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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...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

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* If the dots don't connect, gather more dots until they do...or, just follow the $$$...





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Friday, October 12, 2012

Money Flow for October Week 2

Further to my last weekly market update, this week's update will look at:
  • 6 Major Indices
  • 9 Major Sectors
  • Ratio charts of SPX:VIX and RUT:RVX
  • Commodities ETF (DBC)
  • U.S. $ (DX)
  • 30-Year Bonds (ZB)
All 6 Major Indices ended the week lower, as shown on the Weekly charts and 1-Week percentage lost/gained graphs below. The largest losses were incurred by the Nasdaq 100, followed by the Dow 30, S&P 500, Russell 2000, Dow Utilities, and Dow Transports.

All 9 Major Sectors ended the week lower in a "risk-off" environment, as shown on the Weekly charts and 1-Week percentage lost/gained graphs below. The largest losses were incurred by the Consumer Discretionary Sector, followed by Technology, Materials, Health Care, Industrials, Energy, Consumer Staples, Financials, and Utilities.

I've added the following Daily charts of the Indices and Sectors, as I would note that, generally, the Stochastics Indicator has reached an oversold condition on most of them, but it has not yet turned up...one to watch in the short term for any signs of stabilization or reversal of this latest pullback...otherwise, look for more selling in the week(s) ahead.

The following Daily ratio chart comparing the SPX to its Volatility Index (VIX) shows that price has, once again, closed below the bottom of its uptrending channel, but is resting on an uptrend line. The Momentum Indicator is just above the zero level, but it made a lower low on the prior price pivot low. A close and hold below the trendline should produce further selling in the SPX.

The following Daily ratio chart comparing the RUT to its Volatility Index (RVX) shows that price has also, once again, closed below the bottom of its uptrending channel, but is resting on horizontal price support. The Momentum Indicator is also just above the zero level, and it made a lower low on the prior price pivot low. A close and hold below its immediate support level should produce further selling in the RUT.

Generally, nothing is indicating that buying in equities will resume next week, although we may see a pause to relieve a bit of an oversold condition on the Daily timeframe. A rise in Volatility will confirm continued bearishness, so it will be an important indicator to monitor.

Of interest is the fact that, although a bearish "Death Cross" has not yet formed on the SPX Monthly timeframe, we have one now on the ES (S&P 500 E-mini Futures Index) Monthly. As such, further selling may be in store for equities.

As shown on the Daily chart below, the Commodity ETF (DBC) has closed at a convergence of its falling mid-Bollinger Band, rising 50 sma (red), and year-to-date Volume Profile POC (horizontal pink). After putting in three bearish "evening star" formations and a tightening of its Bollinger Bands, it is signalling that it may be in for a further pullback. A close and hold below its lower Bollinger Band should produce such a sell-off.

The 80.00 level shown on the Weekly chart of the U.S. $ below represents a high level of interest, as it is currently at a confluence of intersecting Fibonacci fanlines, 50 sma (red), 200 sma (pink), (50 is still above 200 in its bullish "Golden Cross" formation on the Weekly timeframe), and the Volume Profile POC. Price closed on Friday just below this 80.00 level. It will be necessary for the $ bulls to reclaim and hold this level, since a bearish "Death Cross" has just formed on the Daily timeframe.

30-Year Bonds closed out the week above a confluence support level of the mid-Bollinger Band, Fibonacci fanline, and uptrend line on a "Bullish Engulfing" candle, as shown on the Weekly chart below.  There is nothing to indicate that wide-spread selling has begun in this Bond, nor that a shift in trend is about to occur. I do see, however, that a "diamond" pattern is emerging, which may simply represent a continuation pattern rather than a reversal...time will tell which scenario completes.

In summary, if we see a major breakdown in Commodities and a rally in the U.S. $ and 30-Year Bonds, we may see a further pullback in equities, and there will be a rise in Volatility. Since next Friday is Options Expiration, the FOMC meeting is the following Wednesday, and we're now in Q3 Earnings Season, we may see some volatile intraday swings between now and then, particularly as tension builds heading into the U.S. Presidential election on November 6th, along with public and political/economic/fiscal unrest in some Europe countries and rising tensions in the Middle East and between China and Japan. No doubt, the markets will look for defensive measures to protect against such threats to any resumption of a bullish equity bias in the short term, or even just a hedge against further losses on more selling. In any event, it's bound to get interesting.

Enjoy your weekend and good luck next week!