Touchdown in Sight for Dow 30?

In my post on December 9th, 2011, I outlined a hypothetical scenario whereby if the Dow 30 played out over the next three days like it did on the 9th (it gained 200 points that day), we'd see the Dow reach 12800 by the close on December 14th for a "touchdown." Needless to say, it didn't work out within that time period; however, with today's close at 12720.48, that game plan is now within reach, provided it can push above a minor resistance level of 12754, as shown on the Daily chart below. The Dow has gained nearly 1000 points since the December 2011 lows. Near-term support is at 12600.

The S&P 500 has closed above 1300 for three days now, forming near-term support at this level...near-term resistance is at 1320, as shown on the Daily chart below.

The Nasdaq 100 closed above 10 year highs yesterday, but pulled back and closed just below 2011 highs, as shown on the Daily chart below...this 2011 high is near-term resistance at 2438.44 and near-term support is at 2400.

The Russell 2000 closed above near-term support of 780, but closed just below near-term resistance of 785, as shown on the Daily chart below...the next resistance level sits at 810.

The Dow Transports closed just below near-term resistance of 5300, as shown on the Daily chart below. Near-term support is at 5200.

The Dow Utilities bounced and closed up from near-term support at 445.00, after breaking below prior support at 455.00, as shown on the Daily chart below. This is a chart to keep an eye on to see whether it can rally above near-term resistance at 450.00, and, if so, whether we see all three Dow Indices move up in tandem next week...which could provide the Dow 30 with the stimulus to reach the 12800 level, as mentioned above.

Each candle on the chartgrid below of the YM, ES, NQ & TF represents a one-month Options Expiry period, and the current candle closed today. Upside targets for the next OPEX candle are the top Bollinger Bands at 13056, 1390, 2546, and 877, respectively. Near-term support levels are the mid-Bollinger Bands at 11510, 1220, 2181, and 735, respectively. This last candle advanced on considerably lower volumes, so any meaningful and continued move to the upside should be verified by higher volumes on subsequent candles.

Below is a Weekly chartgrid of the YM, ES, NQ & TF. We can see that they closed the week above near-term resistance, but did so on lower volumes than last week. However, the Bollinger Bands are widening as price nears the top band, which suggests a continuation of the rally. Near-term resistance levels are the top Bollinger Bands at 12857, 1332, 2460, and 798, respectively. Near-term support is the POC of the monthly Volume Profile for January (yellow horizontal lines) at 12437, 1286, 2360, and 759, respectively. I'd also like to see higher volumes on subsequent weekly candles in order to verify the sustainability of this latest move up.

YM, ES, NQ & TF...Market Hours Only Charts

Below are 90-day 60-minute market hours only charts of YM, ES, NQ & TF. Overlayed on each chart are Bollinger Bands (which are based on the 50 sma and deviations of +2.0 and -2.0), monthly Volume Profiles (red horizontal lines are POC), 200 sma (pink), Volume Profile for the 90 days at the right edge of the chart, and my short-term RSI indicator. I've chosen this timeframe to look at price action from the October 2011 lows during market hours only.

Price is pushing the boundaries of the upper Bollinger Band, and my RSI is showing a negative divergence from yesterday's and today's actions...ones to watch to see whether they return to the mid-Bollinger Band (50 sma) soon. Alternatively, in view of breaks and closes above near-term resistance levels that occurred today on the Major Indices (except Dow Utilities), as mentioned in my post of January 10th,  we may see a parabolic rise culminating in exhaustion volumes before such a drop takes place.

Major Indices Update for January 17, 2012

The support and resistance levels for the Major Indices noted in my post on January 10th still apply.

In that post, I also made reference to a 10-Day 30-Minute chartgrid of the YM, ES, NQ & TF and said that any repeated attempts to advance convincingly beyond the highs of the first week in January would need to be accompanied by higher volumes. The horizontal white line on the updated chartgrid below represents that week's high. We can see that:

• the YM has struggled to stay above that level on building volumes, and today's advance took place in overnight trading on very low volumes...price fell back to the range high which is near-term support
• the ES has managed to stay above this range high, for the most part, on building volumes, and today's advance also took place in overnight trading on very low volumes...price is trading just above the 200 sma (pink) and last week's Volume Profile POC (yellow horizontal line) on this timeframe
• the NQ has also managed to stay above this range high, for the most part, on building volumes, and today's advance also took place in overnight trading on very low volumes...price is trading just below its 50 sma (red)
• the TF has also managed to stay above this range high, for the most part, on building volumes, and today's advance also took place in overnight trading on very low volumes...price is trading below both moving averages, just above last week's Volume Profile POC, and just above the 10-day Volume Profile POC (red horizontal line) at the right edge of the chart

Inasmuch as today's sell-off during market hours wiped out most of the overnight gains on the YM, ES & TF, I'd look for, firstly, today's low to hold as near-term support, and, secondly, the range high to hold as support...this range high is roughly in line with the support levels for the Major Indices mentioned in my January 10th post. Also, since the Nasdaq 100 is outpacing the other three in terms of relative strength, it's my opinion that any perceived reversal below that range high by these three would need the Nasdaq to come on board, and all on high volumes, together with a cross (and hold) of the 50 sma below the 200 sma. Otherwise, we may see further attempts to push higher. The 10-Day percentage comparison chart below shows this relative strength on the Nasdaq and the weakening of the Dow 30.

The updated Daily chart below of the U.S. $ shows that it is also holding above its near-term support level of 81.00...an important level for the $ bulls to hold, as I mentioned in my January 10th post.

Gold, Oil, Copper & Silver...Weekly & OPEX Charts

Below are Weekly charts during a one-year time period of Gold, Oil, Copper and Silver with Bollinger Bands, 50 sma (red), monthly Volume Profiles (horizontal yellow lines are POC), and a one-year Volume Profile at the right edge (red horizontal line is POC).

While Oil pulled back this past week to confluence support, Gold, Copper and Silver rallied. For this time frame, if Copper and Silver continue to rally, they will be returning to their "mean" (50 sma and one-year POC), and if Gold and Oil rally, they will be adding risk by moving away from their "mean." Volumes were higher last week, and potential targets on the upside are mid-to upper Bollinger Band, as follows:

• Gold - mid-Bollinger Band at 1700ish
• Oil - upper Bollinger Band at 107ish
• Copper - upper Bollinger Band at 4.00ish
• Silver - mid-Bollinger Band at 32.70ish

Below are OPEX charts during a 5-year time period of Gold, Oil, Copper and Silver with Bollinger Bands, 50 sma (red), and a 5-year volume Profile at the right edge (red horizontal line is POC). Each candle represents a one-month Options Expiry period and the current candle will close on January 20th.

While Gold and Silver initially dropped since December 19th, they have rallied and look poised to continue their rally, while Copper has shown the most strength, followed by Oil. They are all above their "mean" on this time frame, and any rally will indicate further risk appetite for these commodities. Copper and Silver are just below their mid-Bollinger Band at 3.80ish and 30.60ish, respectively, so it will be worth watching these two to see if it acts as resistance, while Gold and Oil have their upper Bollinger Band as potential targets on the long side at 1850ish and 108ish, respectively.

Since volumes are considerably lower for this OPEX period, any rally or decline on the current candle would need to be confirmed by the next OPEX period's action and close. In this regard, upcoming Daily and Weekly volumes may give further clues as to commitment in either direction...especially if we see parabolic moves to the upside on progressively increasing volumes.

The following two histogram graphs (available at www.Stockcharts.com) show percentages gained/lost for the past week and for the current OPEX period. We can see that Copper, in particular, has been very strong for both of these time periods, and that, while Oil declined last week, it is still second in strength during the OPEX period, with Gold gaining the least.

We'll see if Dr. Copper stays strong in the coming days/weeks and what volumes say...and how equity markets react.

Photos That Move...

Jamie Beck and Kevin Burg's photos that move...for your viewing pleasure...

OPEX Breakout Coming?

Next Friday is Options Expiry. Looking at the Weekly charts of YM, ES, NQ & TF below, we can see that they closed the week at or just below resistance on higher volume, with Bollinger Bands widening, which suggests an upward continuation. In support of this suggestion, the Dow 30, Dow Transports, Dow Utilities, S&P 500, Nasdaq 100, and Russell 2000 all closed above their support levels that I mentioned in my post on January 10th.

If they break and hold above, they may make a run towards the upper Bollinger Bands on the charts below...each candle represents a one-month Options Expiry period...the current candle will close on January 20th. We'll see if they do break and hold above resistance, and how far they rally...alternatively, price may drop to the mid-Bollinger Band on either timeframe. Inasmuch as it's a short week, we may see daily opening gaps occurring from aggressive overnight trading with market makers running prices further up during market hours in order to reach such lofty targets.

Enjoy your long weekend!

U.S. Trade Balance Shrinks...

Further to my post of January 11th, I have my answer...it would appear not. Based on Trade Balance data released today, the trade deficit widened more than forecast...attempts to move higher have progressively failed from the highs in 2009, as shown on the graph below.

YM, ES, NQ & TF...Sectors...Gold...Oil

My post of January 10th made reference to a 10-Day 30-Minute chartgrid of the YM, ES, NQ & TF. I mentioned that any repeated attempts to advance convincingly beyond last week's high will need to be accompanied by higher volumes. The updated chartgrid below shows, firstly, that the YM has not been able to sustain a breakout above that high, while the ES, NQ & TF advanced today after re-testing this level. Today's initial drop occurred on higher volumes, with the bounce on lower volumes. My prior comments still apply...I'd be looking for higher volumes on any sustained breakout to validate a bullish setup.

Further to my post yesterday, the Sector Rotation graph below shows today's action on the Major Sectors. Materials was the big gainer, while Energy was the big loser...money continued to flow into the "Risk" sectors, as well...will see if money continues to flow into "Risk" on any further advance on YM, ES, NQ & TF.

The 4-Hour chart below of Gold shows that it ran into confluence resistance (Fibonacci, price, and a high volume level on the Volume Profile at the right edge for the entire 180 days) at 1660 today. This is a major resistance level and the advancing volumes were steady, so will see if further risk  appetite continues in this market, and what happens to volumes.

The 4-Hour chart below of Oil shows that it dropped into Volume Profile POC (for both last month and for the entire 180 days) and Fibonacci confluence support today. It has failed, once again, to hold the 102.00 level that I last mentioned in my post on December 29th, 2011. The increase in volumes this year, together with today's drop below this year's range, suggests that a topping process has begun...a chart I'll continue to watch over the next days/weeks.

In Memory...Here's to You, Honey...

Money Flow in the Major Indices and Sectors From January 2011

The following graphs/charts (courtesy of www.Stockcharts.com) depict percentage gains and losses in the Major Indices and Sectors during several periods since the beginning of January 2011.

The first two charts show price action from January 3rd, 2011 to today's close. Prices topped in July of 2011 and bottomed in September.

The first two graphs (in histogram format) also show percentages gained and lost from January 3rd, 2011 to today's close. Overall, the Dow Utilities and Dow 30 Indices held up the best, while the Russell 2000 was the weakest. During that time period, the majority of money flowed into the defensive sectors, namely, Consumer Staples, Health Care, and Utilities, and flowed out of Financials.



The next two graphs show percentages lost from July 1st to October 3rd. Overall, the Dow Utilities and Nasdaq 100 held up the best, while the Russell 2000 and Dow Transports were the weakest. During that time period, the majority of money flowed out of the Financials, Materials, Industrials, Energy, and Consumer Discretionary sectors.

The next two graphs show percentages gained from October 3rd to today's close. Overall, the Russell 2000 and Dow Transports were the biggest gainers, followed by the S&P 500, Dow 30, and the Nasdaq 100. During that time period, the majority of money flowed into the Materials, Industrials, Energy, and Financials sectors.

The next two graphs show percentages gained from December 1st to today's close. Overall, the Dow Transports and Russell 2000 were the biggest gainers, followed by the S&P 500, Dow 30, and the Nasdaq 100. During that time period, the majority of money flowed into the Financials (a big differential here), followed by the Industrials, Materials, Health Care, and Consumer Discretionary sectors, and with less flowing into the Consumer Staples, Energy, and Utilities sectors.

The next two graphs show percentages gained and lost from January 3rd of this year to today's close. Overall, the Dow Transports and Nasdaq 100 were the biggest gainers, followed by the Russell 2000 and S&P 500, while the Dow 30 gained the least, and Dow Utilities declined. During that time period, the majority of money flowed into the Materials, Financials, Industrials, and Consumer Discretionary sectors, while money flowed out of the Utilities, Consumer Staples, and Energy sectors.

The next two graphs show percentages gained and lost this week. Overall, the Dow Transports and Russell 2000 were the biggest gainers, followed by the S&P 500 and Nasdaq 100, while the Dow 30 gained the least, and Dow Utilities declined. During that time period, the majority of money flowed into the Financials, Materials, Industrials, Health Care, and Consumer Discretionary sectors, while money flowed out of the Energy, Utilities, and Consumer Staples sectors.

Of the four Major Indices and in terms of percentages, the Russell 2000 lost the most from the beginning of July to October 3rd of 2011, while the Nasdaq 100 lost the least...the Dow 30 lost about half as much as compared with the Russell 2000. However, when we look at the next graph which shows percentages lost and gained from July 1st to today's close, we see that the Dow 30 has regained its losses much more than the Russell 2000...showing that the Russell 200 still has some catching up to do. We'll see if money flows continue to be strong in the Russell 2000 over the coming weeks. Indices to watch are the Dow 30 and Russell 2000, particularly since money flows into the Dow 30 have declined quite a bit from January 3rd of this year.

Of the Major Sectors, the Financials, Materials, Energy, and Industrials sectors lost the most from the beginning of July to October 3rd of 2011, while Utilities, Consumer Staples, and Health Care lost the least. When we look at the last graph which shows percentages lost and gained from July 1st to today's close, we see that gains have been made in all sectors at approximately the same rate. However, it appears that money has begun to flow out of the defensive sectors and into more risky assets from January 3rd of this year...we'll see if that trend continues in the coming weeks.

Can U.S. Markets Really Ignore European Woes?

That is my question of the day.

With Europe's GDP shrinking well below 2008 levels and Britain's trade balance declining below 2009 levels, is the U.S. really immune to the knock-off effects? Time will tell...

P.S. And, who's minding the store with U.S. politicians focused on the election this year rather than on fiscal and economic problems? The Fed can only do so much with monetary policy...

Support and Resistance Levels on Major Indices

The Daily charts below show near-term support and resistance levels for the Major Indices, as follows:

• Dow 30:  Support = 12400 and Resistance = 12500
• Dow Transports:  Support = 5150 and Resistance = 5200
• Dow Utilities:  Support = 450.00 and Resistance = 455.00
• S&P 500:  Support = 1280 and Resistance = 1300
• Nasdaq 100:  Support = 2360 and Resistance = 2380
• Russell 2000:  Support = 755 and Resistance = 770

The 10-Day 30-Minute chartgrid below of the YM, ES, NQ & TF shows that price failed to advance after making early highs today and fell toward the close. The YM and NQ fell back into last week's range by the end of the day. Volumes were still on the low side today...any repeated attempt(s) to advance convincingly beyond last week's high will need to be accompanied by higher volumes, in my opinion, and as I mentioned in my post on January 6th. We may see more volumes and movement once the Beige Book report is released tomorrow at 2:00 p.m.

So far, the U.S. $ is holding above its near-term support level of 81.00, as shown on the Daily chart below...an important level for the $ bulls to hold, as I also mentioned in my January 6th post.