Chartprofit Webcast – Charts to Friday 30th January 09
*********** PRICE LOCATION
The major level of 1/2 HIGH is in play on the following US indices: NYSE Comp, Nasdaq Comp, SP500 and R2000. Also German Dax index. I would repeat that bull markets often begin from higher lows at these levels – that’s why they are so important to watch right now. if these levels start to break down it would put these charts back into an extremely weak position.
Last Wednesday, ES, SPY, NQ, QQQQ, and USDJPY probed up into the area of their POCs and the sold off pretty sharply. Until these charts find value (spend time) above these levels, risk is still high.
*********** 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 below 50% for all major indices we follow.
The ChartProfit Breadth system is positive for 8 of the 20 DJ sectors, neutral for 10 and negative for 2.
*********** SENTIMENT
Sentiment became measurably over-bullish right at the start of the year and as noted this was consistent with a bear market rally that was likely to run out of steam very soon, and inconsistent with usual sentiment readings in the first few weeks of a new bull market.
Since then the market has retraced more than half the gain off the November lows and quite a number of the sentiment indicators are sitting near the middle of their range over the last six months which is not useful to us.
Investors Intelligence (newsletters) poll: 4wk ma of nett is still high compared to the range of data over the last six months.
Amgdata shows that the 4week flow of Domestic Equity Funds (excluding ETF data) is still very close to the six month high set last week.
*********** COMMITMENTS of TRADERS
The SP500 Small Traders net hit a five year high. The Not-so-Smart-Money are extremely bullish which is usually bearish.
************ CONCLUSION
Two weeks ago:
>>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<<
Last week:
>>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. <<
All of the above is still relevant.
Sentiment data is mixed but suggests there are still bulls out there and maybe enough fuel for more downside. I will stay bearish while the major charts stay below their POCs.