Chartprofit Webcast – Charts to Friday 23rd January 09
*********** PRICE PERFORMANCE
SPX hit a new eight week low last week breaking the December low. Low last week was below the low of the previous five weeks. Sellers seem much more effective than buyers when they are active. Last week saw sellers resting but the buyers did not take the opportunity to auction the market higher.
*********** PRICE LOCATION
Nasdaq Comp, and R2000 found support on their 1/2 Highs. German Dax index also (for the third time). As stated before these are extremely important levels to watch (given in webcast); if these levels start to break down it would put these charts in an extremely weak position.
In the shorter timeframe SPY, QQQQ trade below their POCs. That’s not good price location. Let’s concentrate on these – shown in webcast.
*********** BREADTH
The ChartProfit Breadth system is now neutral for all major market charts apart from R2000 which remains positive.
The percentage of stocks>50dayMA is back below 50% for all major indices we follow.
The ChartProfit Breadth system is positive for 9 of the 20 DJ sectors, neutral for 6 and negative for 5.
*********** SENTIMENT
Investors Intelligence (newsletters) poll are still more bullish than they have been for six months.
Option Ratios; Calls%10dyMA have headed lower pretty quickly with price but are still above the low levels of November.
Amgdata shows that the 4week flow of Domestic Equity Funds (excluding ETF data) is at a six month high while 4week flow of ETF (equity fds) hit a new six month low.
*********** COMMITMENTS of TRADERS
The Small Traders in both the SP500 and ND100 are bullish. With the Commercials, especially ND100, looking bearish I would interpret this data as bearish.
************ CONCLUSION
Last week:
>>Be extremely cautious of this market right now. All the major charts we follow are currently in a weak price location. Do not be long unless charts trade back above those POC levels. This may not happen. It is quite possible that the high earlier this month was the end of a bear market rally. With current price location it is quite possible that another leg down is coming. Most importantly watch the half high levels; if there is extreme weakness these will not provide support<<
We have to wait for effective Buyers to re-emerge before the long side is considered. I still think risk is high, so to be safe we should also wait for strong enough buying to auction price back above the POC levels. Breadth also needs to improve.
Watching particularly Nasdaq Comp, R2000 and German Dax index. As stated above, these charts found support on their 1/2 Highs. If those levels hold that would be very constructive; should that support be broken I would expect to see fast downmove.
I use Gann’s Master Time Cycle as a road map rather than a precise timing device. I’ve discussed this many times in the webcasts over the last few months because it seems to me that current price action is “in sync” with this cycle and worthy of note. If the cycle plays out perfectly (it won’t) – we should expect weakness through to about February 20th, followed by a rally into April and then a final leg down into the bear bottom around the middle of the year. It’s also worth mentioning that years ending in “8” tend to be bullish but 2008 and 1948 were both very poor.
