holiday next week, see you again Monday night!
YM Futures Trader
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