posted midday
pre-open comment today>>ES didn’t quite test Tuesday’s day session high (1005) although it will very likely today. It is rare to see Aggressive Buying (green at top) marking the top of a significant move. ES did sell off early in the day testing Tuesday’s low which is rare following a day when Responsive Buying is marked (green at bottom) but once again recovered fairly strongly. There is currently a minor divergence with NQ weaker than ES over the last few days – this due to the major 50% resistance on the ND100 chart as discussed in the webcast.
With the lack of Effective activity from the Significant Sellers (they’ve had plenty of opportu nity) we have to expect higher but slightly higher prices could bring them out. Sentiment indicators are flashing some warnings of overheating (discussed sperately) which should make us cautious.<<
Update to that pre-open comment:
Tuesday’s day session high at 1005 was tested slighty higher (1105.75) very early in today’s session.
It brought an immediate response from the Sellers. Current price action suggests it is very likely I will have to mark Significant Selling for the first time since the July low although until the day session close I cannot be sure. Considering the overbought nature of the market and the fact that major charts have hit major resistance we should be cautious as suggested this morning.
I also mentioned that some Sentiment indicators were flashing warnings; here’s some detail on that:
Investors Intelligence (newsletter writers) poll this week saw Bulls at 47.2% (up from 42.2) and Bears at 25.8% (down from 31.1). That gives a net of 21.4 which is the highest reading since January 2008 apart from the 24.4 reading in early June.
ISEE (equity only) index, 10dayma reached 197.7 on Wednesday – again the highest level since January 2008 apart from an early June reading of 180.6.
And probably the most striking is the increase in my version of the Rydex Assets Ratio. In 2 0less than three weeks the ratio has shot up from below 1 (too bearish) to 2.9 which is the highest reading in my five year database, indicating that the Rydex mutual fund timers have become very bullish indeed.
A big bullish shift in sentiment is not surprising with the SP500 and the Dow hitting new 2009 highs this month but historically similar readings in these indicators have been a warning.