webcast – charts to 19th February
released for subscribers earlier in the week
Transcript of Webcast below:
Looking first at the emini S&P future. We had some Significant Selling which I marked here, Responsive Selling on Friday which was completely negated on Monday by the Buyers, Responding just below the previous day’s session low taking that as opportunity as they’ve done before (actually last week) and then ran the futures strongly higher – and later in the day I marked what I call Aggressive Buying at the top of the profile here. So there’s a lot more green here than red – it just confirms that Buyers are still very much in control. On Friday there was quadruple witching day when you get increased volatility and not necessarily market moves that you can trust.
First Level support/resistance now at 1161.50, that’s point of control, and as I said pre-open if this holds we’ll most likely see a break to new highs. Actually we’re now very close to new highs – this is current data 15 minute chart – earlier in the day we were oscillating around that level, building that point of control. On the daily chart since late February when the chart found support on the 1094 major point of control the corrections have been very shallow, and short-lived, one or two days and not retracing very much. This is looking like a terminal acceleration move which can go on and on but they are often blow off moves. This is the S&P 500 cash and you can see the RSI Wilder has been what is usually called overbought – currently seventy two on the daily chart RSI. These kind of moves can stay overbought and one way I have found you can handle that is to put a twenty period BollingerBand through the indicator so you have an adjustable overbought level. Here’s the same indicator with the lower band here. It’s pretty simple but it seems to work quite well.
Here’s the auction chart over the last few weeks. Here’s where we had consolidation above the 1094 point of control. One little dip below it as a test and it’s been up since then, lots of green as you can see. Buyers obviously still in control.
In some of the Sentiment Indicators there are signs of increasing bullishness – we’ll look at that now. Firstly; the indicators that are close to flashing extreme readings. This is the Nasdaq/Nyse volume ratio ten day moving average. I watch this when it breaks out to new highs, or lows as it did back in March last year when it broke below the previous lows (always a good method to apply to these indicators) and we saw it in June and January at the tops and this now is really high, very very high actually historically. We’re seeing bulls emerging pretty quickly in the option ratios – this is the Options Clearing Corporation Calls percentage with the ten day moving average in yellow. And you see the low this indicator hit in February was the lowest level since the March 2009 price low and that was a contrarian indicator (and one of the reasons I said there would be a relief rally at least) since when the indicator has very quickly come north and we could easily see a new high here especially if the S&P can consolidate this breakout. And very clearly you can see that in the equity-only version of the ISEE index ten day moving average. Here’s the previous peak and again when that tests previous highs or lows it’s often the point where the market turns and that would be a clear indication of extreme over-bullishness from the public if we see a new high in this indicator. The VIX as well, as you know, back around levels that we saw at the January high and way back in May 2008 – that’s showing real complacency now. Also I will show you the four week fund flow as reported by AMG. There was another net cash inflow last week totalling 2.8 billion dollars – the four week flow hardly changed but you can see here that it could easily hit a new high for many months – that’s the blue line. And here’s my version of the Rydex assets ratio – I’ve mentioned that it took a long time for the Rydex timers to “get with” the rally and that was one of the things that helped propel the market higher but a lot of those bears have turned bullish. A normal pattern I see many times at highs is if they get bullish without getting too excited, then this indicator kind of tails off a little bit and then you see a breakout in the market and a thrust in this indicator to test this previous indicator high and it’s often a good trigger point for a sell.
I don’t want to sound too much like a knee-jerk contrarian, the market’s going higher, the breadth is good, the Chartprofit Market Timing system is green, very strong price location, everything looks very rosy – I would only look to get contrarian if these indicators act in exactly the right way and some of the polls last week were actually surprising. Last week, when we hit a new high in the S&P, the public poll from the AAII showed less Bulls and more Bears. And that’s on a week when the S&P broke higher so that’s bullish in the short term and that’s simply because if last week turned out to be the top or a high it would indicate that the public in this poll were extremely accurate. I saw the same thing in some other polls. I also follow the TSPtalk.com sentiment survey – they also recorded less bulls and more bears and also thestreet.com Real Money Barometer showed the lowest net (bulls minus bears) in six months. That doesn’t seem right for a top. And also the financial bloggers poll, again, Bulls down and Bears up. All of that indicating, most likely, that higher prices are to come in line with the major market timing indicators that I use.
So here’s the Breadth indicators, solidly green again right across the board for the U.S. indices for the fifth consecutive week. Some of the numbers in here are getting extremely high; 89% for the Nasdaq100, 88% for the SP500 and 82% for NYSE stocks showing price above 50day moving average. These are high numbers so we’re getting overbought.
We’ll take the market action as it comes but I do have a really strong collection of Gann time counts (strongest time pivot for months I think) and that’s at the end of this month even early next month and that does fit with this averaged or should I say idealised version of the average zero year.
Here’s the Euro FX chart – and we have this band of resistance, the halfway point at 1.373 and the poc at 1.360 and currently this chart is below that lower level, so this not helping stocks. The big level on Gold, GLD, is at 109.42, and again GLD below that level. The Dollar/Yen chart is doing its best, its consolidating above this band of support here – it’s actually a strong price location relatively and I could see this chart popping higher with equities. Wouldn’t want to see it back below the band though.
Last look at the emini – if we can hold on here (June contract) above 1161.50 there is potential resistance up around 1171, somewhere there, but I’m looking for the emini actually higher than that, up around 1190 or just above. And if we see that in that timeframe (just discussed) I think it could get interesting.