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w/e 21st Dec we saw an increase in bullish sentiment and last week this continued with lipperusfundflows reporting Equity Fund inflows of $3 billion and particularly the NAAIM number which showed the money managers indicator reaching a bullish extreme. SPY Closed below Mon-Wed Hi-Lo Range which indicates Sellers Active (and effective) on the weekly timeframe. Of the four major stock index ETFs only IWM finished the week in a strong price location highlighting its current relative strength. ES closed very weak. Breadth deteriorated. A news driven market. Emphasis should be on price location and this has weakened (see below). SPY Closed below Mon-Wed Hi-Lo Range which indicates Sellers Active (and effective) on the weekly timeframe.
*********** PRICE PERFORMANCE / LOCATION
Weaker. Of the four major stock index ETFs only IWM finished the week in a strong price location highlighting its current relative strength. Last week’s decline brings the 1/2R off November low into play for SPY and DIA (see charts). QQQ is relatively the weakest.
ES analysis: On Friday I marked Responsive (red-at-top) and Aggressive (red-at-bottom) Selling. This was not Effective Selling as the session generated an “inside Value Area”. Never-the-less the sharp sell-off to the Close emphasises the fragility in the market. With ES printing below its major poc (1406) the market is subject to further weakness. New long trades have been eliminated for me since Open on 20th December and only Buyers marked above ES 1406 would have me considering the long side at current levels.
*********** BREADTH
Chartprofit Market Timing System turned neutral for Nyse (from positive); turned negative for Nasdaq (from positive) and remained positive for UK.
%Stocks>50dyma numbers: Nyse 59% and Nasdaq 53%. UK 77%. US numbers fell but held above 50%. Numbers >50 are supportive.
*********** SENTIMENT
Consensus Polls:
12/28: AAII (public poll) reported Bulls% lower at 44.4% from previous week’s 46.4% which was the highest since w/e 10th February.
Bears% was up at 30.2% from previous week’s 24.8% which was the lowest since w/e 10th February.
12/28: Investor’s Intelligence Bulls% was higher for the fifth week running at 48.9% which is a thirteen week high. Bears% was unchanged at 24.5%. The nett (Bulls – Bears) at 24.4 is a thirteen week high.
12/28: Market Vane (advisers) poll was lower at 63 (from 66).
12/28: The NAAIM number (a measurement of average current equity exposure among active money managers) at 88.1 is an extreme reading, being the highest since 2007. Looks like money managers are “all in”. This is a contrarian indicator and is therefore a warning sign.
Mutual Fund Flow:
12/28: My version of the Rydex Assets Ratio ended the week at 3.55. This is not a useful number at the moment. However we do know that both Bear Fund Assets and Bull Fund Assets are low indicating low conviction from the retail trader (fear?). Contrast this with the NAAIM number above.
12/28: lipperusfundflows reported Equity Fund inflows of $3 billion in the week to 26th December
12/28: lipperusfundflows ex_ETFs reported Equity Fund inflows of $508 mil in the week to 26th December. (Previous week’s 4week Flow number was the lowest since December 2011.)