Technical analysis – Market pre-open 5th February 2016
See previous comments. Thursday’s session generated a higher, narrower Value Area above both Support levels that we are currently monitoring. This week’s low (so far) was a brief, rejected test below the 1870 poc and if ES should close strong today that would start to look like a higher low on a poc which we know can be a bullish pattern. I would still be looking for Breadth numbers and Momentum to improve and price printing time back below 1870 would of course negate that best case scenario.
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. Bulls would want to see DIA hold this level.
Stocks>50dyma numbers: Nyse 29% (from 27%), Nasdaq 22% (from 20%), R2000 21% (from 19%). Numbers >50 are supportive.
Sentiment: My version of the Rydex Assets Ratio was higher at 4.26. 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 has fallen sharply this week 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: has rallied strongly this week to probe the Major 1/2R Resistance at 1.1241.
