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Monday, February 27, 2012

TF is the Weak Cousin to the YM, ES & NQ

Further to my post of February 11th, the YM, ES & NQ have advanced above the minor support levels that they had formed just before the latest unemployment data was released during pre-market hours on February 3rd. These e-mini futures indices rallied strongly (on high volumes normally seen during market hours, not during the pre-market session) immediately after that data was released before cash markets opened.

The TF also rallied on higher than normal pre-market volumes, but it has failed to advance above pre-market highs set that day.

As shown on the 4-Hour charts below, the uptrend remains intact for the YM, ES & NQ, while the TF is stuck in a trading range. The TF has re-tested the lows of this pre-market high-volume area five times now and rallied today, along with the YM, ES & NQ...all four e-minis rallied on increased volumes today.

Until such time as each of these four e-minis breaks and holds below this pre-market high-volume level, they have a chance of continuing their upward trek. The 23.6% Fibonacci retracement level is approximately in line with the highs of the pre-market high-volume rally on the YM, ES & NQ, and it is in line with the lows of the pre-market high-volume rally on the TF (the Fibonacci retracement begins from the lows of this year).

Below is a 1-Hour comparison chart of the Dow 30, S&P 500, Nasdaq 100, Russell 2000, Dow Transports, and Dow Utility Indices. It begins on February 3rd. As can be seen, the Nasdaq 100 is the leader in the rally from that date, with the Russell 2000 in negative territory, and Transports the laggard.

I'd look for any developing weakness in the Russell 2000, and a break and hold on the TF of its February 3rd pre-market high-volume level as a signal that the YM, ES & NQ may follow suit. Additionally, I'd look for a resumption of selling in Transports, as a confirmation (any further advance in Oil may have a negative impact on this index). Alternatively, a strengthening of the Russell 2000 and Transports should provide support for any further advance in the Dow 30, S&P 500, and Nasdaq 100 Indices.

As an aside, markets are watching to see whether the Dow 30 can recapture and remain above 13000 (which was hit again today but not held), and whether the S&P 500 can recapture and remain above its May 2011 high of 1370.58 (which was hit today but not held).