posted 8.17 a.m. est
pre-open comment Monday 7th January
Last week 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 (below).
%Stocks>50dyma: Nyse 87% and Nasdaq 81%. Numbers >50 are supportive (>80 usually considered overbought).
First Level Support = 1413 (3mn poc)
Second Level Support = 1406 (maj poc)
Sentiment: my version of the Rydex Assets Ratio ended the week at 3.22, down from Thursday’s 3.86 (a 40day high). VIX closed at 13.83, very close to August’s extreme low which is a concern.
Supporting Charts (+ or – or ? for equities). Momentum = daily PriceOsc
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.
