Chartprofit Webcast – Charts to Friday 6th February 09
*********** PRICE PERFORMANCE
ES Market Profile analysis: as shown in the webcast. Buyers were active last week – Monday tested the previous week’s low and buyers responded immediately. The next four days saw the value area higher each day. Although there was four instances of significant buying activity on the daily timeframe, the value area over the week as a whole was lower and wider. Therefore on the daily (traders) timeframe the buyers are currently active and effective but we have yet to see them take control of the weekly timeframe.
*********** PRICE LOCATION
Charts seem to be basing (highr low) above their 1/2 HIGH level, see: NYSE Comp, Nasdaq Comp, SP500, QQQQ and R2000. I repeat that bull markets often begin from higher lows at these levels – that’s why they are so important to watch right now.
In the shorter timeframe the level of 872 (ES) remains the most important level to watch this week. This is the major poc. I still suggest that investors wait until ES finds value above this level.
*********** BREADTH
The ChartProfit Breadth system is now positive for all major market charts. This is a big improvement.
The ChartProfit Breadth system is positive for 15 of the 20 DJ sectors and neutral for 5.
*********** SENTIMENT
Quite a number of the sentiment indicators (that were extremely useful at the start of the year) are close to the mid point of their six month range. This is not useful to us.
However, there is an interesting divergence between two of the indicators I base on data from www.amgdata.com The 4week flow of Domestic Equity Funds (excluding ETF data) is still very close to the six month high set two weeks ago while the 4week flow of the ETF only data just hit a six month low. There is a school of thought that says this is smart-money bearish and not-so-smart-money bullish.
*********** COMMITMENTS of TRADERS
Once again the SP500 Small Traders net hit a five year high. The Not-so-Smart-Money are extremely bullish – historically it has been wise to avoid joining them when their net position hits an extreme like this.
************ CONCLUSION
Two weeks ago:
>>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. <<
Last week:
>>I will stay bearish while the major charts stay below their POCs<<
Price performance was strong last week and breadth is much improved. COT data tells us to remain cautious. ES and SPY trade very close to their major pocs – ES probed into that area again earlier today (Monday). Let’s stay patient and wait for these charts to consolidate above those levels – that would put the charts in a safer position.