Technical analysis – Market pre-open 7th January 2016
See previous highlighted comments. ES has weakened sharply overnight and pre-open is printing below 1965.25 (1/R off last year’s high) which is now First Level Resistance. Note that Intraday Net Buying Volume numbers (highlighted) for the first three days this week were all positive and yet the Buying activity was completely ineffective in terms of moving the market higher from Monday’s lower open. A weak pattern. The two most important questions should always be – who is Active? are they Effective?
Second Level Resistance = 2043.00 (1/2R off November’s high, Mar contract)
First Level Resistance = 1965.25 (1/R off last year’s high)
Key Charts: SPY, key level is 198.10 (1/2R off last year’s high) – SPY will open below that level in a very weak price location. See yesterday’s comments.
Breadth numbers are weak and price momentum (PriceOsc) for all four major stock index ETFs remains negative and down.
Stocks>50dyma numbers: Nyse 22% (from 25%), Nasdaq 22% (from 26%), R2000 21% (from 23%). Numbers >50 are supportive.
Sentiment: See Tuesday’s comments re concerns about the Rydex Assets Ratio. Worryingly, the ratio has barely moved since then. Yesterday it was lower, but again only slightly, to 8.16. No real fear seen yet and some measure of fear is usually registered in this indicator in a sell-off of this size. The latest sharp decline has happened overnight so we may see something today and sometimes the ratio falls sharply as the market rallies off a low. In any case I would want to see the ratio lower than this before considering longs on any timeframe.
Supporting Charts:
Bonds IEF, the 7-10 yr ETF: back at the Resistance at 106.60 (18mn poc) and held the major Support at 105.00 following October’s decline. Next directional move will likely be signalled by a solid break from this range.
Dollar Index: A probe in early December above the March high was rejected. The minor 1/2R off that high is at 98.85 and the index is printing just below that level today.
Gold GLD: recently printed a new five year low but cash gold is printing a 44day high today as investors seek safe havens. Chart is still in a LT weak price location though.
Oil: is printing below 2008’s low at its lowest level since 2004.
EURUSD: The rally from the November low approached, but did not test, the First Level Resistance at 1.1080, 1/2R off March low.
