Money Flow for May Week 2

Further to my last weekly market update, here is a summary of where money flow ended for Week 2 of May 2012.

The Weekly charts below of YM, ES, NQ & TF show that they closed lower than last week's bearish engulfing candle, except the TF, which closed marginally higher. They are still range-bound from January. Until we see price break out of this range one way or the other with conviction on increasing volumes, we may see an attempt at a bounce on Monday.

As I mentioned in my 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 = mildly bearish
• ES = moderately bearish
• NQ = mildly bullish (bordering on moderately bullish)
• TF = mildly bearish (bordering on moderately bearish)

I'll re-iterate what I said in my last post about the NQ, namely: The NQ's volume in the Volume Profile from February onwards is very thin, which signals a potential weakness/problem in this e-mini futures index being able to advance much further and hold above its 2011 highs. I wouldn't be surprised to see price drop back to this level at some point and further buying volumes finally enter to support a convincing rally...no doubt this would have a negative impact/drag on the other three indices.

The 4-Hour charts below of YM, ES, NQ & TF show their respective intraday ranges from the latter part of March to Friday's close. The YM  & TF are just above the 100% Fibonacci retracement level, and the ES & NQ are just below the 100% level. In the short term, if I were to apply the same rating parameters as above, the YM & TF are bearish, and the ES & NQ are SELLS below the 100% level. If they break and hold below these ranges, they would each, potentially, have a target of:

• YM = 12012
• ES = 1285.25
• NQ = 2458
• TF = 709.40

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

Stocks Above 20-Day Average remained below last week's gap down and closed below last week at 34.78%.

Stocks Above 50-Day Average closed below last week at 35.84%.

Stocks Above 200-Day Average closed below last week at 59.70%.

I'd conclude that, in the short term stocks are moderately bearish, in the medium term stocks are moderately bearish, and in the longer term stocks are mildly bullish...but, as has been the case for the past seven weeks, all are still on negative watch for further potential weakness.

The VIX rose on the week (by 5.02%), 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 that the SPX continued to bounce around in between the 50 and 200 smas. The RSI, MACD, and Stochastics indicators are still trending down...however, the Stochastics has crossed up. Near-term resistance and support are at 75.00 and 65.00, respectively...the next levels are at the moving averages, namely 81.34 and 55.85, respectively...important levels to watch.

The Daily chart below of the VIX shows that price is sitting at the apex of a triangle...a breakout is inevitable next week...one to watch for potential direction and follow-through.

As shown on the graph below of the Industry Groups, they all declined, with the exception of Biotech. Brokers, Gold/Silver, Banks, and Oil Services led the losses.

As shown on the graph below of the Major Sectors, they all declined, with the exception of Utilities. Financials, Materials, Industrials, and Consumer Discretionary led the losses, while Healthcare and Consumer Staples lost the least...markets still favour the defensives.

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

There was more soft data out of China on Thursday and Friday, as shown below.

The Daily chart below of the Shanghai Stock Index shows that price is, basically, trading within a very large triangle and it closed on Friday in between the ever-narrowing 50 and 200 smas. The RSI, MACD, and Stochastics indicators are hooked down. Near-term resistance and support are at the moving averages, namely, 2420.58 and 2384.60, respectively. The next resistance and support levels are at 2450 and 2300, respectively...one to watch.

As shown on the graph below, the largest losses were made in Silver, followed by Gold, Copper, and Oil.

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

As shown on the graph below of the Major Indices, the Dow Utilities gained, while the Dow Transports declined the most, followed by the Dow 30, S&P 500, Nasdaq 100, and Russell 2000. The Emerging Markets ETF (EEM), suffered large losses, while minor losses were taken by the High Dividend-Paying Stocks ETF (DVY), and Corporate Bonds (JNK).

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

The Daily ratio chart below of the SPX:U.S. $ shows that the SPX continued to weaken in comparison to the $ and now sits in between the 50 and 200 smas. The RSI, MACD, and Stochastics indicators are trending down, although Stochastics is attempting to cross up. Resistance levels are at the 50 sma (17.43), and 18.00. Support levels are at 16.50 and the 200 sma (16.33). Ones to watch to see if the SPX continues to weaken against the U.S. $.

My post of May 10th mentioned that JPM fell in after-hours trading due to $2 billion in trading losses. The Daily chart below shows the large gap down and where JPM closed on Friday. Price is sitting on a confluence of Fibonacci levels and the 200 sma.

This Daily comparison chart below of the Dow 30, S&P 500, Nasdaq 100, and Russell 2000 Indices, as well as JPM, shows that JPM was outperforming on the advance from the October 2011 lows until Friday's close.

The Daily ratio chart of NDX:JPM shows a huge gap up by NDX in comparison (reflecting JPM's weakness) on Friday. Immediate support sits at 70.00. It's a chart I'll be following to see whether the NDX continues to advance, with JPM falling further (signalling a potential flight into Technology as a hedge against weakening Financials), or whether the Nasdaq 100 (NQ) continues to fall, as well, as noted above on the 4-Hour chartgrid of the YM, ES, NQ & TF (since the NQ now has a SELL rating, along with the ES)...charts worth watching next week.

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, depending which way the triangle breakout occurs on the VIX.

Enjoy your weekend!

SPX Reminder

A gentle reminder of my Top-Down Analysis of SPX...

Below is an update of the Daily chart...my comments still stand...looking for a break and hold beneath 1350...target is 1250.

JPM ~ After-Hours Trading ~ May 10th

JPM has fallen in after-hours trading on May 10th, as shown on the 4-Hour chart below.

This Wall Street Journal article explains that "J.P. Morgan has taken $2 billion in trading losses in the past six weeks and could face an additional $1 billion in second-quarter losses due to market volatility."

Friday should be interesting since XLF and other major banks have also dropped after-hours...

The Results of Europe's LTRO 1 & 2

These are the results of Europe's ECB LTRO 1 & 2 programs (Daily chart of the European Financials ETF, EUFN)...you be the judge as to whether they have worked.

Charts of Interest

Charts of interest that I'm watching over the next few days are shown below...action of late has been in favour of the bears (except the U.S. $)... (of particular interest is Tuesday's break and close below the uptrend line on OEX).

Consumer Debt Bubble Looming?

Data released on May 7th shows that consumer debt levels rose again and are now at their highest levels since January 2000, as shown on the graph below.

As you can see, the "boom and bust" swings have been steadily widening since that time, which indicates "increasing volatility" in this type of psychological behaviour...some may call it "unstable and unsustainable."

The Monthly chart of the S&P 500 Index below shows a corresponding widening within this same time cycle...however, unlike consumer debt, the value of the SPX has not exceeded the last boom experienced in 2008. Personal debt has actually outpaced the value of the markets (that's the big difference this time) and, in my opinion, it is the next bubble which is about to burst...and I wouldn't be surprised if it's sooner rather than later, particularly since Average Hourly Earnings fell, as reported on May 4th, and they have been in decline since March 2003. This corresponds to the information contained in my post of March 7th.

Add to this, the growing national debt problem, and there is a recipe for disaster waiting to happen (unless the Fed also prints money for each individual who carries debt).

Investor Confidence in Europe at Lowest Level Since July 2009

Data released on May 7th shows that Sentix Investor Confidence in Europe is now at its lowest level since July 2009, as shown on the graph below. Economic pessimism is accelerating.

Since it's a "leading indicator of economic health - investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity," this can only mean that economic conditions will worsen in Europe.

AUD/USD and its Pink Diamond Pattern

This break below the 61.8% Fibonacci fan line on Friday (and the hold below the earlier break below the pink diamond pattern) is worth keeping an eye on on the AUD/USD forex pair...major resistance is at 1.0365 on this Daily chart below...the next MAJOR support is at 0.938.

Money Flow for May Week 1

Further to my last weekly market update, here is a summary of where money flow ended for Week 1 of May 2012.

The Weekly charts below of YM, ES, NQ & TF show that they reversed last week's bullish setup to close as bearish engulfing candles. They are still range-bound from February. Until we see price break out of this range one way or the other with conviction, we may see an attempt at a bounce on Monday.

As I mentioned in my 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 = mildly bearish
• ES = mildly bearish (bordering on moderately bearish)
• NQ = moderately bullish (bordering on mildly bullish)
• TF = mildly bearish (bordering on moderately bearish)

I'll re-iterate what I said in my last post about the NQ, namely: The NQ's volume in the Volume Profile from February onwards is very thin, which signals a potential weakness/problem in this e-mini futures index being able to advance much further and hold above its 2011 highs. I wouldn't be surprised to see price drop back to this level at some point and further buying volumes finally enter to support a convincing rally...no doubt this would have a negative impact/drag on the other three indices.

The 4-Hour charts below of YM, ES, NQ & TF show their respective intraday ranges from the latter part of March to Friday's close. The YM  is just below the 50% Fibonacci retracement level, and the ES, NQ & TF are near the low of their respective ranges. In the short term, if I were to apply the same rating parameters as above, the YM is mildly bearish, and the ES, NQ & TF are bearish. If they break and hold below these ranges, they would each, potentially, have a target of:

• YM = 12012
• ES = 1285.25
• NQ = 2458
• TF = 709.40

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

Stocks Above 20-Day Average closed well below last week at 36.83%.

Stocks Above 50-Day Average closed well below last week at 36.85%.

Stocks Above 200-Day Average closed well below last week at 61.08%.

I'd conclude that, in the short term stocks are moderately bearish, in the medium term stocks are moderately bearish, and in the longer term stocks are mildly bullish...but, as has been the case for the past six weeks, all are still on negative watch for further potential weakness.

The VIX rose on the week (by 11.72%), 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 that the SPX declined and closed below its 50 sma, once again, and just below an uptrend line from the October 2011 low. The RSI, MACD, and Stochastics indicators are trending down and are not oversold. Near-term resistance is at the uptrend line at 73.00, then the 50 sma at 82.00, and support is at 65.00, then 60.00, and then the 200 sma at 55.81...important levels to watch.

As shown on the graph below of the Industry Groups, they all declined, with Oil, Gold/Silver, and Brokers leading the losses.

As shown on the graph below of the Major Sectors, they all declined, with Energy, Materials, Technology, and Financials leading the losses...the defensives (Consumer Staples, Health Care, and Utilities) lost the least.

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

Further to my post of May 2nd, the SPX and DBC both declined into Friday's close, as shown on the Daily comparison chart below...two I'll be watching for either continued correlated or divergent moves for the coming week(s).

As shown on the graph below, the largest losses were made in Oil, followed by Copper, Silver, and Gold.

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

As shown on the graph below of the Major Indices, the Nasdaq 100 made the biggest losses, followed by the Russell 2000, S&P 500, Dow 30, Dow Utilities, and Dow Transports. Losses were also made by the Emerging Markets ETF (EEM), and the High Dividend-Paying Stocks ETF (DVY). Minor gains were made in Corporate Bonds (JNK).

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

Further to my post of May 3rd, the similarity in price movement continued into Friday's close, as shown on the comparison chart below of the Commodities ETF (DBC) and the Aussie $. The second chart shows that DBC closed below trendline and price support, while the AUD/USD forex pair closed just above trendline support, but below price support. Further weakness in both of these could drag the equities markets further down...two to watch for further direction.

The Daily ratio chart below of the SPX:U.S. $ shows that the SPX weakened in comparison to the $ and now sits below the confluence of the 50 sma at 17.47 and the major uptrend line from the October 2011 low (now major resistance). Near-term support is at 17.00, and major support is at the 200 sma at 16.35. The RSI, MACD, and Stochastics indicators are all trending down. Ones to watch to see if the SPX continues to weaken against the U.S. $.

In summary, the markets failed to continue their trek upwards and were more influenced by negative economic data releases than they have been since their October 2011 low. This weakens the argument in favour of further advances to new highs for this year in the very near term. It will be interesting to watch the markets' reaction to the May 6th French and Greek elections next week, and to see whether the Major Indices break below their sideways ranges on accelerating downward momentum, or whether they attempt to bounce on Monday. Either way, 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.

Enjoy your weekend!

A Comparison of DBC and AUD/USD

Further to my post of May 2nd, there is a similarity in the behaviour of price action since last May, as reflected in the following two Daily charts of the Commodities ETF (DBC) and the AUD/USD forex pair.

At the moment, each one is trading below both the 50 sma (red) and 200 sma (pink), both are at their respective lower Bollinger Band, the MACD has just hooked down on Thursday's close, and the Stochastics has crossed over to the downside. The DBC is approaching major support in the vicinity of 27.47, while the AUD/USD is trading immediately below trendline apex support of 1.0274.

A break with conviction and hold below these respective support levels would indicate further weakness in commodities, and possibly drag the equities markets further down...two to watch for further direction.

SPX:DBC Ratio and Comparison Charts on my Radar

This 3-year Daily chart of the SPX:DBC ratio (S&P 500 Index and Commodities ETF) shows that the SPX is up against major resistance, and is under the influence of declining RSI, MACD, and Stochastics indicators.

This next Daily chart shows a comparison of the SPX to DBC. They've been pretty closely correlated over the past year. I'm paying attention to the recent dip in DBC to see whether it continues down and whether the SPX follows.

Mayday Buyer's Reward

This is what buyers of the TF were rewarded with during intraday action through to the close on Mayday, as shown on the Daily chart below (note that volume was higher on Tuesday's candle and is reflecting a build in volatility):

This e-mini futures index has, basically, been in a large sideways trend since the latter part of January of this year. Price has been consistently rejected at 830.00, but remains above 780.00. It's had difficulty remaining in the upper one-third of this range and closed the day just below the 50% level. Failure to hold this 50% level could send it back down to 780.00 or lower.