Technical analysis – Market pre-open 4th February 2016
See previous comments. Wednesday’s red-at-bottom low was broken soon after the open but following a very brief test of the 1870 Support, see chart, ES rallied strongly. The rally was following oil higher and the fact that Sellers were active intraday and the Value Area was lower and wider I’m not too convinced by the strong close. Even so, the poc Support held which is a positive as did the equivalent level on SPY, see Pulse Chart (also DIA below), but we’re still looking for Breadth numbers and Momentum to improve. Price printing time below ES 1870 would be a negative and suggest lower.
First Level Support = 1886.50 (45dy poc)
Second Level Support = ES 1870 (previous maj poc)
Key Chart: DIA probed 63.75, its major poc, this week but has so far not printed any time above it. The 1/2R off the January low is just below 160 and this corresponds to the minor poc. On Wednesday this level was briefly tested and DIA rallied to a strong close. Bulls would want to see DIA hold this level.
Stocks>50dyma numbers: Nyse 27% (from 23%), Nasdaq 20% (from 18%), R2000 19% (from 18%). Numbers >50 are supportive.
Sentiment: My version of the Rydex Assets Ratio was lower at 3.93. On 12/29 the ratio reached 9.17. On 01/21 it fell to 3.52 which is as low as it has been for two years except for the sell-off late last year when the ratio fell to 3.00.
Supporting Charts:
Bonds IEF, the 7-10 yr ETF: Held the major Support at 105.00 following October’s decline and has rallied strongly to its highest level since Jan 2015.
Dollar Index: A probe in early December above the March high was rejected. The chart has been climbing back from the December low but fell sharply yesterday and broke that low.
Gold: benefiting from the risk-off tone and weaker dollar and has printed its highest level since October. But is still in a LT weak price location.
Oil: rallied strongly off the low in January and is currently printing above the 1/2R off that low. Equity Bulls would want to see oil printing above that level.
EURUSD: rallied strongly yesterday and today and has broken above 1.1080, 1/2R off March low and is currently probing the Major 1/2R Resistance at 1.1241.
