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Saturday, February 18, 2012

Money Flow for February Week 3

Further to my last weekly market update, here is a summary of where money flow ended for Week 3 of February, 2012.

The Weekly charts below of YM, ES, NQ & TF show that all four made a higher weekly high than the prior week, but the TF was the only one that didn't make a higher weekly close, so far, in February. The NQ has reached a confluence of Fibonacci and upper channel line resistance...one to watch for either a breakout higher or a retracement.

Overlayed on the Daily charts below of YM, ES, NQ & TF is a Monthly Volume Profile POC (yellow horizontal line). This POC level is roughly in line with the highs achieved on February 3rd, the day on which these markets rallied on unusually high pre-market volumes when the latest unemployment data was released...I wrote about this in my post on February 11th. I'd put near-term support at this POC level...the TF closed on Friday just above and will be the one to watch for either developing weakness or a burst in strength.

The three Daily charts below show that Stocks Above 20-Day, 50-Day, and 200-Day Averages are still trading either at or above near-term support levels...a lower support level was tested on the 20-Day Average chart and stocks bounced back up to close just above prior support. It will be important that this level be maintained on all three charts to confirm any further advance in equities.

The VIX fell by 6.62%, as shown on the graph below...one to watch to see if equity strength continues.

Unlike the previous week, most Industry Groups gained on the week, except for Biotech and Gold/Silver, as shown on the graph below.

While the previous week was mixed, all Sector ETFs gained on the week, except for Industrials, as shown on the graph below.

The Commodity, Agricultural, and Financials ETFs did an about-face from the previous losing week and all gained on the week, as shown on the graph below. As can be seen, the Chinese Financials ETF (GXC) was the big winner.

As an aside, I wrote about the big drop in foreign direct investment in China in my post on February 15th, as well as the Shanghai Stock Exchange Index. The 5-day intraday chart below shows that traders managed to close this index just above the near-term support level of 2350 on Friday...a level to watch. Furthermore, a fellow trader posted this Bloomberg article on Slope of Hope this morning...so, perhaps the Chinese were buying their own Financials ETF and keeping the Index propped up. In this regard, it would be also be worth tracking the European Financials ETF (EUFN) above to see whether buying continues in both of these ETFs.

As shown on the graph below, Oil was the big winner again for a second week in a row, while Copper continued to lose. Much more weakness in Copper could produce a drag on any further advance in equities...one to watch.

The Daily chart below shows that Oil closed above the 104.00 level on Friday. A hold above this level could see price retest the prior swing high of 114.83, and ultimately 131.00ish (a potential IH&S target).

As shown on the graph below, the Major Indices gained on the week, except for the Dow Transports (for the second week running), and a minor drop in the High Dividend-Paying Stocks ETF (DVY) (also for the second week running). Any further drop in Transports could begin to produce a drag on the equity markets, particularly if it falls and holds below its 50 sma, as shown on the chart below.

As shown on the currency graph below, the U.S. $ gained the most, followed by the British Pound and Canadian $, while the Euro lost the most (an about-face from the prior week), followed by the Aussie $. Another reason to watch the price of Oil, as well as to see whether buying continues in the Chinese and European Financials...to see the resulting effect on the Euro, as well as on the equity markets, in general.

Since this past Friday was Options Expiry Friday, I'll post the chart below of YM, ES, NQ & TF. Each candle represents a one-Month options period. As can be seen, all four closed the current candle higher than the prior OPEX period. With Bollinger Bands widening, there is still more upside potential. Provided that price can remain above their Monthly POC, as I mentioned above, there is a good chance that the March OPEX (March 16th) will see a higher close, as well. With the next FOMC meeting coming up on March 13th, and barring any shock news events, that may very well occur. However, with the tepid rise on the YM on this last candle, I'd like to see buying commitment increase in this index, and to resume in the Dow Transports Index, in order to confirm any further buying in the other indices.