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Last week was volatile and saw a sharp rally putting the major index ETFs back in a much stronger price location. Can this be sustained?
Positives: 1) Stronger price location. 2) There was no obvious increase in bullish sentiment with the rally although VIX collapsed last week. 3) LT Breadth is supportive.
Negatives: 1) Big gaps up on the major index ETF charts, the majority of the time these are filled. 2) Market is overbought e.g. Nyse %stocks>50dyma is well above 80. 3) Possible negative is the Supporting charts which are not conclusively supportive (see below).

 

*********** PRICE PERFORMANCE / LOCATION

Unlike Equity Index/ETF charts, the following KEY Charts are printing very close to useful reference levels. Monitoring price relative to these levels over the next few days will give us a very good idea about the markets current appetite for risk.

Bonds TLT: At major poc Support (117.15). Price printing below this level would indicate further weakness and be a positive for equities. Price holding this Support would most likely indicate equities will stall.

Oil USO: Has rallied to important 1/2R and poc Resistance. Price printing above this level would indicate further strength and “risk on”. Failure at this Resistance would most likely indicate equities will stall.

EURUSD: Chart indicated weakness late in the week by printing back below the 24mn poc. This is now Resistance in the ST. Price back above 1.3117 would be a positive for equities.

Dollar Index: Strength late in the week saw the Dollar Index back above 80.15 which is strong price location. Can that level now hold as Support? If so it would most likely indicate equities will stall.

ES analysis:
from pre-open 2nd Jan. >>Until we see a VA printed entirely below the maj poc at 1406 we can say that the longer term trend has not broken down. We haven’t seen that yet and no part of a VA has been printed below 1397, the 1/2R (basis March).<<

 

*********** BREADTH

Chartprofit Market Timing System is positive for all Major Market Charts.
%Stocks>50dyma numbers: Nyse 87% and Nasdaq 81%. UK 87%. Numbers >50 are supportive. Numbers>80 usually consideed overbought.

 

*********** SENTIMENT

Consensus Polls:

01/04: AAII (public poll) reported Bulls% lower for the second week at 38.7% (from 44.4%) and Bears% was higher at 36.2% (from 30.2%). The nett (Bulls – Bears) at 2.5 is the lowest in six weeks.

01/04: Investor’s Intelligence Bulls% was lower for the first time in six weeks at 47.8%. Bears% was again unchanged at 24.5%.

01/04: Market Vane (advisers) poll was higher at 68, a 15week high.

01/04: The NAAIM number (a measurement of average current equity exposure among active money managers) has been volatile recently. Last week’s 88.1 was an extreme reading, being the highest since 2007. This week the number is sharply lower at 75.98, the lowest in four weeks.

Mutual Fund Flow:

01/04: My version of the Rydex Assets Ratio ended the week at 3.22 down from Thursday’s 3.85

01/04: lipperusfundflows reported Equity Fund inflows of $3.7 billion in the week to 22nd January.

01/04: lipperusfundflows ex_ETFs reported Equity Fund outflows of -$3.5 bill in the week to 2nd January.

Volatility:

01/04: VIX closed at 13.83, very close to August’s extreme low