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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Friday, May 25, 2012

Money Flow for May Week 4

Further to my my last weekly market update, here is a summary of where money flow ended for Week 4 of May 2012.

The Weekly charts below of YM, ES, NQ & TF show that they all closed a bit higher than the prior week on lower volumes. Price is hovering just above the lower Bollinger Band and the 50 sma (red). In the case of the NQ, price is still within its rising channel from the 2011 low. The YM and ES are trading just above longer-term trendline support, whereas the TF is just below price resistance.

As I mentioned in my weekly market update of April 13th, I'm assigning a weekly bullish or bearish rating on YM, ES, NQ & TF until the end of this year. Please refer to that post for the parameters, and to the Weekly charts below. As of this past week's close, the ratings for next week are as follows:
  • YM = bearish (approaching MAJOR BREAKDOWN)
  • ES = bearish (approaching MAJOR BREAKDOWN)
  • NQ = borderline mildly bullish/mildly bearish
  • TF = bearish (bordering on MAJOR BREAKDOWN)

The 4-Hour charts below of YM, ES, NQ & TF show a Fibonacci retracement from this year's high to recent lows, as well as a downtrending channel. They are all still within the lower one-third of this correction, and the NQ is caught up in its channel. I would assign a SELL rating to anything within this lower one-third level...as such, price action is subject to bearish influences until it breaks and holds above with conviction and higher volumes.

The three Daily charts below depict support and resistance levels on the percentages of Stocks Above 20-Day, 50-Day, and 200-Day Averages.

Stocks above 20-Day Averages closed higher than the prior week at 24.73%.

Stocks Above 50-Day Average closed higher than the prior week at 23.97%.

Stocks Above 200-Day Average closed higher than the prior week at 50.75%.

I'd conclude that, in the short term and the medium term stocks are bearish under 30% to 20%, and in the longer term stocks are mildly bullish above 50% to 60% (however, they are borderline mildly bearish if they drop below 50% to 40%...as has been the case for the past nine weeks, all are still on negative watch for further potential weakness.

The VIX fell on the week by 1.14%, as shown on the graph below.

Further to the comments in my last weekly market update, the Daily ratio chart below of the SPX:VIX shows that the SPX rallied back above the 200 sma. The RSI, MACD, and Stochastics indicators are still trending down, but have hooked up to reflect this bounce. Near-term support is at the 200 sma at 56.66, followed by 50.00. Near-term resistance is at 65.00, followed by the 50 sma at 76.84.

The Daily chart below of the VIX shows that price has remained above the 20.00 level (which is the apex of a triangle breakout). If this support level holds, a resumption of a rally could send the VIX up to the triangle target of 33.22...one to watch for follow-through on intraday and daily price action.

As shown on the graph below of the Industry Groups, Gold/Silver gained the most, followed by Retail and the Banks. There were losses in Internet, Pharmaceuticals, Brokers, and Semis.

As shown on the graph below of the Major Sectors, the largest gains were made in Consumer Discretionary, followed by Utilities, Financials, Materials, and Consumer Staples. Technology lost the most, followed by Energy. Basically, markets bought (or did some short-covering on) a mixture of defensive and risk sectors.

As shown on the graph below, there were minor gains in the Financials ETF (XLF). The biggest losses were in the Emerging Markets ETF (EEM), followed by the Agricultural ETF (DBA), the Chinese Financials ETF (GXC), the European Financials ETF (EUFN), and the Commodities ETF (DBC).

Please see my post of May 24th which discusses the key to economic stability in China, Europe, and U.S.A. In summary, the key is a unified approach and implementation of monetary and fiscal policies to ensure that financial institutions are stable, that they can support any further economic growth of any substantive quality and quantity, and that they can attract confidence in foreign and domestic investments (in global, federal, and regional areas). There is work to be done in all three (particularly in Europe) to meet such an objective. Until then, the markets are faced with further uncertainty and will be choppy and continue to be affected by Europe's rumours and problems, including those of China and the U.S.A.

I would also draw your attention to the last paragraph of my May 24th post which discusses the bearish Death Cross influence now present in the Commodities ETF (DBC) and in the AUD/USD forex pair. Market action may be quite volatile and choppy for awhile, which may, in turn, cause volatile and choppy price action in the equity markets...ones to keep an eye on over the next days/weeks ahead.

As shown on the graph below, Copper lost the most, followed by Oil, Gold, and Silver.

The following four Weekly charts of Gold, Oil, Copper, and Silver show support and resistance levels...ones to watch, particularly Oil and Copper.

As shown on the graph below of the Major Indices, the Dow Transports gained the most, followed by the Dow Utilities, the Russell 2000, and the S&P 500. Losses were made in the Nasdaq 100, followed by the Dow 30. There were big losses in the Emerging Markets ETF (EEM), and minor losses in Corporate Bonds (JNK), with gains in the High Dividend-Paying Stocks ETF (DVY)...showing market preference for defensive sectors.

As shown on the currency graph below, money flowed into the U.S. $, once again, and out of the Euro, Canadian $, Aussie $, and British Pound.

The Daily ratio chart below of the SPX:U.S. $ shows that the SPX is trying to stabilize against the decline which began at the beginning of May. Price now sits just above major support at 16.00 and below major resistance at the 200 sma at 16.30...this is worth tracking because a failure to hold this major support level could send the SPX tumbling on a resumption of accelerating downside momentum. The RSI, MACD, and Stochastics indicators are still trending down, although the RSI and Stochastics have hooked up.

The next chart of interest is the Weekly chart below of the 30-Year Bonds (ZB). Once again, price closed just below trendline and Fibonacci fan line confluence resistance on high volumes. Whether accelerating momentum will carry it higher remains to be seen.

In summary, I'll be watching to see whether more volumes enter the markets next week during intraday action, and in which direction they dominate (and whether they can be sustained), in order to judge relevant moves with conviction. As well, I'll be watching for either rising or declining volatility (as depicted by the VIX), and money flow into/out of the U.S. $, Bonds, and the Financial stocks (which are in correction mode and are attempting to stabilize, as shown on the chartgrid below). Any meaningful and sustainable stabilization of the bank stocks will require the solid backing and implementation of unified government monetary and fiscal policies, both domestically, and globally, as I discussed above...otherwise, expect further choppiness and volatility in the markets (particularly the financial markets).

Enjoy your long weekend!